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2012 (4) TMI 479 - AT - Income TaxAddition - principal agent relationship - addition on the ground of surplus in RGCTP account on sale of development rights to M/s Parsvnath Developers Ltd., made by the AO - The assessee-Board and the Chandigarh Administration are not natural persons but juristic entities and hence there cannot be any oral agreement between them to create agency. The admitted position is that there is no written contract between them to create agency. After taking into account all the materials brought on record including the legal position, we confirm the finding of the AO/CIT(A) that the assessee-Board was not an agent of the Chandigarh Administration in so far as the said project is concerned. All the pleas taken by the assessee in this behalf are therefore rejected. . Regarding diversion of income - if the income, before it reaches the assessee, is diverted away by superior title so that the assessee, when he receives the income, has to pass it on to a third party, the portion passed on, or is liable to be passed on, is not the income of the assessee but of the person to whom it is passed on or is liable to be passed on - Held that: there is no diversion of income arising from the commercial exploitation of land owned by the assessee by an overriding title in favour of the Chandigarh Administration - it is held that the impugned sums accruing to the assessee in pursuance of the Development Agreement did not stand diverted at source by any over-riding title, which is antecedent in point of time, in favour of the Chandigarh Administration - The application or destination of the income has nothing to do with its accrual or taxability. . Whether the AO is right in holding that the impugned amount has accrued to the assessee in the year under appeal and taxing the same as such in the year under appeal - The case of the AO is that the assessee follows mercantile system of accounting and hence the entire bid price amounting to Rs. 821.21 crores being consideration for granting the leasehold and development rights to the Developer has accrued to the assessee in the year under appeal and therefore is chargeable to tax in the year under appeal - assessee has followed accrual system of accounting, the AO has rightly taxed the impugned sum in the year of accrual, i.e., the year under appeal, and not on the basis of receipt or in the years of actual receipt - Appeal is dismissed
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