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2014 (7) TMI 501 - AT - Income TaxTransfer of property - Development agreement where possession was not handed over yes - No real income accrued – Held that:- the assessee has recognised the income in accordance with the true terms of the agreement and if there is any inconsistency in recognising the income then only revenue authorities can disturb the same. Once the assessee recognised the income in accordance with the agreements, the AO cannot substitute his assessment to say that the assessee has postponed the tax liability. The assessee initially entered into Development Agreement with M/s. ECE Industries Ltd. on 17.9.2007 for development of land admeasuring 67824 sqy situated at Sy. Nos. 74/P and 75/P at Borabanda, Fathenagar village, Ashok Marg, Hyderabad for which the assessee was required to pay ₹ 30,50,36,525 to M/s. ECE Industries Ltd. as a consideration for obtaining Development and GPA rights - it is too early to assess business profit out of the sale of constructed area to M/s. Janapriya Engineers Syndicate - The assessee neither received substantial consideration or assets to be sold are ready for handing over the possession to the concerned parties so as to transfer the title in the property - Till such time, it cannot be said that the parties involved in are ready to perform the contract - neither possession of the property has been given to the ultimate buyer or the assessee has received any substantial consideration - When the property is to be sold is not readily available or constructed, the assessee cannot recognise income with certainty. The agreement entered into by the assessee herein is only for sale of piece of property and sale will take place only after completion of construction and after assessee's share of property is identified - The proposed sale agreement cannot be put into action due to various litigations pending with various courts - Nobody can transfer title in a property when the property is not in existence - when there is litigation pending on the same property and no profit can be anticipated when the agreement itself is subject matter of litigation - It is not possible to bring the same to tax - it is not possible to hold that income has actually accrued to the assessee - When consideration is not determinable with reasonable certainty, the assessee is justified in postponing recognition of income and it is appropriate to recognise the income only when it is reasonably certain that the ultimate realisation is possible - revenue could be recognised at the time of sale or handing over of possession of flats to the ultimate customers -The Department cannot thrust upon the assessee so as to tax the future income. Income arising out of sale of flats to M/s. Janapriya Engineers Syndicate in which constructed property was sold by the assessee, profit on such transaction is to be assessable not in the year of agreement and it should be assessable proportionately in the previous years in which the constructed area was sold by the assessee or constructed flats were handed over by the assessee to the buyers – Relying upon BL. Subbaraya Versus Deputy Commissioner of Income-tax, Cir. 6(3), Bangalore [2005 (4) TMI 535 - ITAT BANGALORE] – thus, the CIT(A) is justified in deleting the addition made by the AO as there is no income accrued to the assessee on the basis of agreement entered by the assessee with M/s. Janapriya Engineers Syndicate – there was no infirmity in the order of the CIT(A) – Decided against Revenue. Disallowance of Expenses u/s 40(a)(ia) of the Act - Foreign travel expenditure – Held that:- The AO is directed not to disallow the expenditure if TDS has been remitted by the assessee before due date of filing of the return of income - if the expenditure is not debited to Profit and Loss A/c., it could not be disallowed by invoking the provisions of section 40(a)(ia) of the Act –Director of the assessee company went on foreign travel for the purpose of business - expenditure on this could will be allowed if the same is incurred for the purpose of business - CIT(A) recorded that the assessee had failed to produce necessary evidence to prove that the expenditure is incurred for the purpose of business - It is also not brought on record by the lower authorities that the expenditure is in the nature personal expenses - thus, the matter is remitted back to the AO for fresh adjudication – Decided in partly in favour of Assessee.
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