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2016 (12) TMI 1295 - HC - Income TaxMethod of accounting - whether sale price in respect of constructed/built up properties should not be accounted for at the time of handing over the possession or conveyancing whichever is earlier? - Held that:- The change in the accounting method in 1992-93 ipso facto could not have resulted in loss of revenue as is urged by the tax authorities in the present case. The distortions, which the revenue urges relate to the treatment of development charges as well as the treatment of expenditures such as brokerage, commission and interest payments. The assessee’s explanation here is that the 30% of the sums realized by it were under compulsion of law to be treated as development expenses and kept in a separate escrow account under the control of the HUDA. The revenue has not disputed this position. In that sense, the assessee was justified by statute to appropriate the sums towards development expenses. So far as the treatment of revenue with respect to brokerage and interest payments is concerned, the assessee again has an explanation, which is a rational one: i.e., that only such of the expenses attributable to the agreement with the purchasers was debited as expenditure. So far as the question of applicability to section 2 (47) or Section 53(A) of the Transfer of Property Act is concerned, legally speaking, part performance is undoubtedly an interest or right known to law. However, part performance, pre- supposes handing over a possession, at the time the agreement is entered into. Having regard to the assessee’s uniform pattern of revenue recognition that only upon execution of the conveyance/sale- deed, would the amounts lying with it be treated as profit and brought to tax, the possibility that in law certain flat or plot buyers could be handed over possession earlier per se would not result in distortion of the kind stated by the revenue. There is no material or evidence in this regard nor was cited by the revenue. - Decided in favour of the assessee. Re-working the cost of land - dividing the cost of the acquired till the end of the year by saleable area including lands earmarked for schools, hospitals, clubs and other community building, in each phase - Held that:- The factual findings are against the revenue, which had clearly accepted the legal position interpreted by the ITAT as correct - evidenced by not filing an appeal on this question. Therefore, the revenue cannot be permitted to urge this as a grievance. In any case, this kind of treatment was permitted during all other years and there is no compelling rationale for the court to examine it – especially because the facts found point to a contrary picture. The question of law is therefore, answered against the revenue/appellant.
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