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2018 (12) TMI 820 - AT - Income TaxUndisclosed profits from the payments received from HPC - accrual of income - receipt in the nature of advance - accounting treatment - Held that:- The advance amount so received by HAN from HPC was to be refunded in case the land acquisition doesn't materialize in time bound manner. Post the execution of the above amended MOA, the very premise of the AO i.e the amount received is non-refundable has ceased to exist. Further proof for the above comes in the future transactions entered into by the assessee with HPC. The assessee has already refunded an amount of ₹ 5.13 crores to HPC as on date. The same has been verified by the ledger account of HPC in the books of the assessee and the confirmation given by HDFC bank which reflects the payments made by the assessee to HPC. On the basis of above, the question of refundability or otherwise becomes immaterial and the said advance cannot be treated as income in the hands of the assessee. Assessee fails to perform the future services with respect to acquiring land, conducting a land survey and providing Title certificate' all the services performed in the past would be rendered futile and the assessee would be required to refund the advance received owing to its inability to provide the services agreed upon. For income to accrue to the assessee, the transaction should have been materialized. Since, there is no accrual the consideration received shall be treated as advance and not as an income item. Thus, the original Memorandum of agreement alongwith new deed of amendment dated 15/03/2012 establishes in clear and unambiguous terms that the amount received by the assessee was as “advance” and was refundable in case the objectives were not met. Further as per Clause 2 of MOA, it is evident that the “acquisition of land” was the essence of the agreement entered into as MoA. Once the same is established, it flows that the amount received cannot be bifurcated between the “past services” and “future services”. The land as envisaged as available by both the parties to MoA never became available due to the stiff opposition to the proposed power plant. To confirm the position from the perspective of opposite party HPC, a confirmation was received from the said party. The said confirmation also supports the position that the MoA was entered with the objective of land acquisition which never materialized. CIT(A) has dealt with the issue threadbare after meeting with all the observation of the AO with regard to the nature of advance and after recording detailed finding reached to the conclusion that amount so received was in the nature of advance not liable to tax during the year under consideration. - Decided against revenue
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