9911796707
TMI Blog1980 (6) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... arnest money paid by the assessee 1 39 Rs. 7,00,000 Rs. 1,75,000 2 40 Rs. 7,75,000 Rs. 1,93,750 3 41 Rs. 8,00,000 Rs. 2,00,000 . . . Rs. 5,68,750 In the same auction the assessee had successfully bid two more plots, namely, plot Nos. 35 and 36 but that is not material for the dispute here. Shortly after successful bidding and also paying the earnest money of Rs. 5,68,750 for plot Nos. 39, 40 and 41, the assessee felt that these plots were unsuitable and the bids unremunerative for his business. Accordingly on 2nd March, 1973 the assessee retracted its bids for these three plots and wrote to the D.D.A. as under": 'On going through the details of those plots, we find that all these plots are too small to have any proper planning. Total covered area also being very small, we being the promoters do not feel it worth marketing the flats to the public. We, therefore, request your good self to kindly treat our bid for the above plots as withdrawn and refund our money at the earliest possible'. The D.D.A., however, relying on the terms and conditions under which the auction was held replied to the assessee as under on 28th March, 1973. '...I am to invite your referen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract was final and complete, it retracted its bid and sought for refund of its earnest money which was allowed by the High Court. Thus there was no breach of the contract in this case and, therefore, the cases relied upon by it are not useful to the assessee company. (c)The bid was made for the auction on 6th Feb., 1973 and the assessee retracted from its bid on 2nd March, 1973 within the accounting period ending on 30th June, 1973 relating to the asst. yrs. 1974-75. The loss, therefore, should have been claimed for the asst. yr. 1974-75. (d)There was no forfeiture of the earnest money as the Singly Bench judgment of the Delhi High Court decreed the amount of Rs. 3,66,000 in the assessee's favour and refunded to it under bank guarantee pending decision on the appeal filed by the D.D.A." Even when the assessee had relied on the judgment in Narandas Mathuradas & Co. vs. CIT (1) CIT vs. Tulsi Ram Karam Chand (2), Laxmi Ginning & Oil Mills vs. CIT (3), CIT vs. Indian Biselers (4) and CIT vs. Sugar Dealers (5) while dealing with the reasons given by the ITO, the CIT (A) held as under in para 3.5 of his order: "The assessee's business itself was the construction and sale of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66,000 was in fact incurred in the accounting year, the pendency of litigation would not constitute a good reason or justification for postponing allowance of the loss in the correct year to which it relates. Secondly it is not as if the Single Bench's judgment of the Delhi High Court has settled the matter in favour of the assessee. The assessee had to furnish a bank guarantee pending decision on the appeal filed by the D.D.A. and, therefore, even today there is no debt or right in the assessee's favour in respect of the amount of Rs. 3,66,000. Even if the assessee ultimately receives back the amount of Rs. 3,66,000 that would not in my opinion and in view of the High Court's decisions cited earlier constitute any reason why the amount of Rs. 3,66,000 can be disallowed in the year under appeal. The forfeiture took place in the year under appeal and the loss was actually and from a business and commercial point of view suffered by the assessee in the accounting year. If the assessee is ultimately successful, on the basis of the High Court's judgment cited above and the specific provisions of s. 41(1) of the Act, the amount obtained can certainly be brought to tax in the year in whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO allowed the provision for expenses on completion amounting to Rs.12.75 lakhs, calls for the allowance of the provision for registration of plots also." The ITO had disallowed the assessee's claim as follows: "The assessee has charged a sum of Rs. 2,42,000 (Rs. 1,29,000 for Vishal Bhawan and Rs. 1,13,000 for Agarwal Bhawan) to the two projects accounts in this year by way of "provision for registration of plots." On being requested to implement the basis of the claim reference has been invited (vide assessee's letter dt. 5th Dec., 1977) to the terms and conditions for sale of auction by D.D.A. of the perpetual lease hold rights in the commercial flats in Nehru Place to the effect that "the intending purchaser shall execute lease deed in the said firm when called upon to do so." The registration was not done in the year of purchase; nor it has been done so far even though the structure thereon has been constructed and sold out. It is gathered that the association of builders of the multi-storeyed buildings has disputed its liability to buy, the registration charges to the extent of 8 per cent. There is no evidence that the assessee has been called upon to execute the lease d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if formed to hold the properties and if the D.D.A. executes the lease deed directly in favour of such society company or corporate body of buyers. The D.D.A. has not so far agreed to execute such a direct lease deed by which the assessee would be able to escape the necessity of incurring the registration charges from its pocket. The correct position till now is, therefore, that the assessee is bound with the D.D.A. to incur the registration charges as claimed by it. Such a claim is a proper deduction in the year under appeal under the method of accounting followed by the assessee and accepted by the ITO and in accordance with the principle laid down by the Supreme Court in 37 ITR 1. In the event of D.D.A. either relieving the assessee from its obligation to incur the registration expenses or the assessee escaping from the need to incur such expenses on account of the D.D.A. agreeing to execute the lease deed directly in the name of the Society, company or other corporate body of the persons who purchased the flats from the assessee, s. 47(1) would certainly operate and the assessee can then be taxed in respect of the benefit obtained or accruing by way of such remission, revision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of goods. In considering matters like this, I think I should be guided by the following approach approved by the Delhi High Court is Sant Ram vs. Union of India (14). 'One of the surest indications of a nature and developed jurisprudence is not to make a fortress of the dictionary but to remember that statutes have always some purpose and object to accomplish, whose sympathetic and imaginative discovery was the surest guide to their meaning.' The annual Finance Act, prescribed a concessional rate of tax for industrial companies as a measure of encouraging the setting up and growth of industrial, manufacturing and productive enterprises in the country and thereby increase the levels of production, employment and incomes. While from a broad business, commercial and even commonsense point of view the assessee's activities fully satisfy the criteria laid down in the definition of industrial company in the Finance Act, and also meet the tests laid down in several judicial pronouncements on this question, I see no reason why the relief should be denied to the assessee on narrow and technical considerations. Such a denial would amount to the ITO taking back by his left hand what t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng before the Full Bench of the Delhi High Court. We will first decide whether the claim of the assessee was within the accounting period before us. The D.D.A. having deducted the amount on 3rd Dec., 1973 fell beyond the accounting period relatable to the asst. yr. 1974-75 as the accounting period of the assessee for that closed in June, 1973. As the deduction was made during the accounting period relevant to the assessment year before, we agree with the ld. CIT that the loss pertains to this year. 7. The second issue to be decided is whether in the case of the assessee who is a builder, the forfeiture was in the normal course of the carrying on the business of a builder or was on account of an infraction in law. In case of contract, security deposits are made and for non-acceptance of the contract and non-performance of the contract, the security deposits are forfeited. If the contractors were not to be allowed the security deposits as a trading loss, no contractor would be in a position to carry on business as a contractor. The assessee's case is similar. The assessee being a builder has to bid for plots and after constructing the superstructure sell to the customers and earn p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Promoter in preparing and approving all such documents shall be borne by the Society or Limited Company if formed and otherwise proportionately by all the holders of flats in the said building. The Promoter shall not be liable to contribute any amount towards such expenses. The same will be the position regarding the lease to be executed by D.D.A. if it is executed directly in favour of the Company/Society or Incorporated body of buyers. The proportionate share of such costs, charges and expenses payable by the buyer as worked out by the Promoter shall be paid immediately on demand." It was, therefore, submitted that keeping in view the contract by the assessee with the D.D.A. and his prospective buyers, this was not a case of an ascertained liability. The ld. counsel for the assessee, on the other hand, submitted that when the ITO had accepted the system of accounting adopted by the assessee wherein the assessee had accounted for the cost of the total project, the registration expenses as claimed should have been allowed on the same basis. Our attention was invited to the following clause in the agreement with the D.D.A. "4(1) The terms and conditions of the lease are those ..... X X X X Extracts X X X X X X X X Extracts X X X X
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