TMI Blog2008 (11) TMI 440X X X X Extracts X X X X X X X X Extracts X X X X ..... was to be constructed. The 2nd agreement dated 10-6-1999 provided for development of the building construction of commercial buildings by name of Eternia B C . On scrutiny, the Assessing Officer found that the assessee had claimed loss of Rs. 15,10,176 from the business of construction and development and was following project completion method of accounting. The Assessing Officer asked the assessee to produce project-wise profit and loss account. The assessee complied with the direction of the Assessing Officer. On perusal, the Assessing Officer noticed that in the recasted account, the assessee has separated only the cost of WIP (direct cost) for Sherwood and cost of land of the project Eternia and that the assessee had not worked out separate profit for Eternia B building. The Assessing Officer made enquiry from M/s. GPIL about the net surplus realisation in respect of the building Eternia B . In the meantime, the assessee submitted another profit and loss account showing separate expenses for each project and in this the loss for the year under appeal had been recomputed at Rs. 3,72,77,824 as against the loss of Rs. 15,10,176 shown originally. In this computation, it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d modified the agreement dated June 1999 with a view to ensure developers had sufficient liquidity for completion of the project within the time. The CIT(A) has pointed out that there is a specific agreement dated 26-2-2001 entered into between the assessee and M/s. GPIL and HDFC. It has accordingly been held by the CIT(A) that as per revised agreement the DM fees of Rs. 5,30,02,177 payable to M/s. GPIL was a charge on the profits of the project Eternia B . The CIT(A) has held that the mere fact that the assessee had not made entries in the books of account is not sufficient to deny the deduction. Reliance has been placed on the decisions of the Supreme Court in the case of CIT v. K.B. Kalikutty [1969] 73 ITR 533 . The CIT(A) has accordingly held that the assessee was entitled to deduction in respect of DM fee payable to M/s. GPIL at Rs. 5,30,02,177. 3. The Revenue is aggrieved and is in appeal before us. 4. The learned D.R. contended before us that the assessee was bound to offer the income for taxation on the basis of the completion of each building. The assessee having completed the building Eternia B in the year under appeal, the profit derived therefrom was liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r about the assessee not having filed the revised return is not well founded. The assessee has followed completed project method system of accounting. Since, as per the assessee, the project had not been completed in the year under appeal, no profit was assessable for taxation in the year under appeal. It was only when the Assessing Officer expressed the view that the income was to be assessed on the basis of sale of each building, the assessee had prepared the income and expenditure statement relating to the particular building which had been completed. It was contended that as per the modified terms and conditions, the assessee had agreed to give 100 per cent profits in respect of building Eternia B to M/s. GPIL. It has been confirmed that the said M/s. GPIL has offered the income at the rate of 100 per cent from the building Eternia B for taxation that has been accepted. In subsequent assessment year i.e., assessment year 2002-03, it is claimed that the assessee has offered income at the rate of 100 per cent in respect of Eternia C building and subsequent to that the income has been offered on the basis of modified terms and conditions of the agreement and assessed as su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of portion of the land relating to the project Eternia B . 8. The learned counsel for the assessee contended before us that since there was no transfer of the land to M/s. GPIL, no capital gain arose to the assessee in the year under appeal. According to the learned counsel for the assessee provisions of section 2( 47 )( iv ), ( v ) and ( vi ) are not applicable in this case, as the land and building was, the stock-in-trade in the case of the assessee. It was however admitted that if section 2( 47 )( iv ), ( v ) and ( vi ) are attracted, then the profit on transfer is assessable to tax in the year under appeal. 9. The learned D.R., on the other hand, contended that the provisions of section 2( 47 )( iv ), ( v ) and ( vi ) are attracted in this case. The assessee had given complete possession of the land to the developers and subsequently transferred the same to the buyers of the flats. As such, the Assessing Officer was justified in assessing the profit on transfer of the land in the year under appeal. 10. We have given our careful consideration to the rival contentions. In order to decide this issue, it will be relevant to point out that the assessee in its profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. We have given our careful consideration to the rival contentions. In our considered view, there is no merit in the contentions advanced on behalf of the assessee. The provisions of section 2( 47 )( iv ), ( v ) and ( vi ) are attracted in this case which provide for certain transactions to be treated as transfer for the purpose of computation of capital gains. The assessee had converted the capital asset into stock-in-trade. The profit arising on the conversion of capital asset is assessable to tax under section 45(2) in the year of sale of stock-in-trade. In the year under appeal, the property Eternia B has been fully sold. The assessee has not executed any sale deed in respect of the land as well as for the building. Since the building is also immovable property as well as the land underneath and apartment thereto, there cannot be a separate criteria for the building on the one hand and for the land on the other hand. The same criteria would be applied to the sale of building as well as to the land underneath and apartment thereto. Since the profit on sale of building is acceptable as correct, there is no reason why on the same principle the transfer of land cannot be treat ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
