GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (4) TMI 438 - ITAT BANGALORE

2015 (4) TMI 438 - ITAT BANGALORE - TMI - Disallowance u/s.14A - Held that:- The Hon'ble Delhi High Court in the case of Maxopp Investments Ltd. V CIT [2011 (11) TMI 267 - Delhi High Court] has held that by virtue of the provisions of sub-section (2) and (3) of Section 14A of the Act, if the Assessing Officer is not satisfied by the correctness of the claim of the assessee in respect of such expenditure or no expenditure, as the case may be, cannot embark upon the determination of the amount .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

disbelieving the contention of the assessee that it has incurred no expenditure to earn the exempt income of ₹ 18,400 but has proceeded to apply the provisions of Rule 8D to arrive at the disallowance of ₹ 1,93,730 as the expenditure deemed to be incurred for earning exempt income. Further, as contended by the learned Authorised Representative, the judicial pronouncements relied on by the assessee i.e. J.M. Financial Ltd (2014 (4) TMI 752 - ITAT MUMBAI), apply to the factual matrix .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

- difference in liability towards Karnataka Breweries & Distilleries Ltd. ('KBDL') - Held that:- It has been submitted by the assessee that the impugned addition of ₹ 5,87,817 can be made only if the liability claimed by the assessee is higher than the dues shown by the creditor viz. KBDL. In the case on hand, the undisputed facts as per record show that the liability claimed by the assessee is ₹ 3,65,92,256, whereas on examination of the books of KBDL by the Assessing Offic .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd the Assessing Officer has no discretion in the matter. This proposition has been upheld in the case of Anjum H Ghaswala (2001 (10) TMI 4 - SUPREME Court) and we, therefore, uphold the action of the Assessing Officer in charging the said interest. - Decided against assessee.

Income from 'Prestige Shantiniketan' Project - CIT (Appeals) deleted the addition and upheld the basic contention of the assessee that the property, which is the subject matter of JDA between the assesse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of JDA was entered into. There is a finding to this effect, rendered by a co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2005-06 [2015 (4) TMI 465 - ITAT BANGALORE]. No sale of such stock-in-trade has been reported to have taken place during the year under consideration i.e. Assessment Year 2009-10. The assessee has reportedly been consistently following the completed contract method of accounting and the same appears to have accepted by revenue. AO has no .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e assessee ought to adopt the percentage completion method of accounting merely because PEPL, the developer in the JDA, in following the said method.In the light of the above facts, it would be incorrect to conclude that the assessee has earned any income out of the JDA in the period relevant to the impugned assessment year 2009-10.

As decided in case of R.Gopinath (HUF) V CIT [2009 (7) TMI 1209 - ITAT CHENNAI] when an immovable property is held as stock-in- trade, the same is to be c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ately applicable to the extent of the land so transferred. 11.6.4 In the light of the facts and circumstances of the case as discussed above and the observations made and findings rendered by us, we see no reason for interfering with the findings rendered by the learned CIT(A) in the impugned order deleting the addition as income from the Shantiniketan Project in the year under consideration - Decided against revenue. - I.T.A. No.52/Bang/2013, S.P. No.148/Bang/2014, I.T.A.No.125/Bang/2013 - Date .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r :- 2.1 The assessee is a company engaged in the business of property development, being the land owner, also derives rental income from various properties. For Assessment Year 2009-10, the assessee filed its return of income on 29.9.2009 declaring income of ₹ 4,41,18,220. The return of income was processed under Section 143(1) of the Income Tax Act, 1961 (in short 'the Act') and the case was subsequently selected for scrutiny. The assessment was completed under Section 143(3) of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

fore the CIT (Appeals) - I, Bangalore. The learned CIT (Appeals) disposed off the assessee's appeal by the impugned order dt.22.10.2012 allowing the assessee partial relief. In this order, learned CIT (Appeals) deleted the addition of ₹ 29,55,92,202 made in respect of the income of the Shantiniketan Project; deleted the addition made under Section 41(1) of the Act to the extent of ₹ 32,19,299; sustaining the remaining portion of ₹ 5,87,817 under Section 41(1) of the Act and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

its appeal has raised the following grounds :- "1. The order of the authorities below in so far as it is against the appellant, is opposed to law, weight of evidence, natural justice, probabilities, facts and circumstances of the appellant's case. 2. The authorities below are not justified in adding a sum of ₹ 1,93,730 under section 14A of the Act read with Rule 8D of the Rules since the mandatory conditions for invoking the said provisions has not been complied with as the Asses .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd circumstances of the case. 6. The authorities below failed to appreciate that the provisions of section 41(1) of the Act are not applicable to the facts of the case of the appellant as there is no remission or abatement of the liability. 7. The authorities below are not justified in adding a sum of ₹ 5,87,817 on account of difference in account balances with M/s. KBD Sugars & Distilleries Ltd under the facts and circumstances of the case. 8. The authorities below failed to appreciat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssly urges that the period of levy of interest is not in accordance with section 234B of the Act. 10. The appellant craves leave to add, alter, delete, modify any of the grounds which are urged above. 11. For the above and such other grounds as may be urged at the time of hearing the appellant prays your Honour to consider the facts and circumstances of the case and justice be rendered." 5. The grounds at S.Nos.1, 10 & 11 of the assessee's appeal are general in nature and not being .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ch investment activity it has directly or indirectly utilized the services of man power, office, etc to earn such income. The Assessing Officer invoking the provisions of section 14A of the Act r.w. Rule 8D(2)(iii) of the IT Rules disallowed an amount of ₹ 1,93,730. 6.2 On appeal, the assessee challenged the disallowance of ₹ 1,93,730 made by the Assessing Officer u/s. 14A r.w. Rule 8D(2)(iii) on three counts. Viz., (i) that the Assessing Officer has invoked section 14A of the Act in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ule 8D and the judicial pronouncements in the case of - (i) Technopark Advises (P) Ltd., 18Taxman.com 146 (Del), and (ii) Cheminvest 121 ITD 318 (Del)(SB), he confirmed the entire disallowance of ₹ 1,93,730. 6.3.1 In the proceedings before us, the learned Authorised Representative submitted that the Assessing Officer has not rendered any correct or cogent reasons for rejecting the assessee's contention that it has not incurred any expenditure to earn the exempt income of ₹ 18,400 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sideration, but are opening balances of such investments as appear in the books of account of the assessee. It is submitted that the break-up of the investments in shares are as under :- In associate companies 38,70,000 equity shares in Trichy Steel Rolling Mills P. Ltd. : ₹ 3,87,00,000. In other companies 4600 equity shares of Andhra Bank : ₹ 46,000. 6.3.3 The learned Authorised Representative submits that, from the above break up of investments, it is clear that out of the total am .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ch, 2001 and of the investment of ₹ 3.87 Crores in Trichy Steel Rolling Mills, ₹ 1,87,00,000 was invested in the financial year ending 31st March, 2001 and the balance ₹ 2.00 Crores was invested in the financial year ending 31st March, 2003. It is contended by the learned Authorised Representative that these investments are long term investments, which form a part of the record before the IT Department and that no expenditure has been incurred to either maintain or monitor thes .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

expenditure incurred on earning the exempt income of ₹ 18,400. 6.3.4 In this context, the learned Authorised Representative placed reliance upon the decision of the Hon'ble ITAT, Mumbai Bench in the case of J.M. Financial Ltd. V Addl. CIT in ITA No.4521/Mum/2012 dt.26.3.2014. The learned Authorised Representative submitted that in this order the Tribunal has held that where the investment is made in sister / associate concerns, it is so made for the purpose of having control or for bus .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Mumbai Bench in the case of Garware Well Ropes Ltd. V Addl. CIT in ITA No.5408/Mum/2012. The learned Authorised Representative prays that in view of the facts and circumstances of the case and the judicial pronouncements on this issue on similar facts, the addition of ₹ 1,93,730 made under Section 14A rws Rule 8D ought to be deleted. 6.3.5 The learned Authorised Representative alternatively placed reliance on the decision of the ITAT, Mumbai Bench in the case of Daga Global Chemicals Pvt. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in the orders of the authorities below. 6.5.1 We have heard the rival contentions and have perused and carefully considered the material on record; including the judicial pronouncements placed reliance upon by the assessee. The Hon'ble Delhi High Court in the case of Maxopp Investments Ltd. V CIT reported in 347 ITR 272 has held that by virtue of the provisions of sub-section (2) and (3) of Section 14A of the Act, if the Assessing Officer is not satisfied by the correctness of the claim of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the assessee. In the case on hand, we find that the Assessing Officer has not given any cogent reason in the order of assessment for disbelieving the contention of the assessee that it has incurred no expenditure to earn the exempt income of ₹ 18,400 but has proceeded to apply the provisions of Rule 8D to arrive at the disallowance of ₹ 1,93,730 as the expenditure deemed to be incurred for earning exempt income. 6.5.2 Further, as contended by the learned Authorised Representative, t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

discussed and for the reasons stated above, we delete the disallowance of ₹ 1,93,730 made by the Assessing Officer under Section 14A r.w. Rule 8D. 7. Ground Nos. 6 to 8 : Addition u/s.41(1) of the Act. 7.1 These grounds are raised in respect of the addition made under Section 41(1) of the Act in respect of the difference in liability towards Karnataka Breweries & Distilleries Ltd. ('KBDL'). 7.2 The facts of the matter, briefly, are that in the course of assessment proceedings t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

explained payment and cessation of liability and brought the same to tax in the assessee's hands under Section 41(1) of the Act. On appeal, the learned CIT (Appeals) sustained the addition made by the Assessing Officer. 7.3 The learned Authorised Representative submitted that the addition of ₹ 5,87,817 made cannot be sustained on basic accounting principles considering the fact that the liability admitted by the assessee at ₹ 3,65,92,256 is less than the dues of ₹ 3,71,80,0 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ded that in the said case since the assessee has shown a lesser liability than the amount shown as due by its creditor, the basic requirement that a liability no longer exists is not present in the facts of this case in order to apply the provisions of section 41(1) of the Act. 7.4 The learned Departmental Representative supported the orders of the authorities below and prayed for the assessee's appeal on this issue to be rejected as the orders of the authorities below were factually indispu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of ₹ 5,87,817 as unexplained payment and cessation of liability under Section 41(1) of the Act and brought the same to tax in the assessee's hands. On appeal, during remand proceedings, the assessee submitted that the difference appearing in this account was offered to tax by KBDL in the year ended 31.3.2008. The learned CIT (Appeals), observing that in respect of the discrepancy of ₹ 5,87,817, no proof was produced by the assessee to establish that this amount was offered to tax .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on examination of the books of KBDL by the Assessing Officer, it was found that the assessee was shown to be liable to pay KBDL ₹ 3,71,80,073. We find that it is in these factual circumstances the finding of the authorities below is erroneous as the basic requirement that a liability no longer exists is not present in the case on hand to warrant the application of the provision of section 41(1) of the Act. In this being the factual matrix of the case, we delete the addition of ₹ 5,8 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ction of the Assessing Officer in charging the said interest. The Assessing Officer is, however, directed to recompute the interest chargeable u/s. 234B of the Act, if any, while giving effect to this order. 9. In the result, the assessee's appeal for Assessment Year 2009-10 is partly allowed. Revenue's appeal for Assessment Year 2009-10 in ITA No.125/Bang/2013. 10. In its appeal revenue has raised the following grounds :- " Ground No.1. The learned CIT (Appeals) erred on fact and i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tradicting his own findings where he accepted that the capital gains will arise only in the assessment year 2005-06 since the transfer took place during the year on the basis of execution of JDA by the appellant company and further execution of Power of Attorney on 5.2.2005 and 1.3.2005 in favour of M/s. PEPL for transfer of stock for development and finally the CIT (Appeals) is directing the Assessing Officer to take necessary remedial action to tax the capital gains in the appellant's case .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

as of land with Prestige Estate Projects Ltd. ('PEPL') by agreement dt.5.2.2005, in the period relevant to Assessment Year 2005-06 and the project was named 'Prestige Shantiniketan'. 11.2.1 In the course of assessment proceedings, the Assessing Officer after examining the JDA dt.5.2.2005 came to the conclusion that the assessee has transferred stock-in-trade to PEPL and is therefore liable to pay tax arising out of the said transaction. In coming to this conclusion, the Assessing .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Clause (xviii) of the JDA, it is clear that the assessee company has obtained approval from their share holders to enter into the JDA with PEPL and to execute the necessary documents in connection with the same; (iii) As per page 11 of the JDA, the assessee has handed over possession of the property to PEPL till the completion of the development and construction of the project on the property; (iv) As per page 19 of the JDA, the assessee company has agreed to transfer / relinquish / sell 68.23% .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ceeded to determine the assessee's income on the Percentage Completion Method holding that the assessee was not correct in following the Project Completion Method as it was maintaining its books of account on the Mercantile System of Accounting and not the cash system and that the assessee ought to have recognized and admitted its income in accordance with Accounting Standards - 7. The Assessing Officer contends that when both the assessee and PEPL have held common stock of land on which con .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

EPL, the developer, offers its income on the Percentage Completion Method, the same is also applicable to the assessee and it should offer its income on this basis. The Assessing Officer on the basis of advances collected from customers, on behalf of the assessee by PEPL and the non-refundable deposit paid by the PEPL to the assessee, arrived at a sale consideration of ₹ 260,09,86,890. Applying the Percentage Completion Method thereon, the Assessing Officer arrived at the Gross Income of & .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

(2) of the Act in respect of the conversion of the capital asset to stock-in-trade, as well as business income arising on the sale of such stock-in-trade will accrue and arise only in the year in which the stock-in-trade is actually sold. 11.3.2 At para 5.9 of the impugned order, the learned CIT (Appeals) has held that it is an undisputed fact that the assessee was holding the land as stock-in-trade after converting the capital asset and the same was disclosed in the assessee's Balance Sheet .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e learned CIT(A) observes that capital asset as defined in Section 2(14) of the Act specifically excludes stock-in-trade. It is also observed that the conversion of a Capital Asset into stock-in-trade amounts to transfer under Section 2(47)(iv) and that transfer of a business asset is not defined under the Act. The learned CIT(A) has observed that the Assessing Officer is of the opinion that in view of the fact that the assessee has entered into a JDA with PEPL and also executed a POA in their f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ion of sale of the immovable property in order to pass on the title to the purchaser or developer in as much as section 53 of the Transfer of Property Act applies only to those immovable properties which are held as Capital Assets as provided under Section 2(47) of the Act and not to those held by way of stock-in-trade. In both paras 5.15 and 5.17 of the impugned order, the learned CIT(A) has held that since no stock (land/flats or apartments) are sold in the impugned Assessment Year 2009-10, no .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng of sale of land / flat, held as stock-in-trade, by the assessee in the impugned Assessment Year 2009-10 in order to warrant estimation of income by rejection of books of account. The learned CIT(A), in the impugned order, however directed the Assessing Officer to take necessary remedial action to tax the capital gains in the assessee's case in the year in which the stock of land was sold or transferred by the assessee in accordance with the provisions of section 45(2) of the Act and also .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

transferred the share of the developer, PEPL, in the immovable property in the Assessment Year 2005-06 and that the assessee's claim of conversion of the Capital Asset into stock-in-trade is factually incorrect and is merely a cover up to avoid payment of tax for Assessment Year 2005-06. The learned Departmental Representative also placed reliance upon written submissions dt.10.11.2014 which is common to the appeal for Assessment Year 2005-06 and the impugned Assessment Year 2009-10. Therei .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

m that the same was stock-in-trade even before the JDA was entered into with PEPL on 5.2.2005 is not correct. The learned Departmental Representative supported the findings rendered by the Assessing Officer in the order of assessment and prayed for the impugned order of the learned CIT(A) on this point to be reversed and that of the Assessing Officer to be restored. 11.5.1 The written submissions put forth by the learned Authorised Representative on this issue regarding the findings rendered by .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

9;D' property shall however not be construed as delivery of possession under section 53 A of the Transfer of Property Act read with section 2(47) (v) of the Income Tax Act, 1961. The legal possession of Schedule 'D' Party shall continue to vest in the First Party. The Second Party shall only be permitted to enter upon the Schedule 'D' Property by way of license to develop the same. iii. The JDA is a contract between the Assessee and PEPL and the covenants contained therein sh .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

permission given to PEPL to enter upon & develop the Schedule Property is for the limited purpose of Development & should not be construed as handing over of possession as contemplated by section 53A of the Transfer of Property Act read with section 2(47)(v) of the Income Tax Act. v. The conclusion of the assessing officer that the Assessee has handed over possession is therefore incorrect. 8.6 TRANSFER OF LAND TO DEVELOPER: i. Clause 11.1 of the JDA (page 70 of paper book) covenants th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

portions of land which is proportionate to such built up area. ii. It is clear that the Assessee shall transfer the land only after receiving its share of built up area, wherein the construction is complete in all respects & such built up area is fit for occupancy & use. It is therefore important to examine the fact as to when the developer has actually completed construction & handed over the built up areas to the owners. Certainly this cannot happen on the very day the JDA is ente .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ot completed the construction of the Owner's constructed area in all respects even as on 24/03/2011, relevant to the A.Y.2011-12 & therefore the question of considering any income from the JDA in the hands of the Assessee upto the A.Y. 2011-12 does not arise. iv. The Assessing officer is therefore wrong in coming to the conclusion that the Assessee has transferred land to the Developer. 8.7 OBLIGATIONS OF THE ASSESSEE: i. Page 5, sub para IV of the preamble in the JDA (Page 44 of paper b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. Clause No.13(1) of the JDA (page 75 of paper book) stipulates that the Assessee shall complete the purchase of land from KIADB within 12 months from the date of the JDA (05/02/2005), perfect title to the same by obtaining a Sale deed for 14 acres 12 guntas of land in its favour from KIADB. The final sale deed from KIADB was obtained on 23/01/2006 & the same is evidenced by the recital to this effect in the agreement dated 24/03/2011(in page 156 of the paper book). v. Clause No.13(2) of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f paper book) stipulates that the Assessee shall secure a sale deed in its favour from Shivakumar Reddy in respect of 7 acres 14 guntas of land within a period of 45 days from the date of the JDA (05/02/2005). vii. It is clear from the above that as on the date of JDA the Assessee had not secured conveyance of title deeds in its name in respect of 31 acres 21 guntas of land out of the total area of 94 acres 1.82 guntas committed to Joint Development. If this be the case then can it be said that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

page 76 of paper book) states that the Assessee has on 05/02/2005, executed a POA in favour of PEPL authorising it to represent the Assessee before all statutory authorities to secure necessary licenses & permissions to carry out the Development authorities. ii. The presence of this clause itself demonstrates that the land is in the name of the Assessee & all permissions, licenses etc are to be obtained in the name of the Assessee in order carry out development on the Schedule Property. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, lease of PEPL's share of the constructed area. iv. Clause 13.6 (page 76 of paper book) states that the Assessee has executed a separate POA, on 05/02/2005, other than the ones mentioned in Clause 13.4 & 13.5 authorising the PEPL to convey sale deeds, lease deeds etc in respect of PEPL's share of the constructed area & that the said POA is kept in escrow in terms of Cl.13.9 of the JDA. v. Clause 13.9 of the JDA (page 77 of paper book) states that the POA mentioned in Clause 13.6 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssessee being 31.77% , PEPL will be entitled to convey the undivided share for 214.76 sft of super built area).That on completion of the construction of the Owners Constructed Area, the Developer shall intimate the Owner in writing with the architect's certificate and the occupation certificate as to the said completion and if the Assessee does not take possession within 10 days of such intimation, PEPL shall be entitled to exercise its rights over the proportionate undivided interest in lan .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

possession of the POA as the same is kept in escrow shows that PEPL cannot convey title before completing its obligation namely keeping the owners constructed area ready for delivery to the Assessee. Further the undivided interest in land which PEPL is entitled to convey is restricted to only those portions which is proportionate to the Area of Owners whose construction is complete. vii. In view of such conditions as stipulated above can it be said that the Assessee has transferred land on 05/02 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

1 and the POA executed on 05/02/2005 was handed back to the Assessee on 24/03/2011 by the Escrow, which fact is evidenced in page 15 of the said agreement of 24/03/2011(paper book page no.168) under the head "Documents of Title". 8.9 DOCUMENTS OF TITLE: i. Clause No.14 of the JDA (page 78 of paper book) specifies that the Original Documents of Title shall also be kept in Escrow with Mr.Kusuma Muniraju, Advocate having his office at Eden Park, No.20, Vittal Mallya Road, Bangalore and th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of the Constructed Area agreed upon & not before that. iii. Further it is evident from the Agreement entered into dated 24/03/2011, between the Assessee & PEPL that the Documents of title which is kept in Escrow is handed over by the Escrow to the Developer for the benefit of all owners only on 24/03/2011, which fact is evidenced in page 15 of the said agreement of 24/03/2011(paper book page no.168) under the head "Documents of Title". 8.10 RECEIPT OF NON REFUNDABLE DEPOSIT: i. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

with the Development & is forced to abandon or terminate the same, then in such an event any amount received by way of Non refundable Deposit by the Assessee is not returnable to the Developer and this partakes the nature of compensation & becomes a Capital Receipt in the hands of the Assessee. iii. In the event the Developer is able to complete the project then the Non Refundable Deposit gets converted to Sale Consideration & is to be over the entire area of land sold and will be tr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o when the ownership of the land gets transferred from the Assessee it is clear that no part of it is transferred for and upto the A.Y. 2011-12 much less on 05/02/2005 itself. 8.12 The fact that the land which is subjected to Joint Development is Stock In Trade of the Assessee is a very important fact to take note off in order to decide the exact point in time as to when the ownership in these lands held as stock in trade gets actually transferred from the Assessee. 8.13 The application of secti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of undivided interest in land which are actually registered in favour of PEPL or its nominees or any third person for that matter & bring to tax the Capital Gains arising out of such conveyance in such years in which it is so transferred. The sale of undivided interest in land has two components of income. The first is Income from Capital Gains which is to be worked out as per the provisions of sub section (2) of section 45 & the other component being Income from Business, which is to b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

executed by PEPL transferring ownership of the apartment to the purchasers, one can find out the value per sft of land and the value per sft of building. Both these components are to be taxed in the assessment year relevant to the previous year in which the undivided interest in land is actually conveyed and to the limited extent of the land actually conveyed. 8.15 The Hon'ble Chennai Bench of the ITAT has in the case of R.Gopinath (HUF) vs ACIT, 42 DTR Tribunal Judgments 127, held that one .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ords "Otherwise Transferred" in section 45(2) should be according to its ordinary, natural & popular sense, and it should not include a transaction referred to under sub -clause (5) of sub - section (47) of Section 2 of the IT Act, 1961 in relation to a Capital Asset are SUSTAINABLE. By no stretch of imagination, the said transaction can be termed as more or less as sale. When Legal title & possession were with the assessee, then the transfer of the same is not possible merely .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

pital asset does not include Stock in Trade. Further the Tribunal confirmed that the sale of stock in trade is complete when title was conveyed by execution of a registered deed of conveyance. 8.16 In the present case, the facts being similar, the decision of the ITAT Chennai Bench in the case of R.Gopinath (HUF) vs ACIT, 42 DTR Tribunal Judgments 127 is squarely applicable. 8.17 One another important fact that needs to be considered is the assessment order u/s 143(3) passed for the A.Y. 2007-08 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rpose. This has not been done by the assessee company. It stated that the income would be declared when the project is completed. Presumably the assessee is following the project completion method for recognizing the income. This method of revenue recognition has been examined in detail in A.Y. 2005-06. There the assessing officer held that since the corresponding income is not declared for taxation, the corresponding expenses should not be booked as expenditure. The expenditure should be recogn .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssessee has to offer its income on Percentage Completion Method. 8.19 The reasoning of the assessing officer that the Assessee has to necessarily follow the percentage completion method merely because the Developer PEPL is doing so in respect of this project is absurd, to say the least. 8.20 Further Accounting Standard 7 is not applicable to the Assessee in as much as he is not a contractor & is only a land owner who holds the land as stock in trade. 8.21 All these submissions made by the As .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

are also not precluded from following Completed Contract Method of Accounting. When that be the case how can this Assessee who is neither a Contractor and nor a developer but a pure land owner be compelled not to follow Completed Contract Method of Accounting & have Percentage Completion method thrust on it. 8.22 The Assessee has in fact declared the following income from the said project based on Actual Sales made: (i) For the A.Y. 2012-13, Gross Income of ₹ 61,26,29,381/- and a Net .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssessee had actually converted the asset into stock-in- trade before entering into the JDA with PEPL, the learned Authorised Representative submitted that the issue was argued before this Tribunal in the appeal for Assessment Year 2005-06 by both the assessee and the Revenue. The co-ordinate bench of this Tribunal in its order in ITA No.557/Bang/2014 dt.21.11.2014 at para 21 thereof has rendered a finding of fact that the assessee had converted the lands held as Capital Assets into stock-in-trad .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

onvenient for the assessee to sail with Revenue's contention that the lands were never converted into stock-in-trade but was all along held as capital assets and that the ownership stood transferred to PEPL on 5.2.2005. The learned Authorised Representative contends that in these circumstances, in view of and accordance with the decisions of the Hon'ble High Court of Karnataka in the case of CIT V T.K. Dayalu 202 Taxman 531 and of the Hon'ble Bombay High Court in Chaturbhuj Dwarkadas .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e learned Authorised Representative that the finding rendered on this issue in the impugned order of the learned CIT(A) is in order and therefore, the ground raised by revenue on this issue ought to be dismissed. 11.6.1 We have heard the rival submissions of both parties and perused and carefully considered the material on record. We have also perused the decision rendered by a co- ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2005-06 in ITA No.557/Bang/2014. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in the assessee's own case for Assessment Year 2005-06, the point in time when the tax will arise is only in the year in which the stock-in-trade is sold; iii) No sale of such stock-in-trade has been reported to have taken place during the year under consideration i.e. Assessment Year 2009-10; iv) The assessee has reportedly been consistently following the completed contract method of accounting and the same appears to have accepted by revenue; v) The Assessing Officer has not brought on re .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ought to adopt the percentage completion method of accounting merely because PEPL, the developer in the JDA, in following the said method. In the light of the above facts, it would be incorrect to conclude that the assessee has earned any income out of the JDA in the period relevant to the impugned assessment year 2009-10. 11.6.2 On a careful perusal, we find that the judicial pronouncement rendered by the Chennai Bench of the ITAT in the case of R.Gopinath (HUF) V CIT in ITA Nos.29 & 30/Ma .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version