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2015 (7) TMI 839 - ITAT HYDERABAD

2015 (7) TMI 839 - ITAT HYDERABAD - TMI - Treating the agreement for sale of land as sales - Whether there is a sale of the lands having regard to the terms of agreement of sale and as well as the method of accounting followed by the Respondent-Assessee Company - CIT exercising the power of revision u/s 263 had set aside the assessment to re-examine afresh whether the transaction of the Agreement of Sale, the Respondent Company had with M/s. Leo Edibles and Fats Limited, it amounted to sale or n .....

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Act, has no application, because the definition is given in relation to capital asset, which is not clearly applicable to stock-in-trade. Therefore, the law applicable to the immovable property is to be considered to determine whether there is a sale or not. The Hon’ble Apex Court in the cases of CIT vs. Bhurangya Coal Co. [1958 (9) TMI 2 - SUPREME Court] and Alapati Venkatramiah [1965 (3) TMI 21 - SUPREME Court] laid down that the transfer of immovable property was considered to have taken plac .....

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the learned Commissioner of Income Tax (Appeals) and we do not want to interfere with the order of Commissioner of Income Tax (Appeals). Decided against revenue. - I.T.A. No. 838/Hyd/2013 - Dated:- 15-7-2015 - Shri Saktijit Dey and Shri Inturi Rama Rao, JJ. For the Petitioner : Shri A.V.Raghuram, Advocate For the Respondent : Shri Ramakrishna Bandi, Senior DR ORDER PER INTURI RAMA RAO, A.M. : This is an appeal by the Revenue against the order of the learned Commissioner of Income Tax (Appeals)- .....

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preciated the fact that through the agreement of sale dated 02.11.2005 the assessee is entitled to receive the amount of ₹ 502,60,000/- and it is accrued to the assessee as the assessee has the right to receive the same. iv. The Commissioner of Income Tax (Appeals) ought to have appreciated the fact that ITAT, Bench B in ITA No.1080/Hyd/2011 dated 18.05.2012 has already decided the matter on an appeal by the assessee on the order u/s. 263 passed the Commissioner of Income Tax. v. Any other .....

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bsequently, the Commissioner of Income Tax-IV, Hyderabad, exercising the power of revision vested with him under the provisions of Section 263 of the Income Tax Act, 1961, had set aside the assessment to re-examine afresh whether the transaction of the Agreement of Sale, the Respondent Company had with M/s. Leo Edibles and Fats Limited, it amounted to sale or not. The crucial facts of the transactions are that the Respondent-Assessee Company had acquired/purchased the following lands at Mansanpa .....

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Vide document No.7835/2005 01 AC- 19Gts/Sy.No.337 4,84,440 Total 4,68,21,990 3. The Respondent-Assessee Company had entered into an Agreement of Sale dated 02.11.2005 with M/s. Leo Edibles and Fats Limited to sell the land to the extent of Ac.22.32 Gts. out of the above lands for a consideration of ₹ 5,01,60,000/- at the rate of ₹ 22,00,000/- per acre. In terms of the same Agreement of Sale, the Respondent-Assessee Company had received a sum of ₹ 36,55,000/- as advance on 02.11 .....

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that since the Respondent-Assessee company was following the mercantile system of accounting, the transaction should have been accounted as credit sale. Accordingly, the assessment was set aside by the learned Commissioner of Income Tax with the following directions:- 4. I, therefore, direct the Assessing Officer to re-examine the transactions in-depth. She/He should call for the original Minutes Book as maintained by the assessee company and the Vendee in he regular course of their Board Meeti .....

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aid amount to tax. 5. In view of the aforesaid, I hold that the assessment completed by the Income Tax Officer, Ward-6(1), Hyderabad is erroneous in so far as it is prejudicial to the interest of the revenue. I, therefore, deem it proper to set-aside the said assessment order with the direction to re-do the same in the light of the aforementioned findings, observations and directions. 4. Aggrieved by this order, an appeal was filed before this Hon ble Tribunal. This Hon ble Tribunal, after heari .....

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sequential order after affording an opportunity of being heard to the Respondent-Assessee company vide order dated 27.12.2011 treating the transaction as a sale and brought to tax the excess of sale consideration over the purchased price of ₹ 79,27,913/-. Aggrieved by this order, an appeal was filed before the learned Commissioner of Income Tax (Appeals)-V, Hyderabad, who, vide order dated 13.02.2013, allowed the appeal, vide para 5.3 of his order, which is extracted below:- 5.3 I have gon .....

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ment order, I find that the Assessing Officer had not recorded any such cumulative findings for holding the transaction entered by the appellant for the year consideration as sale . As a prudent business man, the appellant entered into an agreement for sale of land. As was done in individual cases, the transaction cannot be treated as transfer basing on the agreement for development. The Assessing Officer almost equated the business transaction of agreement of sale of the appellant-company with .....

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ts cannot, at any stretch by imagination, be treated as sales and taxed under any system of accounting. Only when the property in question was sold by way of executing a sale deed with possession and registered in the name of the purchaser, the transaction can be said to be sale and income had to be taxed on the profits so arrived at from the sale. In the case on hand, no such final transaction has taken place, and therefore, the agreement of sale cannot be termed as sale and the consideration a .....

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nt for reclassification of the land as industrial land . The Assessing Officer also brought out some isolated portion of clause (3) of the agreement regarding the possession and stated that the possession of the land is given by the seller. However, that is not the case as per the agreement of sale. In view of he above discussion, I am not inclined to sustain the addition so made and direct the Assessing Officer to delete the addition. 5. Aggrieved by this Order, the Revenue had come up with the .....

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not to have deleted the addition, inasmuch as, the Respondent-Assessee Company was following the mercantile system of accounting and the possession of the property was given as per terms of the agreement, substantial amount of consideration was received. The Agreement of Sale which was stated to have been cancelled was never produced before the Assessing Officer. Further, he had drawn our attention to clause (3) of the Agreement of Sale, which reads as under:- 3. The Vendee has paid the followi .....

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or from thereon. Therefore, he submitted that the impugned transaction should be treated as sale and the Commissioner of Income Tax (Appeals) without properly appreciating the facts of the case, had deleted he addition, and he had placed strong reliance on the order of the Commissioner of Income passed under Sec. 263 of the Act, as well as on the order of assessment. On the other hand, the learned Counsel for the Respondent-Assessee Company had drawn our attention to the Paper Book filed by the .....

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ther submitted that the agreement was cancelled subsequently on 27.03.2008. A copy of the cancellation of Agreement of Sale is placed at page No.5 of Paper Book. Finally, he submitted that since the property involved is immovable property unless and until the transaction of sale is evidenced by a Conveyance Deed duly executed and registered, it cannot be said that the lands were sold. Therefore, he prayed that the order of Commissioner of Income Tax (Appeals) may be upheld. 6. We heard the rival .....

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