TMI Blog2017 (8) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest income in the year of receipt. Here,we would like to mention that the ‘computation of total income’,u/s.5 of the Act has to made of real income and not of any hypothetical income. No real income had accrued to the assessee during the year under appeal under the head ‘interest income’ considering the method of accounting adopted by it.The assessee had offered the entire interest income in AY.2012-13 i.e. the year of actual receipt. Decided in favour of the assessee. Carry-forward and set off of unabsorbed depreciation - Held that:- As decided in case of General Motors India Pvt. Ltd.[2012 (8) TMI 714 - GUJARAT HIGH COURT] unabsorbed depreciation available to an assessee on 1st day of April 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001, thus once the Circular No.14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997-98 upto the A.Y.2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est of ₹ 1.82 crores.During the assessment proceedings,the AO found that ₹ 25 crores alongwith interest thereon had accrued to it during the year under appeal, that the P L account had not been credited with the amount in question,that the assessee had entered into a development agreement with a developer,that in terms of the supplement agreement to the original development agreement the developer was to acquire at its own cost additional TDR,that assessee was to receive additional consideration of ₹ 25 crores in lieu of that.The AO observed that the assessee was following revenue recognition method.He directed the assessee to explain as to why the additional consideration and the interest thereon should not be treated as revenue receipt for the year under appeal. The assessee furnished its reply on 7/ 9/2011.The AO referred to various clauses of the supplemental agreement and held that revenue minister had sanctioned proposal and granted approval on 11/07/2008, that developer had to pay the assessee ₹ 25 crores within a period of 90 days of getting the externally procured TDR, that the condition mentioned in the agreement were not cumulative and were mutual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t already existed, that the direction of Court did not create any right in favour of the assessee. With regard to interest of ₹ 1.82 crores (for the period 1.11.2008 to 31.3.2009) on the additional compensation of ₹ 25 crores (at the interest rate of 18% for two months and 17. 25% for 3 months),the FAA observed that the assessee was entitled to receive interest on additional compensation,that there was no infirmity in the working of the AO.Finally,he dismissed the Ground raised by the assessee. 4 . Before us,the Authorised Representative(AR)argued that due to ongoing litigation and failure on part of the developer to make additional consideration in November ,2008 the said amount did not accrue to the assessee for the year under appeal, that the litigation was resolved in June,2011 i.e.in AY 2012-13, that the additional consideration could not be taxed in AY.2009-10,that Income tax was leviable on real income and not on the hypothetical income,that in line with the accounting policy on income recognition consistently followed by VLC from year to year the disputed amount was to be accounted for in the year in which the possession of the constructed flats had to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lending rate of SBI, that in terms of order dated 11/07/ 2008 of the State Revenue Minister s permission was granted for utilisation of TDR, that the company took up the matter with GNRC to make payment of additional consideration,that due to ongoing dispute among the partners of GNRC it did not make payment on time,that on failure of GNRC to make payment of additional consideration the assessee moved to Hon ble Bombay High Court and filed winding up petition against the partners of GNRC,that the matter got resolved in term of order dated 28/4/2011 passed by the Hon'ble High Court, that the assessee offered the compensation amount and the interest received by it from GNRC for taxation in the AY.2012-13,that the AO and the FAA had taxed the compensation in the year under appeal. Therefore,the basic question to be decided by us is in which AY.Rs.25 crores should be taxed.The AO has taxed in twice in the AY.2009-10 as well as in AY.2012-13.The fundamen -tal principle of tax jurisprudence stipulates no double taxation and no double deduction.So, same income cannot and should not suffer taxation in two AY.s. It will be useful to refer to the supplementary agreement to determine t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Developer shall pay to the Owner within a period of 90 days thereof a sum of Rs . 25,00,00,000 /- ' ( Rupees Twenty five crores ) as additional consideration ( hereinafter referred to as the Additional Consideration ). 5 . 1 . From the above,it is clear that payment of ₹ 25 crores was to made by the developer to the assessee on occurrence of either of the two events.The Hon ble Bombay High Court passed order on 20.11.2006,therefore the income could have been taxed in the AY.2007- 08.The assessee received additional consideration and the interest in the AY.2012-13 and offered the same in that year.The AO while completing the assessment order u/s.143(3)of the Act substantively taxed the additional compensation for the AY.2012.At that time he was aware of the fact that same amount was assessed in the earlier year.Even then he did not pass a protective assessment.Coming to the facts of the case,it is found that in the year under appeal there was order of the Revenue Minister. But,order of the Minister was not one of the conditions of the agreement.The assessee had challenged the valuation adopted by the Revenue authorities and as per the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided as under :- Section 32 ( 2 ) was amended by the Finance Act, 2001 . The Central Board of Direct Taxes Circular clarifies the intent of the amendment that it is for enabling the industry to conserve sufficient funds to replace plant and machinery and accordingly the amendment dispenses with the restriction of 8 years for carry forward and set off of unabsorbed depreciation . The amendment is applicable from the assessment year 2002-03 and subsequent years . This means that any unabsorbed depreciation available to an assessee on the 1st day of April, 2002 ( assessment year 2002 - 03 ) , will be dealt with in accordance with the provisions of section 32 ( 2 ) as amended by the Finance Act, 2001, and not by the provisions of section 32 ( 2 ) as it stood before the amendment . . Even on the merits the provisions of section 32 ( 2 ) , as amended by the Finance Act, 2001, would allow the unabsorbed depreciation allowance available in the assessment years 1997-98 , 1999-2000 , 2000-01 and 2001-02 to be carried forward to the succeeding years and if any unabsor - bed depreciation or part thereof could not be set off till the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO held that the liability to pay taxes was a contractual obligation on the part of the assessee as per the terms of the agreement entered with the developer,that it was obliged to collect and pay the municipal taxes,that bringing the net effect to nil would not take away the fact that revenue had accrued to the assessee or that the debit was not an expenditure covered by section 43B of the Act,that as per matching principles the amount in question,being differential amount between recovery of municipal property tax (21.03 lakhs) and municipal property tax(76.78 lakhs) had to be added to the income of the assessee.Accordingly,the AO made an addition od ₹ 55.74 lakhs to the total income of the assessee . 8 . 1 . Aggrieved by the order of the AO,the assessee preferred an appeal before the FAA.In the appellate proceedings,he held that there was no real expenditure to the assessee,that the action of the AO in disallowing municipal taxes had to be confirmed. 8 . 2 . Before us,the AR argued that the assessee had not received municipal taxes in the year under consideration,that AO had made double addition,that disputed amount was shown in the return filed for the ne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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