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Vidyavihar Containers Limited Versus The Income tax Officer Range-10 (2) (4) , Mumbai

2017 (8) TMI 411 - ITAT MUMBAI

Accrual of income - Addition on additional consideration as accrued income during the year alongwith accrued interest - scope of the agreement - postponement of revenue - year of assessment - Held 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 of law the assessee had challenged the valuation. In .....

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method of accounting and same had not been rejected by the AO. It has shown 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 .....

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arry 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) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever - Decided in favour of assessee. - Addition made under the .....

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e addition when the assessee had not received the disputed amount during the year under appeal - Decided in favour of assessee. - I.T.A. /6914 & 6915/Mum/2013 And I.T.A. /7029 & 7030/Mum/2013 - Dated:- 23-6-2017 - Sh.Rajendra,Accountant Member And C. N. Prasad,Judicial Member For The Revenue : Ms. Pooja Swaroop- DR For The Assessee : Sh. A.V. Sonde & M.A. Gohel ORDER PER Rajendra A.M.- Challenging the orders dated 4/9/2013 of the CIT(A)-22,Mumbai the Assessing Officer (AO) and the assessee h .....

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business of trading in furnishing material, furniture and fixtures and life style products. ITA/7029/Mum/2014-AY.09-10: 2.First Ground of appeal,raised by assessee,is about addition of ₹ 25 crores received towards additional consideration as accrued income during the year alongwith accrued interest 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 h .....

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ation 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 .....

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he year under consideration and it could not be postponed to subsequent years. He calculated the interest at ₹ 1.82 crores and added it to total income of the assessee. 3.Aggrieved by the order of AO,the assessee preferred an appeal before the First Appellate Authority(FAA)and made elaborate submissions.It relied upon certain case laws also. After considering the assessment order and submission of the assessee,he referred to clause 2.2., 2.3 and 6.1 of the supplementary agreement and obser .....

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ssee was entitled to receive ₹ 25 crores, that when the permission was granted by the State Government it was duty of the developer to fulfill the conditions laid down in the agreement,that irrespective of the dispute among the developers the assessee had a right to receive ₹ 25 crores on 91st day of the Agreement, that the AO had rightly taxed the income under appeal, that he had taxed the real income and not the hypothetical income.He further observed that in the mercantile system .....

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th 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 fa .....

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to be accounted for in the year in which the possession of the constructed flats had to be handed over. He referred to page No.14 and 16 of the PB and further argued that clause 2.1 specifically mentioned that amount would be due on occurrence of certain events,that the first event took place on 20/11/2006,that the amount should have been taxed in that year, that the revenue minister passed the order for the year under consideration with regard to premium,that reducing of premium was not the pre .....

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axed in AY. 2009-10,that it was a clear case of double addition. The Departmental Representative (DR) supported the order of the FAA and referred to the clause 2.1. and 2.2 of the supplementary agreement.She argued that income had accrued to the assessee in the year under appeal,that assessee could not be allowed to defer the payment of taxes,payment of taxes in later AY.s.would not absolve the assessee from paying taxes in relevant AY.i.e.2009-10. 5.We have heard the rival submissions and perus .....

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ional consideration as may be mutually agreed between the parties as and when externally procured TDR was permitted to be utilized, that second supplement agreement was signed on 14/07/2005,that as per the new agreement additional consideration was fixed at ₹ 25 crores,that it was also agreed that in the event GNRC would fail or neglect to make payment of consideration on due date the assessee would be entitled to interest @ 5% per annum over the then prevailing prime lending rate of SBI, .....

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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 dou .....

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nd L.B.S. Marg within, which the said Property is situated provided Externally Procured TDR was generated from the slum area. iv) By an Order dated 8th July, 2004 passed in Writ Petition No.637 of 2003 the, Hon'ble Bombay High Court granted stay of utilization of Externally Procured TDR, in the corridor and at present it is not permissible for the Developer to use and utilize the Externally Procured TDR on the said Property. v) Under the Development Agreement there is a provision for the dev .....

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the terms, conditions and manner hereinafter provided. NOW THIS AGREEMENT WITNESSETH AS FOLLOWS:- 1. The Parties hereto agree, confirm and declare that the said Development Agreement and Supplementary Agreement are valid and subsisting. 2.1 In the event at any time prior to the completion of the development the Hon'ble Bombay High Court or the Hon'ble Supreme Court finally resolves the matter and sets aside Order dated 8th July, 2004 or by the Hon'ble Bombay High Court in Writ Petiti .....

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eof 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 .....

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ment.The assessee had challenged the valuation adopted by the Revenue authorities and as per the provisions of law the assessee had challenged the value - tion.In our opinion,the order of the Revenue Minister cannot be the deciding factor for determining the year of assessment in which disputed amount could be taxed.Therefore,we hold that the FAA was not justified in taxing the additional consideration of ₹ 25 crores in the year under consideration.Reversing his order,we decide the first p .....

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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. Considering the peculiar facts and circumstances of the case,we decide second part of the first ground of appeal in favour of the assessee.In short,first ground of appeal is allowed. ITA/6914/Mum/2013-AY.2009-10 (By Deptt.): 6.Effective Ground of appeal,filed by the AO,is about carry-forward and set .....

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Tribunal,the AO made a disallowance of ₹ 5.32 crores. 6.1.In the appellate proceedings,the FAA relied upon the case of General Motors India Pvt. Ltd. (354 ITR244) of the Hon ble Gujarat High Court. 6.2.Before us, the DR stated that mater could be decided on merits. The AR supported the order of the FAA.We find that in the case of General Motors India Pvt.Ltd(supra),the matter had been decided as under :- Section 32(2) was amended by the Finance Act, 2001. The Central Board of Direct Taxes .....

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th 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 cou .....

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rores ,to the total income of the assessee,as he was of the opinion that the assessee was entitled to recover the interest,amounting to ₹ 4.69 crores ,from GNRC.Following our order for the earlier AY.(paragraph 5.2.),we decide the first ground of appeal in favour of the assessee. 8.Second Ground of appeal is about addition made under the head payment of municipal taxes of ₹ 55.74 lakhs.During the assessment proceedings,the AO found that the auditor had,in the audit report,made some c .....

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of land, that the developer had to pay the taxes directly to the authorities,that it had accounted for the same as income as well as expenditure, that during the year under consideration neither VLC nor the developer had paid taxes to the tune of ₹ 54.74 lakhs,that it did not account for the recovery,that no reimbursement was taking place,that court proceedings were going on against the developer,that there was uncertainty about recovery/reimbursement of the taxes, that the developer subse .....

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e 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 .....

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