TMI Blog2019 (5) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... ong to the period in which it accrues. Therefore case clearly justified the alternative case of the assessee that the assessee was merely a custodian of the advances received till the key features of MOU are met and consequently income from lease agreement had never factually accrued or arose in the hands of the assessee. The surrounding facts and circumstances cannot be brushed aside while entrusted with this task. Book entries may, at times, are only subservient to actual facts. We thus do not see any infirmity in the action of the CIT(A) for non-chargeability of the fictional and unaccrued income in the hands of the assessee. The case sought to be propounded on behalf of the Revenue for taxability of income from proposed lease merely based on book entries de hors its accrual in favour of assessee is not sustainable in law when tested on the touchstone of realistic parameters and well established judicial principles. Disallowance of deduction u/s 80IB(10) - HELD THAT:- On appraisal of the development agreements, various approvals granted by the Municipal Corporation for the relevant projects, the CIT(A) came to a justifiable conclusion that the assessee has exercised domina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not have arrived at a finding adverse to the assessee for the purposes of determination of book profit u/s115JB merely because of it being recognized in the P L account by the assessee. Unaccrued income from SEZ project amounting to ₹ 97,72,11,000/- cannot be taken into account for the purposes of determination of book profit u/s115JB and tax liability cannot be fastened on the assessee on this score. Therefore, we find merit in the appeal of the assessee. Deduction under s.80IB(10) - objection has been raised by the Revenue that the terms and the conditions of eligibility of deduction has been breached in as much as the built up area of the residential units exceeded 1500 sq.ft. - Revenue could not rebut the specific finding of the CIT(A) in para 5.3.8 of its order wherein it was concluded by the CIT(A) that the built up area is below 1500 sq.ft. on the basis of documentary evidences. Disallowance u/s 14A - HELD THAT:- We observe that the assessee has not declared any exempt income and consequently the provisions of Section 14A is not attracted in view of CIT vs. Corrtech Energy (P.) Ltd. [ 2014 (3) TMI 856 - GUJARAT HIGH COURT] and other several decisions in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. 3085/Ahd/2015 2012-13 21.08.2015 29.12.2014 2. The assessee has also filed cross objections and cross appeals (in AYs. 2008-09 2009-10) in the Revenue s appeals primarily to support the action of the CIT(A). 3. We first take up Revenue s appeal for AY 2008-09 for adjudication as stated to be lead year by the parties present. ITA No. 2122/Ahd/2011 A.Y. 2008-09 (Revenue s appeal) 4. The grounds of appeal raised by the Revenue reads as under:- 1. The Ld. CIT(A) has erred in law and on facts in directing the assessing officer to treat the amount of sale consideration as advance money and give appropriate effect to the same in the A.Y. 2012-13 as per law, without appreciating the fact that sale of land transaction is completed and the amount payable for the same is shown by the purchaser as current liability. 2. The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of ₹ 17,15,66,503/- made by the AO on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,400/- @ 12040 sq. mtr. Likewise the company to which the land has been sold i.e. AIPL is also showing the land purchased as fixed assets in his balance sheet. The AO observed that a physical inspection of the SEZ site as well as the details furnished by the assessee reveals that no development activity has been carried out. The uneven and widely vegetated land is lying vacant and it is not even covered by boundary walls. The SEZ proposal of the assessee company was stated to be approved by the Ministry of Commerce vide letter dated 20th December, 2006 subject to certain conditions as prescribed. For the profits declared by the assessee to be derived for SEZ business, the AO inquired into the eligibility of claim of deduction of ₹ 97.72 Crores claimed under s.80IAB of the Act by issue of show cause notice. In response, the assessee provided a tabulated statement giving details about the various stages of compliance of the general conditions associated to proposed SEZ project as reproduced by the AO in para 5.5 of the assessment order. 5.2 The AO made further inquiries with the Development Commissioner of the SEZ and gathered various information and explanation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80IAB of the Act. 6. Aggrieved by the action of the AO, the assessee preferred appeal before the CIT(A). 6.1 Before the CIT(A), the assessee however repositioned itself and challenged the action of the AO on two grounds; (i) the disallowance of claim of deduction under s.80IAB of the Act amounting to ₹ 97,72,11,000/- is not justified at all in the facts of the case and (ii) in the alternative to the first contention, it was also contended before the CIT(A) that the amount received from AIPL in pursuance of lease agreement is merely an advance receipt which cannot be subjected to tax at all as it cannot be treated as accrued income of the assessee in the peculiar factual matrix of the case at all during the relevant assessment year. 6.2 To support the first contention regarding claim of deduction under s.80IAB, the assessee reiterated various submissions made before the AO as noted by the CIT(A) in length and contended that the AO has wrongly appreciated the facts of the case and has wrongly observed that the assessee has not developed SEZ and merely sold notified vacant land without any development as contemplated under s.80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorized to carry out till the end of the relevant financial year. 4. Even the bond cum legal undertaking required to be executed with the Development Commissioner was executed after the end of the relevant assessment year, 5. The assessee company in its various compliance reports to the development commissioner, in its Directors; Reports etc. has admitted that no development has been made at the proposed site of SEZ. 4.3.1 The A.O has discussed this issue elaborately in the assessment order, and reached to the logical conclusion that the land in SEZ can be leased out either to the approved undertaking by the Development Commissioner, or to the Co developer of SEZ , if that Codeveloper has been approved by the administrative ministry of the Central Govt. It is an admitted fact that impugned land has been leased out to M/s Abir Investments Pvt Ltd. which is neither an approved undertaking by the Development Commissioner nor it has Co developer status approved by the respective ministry of the Central Govt. The A O further mentioned that even if M/s Abir Investment is granted the status of Co developer by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le consideration arising from the proposed long term lease agreement of 99 years was found to be highly conditional and subject to fulfillment of several conditions which have not been met. The CIT(A) accordingly found merit in the plea of the assessee that the lease has not come into force and consequently income from such additional lease agreement cannot be said to have accrued to the assessee and crystalized during the year notwithstanding such sale/lease consideration has been treated as revenue receipt in the books of accounts of the assessee. The CIT(A) having taken note of the facts of the case and having regard to the long line of judicial precedents, directed the AO to treat the amount arising from the proposed lease agreement as advance receipt being contingent in nature on account of non-fulfillment of prescribed conditions of the lease agreement qua rules and regulations of SEZ. The CIT(A) accordingly granted relief to the assessee in respect of alternative conditions to advance. 6.4 It will be appropriate to reproduce the deliberations made by the CIT(A) while dealing with the alternative contentions for the sake of proper reference: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction U/s. 80IAB of the I .T. Act, by the appellant, the appellant company has already taken an alternative ground in the grounds of appeal filed with Form No. 35 in Para 7,8 9 while taking the contention that the amount received from M/s. Abir Investments Pvt. Ltd., in pursuance of the lease agreement is an advance receipt not subject to tax as it cannot be treated as an accrued income in the case of the appellant company for the reason that the said lease agreement is subject to fulfillment of obligations of the appellant company and lessee M/s. Abir Investments Pvt.Ltd., and contingent upon the approval of M/s. Abir Investments Pvt.Ltd., as a co-developer by the Appropriate Authority of Government of India. 6.1. The appellant company invite your honour's attention to the lease agreement entered into between the appellant company and M/s. Abir Investments Pvt.Ltd., which has been compiled at Page No. 672 to 731 of Paper Book No. 111. From the perusal of the said lease agreement, in Para 2 the title given is conditions precedent and obligations of the Parties and in Para 2.1 it has been stated that The obligations of the proposed Lessee to comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In Para 5.1 in Clause (O) it has been stated as under :- (O) The Developer undertakes to procure the Co-developer's status for and on behalf of the Proposed Lessee. Official expenses to obtain co-developer status shall be borne by he Proposed Lessee . From the perusal of the aforesaid terms and conditions of the Lease Agreement, it is crystal clear that it is not a formal Lease Deed assigning the leasehold rights of the land of the SEZ Project in favour of M/s. Abir Investments Pvt.Ltd. as it is an understanding between the appellant company and M/s. Abir Investments Pvt. Ltd. to execute formal lease deed on fulfillment of the conditions laid down in the so-called Lease Agreement wherein the obligations of both the parties have been specified. The appellant company invites your honour's attention to Para 2.1 as referred herein above The appellant company has entered into the lease agreement with M/s. Abir Investments Pvt Ltd., simplicitor on a 100 rupees stamp paper as it is not a formal Lease Deed and the same has not been registered with the Registrar. The said land of Notified SEZ Project of the appellant is still standing in the name o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deeds itself. The assessee was obliged to carry on various developmental works not only within the sold plots but also to provide the common facilities for the entire park, and then only deliver the possession of the plots sold to the parties . The Hon'ble ITAT Hyd., in the case cited supra has also followed the principles laid down by the Apex Court in the case of Calcutta Co. Ltd. Vs. CIT 37 ITR 1. 6.3. The contention of the Ld. A.O to the effect that in the books of account, the Appellant has treated the transaction of lease as a transaction of sale of land and therefore there is a violation of provisions of SEZ. Act and hence income earned out of such activity cannot quality for deduction u/s. 80IAB of the Act. The Appellant most respectfully submits that the objection raised by the Ld. A.O is without any substance both on facts as well as in law in as much as treatment given in the books of accounts is a matter of no consequence when it comes to deciding a particular character of an income under the IT. Act. The Appellant submits that a transaction of lease for the user of land in any case is outside the purview of Accounting Standard - 19 issued by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to that effect might, m certain circumstances, have been made in the books of account The reliance is also placed on the decision of Hon'ble Supreme Court in the case of Sutlej Cotton Mills Ltd. Vs. CIT, West Bengal 116 ITR 1 wherein it has been held as under :- It is now well settled that the way in which entries are made by an assesses in his books of account is not determinative of the question whether the assessee has earned any profit or suffered any loss. The assessee may. by making entries which are not in conformity with the proper principles of accountancy, conceal profit or show loss and the entries made by him cannot, therefore, be regarded as conclusive one way or the other. What is necessary to be considered is the true nature of the transaction and whether in fact it has resulted in profit or loss to the assessee . 6.4. On the other hand, the absence of an entry in the books is also not fatal to a claim for deduction. It has been held that in a case where the mercantile system is adopted, for deduction can be made even in the absence of entries in the books. This was a case where no entries were passed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the decision of jurisdictional Hon'ble Gujarat High Court in the case of S.R. Kosti v. CIT (Guj) (2005) 276 ITR 165 and the judgment of the other High Courts The case of Yoosuf v. I.T.O. (1970) 77 ITR 237, CITv. Bharat General Reinsurance Co. Ltd. (1971), 81 ITR 303, CIT v. Archana R. Dhanwate (1982) 136 ITR 355 (Bom). If particular levy is not permitted under the Act, tax cannot be levied applying the doctrine of estoppel. (See Dy. Commissioner of Sales Tax vs. Sreeni Printers (1987) 67 SC 279. The Court in the case of Mirmala L. Mehta v. A. .Balasubramanian, C.l.T. (2004) 269 ITR 1 has held that there cannot be any estoppel against the statute. Article 265 of the Constitution of India in unmistakable terms provides that no tax shall be levied or collected except by authority of law. Acquiescence cannot take away from a party the relief that he is entitled to where the tax is levied or collected without authority of law. In the case on hand, it was obligatory on the part of the Assessing Officer to apply him mind to the facts disclosed in the return and assess the assessee keeping in mind the law holding the field. From t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- in its books of account and claimed the same as deduction u/s 80IAB of the Act in the Return of Income. The claim of 80IAB was disallowed by the A.O and the same has been confirmed by me in the earlier paras of the appellate order. 4.3.8 Now the question arises whether the impugned conditional lease transaction is crystallized and income has been accrued, which is liable for taxation. It is an admitted fact that impugned lease agreement is conditional subject to approval of Central Govt. as Co developer to M/s AIPL. As per the submission of the appellant the impugned lease agreement .with M/s Abir Investment Pvt Ltd is on stamp paper of ₹ 1 DO/- and it is not a formal lease deed and the same has not been registered with the Registrar. The said land of Notified SEZ of the appellant is still standing in the name of the appellant in Land Revenue Records, and as such lease hold rights in the impugned land has not been created in favour of M/s AIPL. As per provisions of S.2 (47) of the Act, the so called lease agreement which is unregistered does not amount to lease of land/ sale of land. The AIPL has not been approved as Codeveloper by the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this income was claimed as exempt u/s 80IAB. In the scrutiny assessment the claim of exemption was denied by the DCIT. Thereafter, the matter was referred for appeal before CIT-Appeals. During the course of hearing, various opinions from tax consultants and advisors were obtained OH the subject matter, it was opined that in the absence of any crystallization of accrual of income, the amount received for perpetual lease is to be considered as advance and to be accounted as current liability. The income could not be booked for the reason that the terms and conditions of co-developer under the provisions of the SEZ Scheme as laid down in the agreements between the company and Abir Investment Pvt Ltd., are not fulfilled as on the date relevant to F.Y. 2007-08. It was also opined that the income can be booked as income from the development of SEZ and within the meaning of provisions contained u/s 80IAB of the Act, 1961. With the above referred background the matter was discussed at length and it was decided to reverse the income of ₹ 97.72 crores as income from perpetual lease of land situated in SEZ by cancelling the agreements entered with Abir Investment Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and M/s. Abir Investments Pvt. Ltd.. was also required to be discharged as a proposed co-developer before execution of the final lease deed. The appellant company relied upon the decision of Hon'ble Supreme Court in the case of Calcutta Co. Ltd. Vs. CIT 37 ITR 1 and the decision of Hon'ble ITAT, Hyderabad 'A' Bench in the case of DCIT vs. Shapoorji Pallonji Biotech Park (P) Ltd. 138 TTO'62, wherein it has been held that The A.O was not justified in assessing the income in respect of sale deeds executed as it would not give rise to any income assessable to tax during the year under consideration since the said income was charged with several obligations which the assessee was to discharge before the delivery of plots to the buyers in terms of the sale deeds itself. The assessee was obliged to carry on various developmental works not only within the sold plots but also to provide the common facilities for the entire park, and then only deliver the possession of the plots sold to the parties . The Hon'ble ITAT Hyd., in the case cited supra has also followed the principles laid down by the Apex Cu7ourt in the case of Calcutta Co. Ltd. Vs. C1T 37 1TR 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crystallized in the nature of receipt or accrual of income. The books of account of the company are maintained on mercantile basis and the same are mandatory as envisaged u/s 210 of Companies Act, 1955. Even the Tax Audit Report and notes forming part of account as stated in the Balance Sheet clearly states that the books of account by the appellant company are maintained by following mercantile system of accounting. A premature entry of booking the profit in the books of account cannot be a basis of being treated as income accrued or receipt and therefore, consequently also it cannot be a valid basis for claiming deduction u/s 80IAB. The reliance of the appellant on various judicial pronouncements by various courts including that of Appex Court as referred supra , fully supports the alternative contention of the appellant. In view of the above referred clear cut facts, discussions and finding, I direct the AO to treat this amount as advance receipt being contingent in nature on account of non-fuifillment of prescribed conditions of the lease agreement visa vis rules and regulation of SEZ and accordingly the same cannot be eligible for deduction u/s 80IAB, also. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee for treating the sale consideration arising by virtue of long term lease as advance receipt of contingent nature as claimed by the assessee for the purposes of normal provisions of the Act. The learned CITDR pointed out that the assessee itself has declared the consideration arising from lease deed as revenue receipt chargeable to tax and therefore, there was no warrant for the CIT(A) to treat the same as advance receipt and a receipt not in the nature of income. The learned CITDR further submitted that not only the assessee has recorded the entries as revenue income in its books of accounts and recorded liability of AIPL for outstanding payment receivable on account of lease deed, the corresponding lessee company have also recorded entries in its books as acquisition of land forming part of the fixed assets and also recognized the liability payable to assessee for outstanding amount of lease consideration in this regard. Therefore, the transaction recorded by the assessee itself in a particular manner does not warrant any exception as claimed. It was thus contended that no reasons exist to deviate from the declared intentions (as revenue income) of the assessee in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and rights of the assessee company as also of proposed co developer AIPL for approval of lessee (AIPL) as a co-developer of the SEZ project of the assessee company. It was understood between the assessee (lessor) and AIPL (lessee) that if the approval of AIPL is not obtained from the Government of India as a co-developer for the SEZ project, assessee company always remained under sacrosanct and binding obligation to refund the amount of advance received from AIPL. It was thus contended that the so called lease agreement (MOU) was squarely contingent upon the event namely approval of leasee as co-developer and in the absence of sanction from GOI, the contract was to be repudiated. 10.2 The learned AR for the assessee therefore adverted to the provisions of Section 80IAB of the Act in justification of eligibility of its claim and contended that the assessee requires to be a developer engaged in the business of developing SEZ and the deduction as per sub-section (2) of s.80IAB of the Act is eligible at the option of the assessee beginning from the year in which SEZ has been notified by the Central Government. Delineating further, the learned AR canvassed that the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of developing the SEZ had begun with the notification of land in question as SEZ by Government of India (GOI). The learned AR thus submitted that in view of 80IAB(2) of the Act, the assessee is fully entitled for deduction once SEZ has been notified and beginning of operation in SEZ has been per se is not required. The learned AR thus contended that sale of vacant land notified as SEZ is thus profit and gains arising from developing SEZ as contemplated under s.80IAB of the Act. The learned AR thus submitted that both lower authorities were not justified in denying the deduction rightfully claimed by the assessee. 10.5 The learned AR further found fault with one of the objection raised on behalf of the Revenue that the land leased out to AIPL was not approved by the Development Commissioner and therefore, the assessee was not entitled to deduction on sale of such land. In this context, the learned AR submitted that the assessee has not sold the land as wrongly inferred on behalf of the Revenue. The notified land has only been proposed to be leased out to AIPL vide MOU/agreement dated 26th June, 2007. The learned AR contended that as per SEZ Act, 2005 and Rules the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit which is what has been done by the assessee. The learned AR thus submitted that while an entrepreneur wanting to set up a unit in SEZ then as per the SEZ Rules 10(6)/(7), permissions of Development Commissioner would have been required but however, the lessee AIPL is only a proposed co-developer and not a prospective undertaking. No conditions of SEZ Act and Rules thereunder is thus violated. In the circumstances, the gains arising from the leasing out of land in notified SEZ is without any breach of Rules and thus is eligible for deduction under s.80IAB of the Act without any fetters. The learned AR also pointed out that a bond-cum-legal undertaking required to be executed with the Development Commissioner is only procedural in nature. Such bonds had been duly executed on 28.11.2008. It was further submitted that Section 80IAB of the Act does not require the compulsory execution of all formalities for the purposes of carrying on the development work. The learned AR reiterated that benefit of Section 80IAB would commence at the option of the assessee immediately from the beginning of the year in which SEZ has been notified and thus, no strings are attached for claim of deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land to be given to AIPL on lease as co-developer was subject to an approval of the GOI. It was underscored that the lease deed with AIPL was conditional and existential upon fulfillment of substantive conditions. The lease deed could be effected on fulfillment of obligations which is essentially dependent upon the approval of the proposed co-developer AIPL by the competent authority of the GOI. It was further pointed out that the proposed lessee was to pay advance to the assessee as agreed upon but it was simultaneously also agreed that the assessee developer shall return the earnest money so received with interest if the agreement is terminated owing to non-fulfillment of obligations and where the approval of AIPL is not granted as co-developer by the competent authority under SEZ Act, 2005. It was an obligation of the assessee to procure the approval of the co-developer for and on behalf of the proposed lessee. It was thus contended that on a holistic reading of terms and conditions of the lease agreement, it would be crystal clear that it is not formal lease deed whereby the leasehold rights of the part of the land of SEZ project stood assigned in favour of AIPL and the executi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of amount received over a period of time beginning from 03.10.2007 to 25.02.2011 aggregating to ₹ 148 Crore from AIPL. The learned AR submitted that only a fractional amount of ₹ 1Crore was received by the assessee with reference to the aforesaid proposed lease during the AY 2008-09 in question. The learned AR submitted on facts that while the Revenue from the proposed lease was recognized as income from SEZ project, the assessee has also recognized corresponding receivable from AIPL to the tune of ₹ 103.23Crores during the year. 11.5 The learned AR thereafter referred to another tabulated statement of re-payment of advance to AIPL in FY 2014-15 to the tune of ₹ 147 Crores in aggregate as called for by the Tribunal in the course of hearing. Placing reliance on the subsequent happenings of the money received and eventually returned, the learned AR justified its case that the amount received was merely on advance which was ultimately refunded to AIPL owing to no headway in the approval of the proposed lease and consequent induction of AIPL as co-developer in the SEZ project. 11.6 The learned AR thereafter referred to the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zing the factual position, the learned AR for the assessee thus submitted that in the advance received from AIPL in pursuance of MOU is merely an advance receipt and is not accrued in the hands of the assessee as an earned income for the reason that the approval of the said company as co-developer could not be received from GOI. With reference to the MOU/lease agreement, the learned AR for the assessee sought to point out that the said land of the notified SEZ project of the assessee is still standing in the name of the assessee in the land revenue records for which supporting evidences were placed before the lower authorities. The so called lease agreement is not registered and the leasehold rights in the said land has not been created in the name of AIPL on the land revenue records and therefore the transaction cannot be treated as sale of land as mis appreciated by the AO in the assessment order. It was also sought to explain that the enjoyment of the said land of the notified SEZ was also not given to AIPL and therefore, no transfer/sale of land can be envisaged as per the provisions of the Act. In essence, the learned AR attempted to claim that advance received by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount received from AIPL alongwith interest @ 6% p.a. The assessee has received only a token amount of ₹ 1 Crore during the year against the total consideration determined at ₹ 1,04,23,58,400/- and thus the majority of the amount remains outstanding in the books of account of the assessee as a debt receivable from lessee and similar outstanding has been recorded as current liabilities in the corresponding books of accounts of lessee AIPL payable to assessee. 12.2 The assessee has proceeded to declare income from SEZ project to the tune of ₹ 97,72,11,000/- after reducing the cost of land in lease amounting to ₹ 6,51,47,400/- from the said consideration determined based on such tentative and conditional lease agreement noted above. The assessee has claimed deduction under s.80IAB of the Act of the aforesaid amount of ₹ 97.72 Crores on the premise that the deduction of profits arising from business of developing SEZ is available to the assessee beginning from the year in which SEZ has been notified by the Central Government. It is the case of the assessee that the assessee has fulfilled the aforesaid condition stipulated in sub-section2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduced from lease transaction was highly contingent and neither accrued nor crystalized during the year. It is also the case of the assessee that although the consideration agreed with the assessee has been wrongly recognized in the books of accounts as income from SEZ project, it has never actually accrued in the hands of the assessee at all on mere receipt of an insignificant advance in the context and without fulfillment of key obligations associated with agreement. On these broad facts and having regard to the tenets of MOU, we find that CIT(A) has concluded that the MOU/lease agreement cannot be given effect to and no part of receipt can be treated as income of the assessee. The overriding conditions were not found to be fulfilled and therefore, the CIT(A) found significant merits in the alternative contention of the assessee for its non taxability on the ground that mere book keeping entry in a particular manner cannot make assessee liable to pay tax in the absence of wake of demonstrable facts towards actual accrual of the income. The CIT(A) has referred to several judicial pronouncements to buttress its view. The deliberations made by the CIT(A) is already reproduced in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. 12.5 The Hon ble Calcutta High Court in Modern Malleables Ltd. vs. CIT (2011) 11 taxmann.com 131 (Cal.) once again reiterated the settled principle of law that if a particular income is not taxable under the Act, it cannot be taxed on the basis of estoppel or in other equitable doctrine. The Hon ble High Court further observed that merely because an assessee has made wrong or even fictitious entry in account, such act cannot be a ground for accepting such wrong or fictitious entry. The Hon ble High Court observed that since nature of original entry in the accounts, on the face of it, was not in conformity with law of accountancy, it was duty of Revenue to call for explanation from assessee and to come to a definite conclusion as regards real nature of transaction. The assessing authority cannot enforce apparent wrong entry against the assessee simply because by such alleged wrong entry, assessee had shown higher amount of income. It is thus open to the assessee who made a book entry to show that it is incorrect. 12.6 Hon ble Bombay High Court in Nirmala L. Mehta vs. Ac. Balasubramaniam (2004) 269 ITR 1 (Bom.) held that there cannot be any estopp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. The case sought to be propounded on behalf of the Revenue for taxability of income from proposed lease merely based on book entries de hors its accrual in favour of assessee is not sustainable in law when tested on the touchstone of realistic parameters and well established judicial principles. We thus decline to interfere with the action of the CIT(A). 12.8 Ground No.1 of the Revenue s appeal is accordingly dismissed. 13. Ground No.2 of the Revenue s appeal concerns disallowance of deduction under s.80IB(10) amounting to ₹ 17,15,66,503/-. 13.1 The AO in the course of the scrutiny assessment observed that the assessee is not entitled to deduction under s.80IB(10) of the Act for the following reasons: (1) The assessee is not the owner of the lands on which projects have been erected. The same is established from the fact that the assessee company had to enter into development agreement for construction of the hosing projects. Had the assessee enjoyed unobstructed rights in land, the same would not have been necessary. (2) The layout plans of the project has been approved by the local autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and therefore, in terms of the decision of the Jurisdictional Tribunal in the case of M/s. Radhe Developers in IT A No. 2482/Ahd./2006 for 2003-04 {now reported at 113 TTJ (Ahd) 300}, it is sufficiently established that in the case of the appellant on acquiring dominion over the property, the assessee has developed and constructed the housing projects at its own cost and risks and therefore, the assessee is deemed to be the owner of the property on which the project is done. 5.3.5. The relevant finding of the aforesaid decision of M/s. Radhe Developers Ors. Vs. I.T.O. Ors. (supra) is reproduced hereunder for the same of convenience: A bare reading of the provisions of S. 80-IB(10) as they stood in the years under consideration, shows that the requirements for claiming deduction for housing projects are that (i) there must be an undertaking for developing and building housing project; (ii) such housing project is approved by the local authority' (iii) the development and construction of housing project has commenced on or after 1 day of October, 1998; (iv) the housing project is on -a size of plot of land which has a minimum ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce: The facts involved in the case of the assessee are similar to the facts in the -case of Radhe Developers (supra) and accordingly, we are of the view that the assessee has acquired the dominance over the land and has developed the housing project by incurring all expenses and taking all the risks involved therein. We may mention here that, in our opinion, the decision in the case of Radhe Developers (supra) will not apply in a case where the assessee has entered into the agreement for a fixed remuneration merely as a contractor to construct or develop the housing project on behalf of the landowner. The agreement entered into in that case will not entitle the Developer to have the dominant control over the project and all the risks involved therein will vest with the landowner only. The interest of the Developer will be restricted only for the fixed remuneration for which he would be rendering the services. The decision in the case of Radhe developers (supra) has not dealt with such situation. The proposition of law laid down in the case of Radhe Developers cannot be applied universally without looking into the development agreement entered into by the Develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the copy of the ledger account showing consideration paid for acquiring the rights in the land and also copies of income tax return of the transferors would show that the transferor companies have offered taxes (LTCG) in their respective returns recognizing the transfer of land in favour of the assessee. It was contended that the assessee has the intrinsic right and ownership in the land as per the development agreement entered into with the land owner companies for which the consideration has been duly paid to the land owners. Thus, the assessee has acquired dominant control over the land on which construction and development of the residential housing project was carried out. The assessee incurred all the expenses of the development, construction and administrative expenses and took all risks and liabilities. As a sequel thereto, all the profits or loss in relation to the development of the residential house project stood vested in the assessee. The learned AR contended that all the terms and conditions laid down in Section 80IB (10) of the Act were fulfilled and is supported by relevant evidences as placed before the lower authorities. The learned AR next submitted that the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure of ₹ 1.31 Crores in the ratio of borrowed funds (₹ 81.24 Crore) vis- vis total own funds of (₹ 385.17 Crores). 15.2 Aggrieved by the disallowance of proportionate interest expenditure, the assessee preferred the appeal before the CIT(A). It was contended before the CIT(A) that while the assessee has incurred interest expenditure of ₹ 6.21Crores, the assessee has also simultaneously earned interest income of ₹ 12.62Crores and resultantly, there is a net interest income of ₹ 6.41 Crores in the hands of the assessee company. This fact was overlooked by the AO. It was further contended that the assessee company holds own capital by way of share capital and free reserves to the tune of ₹ 417.83 Crores whereas the corresponding advance of ₹ 259 Crores were given interest free. It was contended that advances have been made for business purposes as pointed out to AO. It was further contended that in view of the own funds (interest free) at the disposal of the assessee in excess of the advance made, the issue is covered by the judgment of the Hon ble Bombay High Court in CIT vs. Reliance Utilities and Power Ltd. (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose. In view of above referred facts and legal position of the law, I direct the AO to delete the disallowance made of interest amounting to Rs, 1,31,00,000/-, 15.4 Aggrieved by the relief granted by the CIT(A), the Revenue preferred appeal before the Tribunal. 15.5 The learned DR for the Revenue relied upon the order of the AO. 15.6 The learned AR for the assessee, on the other hand, reiterated various submissions made before the CIT(A) and submitted that law is well settled in this regard. It was further pointed out that for the AY 2014-15 where the assessee is placed in the similar circumstances, no disallowance has been made by the AO himself of correct appreciation of fact. The learned AR for the assessee accordingly submitted that there is no warrant for any interference with the order of the CIT(A). 15.7 We have heard rival submissions. The maintainability of disallowance of interest expenditure under s.36(1)(iii) of the Act is in question. As noted by the CIT(A), the assessee has clearly demonstrated its own funds to be in excess of corresponding interest free advances. Secondly, the assessee has earned sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5JB of the Act. It is the case of the assessee that as demonstrated in the Revenue s appeal in ITA No. 2122/Ahd/2011 (supra), the agreed consideration recognized on the basis of MOU has neither accrued nor received and the income from such MOU is completely contingent and conditioned upon fulfillment of various obligations integral to the proposed agreement including approval of the Government for putting the proposed agreement into motion. In essence, it is further contended that assessee has received only a token amount of ₹ 1 Crore during the year and remaining advance received in subsequent years were ultimately returned due to lack of approval of the lessee as a co-developer in SEZ project from the Central Government. It is contended on behalf of the assessee that when the CIT(A) has observed on facts that the consideration agreed upon as per the lease agreement is highly contingent and liable to be returned on non-fulfillment of prescribed conditions, there was no warrant for the CIT(A) to reckon the same consideration (recognized in the books owing to such agreement) for the purposes of determination of book profit. As noticed earlier, it is also the contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from operations should not enjoy tax free status due to many deductions available under the Income Tax Act. It was contended that there was never any intention of the legislature to tax what is not income at all. It was submitted that inclusion of such a refundable advance receipts of intrinsically contingent nature (which is parallely a liability of the company) in the computation of MAT would defeat both the fundamental principles namely (i) it would tantamount to levy to tax on receipt which is not in the nature of income and (ii) it would give rise to misleading working results of the company instead of real working result. It was submitted that in order to arrive at the correct working result, the consideration agreed by way of MOU and recognized in the books despite its highly contingent and dependent on various unforeseen and uncontrollable factors requires to be excluded unless the right to receive the consideration accrues and crystalizes in favour of the assessee. It was further contended that the principles laid down by the Hon ble Supreme Court in a case of Apollo Tyres Ltd. vs. CIT (2002) 255 ITR 273 (SC) is limited to the aspect whether the AO is entitled to recast a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in subsequent year and thus does not bear the character of income in the absence of legal right to receive such money created in favour of the assessee and thus cannot form part of the book profit for the purposes of Section 115JB of the Act. 16.2 Learned DR, on the other hand, submitted that the assessee itself has recognized the consideration from lease agreement as the revenue income and therefore, there is no reason for the AO to travel beyond what has been accepted by the assessee itself and therefore, no adjustment for determination of book profit is required. 16.3 We have carefully considered the rival submissions and the facts of the case and perused the order of the lower authorities. The pertinent question involved is whether the consideration arising from the MOU/lease deed with AIPL recognized as revenue income despite it being a contingent liability and admittedly not accrued or earned by the assessee is liable for taxation under s.115JB of the Act or not. 16.4 It may be pertinent here to re-capitulate that Section 115JB of the Act requires that the account of the company should be prepared in compliance with Schedule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses of determination of book profit under s.115JB of the Act merely because of it being recognized in the P L account by the assessee. We are thus of the considered view that unaccrued income from SEZ project amounting to ₹ 97,72,11,000/- cannot be taken into account for the purposes of determination of book profit under s.115JB of the Act and tax liability cannot be fastened on the assessee on this score. Therefore, we find merit in the appeal of the assessee. The obscure and unintelligible order of the CIT(A) is consequently set aside and the AO is directed to exclude the aforesaid income for the purposes of determination of book profits. 16.6 In the result, appeal of the assessee in ITA No. 2179/Ahd/2011 for AY 2008-09 is allowed. CO No. 237/Ahd/2011 A.Y. 2008-09 (in ITA No.2122/Ahd/2011) 17. The grounds of appeal raised by the assessee read as under: 1. The Ld. CIT (A)- VIII, Ahmedabad after going through the details and submissions made by the Respondent as well as after duly considering the various facts of the case as well as various case laws has rightly given the direction to the A.O to treat the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly appreciating the facts of the case and the material brought on record. 19. The Ground No.1 of the Revenue s appeal concerns disallowance of deduction under s.80IB(10) of the Act concerning AY 2007-08 in question. The issue is identical to the Ground No.2 of the Revenue s appeal in AY 2008-09 (supra). In parity with the conclusion drawn in AY 2008-09 in Revenue s appeal, Ground No.1 of the Revenue s appeal is dismissed. 20. Ground No.2 of the Revenue s appeal concerns deduction under s.80IB(10) of the Act wherein objection has been raised by the Revenue that the terms and the conditions of eligibility of deduction has been breached in as much as the built up area of the residential units exceeded 1500 sq.ft. In the course of hearing, the learned DR for the Revenue could not rebut the specific finding of the CIT(A) in para 5.3.8 of its order wherein it was concluded by the CIT(A) that the built up area is below 1500 sq.ft. on the basis of documentary evidences. We thus decline to interfere with the order of the CIT(A). Ground No.2 of the Revenue s appeal is dismissed. 21. Ground No.3 of the Revenue s appeal concerns disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24. All the grounds raised in the memorandum of cross objection filed by the assessee merely supports the order of the CIT(A). In the absence of any objection per se to the order of the CIT(A) and also in the light of the fact that Revenue s appeal concerning AY 2007-08 is dismissed, the cross objection of the assessee is rendered infructuous. 25. In the result, cross objection of the assessee dismissed as infructuous. ITA No. 452/Ahd/2014 A.Y. 2009-10 (Revenue s appeal) 26. The grounds of appeal raised by the Revenue reads as under:- 1. The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of ₹ 71,99,242/- made u/s. 80IB(10) of the Act relying on the appellate order of the predecessor in the case of assessee for A.Y. 2008-09 in which reliance was placed on the decision in the case of Radhe Developers in ITA No. 2842/Ahd/2006, without properly appreciating the facts of the case and material brought on record. 2. The Ld. CIT(A), however, failed to appreciate the fact that the assessee company did not satisfy the condition with regard to built up area as the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e grounds raised by the assessee in its appeal seeks to assail the alleged obscurely in findings of the CIT(A) towards manner of dealing with taxability under s.115JB of the Act. It was contended that where the CIT(A) found that the advance receipts from lessee is not in the nature of accrual income, it could not be taken into accounts for the purposes of s. 115JB either. The issue has been deliberated in length in assessee s appeal concerning AY 2008-09 in ITA No. 2179/Ahd/2011 (supra). The issue being identical, our conclusion drawn concerning AY 2008-09 shall have the same effect for AY 2009-10. 34. In the result, appeal of the assessee in ITA No. 298/Ahd/2014 for AY 2009-10 is allowed. CO No. 129/Ahd/2014 A.Y. 2009-10 (in ITA No.452/Ahd/2014) 35. The grounds of appeal raised by the assessee read as under: 1. The Ld. CIT(A) after considering the facts of the case, submission of the Respondent as well as relying on the appellate order passed by the predecessor in the case of the appellant company for A.Y. 2008-09 has rightly held in law and on facts that since a clear finding has been given in the above referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jection of the Revenue. 40. In the result, appeal of the Revenue in ITA No. 3011/Ahd/2014 for AY 2010-11 is dismissed. CO No. 322/Ahd/2014 A.Y. 2010-11 (in ITA No.3011/Ahd/2014) 41. The grounds of appeal raised by the assessee read as under: 1. The Ld. CIT(A) - VIII, Ahmedabad after carefully considering the facts of the case, submission of the Respondent as well as the various case laws relied upon by the Respondent and following the appellate order for A.Y. 2008-09 2009-10, has rightly given the direction to the A.O to delete the disallowance u/s. 36(1)(iii)of the Act ₹ 8,67,06,000/- as the issue being a covered matter in appellant s own case for A.Y. 2008-09 A.Y. 2009-10. 42. All the grounds raised in the memorandum of cross objection filed by the assessee merely supports the order of the CIT(A). In the absence of any objection per se to the order of the CIT(A) and also in the light of the fact that Revenue s appeal concerning AY 2007-08 is dismissed, the cross objection of the assessee is rendered infructuous. 43. In the result, cross objection of the assessee dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.36(1)(iii) of the Act, without properly appreciating the facts of the case and the material brought on record. 2. The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of ₹ 6,96,18,668/- made u/s.14A of the Act, without properly appreciating the facts of the case and the material brought on record. 51. The objection of the Revenue in AY 2010-11 concerning eligibility of interest expenditure under s.36(1)(iii) of the Act is identical to the similar objections raised as per Ground No.3 of AY 2008-09. In line with the detailed discussion made in AY 2008-09 in revenue s appeal, we do not see any force in the objection of the Revenue. 52. Ground No.2 of the Revenue s appeal concerns disallowance under s.14A of the Act. The assessee claims to earn no exempt income. It has however suo motu disallowed ₹ 68,65,382/- and offered the same in its computation of the taxable income. The AO applied Rule 8D and computed addition disallowance of ₹ 6,96,18,668/-. 52.1 In first appeal, however, the CIT(A) sustained the addition to book profits under s.115JB to the extent of suo motu disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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