9911796707
TMI Blog2020 (3) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... een developer and the assessee regarding the validity of lease rent agreement as well as development right agreement. 2. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the advance income of Rs. 269.48cr received by the transfer of asset without appreciating the fact that in the relatively new circumstances the AO analyzed and concluded that Revenue has arisen on account of transfer of asset and the tax on the Revenue generated cannot be postponed indefinitely. 3. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that the advances received in different years, though credited in the account of the assessee in the previous year relevant to the AY-2011-12,is not taxable in that assessment year without appreciating the fact that these amounts had been shown as the contingent receipts by the assessee and were not offered to tax in year of receipt. 4. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that the lease rent and 12% of sale proceeds pertaining to the AY 2009-10, 2010-11 and the instant assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 82. The relevant written submissions of the assessee have been reproduced by the AO in assessment order at para. 5.2 on pages 3 of assessment order. 5. The facts culled out from the records in respect of impugned dispute are that one Mr. Edulji Framrize Dinshaw a parsi American, resident of New York, USA had during his life time inherited vast tracks of land in northern suburbs of Mumbai which were acquired by his father Late F.E. Dinshaw (EFD). In February 1970, EFD executed his Will appointing his sister Ms. Bachoobai Woronzow ('BW') as the executrix of the Will for administering the Estate. The Bombay High Court vide its order dated 21st December 1972 appointed Mr. Nusli N Wadia ("NNW") as the Administrator of the Estate of EFD ("the assessee"). Mr. NNW, acting as the sole Administrator of the estate of the said E.F.Dinshaw, entered into agreements with developers of real estate (M/s Ivory Properties and Hotels Private Limited in relation to development of designated land admeasuring 205.69 acres and M/s Ferani Hotels Private Limited in relation to development of the designated land admeasuring 478.50 acres (hereinafter referred to as "developers"}. By the said agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment had considered these gains as Business Income in various years arising out of the business of real estate activity carried out by NNW the Administrator. The Tribunal has consistently held that the same is Capital Gains and not Business Income in the hands of the estate. The transaction which was involved in AY 2003-04 related to sale of assessee's interest in land situated at Malad, Mumbai in respect of which the development rights were awarded to M/s Ivory Properties Pvt. Ltd. In AY 2003-04, the assessee had executed two conveyances in favour of M/s Blueberry & M/s Property Venture and 12% share in the sale consideration received from the transferee was offered to tax under the head "Capital Gains" in the year in which the conveyances were executed. As such, in respect of sale of land covered by the development agreement with Ivory Properties Pvt. Ltd, also; the appellate authorities up to the Hon'ble Supreme Court had upheld the assessee's contention that the profit made by the assessee would be assessable under the head "Long Term Capital Gains". Further, in the year 2008, Mr. NNW took legal steps for termination of his agreements with Ivory & Ferani respectively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 stayed the judgment of the Single Judge. Administrator also filed an cross appeal against order of single judge on 3rd August 2010 which was admitted and directed to be heard along with the Appeal of Ferani. Later on, the Division Bench of the Bombay High Court by its common order and judgment dated 19.07.2012 allowed the appeal of Ferani since the Single Judge had disposed of the entire Notice of Motion contrary to Section 9-A of CPC. The judgment of the Single Judge was set aside to that extent. In its judgment dated 19.07.2012, the Division Bench of the High Court framed the preliminary issues under section 9A of CPC as 'Whether the claim of the Plaintiff in the suit is barred by limitation' and further directed as follows: "(i) Pending the hearing and final disposal of the preliminary issue, (Ferani) is directed to maintain accounts and to continue depositing an amount equivalent to 12% of the gross sale consideration in a designated bank account. The amount upon deposit shall be invested in a fixed deposit to abide by further orders of the learned Trial Judge"; and (ii) Liberty is reserved to the Administrator to apply before the Learned Single Judge for appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt shown under the head advances is a liability which ceased to exist as liability and therefore was assessable under the head income from other sources. The AO had also taken support from the provisions of Maharashtra Flat/Apartment Owners' Act, (MOA) Act, to come to the conclusion that there being deemed conveyance in favour of the flat purchasers, and hence income accrued in a financial year relevant to A.Y. 2011-12 becomes deemed conveyance of land. The AO further observed that the assessee is continued to receive money towards 12% share of income from sale of property and credited into advance account without offering any income, even though there is no obligation on the assessee to repay the same to the flat purchasers. The assessee was not able to prove that there existed any liability to the creditors shown in the books of accounts. As such the liability is a nonexistent and liable to be treated as income as there is cessation of liability. Even otherwise, the amendment in the Maharashtra Flat/Apartment Owners' Act mandates deemed conveyance of title of land to the flat owners makes the condition imposed by the assessee of transfer of title of land to recognise revenue is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said bank account nor used the money lying in the said bank account because the amount deposited in the said account is kept in fixed deposits under the supervision of trial court and therefore it cannot be said that money deposited in designated account is belonged to the assessee, consequently income accrued for the year under consideration. The assessee had also relied upon plethora of judicial decisions in support of his argument and argued that interim amount received pursuant to order of Court is not liable to tax in the year of receipt but it is taxable in the year when final award is passed by the Court. Since, the matter is subjudiced before the court, unless the court decides the issue finally the disputed amount cannot be considered as income accrued to the assessee. 8. The Ld. CIT(A), after considering the relevant submissions of the assessee and also by relying upon various evidences including certain judicial precedents and also judgments of Hon'ble Bombay High Court in civil suits filed by the parties, held that amount received by the assessee towards 12% share from sale of flats is assessable under the head capital gains when the appellant has conveyed ownership r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO has assessed advances received under the head income from other sources without adducing any cogent evidence and material to establish that the sums received by the assessee during the financial year 1995-96 to 2008-09 became income chargeable to tax in the assessment year 2011-12, which has been accepted as liabilities by the AO in all the preceding assessment years upto assessment year 2010-11. Accordingly, deleted additions made by the AO of Rs. 2,69,48,90,886/- under the head income from other sources. Similarly, the Ld. CIT(A) had also deleted additions made by the AO towards advances received for the assessment year 2009-10 to 2011-12 on the ground that amount received towards 12% share of income from sale of flats is not liable to tax, because the assessee has not transferred right in immovable property during the relevant period due to cancellation of development agreement dated 02.01.1995 and also revocation of the power of attorney given to PHFL. The relevant findings of the Ld. CIT(A) are as under: "7.1 Having taken note to the AO's order as well as appellant AR's submissions, I find that the appellant received the gross sums of Rs. 278,51,85,876/- durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; and hence, it did not represent income of the appellant for the years in which either the relevant Agreements were executed or the amounts received as per the Agreements dated 02.01.1995. In view of the above facts of the appellant's case, I do not find any merit in the AO's action of assessing the said sum of Rs. 269,48,90,886/- as appellant's income chargeable in the A.Y.2011-12. Even in my considered view, the action of the AO is completely contrary to the provision of charging Section i.e. Section 4 and 5, which empowers an Income-tax Authority to assess income to tax in a particular assessment year for income of a just preceding accounting year. Even, I find that the AO could not adduce any cogent evidence and material to establish that the sums received by the appellant during the FYs 1995-96 to 2008-09 became Income' chargeable to tax in the AY 2011-12, which-has been accepted as 'Liabilities' by the Assessing Officers in the all the preceding assessment years upto A.Y. 2010- 7.2 In my considered view, the AO has wrongly assumed that the sum of Rs. 269,48,90,886/- has become income due to cessation of the liability as the AO is of the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting prescribed in Section 145, the amounts/deposits received in the years prior to 2010-11 could not be brought to tax in AY 2011-12 under the provisions of the I.T. Act, 1961. Even I also find force in the appellant AR's this argument that the AO himself was not convinced by his own action that the amount received by the appellant in a period of 14 years i.e. From F.Y. 1995-96 to 2008-09 became chargeable to tax as income in A.Y.2011-12, which is evident from his subsequent action of re-opening of the assessment of the appellant u/s.148 of the Act for A.Y.2007-08 and 2009-10. To this effect, the appellant's AR filed copies of notices u/s.148 of the Act in the appellate proceedings. Besides this, specifically the appellant's AR also brought my attention to specific finding of the AO recorded in para 28 of the assessment order, which reads that ""Without prejudice to the above, proceedings are being separately initiated to examine the chargeability of income out of the 12% share in the sale proceeds and other receivables, arising in each earlier previous years in the assessment year relevant to the respective previous year of receipt or accrual." In view of these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote to the AO's order as well as appellant AR's submissions and documents available on record, it is evident that the appellant instituted legal proceedings -Civil/Criminal in 2008 against the Developers who were party to the Development Agreement dated 02.01.1995. Subsequent to that, M/s.IPHPL neither entered into agreements with the intending purchasers nor collected & paid any sums to the appellant's 12% share in the sale proceeds. But M/s.FHPL continued with the development of the land and continued to enter into agreements with the intending purchasers for sale of the constructed spaces. Though the appellant had not only issued notice of termination of the Agreement but also revoked the Power of Attorney granted to FHPL under the Development Agreement dated 02.01.1995. Even the Administrator had also filed lis pendence notice with the office of the subregistrar, Borivali. The Administrator also published public notices warning the members of general public cautioning them against entering into any agreements with the Developers in view of the pending litigation. Despite all such steps taken by the appellant, FHPL continued to develop the property and entered into r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation the same can be brought to the ambit of income in the hands of the appellant chargeable to tax in A.Y.2011-12. It is also evident from the appellant's submission that M/s. FHPL did not ever intimate or provide any details of such collection to the appellant. The appellant could gather this information of such deposit only after inspection of the assessment records of the AO subsequent to the assessment order passed by the AO for A.Y.2011-12. . Therefore, I find that no income accrued to the appellant on account of unauthorized sale of constructed spaces carried out by FHPL in the name & on behalf of the appellant. It is also a fact on record that the Hon'ble Bombay High Court directed M/s.FHPL for maintain a separate account of 12% share of the sale proceeds as an interim measure which will be liable to be governed by the order of the Trial Court. Thus, the rights & obligations of the parties in the amounts collected were subject to the outcome of the order to be passed by the High Court. Hence, the . rights of the appellant in the amounts so collected remained ' indeterminate and inchoate. Further to that, even I also find that the developer M/s.FHPL opened the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho had executed Agreements for Sale in favour of the intending purchasers after 2008 even though the appellant had instituted legal proceedings seeking cancellation of agreement dated 02.01.1995. I find that this act of the developer in executing the agreement for sale was without the consent of the appellant and also after revocation of Power of Attorney given by the appellant in favour of M/s.FHPL consequent to Development Agreement dated 02.01.1995. Even I find that the appellant had filed suit in the Court for cancellation of the agreement dated 02.01.1995 and restoration of land on account of fraud committed by the Developer while executing the agreement. Having taken note to the submission of the appellant and the documents on record, I am of the considered view that the AO was completely unjustified in his action in holding that the appellant by cuting agreements in 1995 and granting irrevocable development rights and executing power of attorney authorizing FHPL to undertake sale of the constructed spaces, the Administrator had also granted rights to the developer to conduct sale of his ownership rights in land. 9.3 Having taken note to the decision of Single Judge of Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Co [244 ITR 764] and CIT Vs K.C.P. Ltd [245 ITR 421] is not applicable in the appellant's case as the same, is clearly distinguishable on the facts of the appellant's case. In the case of the appellant, the amount collected by FHPL is assessable under the head 'Capital Gains' where as the decision relied upon by the AO is in respect of income assessable under the head 'Profits and Gains of Business'. Thus, in the circumstances where the appellant has filed Suit for cancellation of Development Agreement dated 02.01.1995 and also revoked the Power of Attorney given to FHPL. Any unilateral execution of agreement for sale by FHPL cannot be termed as income of the appellant. In view of the same, I consider it proper and appropriate to hold that the addition so made by the AO of Rs. 17,32,37,95s/- was completely unjustified and incorrect. Accordingly, the same is deleted. 10. In so far as, additions made by the AO towards lease rental income of Rs. 39,60,000/-, the Ld. CIT(A) observed that the AO was incorrect in bringing to tax lease rental even though it was demonstrated that the assessee has cancelled development agreement dated 02.01.1995 and a civil and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the Form of Lease agreement was agreed and was annexed to the Agreement dated 02.01.1995, yet no lease deeds were formally executed in favour of the Developers since they did not called upon the Administrator to formally execute the lease document. It is also an admitted fact that even though lease deed was not formally executed the developers paid monthly sums of Rs. 55,000/- to the Administrator which he continued to accept. Thus, based on the appellant's act and also of the Developer, the AO held that there existed an arrangement between the parties in terms of which appellant was receiving Rs. 55,000/- per month from each of the Developer. However, from the document and the appellant's submission, it is inferred that the appellant had specifically terminated the agreement in year 2008. Besides this, it is also a fact on record that the counsel of the Administrator issued legal notices in the year 2008 terminating the arrangements under which the Developers were paying monthly sums of Rs. 55,000/-. In view of the same, the appellant claims that no lease rental income can be termed as income of the appellant as the Development Agreement dated 02.01.1995 itself was ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the addition made by the AO of Rs. 39,60,000/- in the hands of the appellant is against the provisions of law and hence, the same is deleted. 10.4 Under none of the charging provisions of the Income-tax Act, 1961, sum of Rs. 26,40,000/- could be brought to tax in AY 2011-12. Even if one accepts the AO's presumption that appellant was legally entitled to receive lease rent on monthly basis, yet both under the mercantile system and the cash system of accounting, the income allegedly pertaining to FYs 2008-09 & 2009-10 could not be assessed to tax in AY 2011-12. Particularly AO has admittedly that lease rent is assessable under the head 'Other Sources'. In the circumstances it was necessary for the AO to prove that the said sum of Rs. 26,40,000/- was either received by the appellant during FY 2010-11 or legal right to receive such income accrued or crystallized during FY 2010-11. In absence of fulfillment of either of the two situations the AO could not assess Rs. 26,40,OOO/- as appellant's income in AY 2011-12. 10.5 Even with regard to assessment of Rs. 13,20,000/- allegedly pertaining to AY 2011-12 I find that the sum was not chargeable in the appellant& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the payers on perpetual basis. In my considered opinion the payments could at best be considered to be contractual payments not amounting to tenancy or lease because such an arrangement was not supported by any registered & stamped instrument of lease. Whatever private arrangement or understanding in terms of which monthly payments were made, was terminated by the assessee by issuing legal notices. Once the assessee took requisite steps for termination of agreement of his private understanding with the developer the assessee itself never acknowledged or accepted that any lease hold rights subsisted with the Developers. The AO did not bring on record any documents or material except the agreement dated 02.01.1995 under which the leasehold rights were intended to be granted. Moreover the said agreement itself provided for grant of lease .only for a period of 5 years and not beyond. Viewed from any angle therefore I find that there was no sufficient & cogent material available with the AO on the basis of which he could infer that assessee had subsisting & enforceable right to claim lease rent as the assessee never executed any registered and duly stamped document by which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same amounts to a business activity. The Ld. Sr. Counsel further submitted that the moment the assessee entered into a development agreement it becomes stock in trade of the assessee, consequently any income arising from said transaction is assessable under the head income from business. Since land was part of development agreement on entering into development agreement it becomes stock in trade based upon decisions of the Hon'ble Supreme Court of India cited above and the meaning of the term Stock in Trade. Since interim relief was refused by the Bombay High Court vide order dated 19th July 2010, the income relating to the transactions pertaining to the period from 1995-96 to 2010-11 relating to the development agreement treated as an advance by the assessee acquired the character of accrued income. The provisions of section 52 and 53A of the Transfer of Property Act enclosed marked Exhibit A may be considered in this regard. As per section 52, a third party acquires right in a property which is subject matter of a suit depending upon the result of the suit or as directed by the Court. In the instant case, the Hon'ble Bombay High Court in July 2010 rejected the motion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejudice to its contentions seek to withdraw. It may be noted the Assessee itself on its own account had stopped accepting the 12% amount on the ground that the agreement is in dispute. Under section 11 of the Maharashtra Ownership Flats Act 1970 even the land has to be transferred to the purchaser of the Flats (society). Hence, in any view of the matter the amounts received/deposited in bank accounts (including lease rentals) as stated above are rightly treated as income of the year 2011-12. In the decision of the Bombay High Court in the Assessee's own case for A. Y. 2003-04, the Hon'ble High Court was not apprised it is respectfully submitted about the decision of the Supreme Court of India holding sale of land (based upon development contract) to be business income and follows the earlier order for years not concerned with the development agreement without either side attempting to point out the difference. 13. The Ld. Sr. Counsel further referring to Maharashtra Flat/Apartment Owners' Act, 1970 submitted that section 11 of said Act, is very clear that the promoter shall take all necessary steps to complete his title and convey to the organisation of persons, who take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciated the facts in light of various evidences filed by the assessee to come to the conclusion that the AO was incorrect in holding that amount received towards 12% share of income from sale of flats is assessable under the head income from business. The Ld. Sr. Counsel further submitted that the issue of head of income under which receipt from sales is assessable is no longer an issue, because the matter has been finally settled by the Hon'ble Bombay High Court in assessee's own case for earlier period where the assessee had offered income under the head income from capital gains, whereas the AO had assessed under the head income from business or profession. On appeal, the appellate authorities including Ld. CIT(A) and ITAT held that income embedded in the advance received was chargeable only under the head income from capital gains and that too in the year of the transfer of the capital asset. The Ld. A.R. further submitted that the Ld. CIT(A) had recorded categorical finding in paras 6.9 to 6.21 that income received from transfer of capital asset is chargeable to tax under the head capital gains but not under the head income from other sources. These specific findings of the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the year 2008 and a suit has been filed before the court. The assessee had also filed criminal cases against Ivory hotels and Properties Pvt. Ltd., for which the economic offence wing of Mumbai Police had filed charge sheet. In so far as agreement with M/s. Ferani Hotels Pvt. Ltd., agreement and power of attorney has been cancelled and also a civil suit has been filed in the court of law to restore the possession and the legal title of the disputed land with the assessee. The Hon'ble Bombay High Court single member judge had taken up the case for hearing, but at a time of hearing M/s. Ferani Hotels Pvt. Ltd. had challenged the application filed by the assessee on the ground of limitation. However, the Hon'ble Bombay High Court has passed an interim order and observed that the assessee had prima-facie grounds for cancellation of agreement and power of attorney. Although, the Division Bench of Hon'ble Bombay High Court has suspended the judgment of Hon'ble Single Judge, but has not given any finding in respect of dispute between the parties, however, only stated that the dependants M/s. Ferani Hotels Pvt. Ltd. can continue construction and sale of flats in concurrence with land own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Agreement in May 2008, the Administrator had instructed ICICI Bank not to accept deposits being 12% share of the sale proceeds receivable under the Agreement dated 02.01.1995. Since Estate of EFD as well as its Banker i.e., ICICI Bank was not accepting the payment of 12% share of the sale proceeds, Ferani su-motto, unilaterally opened a Current A/c bearing No.843184512 with Indian Bank, Bandra Branch, Mumbai under the nomenclature/cause title of "Ferani Hotels Pvt. Ltd-NN Wadia share" and utilized for depositing the 12% share of the proceeds arising from sale of flats/units by Ferani after the determination of the development agreement in 2008. Although such A/c was opened by Ferani: the Administrator was never informed about bank name, details of such an A/c nor had the Administrator authorized Ferani to open the said account and collect and deposit such sums in the said account. The Administrator moved an application bearing Notice of Motion No. 1863/2008 in Suit No. 1628 of 2008; seeking ad-interim and interim Injunctions against Ferani who alone was unilaterally carrying on development work in terms agreement dated 02.011995 even after the agreement was determinated and powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment dated 19.07.2012 (Page 787- 822) decided these Cross Appeals which arose from the judgment of the Bombay High Court order dated 19.07.2010 passed in relation to Notice of Motion No. 1863 of 2010 seeking ad interim relief. This is apparent from the opening para of the Judgment which reads: "These appeals arise from a judgment dated 19.07.2010 of a Ld. Single Judge on a Motion for interim relief in his Suit. When an application for Ad interim relief came up for hearing before the Ld. Single Judge; an objection to the maintainability of the Suit was raised on behalf of the first defendant on the ground that the claim was barred by limitation." After considering the arguments on behalf of the rival parties; in Para- 35 the High Court recorded the following findings: (i) Appeal 817 of 2010 filed by Ferani Hotels Private Limited shall stand allowed and the impugned order of the Learned single Judge dated 19 July 2010 shall stand set aside: (ii) The following issue is raised under Section 9A of the Code of Civil Procedure,1908 and shall be tried as a preliminary issue: "Whether the claim of the Plaintiff in the suit is barred by limitation." (iii) ................. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, inference against the assessee could not be drawn in AY 2011-12 in relation to amounts received in total in Rs. 269.48 Crores. As regards agreement with Ivory there was no development during the financial year 2010-11 so as to warrant drawing any inference that income to the assessee accrued during the relevant year in respect of sums received up to 2008-09 under the agreement with Ivory. It is also entirely incorrect on the part of the AO as also the Ld. Counsel for the Revenue to interpret & hold that the judgement of Bombay High Court dated 19.07.2012 finally adjudicated upon the rights and obligations of the parties arising from the Development Agreement dated 02.01 .1995. The AO while completing the income tax assessment order for A.Y. 2011- 12 interpreted the judgment of the Bombay High Court dated 19.07.2012 in the manner that the Court had finally decided on the assesses entitlement to receive the consideration on sale of the constructed spaces in his own right even though the Suit has remained pending even till today. In fact the Hon'ble High Court directed that pending hearing and final disposal of the preliminary issue; Ferani would maintain the accounts and to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in the name of Estate of EFD. We have notice from the judgment of Hon'ble Bombay High Court dated 19.07.2012 that the relevant directions of the High Court were pronounced while disposing the appeal filed by Ferani against the judgment of the Single Judge disposing Notice of Motion for Interim relief. We are of the view that CIT was unjustified in drawing inference against the assessee on the ground that it was the assessee who had approached the Court and therefore assessee could not deny the fact that the fixed deposits were made in its favour on the basis of Court directions & the FDs legally belonged to the assessee. We have noted the fact that the assessee had filed Suit before Hon'ble Bombay High Court in 2008 after terminating the Agreement dated 02-01-1995 and prayed for restitution of the property in its original form. The said Suit was pending and therefore the rights of the Parties flowing from the Agreement dated 02-01-1995 were inchoate and/or indeterminate. Even the CIT (A) in his appellate order for the A.Y. 2011-12 dated 28.10.2014 had held that no income arising from Agreements for Sale unilaterally executed by Ferani during F.Y.2010- 11 was legally cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and language. Nowhere the order Court required Estate of EFD to take any steps with regard or with reference to amounts collected by Ferani. It was not for Administrator to keep account of the moneys collected. The directions of the Court expressly bound Ferani to deal with the amounts collected by it in a particular manner. Even though the Court permitted Ferani to proceed with collecting the sale proceeds from the Flat purchasers and the Court had required Ferani to maintain the accounts in respect of 12% share of the sale proceeds collected by it and further required Ferani to periodically keep such sale proceeds in fixed deposits so that Ferani did not have free and unfettered access to sums so collected. The Court also made it expressly clear that the amounts upon being invested in Fixed Deposits would ultimately be governed by the orders of the Trial Court. The directions of Hon'ble Bombay High Court made it clear that the deposits kept with the Bank under the orders of Hon'ble Bombay High Court essentially constituted funds in custodia legis. In other words, upon the amounts being kept in FDs the funds remained in the custody of the Court. In the circumstances there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order recorded a categorical finding that the amounts assessed as income were received as 'advance" from various persons to whom the assessee had agreed to transfer his right, title and interest in land. The income embedded in such advance could therefore be assessed only under the head "Capital Gains" and not under any other head of income. Further such income could only be assessed in the relevant previous year in which transfer of the capital asset took legal effect On scrutiny of memorandum of appeal, it was noted that, in four grounds of appeal the Revenue has not challenged the said specific finding and directions of CIT(A). In absence of any specific challenge to the CIT(A) finding in the grounds of appeal, the Revenue cannot be permitted to raise arguments in relations to head of income, more particularly when the matter was settled in earlier years. 22. We further noted that the CIT(A) had recorded categorical finding in his order, wherein he has first set out the historical background of assesses case inter alia giving details of past assessments in which profit on sale of inherited lands was assessed as business income, but held to be assessable under the head Capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his land from "capital asset" to "stock in trade". The income tax assessment of the assessee for the AY 1995-96 i.e. the year in which development agreements were executed, was completed u/s 143(3), In that order, the AO did not record any finding to the effect that by entering into Development Agreement coupled with the receipt of Security Deposit of Rs. 200 Lacs the land was converted into "stock in trade". Even in the assessment order for the AY 2003-04, when the assessee had offered the income on execution of two conveyances the AO assessed the said profit as business income by following the reasons discussed in the prior year which were disapproved by the Bombay High Court. In the assessment order for the AY 2003-04 no case was made out by the A.O. that the Land which was subject matter of the Development Agreement dated 02.01.1995 was converted into "stock in trade" because of the fact that transfer of land was under a development agreement. In absence any such finding in the prior year's assessments completed under section 143(3), the AO could not make out an altogether new case when factual matrix of the case did not change in the FY 2010-11. Further, virtue of signing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C was a sick company under SICA and scheme for its revival was sanctioned by BIFR. During the period of revival scheme the said GTC entered into agreements with transfer of its immovable properties to two property developers by executing the development agreements. The IT department however sought to attach these properties for recovery of taxes. The recovery proceedings were opposed by GTC claiming that it was a sick company and during the period when revival scheme is in operation attachment of its properties by IT department was not permissible. Question for decision before the SC was therefore, whether the attachment of the properties was permissible and the attachment was legally valid. The relevant findings of the Supreme Court on the issue are as under. "What follows from the above is that the High Court was convinced by the reason that the question as to whether the company had indulged in sale of assets unauthorisedly and in violation of para 9 (5) (b) which is yet to be taken by the Board. The High Court also proceeded on a palpably wrong presumption that the sanctioned scheme was still under operation and, therefore, bar under Section 22 of the S/CA applied. For this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a word, clause or a sentence occurring in the judgment of the supreme court, divorced from its context, as containing a full exposition of the law on a question when the question did not even fall to be answered in that judgment" Applying these observations to the assessee case, one needs to ascertain whether the judgment relied upon was at all applicable or relevant in deciding the assesses case. The lands were inherited by EFD on demise of his father in 1936 and after his demise in 1970 the lands were held by the Administrator for the benefit of his sister. In the context of the entire land holding of F.E.D admeasuring 2500 Acres approximately which was inherited by his two non-resident children i.e. EFD and BW, the Bombay High Court had taken note of these material facts and also observed that no sale of land had taken place in the life time of EFD, but the sale of land first took place almost after 65 years after the land was purchased. The high court in the assesses own case therefore held that entire land holding in the hands of the Administrator was capital asset and therefore income on it's transfer was assessable as capital gains but not as business income. Even th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Administrator with the inherited land were with a view to protect the corpus of the estate as well as interest of the beneficiary and therefore, could not be regarded as business or adventure in the nature of trade and therefore the income was assessable only under the head Capital Gain' and not under the head business". 27. Further, in every case where land is given to a developer under Development Agreement there cannot be a presumption that the owner of the land has converted the land in to stock in trade. In this regard, the assessee relied upon the decision of the ITAT Kolkata in ITA No94IKolI2012 dated 03.02.2016, in the case of Eveready Industries India Ltd. In this case, assessee had acquired an industrial plot of land at Madras in 1971 for setting up a factory. After the factory was operated for 23 years the company decided to consolidate its operations at one location. Pursuant to such decision, the factory land was found surplus. In December 2004 the assessee entered in a development agreement in respect of 7.1. Acres of land with a developer who agreed to pay part consideration in cash and part consideration in the form of 20% of the constructed area in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances, the amounts received from the flat purchasers will be liable for tax subject to outcome of the decision in civil suit. Therefore, entire amount assessed by A.O. for A.Y. 2011-12 is incorrect. Further, it is noted that the bank account was opened by Ferani in the name of Ferani Hotels Pvt. Limited A/c - N N Wadia share", but the bank statement shows in the name of Ferani Hotels Pvt. Limited" only and not the Administrator of EFD. The said account was never opened by the Administrator nor had the Administrator consented for opening of such an account. The Administrator had never provided his PAN nor the Bank completed KYC formalities in respect of this account. The account title includes the name of Shri. N.N. Wadia; nowhere it clarifies as to in what capacity name of Shri NN Wadia has been mentioned. It is material and pertinent to note that Shri N.N. Wadia is assessed to tax in his own name and in his own right in respect of income which he earns in his individual capacity as Administrator of the Estate of EFD in terms of Section 168 of the Act. As such, the mere reference to the name of N.N. Wadia in the account opened and operated by Ferani Hotels Pvt. Ltd., could not le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in which the entire land was inherited by the children of F.E.D. and held that the Administrator was holding this land as capital asset and therefore income on its transfer can only be taxed under the head 'Capital Gains". In the circumstances, once the A.O. has admitted that Rs. 269.48 crores was received as Advance against transfer of asset, then he could not under the provisions of section 56 of the Act assess the same as income because none of the taxable events contemplated under section 56 took effect in FY 2010-11. Moreover as held by the High Court, the land in question is capital asset of the assessee, and hence, income embedded in advances against the transfer can only be assessed under the head capital gains and that too in the year in which 'transfer" of the capital asset legally takes effect and not in any year. Since, in the suit the assessee has claimed for cancellation of development agreement in its entirety and has prayed for repossession of the entire land in its original form, the transfer of the capital asset if any can happen only when the suit of the assessee is finally decided by the Court and the decision of the court becomes final. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment with M/s Lokhandwala Construction Industries Limited for which consideration of Rs. 11 Crores or Rs. 50 per square feet of available FSI whichever is higher was to be paid. The said trust received Rs. 32.50 Crores from the developer. However, since there were disputes with the developer with regards to quantum of available FSI, advance of Rs. 32.50 Crore received from the developer was shown as liability in its books. The manner in which the advance received was shown in the balance sheet and the disclosure in relation thereto by way of Notes in the audited accounts was consistently same in all the past years and was accepted by the Revenue in past assessments. In AY 2010-11, the A.O assessed the said sum on the ground that it was income of that year because there was cessation of liability. On appeal by the assessee, the ITAT observed that development agreement was entered in 1984 and advance was received was never disputed. Till preceding year, advance received in 1984 was treated as advance and was never disputed. The fact that from 1984 till date there had being no change in the status of the transaction and there was neck deep litigation was also not disputed by the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r possession of flats to related as well as non-related third parties till the Notice of Motion was disposed. Once the court restrained Ferani from handing over possession, it implied that the agreements with flat purchasers could not have been given effect to and thereby there would not have been transfer of property in law. Even in the decision of the division bench of the High Court in July 2012, the Court directed the Trial Court to first decide the preliminary issue of limitation in terms of Section 9A of CPC and thereafter to proceed with the suit. It also granted liberty to the assessee at that stage to seek interim relief by moving Notice of Motion. Therefore, it is factually and legally incorrect for the Id. Counsel to contend that upon disposal of assessee Notice of Motion seeking ad interim relief the agreements with the parties become final and income chargeable to tax accrued in AY 2011-12. 33. We further noted that when, the appeals were fixed for clarification on 22/11/2019, the Ld. AR for the assessee submitted that the Hon'ble Supreme Court, vide its order dated 04/10/2019 passed by the three judge Bench in Ivory SLP and Ferani review petition, decided the refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused materials on record along with orders of lower authorities. We find that in the agreements dated 02.01.1995 with Ferani & Ivory clause 2 envisaged that the assessee would grant a lease of the demised lands for a period of 5 years. In the circumstances, merely because grant of lease was provided in the Agreement dated 02.01.1995 but when in fact the lease deed was never executed in favour of the parties, then said Ferani & Ivory could not presume that lease rights were in fact awarded in their favour by the Administrator. In absence of any formal registered lease agreement, Ivory & Ferani could not legally infer that the lease of land was granted by the Administrator in respect of the lands. The fact that the enforceable lease was not in operation was not disputed by the revenue. The Ivory had accepted contractual tenancy when it had executed conveyance in FY 2001-02 and 2002-03. The assessee had filed copy of lease deed dated 25- 10-2001. We find that clause (iv)(b) of the deed of conveyance dated 25.10.2001 executed between the assessee and Ivory properties and hotels Pvt. ltd and Toyota Lakozy Auto Pvt. Ltd., which clearly talks about contractual monthly tenancy on the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation enabling either of the companies to open these accounts. In the circumstances, on account of unilateral acts of the project coordinators, no income in law could be inferred particularly when no part of the income assessed was either legally due to the assessee or when the amounts were not actually received by the Administrator. The ld. CIT(A) after considering relevant facts has rightly held that the AO was incorrect in taxing lease rent as income chargeable to tax under the head income from other sources. Hence, we are inclined to uphold findings of the ld. CIT(A) and reject grounds taken by the revenue. 38. In the result, appeal filed by the Revenue for Asst. Year 2011-12 is dismissed. ITA.No. 334/Mum/2017-Asst Year 2012-13. 39. The facts and issues involved in this appeal filed by the revenue are identical to facts and issues, which we had considered in ITA.No. 1389/Mum/2015, for Asst Year 2011-12, but for figures. The reasons given by us in preceding paragraphs in ITA No. 1389/Mum/2015 for Asst Year 2011-12 shall mutatis mutandis apply to this appeal also. We, therefore for detailed reasons given in preceding paragraph in ITA No. 1389/Mum/2015 upheld the findings of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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