TMI Blog2020 (5) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... of the agreement were to be read in conjunction of each other. When an assessee had an obligation to perform something, and the assessee had not performed those obligations nor does he even seem to be in a position to perform these obligations, it cannot be said that a partial payment for fulfilling these obligations can be treated as income in the hands of the assessee. The obligations under the agreement, as extracted above, have not been performed till date, as is the uncontroverted stand of the assessee. Clearly, therefore, the income in question never accrued to the assessee. When obligations of the assessee under the joint venture agreement are not yet performed, there cannot be any occasion to bring the consideration, for performance of such obligations, to tax. The very foundation of the impugned taxability is thus devoid of any legally sustainable basis. As regards the supplementary agreement, in our humble understanding, even if we are to disregard it, the fact remains that income could accrue only on performance of obligations under the joint venture agreement. In any case, it cannot be open to the AO to disregard the supplementary, or modification- whichever way o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee on account of transfer of its rights in the property and therefore this amount cannot be treated as an advance in the nature of capital assets. (3) Whether on the facts and circumstances of the case and in-law, the learned CIT(Appeal) erred in deleting the addition made on account of sale of development rights amounting to ₹ 5,40,00,000/- without appreciating the fact that the assessee had submitted the modified deed for transfer of the property at the fag end of the assessment proceedings and therefore the said deed was not verified during the assessment proceedings. (4) Whether on the facts and circumstances of the case and in-law, the learned CIT(Appeal) erred in deleting the addition made on account of sale of development rights amounting to ₹ 5,40,00,000/- without appreciating the fact that the assessee had not proved the facts claimed in the modified deed for transfer and therefore the said deed is merely an afterthought and a colorable device fabricated for the purpose of tax evasion. (5) Whether on the facts and circumstances of the case and in-law, the learned CIT(Appeal) erred in deleting the addition made on account of sale of dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , within 60 days of the completion of five years time limit. It was further explained that even today the assessee has not been able to get the occupants of property to vacate the property, and, as such, no income has arises in the hands of the assessee. This explanation, however, did not satisfy the Assessing Officer. He was of the view that the assessee is following mercantile method of accounting under which the transactions are recognized as and when they take place and under this method, the revenue is recorded when it is earned and the expenses are reported when they are incurred . It was observed by the Assessing Officer that the assessee has already received an amount of ₹ 86,40,000 during the year, and the balance amount will be received by the assessee in instalments after the fulfilment of the conditions as mentioned in the agreement . It was also observed that since the assessee has transferred the development rights and handed over the possession of the property, the transfer, therefore, qualified be treated as transfer under section 53A of the Transfer of Property Act, 1872 . A great deal of emphasis was placed on the fact that the assessee followed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was shown as income, the reason being that the assessee became entitled to receive that amount from the client in respect of the services rendered. In other words, the High Court held that debt to the extent of the amount pertaining to services rendered only got vested in the assessee. The rest of the amount was taken as liability to be adjusted in subsequent years as and when the service was rendered. It is but clear that the excess amount would have to be returned in case the service was not performed in subsequent year and therefore in respect of such amount no debt came into existence in favour of the assessee. Therefore this amount did not become the income. The High Court was of the view that the Commissioner (Appeals) erred in finding that the assessee was following the hybrid system of accounting on the ground that the whole of the amount received from the clients was not declared as income in the year of the receipt of the amount. 5.2.14 In this case, the income can be considered to accrue or arise only when the appellant is able to evacuate 25% slum dwellers as per the agreement/deed. If in case the appellant is unable to comply with, appellant will have to retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed of the relief so granted by the CIT(A) and is in appeal before us. 5. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 6. It is important to understand the nature of arrangement under which the assessee was to receive ₹ 5.40 crores towards the transfer of development rights. It was a joint venture arrangement between the assessee and Shivalik Ventures Pvt Ltd. There were six cooperative societies, names and details of which were set out in this joint venture agreement, which were formed by certain slum dwellers and these slum dwellers were in use and occupation of certain area of land seized and possessed of, or otherwise well and sufficiently entitled by the Maharashtra Housing Area Development Authority. These slum dwellers, who were members of these six societies and as noted in the said joint venture agreement, were economically weaker, and due to their personal commitments, being unable to personally develop the said property and, therefore, the members of the said societies have held general body meetings, in which it has been unanimously resolved to gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement. 6.5 They shall cause to shift all the Slum Dwellers/Occupants from temporary alternate accommodation to permanent accommodation constructed. 7. What was to be received by the assessee was from a joint venture, in which assessee itself was a participant, but, under the said arrangement, it was to be entirely funded by Shivalik Ventures Pvt Ltd. The essence of the arrangement was the performance of obligations by the assessee so far as the above obligations are concerned. In our humble understanding of the situation, while the assessee was to help the assessee get the development rights in favour of the joint venture, the payment was to be received by hum as original developer appointed by the said societies and this payment cannot be read in isolation with all its obligations under the joint venture arrangement. It was a composite agreement, and, irrespective of whether we look at the modifications or not, and all the terms of the agreement were to be read in conjunction of each other. When an assessee had an obligation to perform something, and the assessee had not performed those obligations nor does he even seem to be in a position to perform these obligati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of accounting, the relevant point of time is not the actual receipt of income but the point of time when right to receive that income, in income character, crystallized. Just because someone is following mercantile method of accounting, that person cannot be forced to account for the monies, as income, even when these monies are received for performance of obligations in future. All it says that once someone has earned the right to receive the money in income character, its immaterial, for recognition of the same as income, as to whether the income is received or not. As held by Hon ble Supreme Court, in the case of CIT Vs Shoorji Ballabhdas Co [(1962) 46 ITR 144 (SC)], Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income , which does not materialise. When obligations of the assessee under the joint venture agreement are not yet performed, there cannot be any occa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Bench may pronounce the order immediately upon the conclusion of the hearing. (b) In case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date for pronouncement. (c) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily (emphasis supplied by us now) be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board. 8. Quite clearly, ordinarily the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression ordinarily has been used in the said rule itself. This rule was inserted as a result of directions of Hon'ble jurisdictional High Court in the case of Shivsagar Veg Restau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown . Hon'ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly , and also observed that arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020 . It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure... . The term 'force majeure' has b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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