TMI Blog2020 (7) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... Venture Agreement that only part income accrued to the assessee on execution of the project agreement. The balance consideration was conditional receipt and was to accrue only in the event of assessee performing certain obligations under the agreement. Another pertinent fact to be noted is that the payments received in subsequent years have already been offered to tax. The same was in line with assessee s arguments that the balance receipts were conditional receipts. The response by M/s Shivalik also confirmed the same. Therefore, no fault could be found in the impugned order in estimating the income @10% of gross receipts. Once the income is estimated, no further disallowance u/s 40A(3) would be warranted. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT:- Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ] - I.T.A. No.5851/Mum/2018 - - - Dated:- 6-7-2020 - Shri Mahavir Singh, VP And Shri Manoj Kumar Aggarwal, AM For the Assessee : Shri Sushil Lakhani-Ld.A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry notices u/s.143(2) and 142(1) were issued in due course. The reasons for reopening the case, as extracted in assessment order, would reveal that it came to notice that M/s Tamboli Developer i.e. proprietorship concern of the assessee, had transferred certain development rights to M/s. Shivalik Ventures Pvt. Ltd. (M/s Shivalik) vide agreement dated 23/07/2008 for a consideration of ₹ 336 Lacs, out of which an amount of ₹ 100.80 Lacs was stated to be received during financial year 2008-09. It was observed that since assessee transferred the development rights and handed over the possession of property, the aforesaid transfer qualified to be treated as transfer u/s. 53A of Transfer Property Act, 1882 and therefore, resultant gains would be chargeable to tax as Business Profits. Since assessee followed mercantile system of accounting, the entire amount received/receivable on sale of development rights would be taxable in the year of signing of development agreement and handing over of possession of land. Upon verifying the return of income, it was seen that the said amount was not offered to tax as business income. In the above background, reassessment proceedings were i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... system of accounting being followed by the assessee. The income accrued to the assessee out of transfer of development right would be ₹ 336 Lacs. As per the term of the agreement, the assessee parted with development rights and the possession of the land was also given. Therefore, the transfer was completed during the year and the taxability of business receipts would not be dependent upon actual receipt thereof. Hence, entire amount of ₹ 336 Lacs was to be brought to tax. 2.9 Upon perusal of expenditure, it was noted that an expenditure of ₹ 42 Lacs was paid through bearer cheques and therefore the same would not qualify as deduction u/s 40A(3) of the Act. 2.10 Finally, the amount of ₹ 336 Lacs was treated as business income against which the expenditure of ₹ 58.80 Lacs was allowed to the assessee and the balance amount of ₹ 277.20 Lacs was determined as business income. 3.1 Aggrieved as aforesaid, the assessee assailed the assessment before Ld. CIT(A) vide impugned order dated 12/07/2018 wherein the assessee drew attention to clause-17 of the joint venture agreement and submitted that as per the agreement, only an amount of Rs,100.80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was responsible to perform the various activities and work assigned thereon, being; a) To procure the revised Letter of Intent (LOI) and Intimation of Approval (IOI) from the Slum Rehabilitation Authority; b) Procure resolution from M/s Nilofer Co-operative Housing Society agreeing to consent the re-development of property and shift to permanent Rehabilitation Tenement; c) To procure resignation and NOC from the previous architects; d) To shift all Slum Dwellers to temporary alternate and handover on vacating the properties and handover the same to M/s Shivalik Ventures Pvt Ltd for redevelopment; e) To shift all Slum Dwellers from temporary alternate accommodation to permanent accommodation constructed. As per Clause No. 8, the appellant was solely responsible and obliged to settle all claims in regard to FSI to be consumed at its own costs and expenses. As per Clause No. 12, the appellant was required to incur all costs, charges and expenses required to obtain the revised Letter of Intent (LOI) and Intimation of Approval (IOA). Accordingly, as per above stated terms and conditions described in Joint Venture Agreement dated 25/07/2008, the appellant was entru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net profit in terms of the formula for the year under consideration for payment of deferred consideration then no amount would be payable to the respondent-assessee as deferred consideration. The consideration of ₹ 20 crores is not an assured consideration to be received by the Shete family. It is only the maximum that could be received. Therefore, it is not a case where any consideration out of ₹ 20 crores or part therefore (after reducing ₹ 2.70 crores) has been received or has accrued to the respondent-assessee. As observed by the Apex Court in Morvi Industries Ltd. v. CIT [1971] 82 ITR 835. The income can be said to accrue when it becomes due.... The moment the income accrues, the assessee gets vested right to claim that amount, even though not immediately. In fact, the application of formula in the agreement dated 25th January, 2006 itself makes the amount which is receivable as deferred consideration contingent upon the profits of M/s. Unisol and not unascertained amount. Thus, in the subject assessment year no right to claim any particular amount gets vested in the hands of the respondent-assessee. Therefore, entire amount of ₹ 20 crores which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant during impugned year under Joint Venture. The AO had allowed ₹ 58,80,000/- as deductible expenses on considering the payments made by Account payee cheques. The appellant had furnished a tabular chart along with profit and loss account of 5 years from A.Y.2008-09 to 2012-13 which is reproduced as under: Amount Received Payment made out of receipt from Shivalik Ventures Financial Year Amount received from Shivalik Amount Spent and payments made Balance amount left offered to Income tax 2008-09 1,00,80,000 83,65,000 17,15,000 2009-10 1,68,00,000 19,82,690 38,17,310 2010-11 20,00,000 20,00,000 - 2011-12 45,00,000 13,18,000 31,82,000 2012-13 40,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance receipts were conditional receipts which were payable only in the event of assessee performing various work, obtain requisite permissions etc. The payments were subject to fulfilment of certain contractual performance by the assessee. The said facts were confirmed by M/s Shivalik also, in response to notice u/s 133(6). 3.4 Another finding is that the payment was received in various trenches over next 5 years and the same has already been offered to tax in those years after deducting related expenditure. The detail of the same has already been tabulated in the impugned order, which is extracted hereinabove. These facts remain uncontroverted before us. 4. Upon careful consideration of the impugned order, we find that Ld. CIT(A) has clinched the issue in correct perspective. The assessee was engaged as civil contractor and the income earned from the stated project was assessed as Business Income. Therefore, the term transfer as defined in Sec.2(47)(v), would not apply since the same is applicable only in case of capital assets held by the assessee. The development rights were held as business assets. Proceeding further, it is evident from the terms of the Joint Venture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time. The situation created by pandemic covid-19 could be termed as unprecedented and beyond the control of any human being. The situation, thus created by this pandemic, could never be termed as ordinary circumstances and would warrant exclusion of lockdown period for the purpose of aforesaid rule governing the pronouncement of the order. Accordingly, the order is being pronounced now after the re-opening of the offices. 5.3 Faced with similar facts and circumstances, the co-ordinate bench of this Tribunal comprising-off of Hon ble President and Hon ble Vice President, in its recent decision titled as DCIT V/s JSW Limited (ITA Nos. 6264 6103/Mum/2018) order dated 14/05/2020 held as under: - 7. However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 7th January 2020, this order thereon is being pronounced today on 14th day of May, 2020, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income Tax Appellate Tribunal Rules 1963, which deals with pronouncement of orders, provides as follows: (5) The pronouncement may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed while calculating the time for disposal of matters made timebound 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 . The extraordinary steps taken suo motu by Hon ble jurisdictional High Court and Hon ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words ordinarily , in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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