TMI Blog2021 (7) TMI 790X X X X Extracts X X X X X X X X Extracts X X X X ..... r and direct AO to give proper opportunity of being heard to the assessee. Accordingly, the grounds raised by the assessee are allowed for statistical purpose. - ITA No. 6611/MUM/2019 (Assessment Year: 2013-14) - - - Dated:- 2-6-2021 - SHRI MAHAVIR SINGH (VICE PRESIDENT) AND SHRI S. RIFAUR RAHMAN (ACCOUNTANT MEMBER) Assessee by: Mr. Vijay Mehta, AR Revenue by: Ms. Shreekala Pardeshi, DR ORDER PER S. RIFAUR RAHMAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2013-14. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-9, Mumbai [in short CIT(A) ] and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the Act ). 2. The brief facts of the case are, assessee filed its return of income for assessment year 2013-14 on 30.09.2013 declaring total income at ₹ 88,44,342/ the case was selected for scrutiny and statutory notices under section 143 (2) and 142 (1) of the Income Tax Act, 1961 (in short Act). In response, A.R. of the assessee attended and filed a relevant information as called for. 3. The AO observed that assessee had entered into a MOU wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been received on transfer of the 74 resident/at flats will be the sale consideration and after reducing the cost of acquisition the resultant gain would be chargeable to tax to capital gains. As explained and as proved before you, not a single residential flat is sold in AY 2013-14 and no income has accrued to our client. You will appreciate that Section 45 of Income Tax Act, 1961 will only apply when there is transfer of capital asset during the financial year. In the absence of any transfer no capital gain can be computed in the hands of the assesses. Our objection to your proposed addition is that no income has accrued or received by our client during the A.Y 2013-14 and hence no income can be brought to tax. As regards the proposition that no income has accrued to our client, we state that section 5 of income Tax Act, 1961 is the charging section. As per Section 5, the total income of any previous year of a person, who is resident, includes ail income from whichever source, which accrues or arises or is deemed to accrue or arise in India during such year. The income will accrue to the company only when the company has acquired right to receive such income. The Hon'ble S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it the 18 post dated cheques on due dates without reference to M/s. Sambhav Infrastructure Pvt. Ltd. 4.2.6 From the above crucial facts, it is evident that the MOU created a right in favour of the appellant to receive ₹ 3,74,22,000/- from M/s. Sambhav Infrastructure Pvt Ltd. within a specific period of time. The right to receive sale proceeds amounting to ₹ 3,74,22,000/- was also reinforced by issue of 18 post dated cheques of equal amounts. 4.2.7 As rightly stated by the appellant the proposition regarding the accrual or arising of income is provided in Section 5 of the Act which is the charging section. In order that income, profits or gains may accrue to a person, it is necessary that he must have acquired a right to receive sale or right to the income, profits or gains has become vested in him as decided by the Supreme Court in the decision of CIT Vs. Shri Govardhan Ltd. 69 ITR 675. The Hon'ble Supreme Court in the case of Morvi Industries Ltd. vs. CIT 82 ITR 835 decided that the postponement of payment does not affect the accrual of the income. The fact that the amount of the income is not subsequently received by the assessee would not also detract from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans that the appellant was free to deposit these cheques and realize the amount of ₹ 3,74,22,000/- even in a situation in which M/s. Sambhav Infrastructure Pvt. Ltd. was not able to sale the flats. The MOU is silent about the situation in which M/s. Sambhav Infrastructure Pvt. Ltd. is not able to sale the flats. It speaks about the commitment given by M/s. Sambhav Infrastructure Pvt. Ltd. to handover the sale proceeds. However, what is material here is the handing over of post dated cheques with freedom for the appellant to deposit the same without any conditions as such. Thus, the fact that M/s. Sambhav Infrastructure Pvt. Ltd. handed over post dated cheques totalling to ₹ 3,74,22,000/- along with the fact that the MOU gave unequivocal and unconditional power to the appellant to deposit the cheques which were in the form of return for the investment made by the appellant, establish that the right to receive amount of ₹ 3,74,22,000/- was created in favour of the appellant on 11.09.2012 4.2.11 Therefore, in view of the overall reading of the MOU between the appellant and M/s Sambhav Infrastructure Pvt. Ltd. and the facts arid circumstances, it is very clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 14 and 2014 15 to the extent of ₹ 24,948,000/ and it was submitted that all these amounts were disclosed in the balance sheet as an liabilities and it is also submitted that the project on which assessee has made the investment is still under construction and the flats were not sold nor assessee had transferred the right over the property. The Ld AR submitted that the assessing officer wrongly made the addition during this year the whole profit which assessee would have made the profit on completion of the project. Therefore, he prayed that this issue may be remitted back to AO for proper verification and appreciate the facts on record. 7. On the other hand, Ld. DR objected to the above proposition and supported the findings of the lower authorities. 8. Considered the rival submissions and material on record. We notice that assessee had entered into a MOU with SIPL to invest in the project to be executed by SIPL. It was agreed between them that SIPL will complete the project and help the assessee to market and sell the flats. Accordingly, SIPL issued 18 post dated cheques to the assessee and in MOU it was agreed that the above said postdated cheques will be deposited ..... X X X X Extracts X X X X X X X X Extracts X X X X
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