TMI Blog2022 (12) TMI 845X X X X Extracts X X X X X X X X Extracts X X X X ..... chaser, i.e., the society and take the land out of the assessee's stock-in-trade. The assessee's method of accounting has no relevance in determining whether receipt of the above nature was trading receipt or income. The method of accounting, whether cash method or mercantile method, would have bearing only in respect of completed business transaction. Thus, the impugned receipt would not constitute the assessee's taxable business income in the assessment year 1971-72. In the case of Shah Doshi Co [ 1981 (3) TMI 56 - GUJARAT HIGH COURT] the Assessee firm, dealing in land, agreed to sale of land, which it agreed to purchase from original owner, to a third party though no sale deed had been executed in assessee's favour by original owner. The Gujarat High Court held that assessee could not treat part of profit arising from such transaction as value of its stock-in-trade in assessment year prior to execution of sale deed in favour of third party by original owner. Further, High Court held that profits arising from impugned transaction accrued to assessee only in assessment year in which sale deed was executed in favour of third party. The judicial precedents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012-13. 2. The assessee has raised the following grounds of appeal:- 1. The order of learned Commissioner of Income Tax (Appeals)-2 is against law and facts of the case. 2. On the facts and in the circumstances of the case and in law the learned CIT(A) has erred in not accepting the claim of the Appellant that the requisite permissions were not obtained till the end of financial year under consideration and the advances were received by merely issuing provisional allotment letter. Even, agreement for sale was not executed and consequently neither the risk and rewards were transferred nor the possession of the plots was handed over to the buyer which requires the appellant to recognise income from sale of plots. 3. On the facts and circumstances of the case, the sum paid as commission to nonresident agents was not in nature of fees for technical services requiring the appellant firm to deduct tax at source. The appellant craves leave to add, alter, amend, edit, modify, change or delete any of the grounds of appeal at the time of or before the hearing of the appeal. Ground number 2: 3. The brief facts of the case are that the assessee is engaged i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 cases of plot sale, the appellant has received full consideration and in all the cases allotment letters have been issued and accordingly with the signing of allotment letter by the appellant and the purchaser, all the risks and rewards, are transferred to the purchaser. On perusal of the allotment letter, I find that the allotment was liable to be cancelled only when permission by the Government authorities was not allowed. Undisputedly, the appellant has been allowed permission to execute the project vide letter dated 02.04.2012. It is an established legal position that once the permission is allowed, it relates back to the date of application in substance. Moreover, the purchaser was fully aware about this factual position about the permission and having agreed to purchase the property, he had taken a calculated risk. It is also worthwhile to mention that from the date of allotment, the purchaser has become entitled to all sorts of appreciation in the property and hence the rewards will also go to him and appellant will not be entitled to any share in such appreciation. This view gets supports from the decision of Hon'ble ITAT, Bangalore in the case of Prestige Estate p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Rs.7,99,56,665/- against the sale of plots, the net profit at 15% works out to Rs. 1,19,93,500/-. Accordingly, the addition to this extent is sustained and the Assessing Officer is directed to allow consequential relief. Thus, appellant succeeds partly in respect of 2. 5. Before us, the counsel for the assessee submitted that the assessee during the year under consideration had only received advances towards sale of plots/villas. The counsel for the assessee drew our attention to page 72 of the paper book and submitted that the final approval in connection with the aforesaid project was received on 10-06-2013 and accordingly, since the project was not approved during the assessment year under consideration, it was not in a position to transfer the title of the aforesaid properties with respect to whom the income has been assessed in the hands of the assessee. He further drew our attention to the allotment letter issue to two of the allottees and submitted that as per the terms of the allotment letter (refer page 76 of the paper book), it was specifically mentioned that the plans for the building have been submitted to the Government Authorities for their approval and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id plots/villas cannot be taxed as income in the year under consideration for the following reasons: firstly, we observe that the approval/sanction letter in respect of the sale of the aforesaid properties i.e. plots/villas came to be acquired only in the month of June 2013 i.e. after the end of financial year under consideration; Secondly, on perusal of the allotment letters issued to the allottees produced before us a sample basis, we observe that the assessee had specifically mentioned in the said allotment letters that the allotment letter is subject to approval being obtained from the Government Authorities and till such time such approval is obtained, the amount so received from the allottees shall be treated as interest free deposits in the hands of the assessee; thirdly, it has not been disputed by the Department that during the year under consideration the title in respect of such property i.e. plots/villas were not transferred in favour of the allottees and same was done only in the subsequent year; fourthly, the assessee has given table stating that income from sale of the aforesaid plots/villas have been offered to tax in the subsequent years when the title in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eate any interest in favour of the purchaser. It is on completion of the transaction of purchase and sale culminating into an extinguishment of the title of the vendor and simultaneous creation of the title of the vendee that the assessee earns profit or suffers loss. Receipt of Rs. 2,13,772 would, therefore, assume the character of income or profit only when sale transaction was completed in accordance with law. Doctrine of part performance embodied in section 52A of the Transfer of Property Act could not also be brought into aid to treat the said receipt of Rs. 2,13,772 as trading receipt. The agreement in writing to sell, coupled with parting of possession, would not confer any legal title on the purchaser, i.e., the society and take the land out of the assessee's stock-in-trade. The assessee's method of accounting has no relevance in determining whether receipt of the above nature was trading receipt or income. The method of accounting, whether cash method or mercantile method, would have bearing only in respect of completed business transaction. Thus, the impugned receipt of Rs. 2,13,772 would not constitute the assessee's taxable business income in the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion agents have visited India in connection with providing the services. Accordingly, there was no requirement to deduct taxes u/s 195 of the Act since no income accrued in India. In response, DR relied upon the observations made by Ld. CIT(Appeals) in the appellate order. 11. We have heard the rival contentions and perused the material on record. In the instant facts, we observe that it is not disputed that both the agents as well as the buyers of the properties to whom such property have been sold/marketed are based outside of India. Further, the Department has not been able to produce any evidence to prove that for the purpose of rendering said services such commission agents had visited India. Further, there is nothing on record to prove that the above agents had a permanent establishment in India. It may be noted that in the recent case of PCIT v. Puma Sports India (P.) Ltd. [2022] 134 taxmann.com 60 (SC) , the Hon'ble Supreme Court dismissed Department s SLP against impugned order of High Court holding that commission paid by assessee-company to its overseas Associated Enterprise (non-resident agent) for purchase orders outside India would not be liable to TDS under s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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