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TMI Blog2023 (6) TMI 1216X X X X Extracts X X X X X X X X Extracts X X X X ..... th M/s. Silver Line Holdings Pvt. Ltd. (SHL) in pursuant to which it was entrusted responsibility to operate, manage and administer the Golf Course at Tarudhan, Gurgaon. It was submitted that refundable interest free securities deposit was received from M/s. Silver Line Holding Pvt. Ltd. which is shown as the liability in the finances. However, Learned AO was not satisfied and made following the observations: "5. The reply of the assessee together with the facts of the case has been considered and the contention of the assessee is not found tenable due to the following reasons: (i) The contention of the assessee that the there is specific agreement with Silverline Holding Pvt. Ltd. and the amount is refundable as per that contact. Further, there is no privity of contract between the assessee company and the Villa Owners, but have been engaged by M/s Silver Line Holding Pvt. Ltd. is not true due to the following reasons: (a) The assessee as stated above that the deposits received from M/s Silver Line Holding Pvt. pursuant to the agreement between the assessee and M/s Silver Line Holding Pvt. However, this fact not supported by the financial statement of the M/s Silver Line Hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this amount has been received from M/s Silver Line Holding Pvt. Ltd. as refundable liability is not supported with the balance sheet of M/s Silver Line Holding Pvt. Ltd. (d) However, as per tri party agreement among M/s Silver Line Holding Pvt. Ltd., customers and the assessee the security deposits are non refundable. Actually this is a valid documents which executes at the time of receiving the security deposits and the contract which the assessee has mentioned to he entered between the assessee company and M/s Silver Line 1 tolding Pvt. Ltd. is only a modus operandi to avoid the taxability of the income/receipt and to create complexity in the transaction in order to hide the genuine nature of transaction. (e) As per clause 18(c) of Buyer Agreement entered by respective buyer and assessee company and M/s Silver Line Holding Pvt. Ltd. the security deposit will be non Refundable. e. The contention of the assessee that my predecessor during the course of assessment proceedings for AY 2012-13 sought detailed note on the said nature and taxability of the interest free security deposit and in response thereto, assessee filed the details and the AO after due examination, queries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant craves leaves to add, alter, amend, forgot any of the grounds of appeal at the time of hearing." 5. Heard and perused the record. 6. At the outset learned AR submitted that the assessment for A.Y. 2009-10 onwards till A.Y. 2012-13 were reopened u/s 147 of the Act on the basis of observation of the learned AO in A.Y. 2013-14. However, as the matter reached the Tribunal, Coordinate Benches have quashed the assessment orders on the ground of change of opinion as the matter of taxability of security deposit was duly examined and accepted during proceedings u/s 143(3) of the Act for A.Y. 2011-12 and A.Y. 2012-13. It was thus submitted that following the rule of consistency, once the position with regard to non-taxability of refundable security deposit stood accepted in all the preceding years, wherein substantial amount was received, a contrary view cannot be taken in the year under reference. Reliance in this regard was placed on the judgment of the Hon'ble Supreme Court in Radhaswami Satsang v. CIT (1992) 193 ITR 321 (SC); and CIT v. Excel Industries Ltd. (2013) 358 ITR 295 (SC). 6.1 It was further submitted on the basis of the agreements dated 24.12.2008 and 29.09.2009, avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention of entering this agreement was based on the consideration that the interest free security deposit (IFSD) received by SHL are entrusted to the assessee as 'Custodian'. This signifies that assessee was merely holding the (IFSD) on account of SHL. The financials of assessee establish it firmly that assessee has shown IFSD, as liabilities. The interest earned on them is shown as 'income from other sources'. 8.1.1 Here it is also relevant to take note of the Buyer's agreement made available at pages 12 to 38 of the PB which is a tripartite agreement between the buyer of Villa/unit with developer SHL, which long with it's subsidiary companies collectively known as TVC PROMOTERS, owns the land, and M/s Silver glades Golf Development Company Private Limited (SGDCPL), which is the assessee here in. The Clause 17 of the Buyer's agreement show that SGDCPL as a separate entity was developing the Golf Course and non-transferable membership was granted to the buyers in the said Golf Course on the request of TVC PROMOTERS for which TVC PROMOTERS had entered into Lease Deed with SGDCPL and had entrusted the development, operation and management work of Golf course to SGDCPL. Then Clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Operation and Maintenance cost, after adjusting the income from the investment made out of security amount as well as other related sources, the same shall be made good by raising the additional bill by SGDCPL upon the Buyers for recouping the shortfall in such Operation and Maintenance expenses of GOLF COURSE, with the approval of SHL" 8.3 Further, agreement dated 29.09.2009 is a corrigendum to the main agreement dated 24.12.2008, which has a clause specifically mentioning that assessee will refund the amount of security deposit to SHL along with details of interest earned and expenditure which was incurred by the assessee till the date of termination of the contract. 8.4 As the aforesaid clauses 3.1, 3.1.1 and 3.1.2 when considered with the relevant clauses of Buyer's agreement establish that the assessee was given responsibility of operation and maintenance of the Golf Course on the basis of self sustenance mechanism and SHL had taken the non-refundable security deposit from the prospective owners of the properties for developing and user of the Golf Course. Security deposit was non-refundable in the hands of SHL and that entity had received the money directly from the owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious clauses of Tripartite agreement and the agreement between the assessee and SHL discussed above it is established that both the companies were operating in different fields of the project. The rights in the land vested with SHL along with other subsidiaries and they were transferred in favour of any buyer of Villa/ Units and qua service or amenities of Gold Course, SHL was separately charging nonrefundable deposits. It was responsibility of SHL to account for the same in books for which assessee cannot be faulted. 8.8 Ld. tax authorities below have completely ignored the corrigendum agreement dated 29.09.2009, considering the same to be self serving ignoring that other clauses of tripartite Buyer's agreement and agreement between assessee and SHL dated 24.12.2008 were themselves clear of the fact that what assessee was getting was something in the form of refundable deposit . The learned CIT(Appeals) has rightly concluded in para 4.1.1 of his order that non-refundable security deposits received by appellant has nexus with O&M services provided to the clients. However, he failed to appreciate that in the hands of assessee the same were refundable and merely as means to financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undable deposit for running and maintenance of golf course as per advice and direction of M/s Silverline Holding Pvt. Ltd. and it has no legal or ownership right in respect of such deposit. Referring to copy of the audited balance sheet, he submitted that the assessee company is holding such deposit as custodian and for exclusive use of running and maintenance of golf course. Referring to the corrigendum dated 29th September, 2009, copy of which is placed at pages 50-52 of the paper book and the renewal agreement dated 27th October, 2017, copy placed at pages 53-55 of the paper book, he submitted that as per the above, the assessee company can hold the deposit only for the purpose of maintenance and running of the golf course. Once the assessee company cease to have running and maintenance right or becomes nonfunctional, the security deposit being liability is to be refunded to M/s Silverline Holding Pvt. Ltd. ....... . 17. We have considered the rival arguments made by both the sides, perused the j orders of the authorities below and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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