2020 (5) TMI 159 - AT - Income Tax

Appeal success for Revenue on non-refundable security deposit dispute

The Revenue's appeal against the deletion of the addition of a non-refundable security deposit as undisclosed receipts was upheld. The non-refundable ... Non-refundable security deposit - Addition as undisclosed receipts - assessee submitted that necessary approvals took lot of time and no activity was carried out on the project and no revenue has been generated from the said project - also that dispute was going between the assessee and the said party in respect of the same land and development, etc., which is pending before the Hon’ble Delhi High Court - HELD THAT:- As brought on record that a settlement agreement has been entered between the parties on 11.07.2017 and the Hon’ble Delhi High Court vide judgment and order [2017 (1) TMI 1715 - DELHI HIGH COURT] has taken the settlement agreement on record and has disposed of the said petition to be decided in terms of settlement agreement. Since the issue has attained finality in terms of settlement agreement duly approved by the Hon’ble High Court, the matter is restored back to the file of the Assessing Officer to implement the said settlement agreement and decide the issue. Accordingly, the Revenue’s appeal is partly allowed for statistical purposes. Issues involved:Revenue's appeal against deletion of addition of non-refundable security deposit as undisclosed receipts in the assessment year 2013-14.Detailed Analysis:Issue 1: Addition of Non-Refundable Security DepositThe Revenue appealed against the deletion of the addition of a non-refundable security deposit of Rs. 5 crores as undisclosed receipts by the Assessing Officer. The assessee, a real estate company, had entered into an agreement with another party for the development of a residential group housing colony. The dispute arose when the other party did not fulfill certain conditions, leading to legal proceedings before the Hon'ble Delhi High Court. The Ld. CIT (A) held that the amount of Rs. 5 crores was contingent on the decision of the court and could not be considered as income during the relevant year. The taxability of the amount would depend on the project's development and the court's decision. Subsequently, a settlement agreement was reached between the parties, which was approved by the Hon'ble Delhi High Court, leading to the matter being referred back to the Assessing Officer for implementation of the settlement agreement and final decision.ConclusionThe judgment highlighted the complex nature of the dispute over the non-refundable security deposit and its treatment as undisclosed receipts. The involvement of legal proceedings and the subsequent settlement agreement played a crucial role in determining the taxability of the amount. The decision emphasized the importance of legal developments in such cases and the need for a thorough assessment based on the final settlement approved by the court.