TaxTMI 
TaxTMI 
2011 (2) TMI 1117
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....ic company. The main objects of the assessee company are to manufacture, produce, process, purchase, sell or otherwise deal in ice-creams, flavoured milk, cheese, butter, ghee, pastries and other milk products and confectionaries of all types and descriptions. As per other clause of memorandum and Articles of Association, the company is carrying on real estate also among other items of business. The ice-cream is sold through various agents called distributors which in term include all vendors. As per agreement entered into between the assessee and the vendors, the assessee supplies them with deep-freezers/freezers/fridges of sizes as per requirement of the Vendors concerned after taking from them full cost of the equipment as Security Deposit. 3. As per the terms of contract, on termination of the agreement entered into by the assessee with the dealers, the assessee shall deduct certain percentage of cost of the freezer from the dealers deposit while settling their account. The assessee can do so only on the termination of the agreement as envisaged in the said agreement. In other words during the subsisting period of agreement the assessee is not entitled to any income. This wa....
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....on has to be computed as per the method of accounting regularly followed by the assessee. The assessee contends further that it is from the inception of business the assessee is accounting compensation received by the assessee on termination of agreement. The Assessing Officer is having the right to disturb the method of accounting regularly followed by the assessee only on occasions where Accounting Standards are not followed or the accounts are in-correct or in-complete. This is not the case of Department that the books are not reflecting the true nature of income so as to reject the books. 7. On the other hand, opposing this Jr. D.R. would submit that the findings arrived at by the ld. CIT (Appeals) is in accordance with law. She contended further that the assessee received full cost of the freezer from the vendor at the time of supply of freezer and this deposit becomes non-refundable by efflux of time in accordance with clause 7 of the agreement. Therefore, according to the ld. Jr. DR, the claim of the assessee is that the income accrues to it only on termination of the agreement and not before, may be relevant for passing the book entries but revenue cannot be compelled to....
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....it so as the amount attached with a liability to refund. The assessee never admitted this amount as income in the books. Only accrued income arose to the assessee during the relevant previous year also can be brought to tax under the Income-tax provisions which is a settled law. In other words, there must be a debt owed to the assessee and until this is created in favour of the assessee as a debt due to the assessee, it cannot be said as income accrued. Hence, the decision relied by the Jr.D.R. in the case of T.V. Sundaiam Iyengar & Sons, cited supra, is clearly distinguishable on facts. In that case, assessee itself admitted this as income as per the book entries. Hence, it is distinguishable. 11. The decision relied by the ld. counsel for the assessee in the case of CIT v. Realest Builders & Services Ltd. [2008] 307 ITR 202 (SC) in addition to the following cases - (a) Siddheshwar Sahakari Sakhar Karkhana Ltd. v. CIT [2004] 270 ITR 1 (SC); (b) CIT v. Bharat Petroleum Corpn. Ltd. v. CIT [1993] 202 ITR 492 (Cal.) (c) CIT v. Sugauli Sugar Works (P.) Ltd. [1999] 236 ITR 518 (SC); (d) Star India (P.) Ltd. v. Addl.CIT [2009] 311 ITR (AT) 235 (TM); (e) CIT v. Govind Pr....
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....ording to the ld. counsel, it is business prudence. This cannot be treated as adventure in the nature of trade. The ld. counsel would submit that the objects of the assessee are not relevant for considering whether it is a business income or of a capital gain. The surrounding facts and the intention of the assessee has to be weighed in the balance. The contention of the department is that it is an adventure in nature of trade of the assessee. Then according to the ld. counsel the burden is on the department to prove. The Assessing Officer failed to prove that such transaction is adventure in the nature of trade. The ld. counsel on his high technical defence again by submitting that the alleged business i.e. dealer of real estate is not in line of the assessee's business activity. 16. The substantial land holding were taken to fixed asset Schedule but were not routed through Profit and Loss Account. In other words, it was not shown as Stock-in-trade. 17. One of the pre-conditions for the imposition of tax on capital gain is the existence of the capital asset. In other words, if the asset which is not considered as a capital asset such gain cannot be brought within the ambit of....
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....ure in the nature of trade. It is only a new invention by the department for this assessment year and the department failed to prove the same. The assessee has shown fixed asset in the Schedule which will go to show the intention of the assessee's investment. Further the land investment is required to avoid the pollution control problem of the State, which is very pertinent now-a-days and it is for this purpose land-holdings were purchased and when the assessee closed the business, the excess land was not needed for the purpose of making good profit and taking the prime rate for the lands they have decided to sell the land for this relevant assessment year and offered it for capital gain will go to show that the intention of the assessee is to invest in the land and it is not in the nature of trade and assessee never shown any income from real estate business will go to show that the assessee's claim is valid in law. The ld. Jr. D.R. would support the stand of the Assessing Officer that for the land development, assessee claimed expenditure in the Profit & Loss Account. Hence, it should be accepted as a business income as the expenditure has been claimed by the assessee and allowed....