TaxTMI 
TaxTMI 
TaxTMI 
2007 (1) TMI 71
X X X X Extracts X X X X
X X X X Extracts X X X X
....l shall be written in English and shall set forth concisely and under distinct heads, the grounds of appeal without any argument or narrative; and such grounds shall be numbered consecutively." 3 However, at the time of hearing learned counsel for the assessee submitted that the final prayer made be taken as the ground. This reads as under : "The appellant, therefore, submits that Rs. 14,59,87,443 which has been set apart and being offered as income over the period of the contract cannot be held as the income of the year of the receipt." 4 We have heard the rival submissions. The assessee is engaged in the business of sale of time share units promoted by it at different locations. During the relevant assessment year the assessee re....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... unit price constitutes the cost of time share." 7 As per the notes on accounts, it is treated as deferred income with the following observations : "(i) In respect of time shares cost portion of the time share consideration, viz., 45 per cent. is treated as income in the year of receipt of 10 per cent, of the total amount specified in the time share agreement. (ii) In respect of holiday units sold, the cost portion of the time share consideration, viz., 45 per cent, is treated as income in the year of receipt. (iii) Advance subscription towards customer facilities in respect of property time shares sold is spread over equally over a period of 100 years and included under sales. (iv) Advance subscription received from customers in respe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oss account is debited with the actual expenses incurred during each year on the provision of amenities and facilities. 11 The general conspectus of the main plank of learned counsel's argument was that the amount received was deferred income as certain obligations were attached with such receipts. The treatment given to such receipt was in accordance with the fundamental accounting concept for matching the revenue of each year with the expenses incurred to earn such revenue. The entire amount received towards advance subscription cannot be debited to the profit and loss account as it tantamounts to provision of agreed amenities and facilities towards which customer made the payment in the previous year. Reliance was placed on the decision....
X X X X Extracts X X X X
X X X X Extracts X X X X
....which would be incurred in discharging the same could be deducted from the profits and gains of the business, and the amount to be expended could be debited in accounts maintained in the mercantile system of accounting before it was actually disbursed. The difficulty in the estimation thereof did not convert the accrued liability into a conditional one because it was always open to the income-tax authorities concerned to arrive at a proper estimate thereof having regard to all the circumstances of the case. 12 We find that the facts of the present case are entirely different. In this case, the assessee spread the liability over 99 years. There is no basis for estimating the expenditure. It was further submitted that earlier the Commissione....
X X X X Extracts X X X X
X X X X Extracts X X X X
....intenance. 14 As per clause 139(c) of the time share agreement, the time shareholder shall pay the requisite charges/fees/prices decided by the company from time to time for use and enjoyment of the amenities. The time shareholder shall also pay such charges as may be fixed from time to time by the company in respect of electricity, gas, water, air-conditioning/heater, etc., that may be utilized by the time shareholder while enjoying his time share. The time shareholder is also required to pay "utility charges" as applicable to the concerned resort. The assessee could not demonstrate that what actual expenditure it incurred towards facilities for which it deducted 55 per cent. out of the total income. The first facility is known as "exchan....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee was engaged in executing projects of a power corporation. The assessee received excess amounts over and above amounts due to it as per actual work done by it. Final adjustments were made at the end of the contract. Excess amount was to beadjusted in future years. The practice of power corporation was to make excess payments to the assessee. It also obtained large security deposits from the assessee which were non-returnable until final bill was passed. On this factual backdrop the hon'ble High Court has held that the excessamounts received were deposits or advances and not income liable to tax. 15 In the present case, 55 per cent. amount allotted for the future expenditure can by no stretch of imagination be construed as depo....