TaxTMI 
TaxTMI 
2018 (3) TMI 1039
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....s of the case and in law, the Ld. CIT(A) erred in allowing the claim of the assessee that the receipts do not crystallize till the matter attains finality in the High Court and as receipts are shown in balance sheets, ignoring the fact that mere entries in books of accounts do not determine true nature of income ". 3. The appellant prays that the order of the CIT(A) be set aside and matter may be decided according to law. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 3. Rival contentions have been heard and record perused. 4. Facts in brief are that the assessee is a partnership firm engaged in the business of construction industrial and service gala. During the assessment proceedings the assessee was asked to explain why the amount deposited with court Rs. 1,15,04,185/- should not be added to the total income. The assessee submitted to the A.O that there are 2 building under construction named building no. 9 and building no. 5. The building no. 9 is named as "Laxmi Plaza" and galas constructed are in the nature of industrial galas. The building No. 5 is named as "Laxmi Mall" are in the nature of service gala with....
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.... that there is dispute between the appellant and the owners of the industrial sheds (which were earlier purchased from the appellant) with regard to the entitlement of additional FSI available on the land owned by the appellant. The erstwhile purchasers of industrial sheds were of the view that they are also entitled to the benefits of additional FSI available now with the appellant. The erstwhile owners have filed a case before the Hon'ble City Civil Court against the appellant vide SC Suit No. 3159 of 1993. The City Civil Court in their interim order allowed the appellant to do pilling work upto one feet above ground level of the proposed building and the court (order dated 8.9.09) has not given relief of injunction to restrain the appellant from carrying out construction of additional structures consuming balance FSI. Aggrieved by the order of the Court, the owners of the industrial shed filed an appeal in the High Court (order dated 22,12,98) and the Hon'ble High Court has passed the following order: "The following order shall operate pending the appeal (1) Respondent No. 1 will be entitled to consume and/or deal with balance F.S.I 0.43 viz. 3,94,680 sq.ft....
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....ol Regulation for Greater Bombay inspite of the fact that societies in the Suit property formed and registered more than two decades ago. In such circumstances the societies are exclusively entitled for further development and utilization of available PS I as per Maharashtra Ownership of Flats Act, 1966 from the date of registration the right of society accrues to the balance F.SI from the date of registration of society as per the relevant provisions of law. M) That the Learned Judge while coming to the conclusion that the appellants are entitled for the conveyance in respect of the suit property in favour of the unit purchasers also ought to have come to the conclusion that the FSI available on the suit land/suit property is also required to be conveyed to the purchasers and they will be exclusively entitled for the said FSI for further development of the suit property in future and the Respondent No. 1 will have no right, title and interest or claim on the said additional FSI available on the Suit Plot of Land. AA) That the Learned Judge ought to have to come to conclusion that the Respondent No. 1 is not entitled to utilize the F.S.I. and put up structure subs....
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....crued to the assessee company. The Court referred to the judgment of the Court in H.M. Kashiparekh & Co. Ltd. vs. CIT (1960) 39 ITR 706 (Bom) which view was approved by the Supreme Court in CIT vs. Birla Gwalior (P) Ltd. 1973 CTR (SC) 349 : (1973) 89 ITR 266 (SC). What can therefore, be assessed is real income as income-tax is a tax on income, The test therefore, before income can be taxed is whether there is real accrual of income. In our opinion, the ratio of that judgement fully applied to the facts of the present case. 5. In the instant case, there is no accrual of income. There is dispute between the parties for the relevant assessment year which GBP was pending in arbitration. It is only on the arbitral proceedings coming to an end and award being passed and income received by the assessee, will it be liable to be assessed. 7.2.1 The Hon'ble ITAT Amritsar Bench in the case of ITO vs. Kuthiala Cold Storage 48 TTJ(Asr)(tm) 46 ITD 1 13(tm) has held as follows: " have heard the parties at length and further considered the relevant material on record. There is no dispute that the order issued by the Punjab & Haryana High Court on a writ petition file....
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.... considered the decisions relied upon by both the sides before me. On a careful consideration of these, I am of the opinion that the view taken r by the Id. Accountant Manager appears to be just and correct. The i order of the ITO as well as the CIT(A) suggest that the award given by the arbitrator was under the rule of the Court by an order passed by the High Court on 22nd Jan., 1979. This does to seen to be correct. Actually it was the order passed by the First Additional Civil Judge, Agra on the date which was an ex parte order. It is not doubt true that once the award becomes the rule of the Court, it becomes enforceable and acquires validity. The Delhi High Court held in the case of Faxika Electric Supply Co, Ltd. vs. CIT (1983) 36 CTR (Del) 355: (1983) 143 ITR 557 (Del) that an award of an arbitrator that is not filed in Court and made a rule of the Court has no force or validity. It cannot create, extinguish or pass any title or interest. Nobody can rely on such award by way of attack or defence in any proceeding whatsoever. No party can be prejudiced or benefited by the mere existence of such an award. Since this award has become the rule of the Court as per the order passe....
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....ng of s.5 of the IT Act because it is that section that permits all levy of tax. Sec. 5 states that the total income of any previous year of a person, who is a resident includes all income from whatever source derived which is received or is deemed to be received in India during such year or accurse or arises to him outside India during such year, Other partitions of s.5 are not quoted here as they are not relevant here for the present purpose. It, therefore, follows that any receipt in order to be income must be a receipt received as income or in the alternative or right to receive that income must accrue to him or arise to him and the accrual or arisal of that right must be during the previous year. It is now settled law that there is not much of difference between the expressions 'accrue' or 'arise' while there is not much of overlapping also. What is, therefore, to be seen is whether any right accrued to the assessee to receive this amount as income. This question is very vexed one and to engaged the attention of several High Court in the country. Identical question arose under several Acts e.g. Land Acquisition Act but the underlying Principle is that when an a....
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.... these dates fell in the asst. yr 1966-67 but still the Tribunal held that the enhanced compensation was to relate back to the asst. yr 1966-67 and consequently assessable in the year. The assessee questioned this conclusion of the Tribunal and, therefore, the matter went up before the High Court to decide the broad question whether in a case where appeals are filed could it be said that a right to receive that amount accrued. Dealing with the question, the Delhi High Court held on p.486 of the report. "Under the Act income is taxable when it accrues, arises or is received, or when it is by fiction deemed to accrue, arises or is deemed to be received. Receipt is the only test of chargeability. If income accurse or arises it may become liable to tax [see CIT vs. Ashokbhai Chimabhai (1965)56ITR42(SC)". Then the High Court held in Harish Chandra & Ors vs. CIT (1985) 45 CTR (Del) 329 : (1986) 154 ITR 478 (Del) at 486 to9 488: "It is thus clear that unless and until there is created in favour of the assessee a debut due by somebody, it cannot be said that he has acquired a right to receive the income or that income has accrued to him. In cases of claims for determination of com....
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....itted the assessee to withdraw the money in accordance therewith. The contest of the Government of Rajathan was that the appointment of the arbitrator invoking cl 25 of the agreement for the execution of the contract works was clearly untenable and beyond jurisdiction and the whole proceedings were arbitrary and one sided and were liable to be set aside. The finality of the decree passed by the Additional District Judge was so disturbed with the grant of the order of the High Court staying the operation of the decree that it cannot be said that any enforceable right to receive the sum in question accrued to the assessee. Unless such a right accrued to the assessee, the amount received cannot be brought to tax under s. 5 of the IT Act. In this context the question whether the assessee is following mercantile system of accounting or cash system of accounting or hybrid system of accounting does not really matter as the system only helps computing the income. If the assessee ultimately succeeds in the High Court, then it can be said that a right to receive those amounts accrued to the assessee and those amounts could then be brought to tax but not till then. I am therefore, of the opin....
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....e only when the dispute is finally settled by the Hon'ble Supreme Court. Shri Ranka argues that by virtue of the notification passed by the Central Government the assessee was not entitled to sell the old stock at the enhanced rate and, therefore, it was not entitled to the difference of the old rate and the enhanced rate, The fetter that was created by the Notification of the Government, Shri Ranka says continued to operate even after the decision of the High Court in the writ, as the writ decision was not final, in as much as, the appeal was filed before the Supreme Court by the State Government. Shri Ranka also argues that at no state, the amount was absolutely given to the assessee, but at all stages it was subjected to conditions and, therefore, there was no vested right of the assessee in the amount. On the other hand, the revenue argues that, the assessee is in possession of the amount refunded by the Collector and that unless the order of the High Court is reversed by the Supreme Court, the assessee has a vested right in the impugned amount. The Hon'ble Supreme Court in the case of E.D. Sasoon & Co. Ltd. & Ors. Vs. CIT (1954) 26 ITR 27(SC) observed at page 51 that i....
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....accrued on the basis of year to year. In those cases the interest was received on compensation awarded on account of acquisition of land. But here is the question of interest awarded on compensation on account of death by accident. In case of Land Acquisition the statutory body as well as the agriculturists filled appeal before the High Court to enhance the compensation or to reduce the compensation as the case may be. However, in the present case there is no question of enhancing the compensation on account of land acquisition but the case is on account of compensation awarded on account of death of the person due to accident. MACT has awarded some compensation and has also directed to pay interest to the assessee. The Insurance Company has filed appeal before the Hon'ble Jurisdictional High Court and Hon'ble Jurisdictional High Court has admitted the appeal of the Insurance Co. and Insurance Company has raised a very valid point which has been mentioned in the written submissions which is part of this order also. There may be possibility -that compensation can be reduced can be cancelled in toto or can be upheld. Appeal is admitted, there is no dispute. If the compensatio....
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....ucted and consumed the FSI of 38351.35 sq.mtr up to 31/03/1995. The building wise utilization of the FSI for the period between 1976 and 1995 is as under:- Building Number FSI Utilised - in sq.mtr. 1,3,5,7 5891.54 2,4,6 4099.17 8,9,11 3932.87 13,15,16 3278.46 23,25,27 3932.87 29, 31, 33 5870.61 30, 32,34,35 9973.90 21 1371,93 Total 38351.35 9. From the record we found that the assessee firm has developed and sold the above FSI to the purchaser and the society for each of the building was formed as per the Co-operative Society Act. The balanced FSI available in hand with the assessee firm in 1995 was 14202.40 sq.mtr. In 1995 the assessee firm submitted the revised plan before the BMC and got the permission for total FSI of 89226.13 sq.mtr. As per the revised plan of 1995, the assessee firm was entitled to additional FSI as under: FSI entitlement as per 1995 plan 89226.13 sq.mtr. Less: FSI entitlement as per 1976 plan 52553,75 sq.mtr Balance Additional FSI 36672.38 sq.mtr 10. The dispute arose between the assessee firm and the various societies as regards the entitlement of the additional FSI of 36672....
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....es Co-operative Housing Society Limited (proposed) have filed short cause suit no. 3159 of 1995 in the Bombay City Civil Court at Bombay, against the Promoters for certain reliefs, viz. conveyance of the said land in their favour and / or respective societies, for accounts and a permanent order of injunction restraining the Promoters from consumption of additional FSI and from construction. They had also made interim application restraining the Promoters from further construction which was disposed of in favour of the Promoters, by the City Civil Court's order dated 8th September 1998. The said order has been challenged by the said S.S. Shah and L. M. Ghanshani in the Hon'ble High Court by filing an Appeal from Order No. 1050 of 1998 which has been admitted and the Promoters have been permitted to consume balance FSI of 0.43 on fulfillment of the conditions laid down therein;" 12. Also the title certificate issued by the advocate enclosed at page 30/31 of agreement for sale also clearly records the said fact. The assessee submitted the copy of specimen sale agreement. Till the time the Hon'ble Bombay High Court permitted construction in 2001-02, from 1995 to 2002 the....
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....t accrued to the assessee and the question of claiming it as deduction would arise only if it is first held that it is income of the assessee. 15. From the record, we also found that the ownership of additional FS1 is in dispute and the assessee has been permitted to develop and sell the such disputed additional FSI subject to certain conditions and deposit of Rs. 500 per sq ft of such additional FSI sold. The right to the said amount of Rs. 500 per sq ft has not accrued to the assessee and the owner of such amount would be decided by Courts and till such time as the issue is resolved the said amount does not accrue to the assessee. 16. In the case of Hindustan Housing and Land Development Trust Ltd., 161 ITR 524 at page 530 Hon'ble Supreme Court held as under:- "It is sufficient to point out that there is a clear distinction between cases such as the present one, where the right to receive payment is in dispute and it is not a question of merely quantifying the amount to be received, and cases where the right to receive payment is admitted and the quantification only of the amount payable is left to be determined in accordance with settled or accepted principles." ....