TaxTMI 
TaxTMI 
TaxTMI 
2020 (7) TMI 217
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....s of the case and in law, the Ld. CIT(A) is right in estimating the income @ 10% without appreciating the disallowance made by AO as per provisions of section 40A(3) of the Income Tax Act when the Ld. CIT(A) himself has stated that the assessee is not eligible for showing income as per provisions of section 44AD of the Income Tax Act. 3. The appellant prays that the order of the Ld. CIT(A) on the above ground be reversed and that of the Assessing Officer be restored. As evident, the primary subject matter of appeal is to determine the question of accrual of certain income. 2.1 We have carefully heard the rival submissions and perused relevant material on record including documents placed in the paper book. Our adjudication on the subject matter of the appeal would be as given in succeeding paragraphs. 2.2 Briefly stated, the assessee, being resident individual, is stated to be engaged as civil contractor under proprietorship concern namely M/s Tamboli Developer. An assessment was framed for year under consideration u/s. 143(3) r.w.s. 147 of the Act on 30/12/2016 wherein the income of the assessee was determined at Rs. 276.69 Lacs as against returned income of Rs. 2.82 Lacs fil....
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....ghts to M/s Shivalik for Rs. 336 Lacs and received part payment of Rs. 100.80 Lacs against the same. 2.5 The assessee defended its stand by submitting that as per the terms of the agreement, the assessee was to perform his work on the basis of receipt of fund from M/s Shivalik. Further, the funds were received from M/s Shivalik which were spent for ground level activities and the balance amount was already offered for taxation. 2.6 In response to notice u/s 133(6), M/s Shivalik confirmed that the assessee was to do ground level work activities like collecting consent, taking care of local elements and do all the activities with the slum dwellers so that letter of intent could be issued. For the same, the assessee was to bear all the expenses and the payment was to be made in trenches as per assessee's activities. The sale consideration was stated to be revised from Rs. 336 Lacs to Rs. 422.40 Lacs, out of which the amount of Rs. 373.80 Lacs was already paid to the assessee. 2.7 During the course of assessment proceedings, the assessee submitted a chart showing amount received from M/s Shivalik and expenses incurred by the assessee for ground level work. The assessee reflected exp....
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....s not applicable. 3.2 Convinced with assessee's, Ld. CIT(A) concluded the issue in assessee's favor by observing as under: - 4.4. I have carefully considered the facts of the case, documents produced before me and submissions of AR. It is observed that the appellant had procured the development rights from 2 Co-operative Societies named Nilofar Co-op. Hsg. Soc. Ltd. and Evergreen SRA Co-op. Hsg. Soc. (Proposed). It is an undisputed fact that the property was under serious encroachment and occupation of slums and was declared as censuedslum. As the appellant was not able to re-develop the property, thus he executed a Joint Venture Development Agreement with M/s Shivalik Ventures Pvt Ltd to assign its rights to the transferee. On perusing the Clause No. 17 of the Joint Venture Agreement, it is observed that the appellant was entitled to receive the Joint Venture consideration of Rs. 3,36,00,000/- in various stages, as under: - a) Rs. 1,00,80,000/- was receivable on execution of the agreement to acquit, release, discharge the rights in favour of M/s Shivalik Ventures Pvt Ltd; b) Rs. 1,66,00,000/- was receivable on obtaining a revised Letter of Intent (LOI) and Intimation of App....
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....ooked into the terms and conditions of the Joint Venture Agreement which mandated the appellant to perform various work, obtain permissions etc and subject to fulfilment of the performance, the payments of the contract were to be released. The AO's contention about part performance u/s 53A of transfer of Property Act, 1882 would not apply since Sec.2(47)(v) relate to transfer of a capital asset whereas, in impugned case, the appellant had offered the income under the head Income from business. The AO had incorrectly considered the Joint Venture Agreement as relating to transfer of development right without considering the various work to be performed by the appellant at various levels by both the parties and that the payments had been recovered in phased manner of 5 years in accordance to the work completed by the appellant. The Hon'ble Jurisdictional High Court in Mrs. Hemal Raju Shette (ITA no-2348 of 2014) decided that: "In the present case, from the reading of the above clauses of the agreement the deferred consideration is payable over a period of four years i.e. 2006-07, 2007-08, 2008-09 and 2009-10. Further the formula prescribed in the agreement itself makes it cl....
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....em. This amount which could be received as deferred consideration is dependent/ contingent upon certain uncertain events, therefore, it cannot be said to have accrued to the respondent-assesses. The Tribunal in the impugned order has correctly held that what has to be taxed is the amount received or accrued and not any notional or hypothetical income. As observed by the Apex Court in CIT v. Shoorji Vallabhdas & Co. (1962] 46 JTR 144 "Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which liability to tax is attracted, viz., the accrual of its income or its receipt; but the substance of the matter is income, if income does not result, there cannot be a tax, even though in book-keeping an entry is made about a hypothetical income, which does not materialize." Also, in the case of Sassoon & Co. Ltd v. CIT reported in 26 ITR 27 Hon'ble Supreme Court laid the principle that an income can be held to accrue only when the assessee acquired a right to receive that income. Accordingly, AO is not justified in holding that the entire consideration of Rs. 3,36,00,000/- under Joint Venture Agreement had accrued during current year. Acc....
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....t would meet an end of justice. I direct AO to sustain the addition at Rs. 10,08,000/- and delete the balance addition of Rs. 2,67,12,000/- i.e. (Rs. 2,77,20,000 /- minus Rs. 10,08,000/-). In the result, the ground nos. a to f are partly allowed, Aggrieved as aforesaid, the revenue is in further appeal before us. It appears that the assessee has accepted the verdict of Ld. CIT(A). 3.3 It is evident that Ld. CIT(A) has held that the provisions of Sec.2(47)(v) defining the term transfer would not be applicable since the income was assessed as Business Income. The Ld. CIT(A), after considering the terms of Joint Venture Agreement, also came to a conclusion that only part-payment accrued to the assessee during the year whereas the balance receipts were conditional receipts which were payable only in the event of assessee performing various work, obtain requisite permissions etc. The payments were subject to fulfilment of certain contractual performance by the assessee. The said facts were confirmed by M/s Shivalik also, in response to notice u/s 133(6). 3.4 Another finding is that the payment was received in various trenches over next 5 years and the same has already been offered to....
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....ch on the ground of exceptional and extraordinary circumstances. However, the extended period shall not ordinarily exceed a period of 30 days. 5.2 Although the order was well drafted before the expiry of 90 days, however, unfortunately, on 24/03/2020, a nationwide lockdown was imposed by the Government of India in view of adverse circumstances created by pandemic covid-19 in the country. The lockdown was extended from time to time which crippled the functioning of most of the government departments including Income Tax Appellate Tribunal (ITAT). The situation led to unprecedented disruption of judicial work all over the country and the order could not be pronounced despite lapse of considerable period of time. The situation created by pandemic covid-19 could be termed as unprecedented and beyond the control of any human being. The situation, thus created by this pandemic, could never be termed as ordinary circumstances and would warrant exclusion of lockdown period for the purpose of aforesaid rule governing the pronouncement of the order. Accordingly, the order is being pronounced now after the re-opening of the offices. 5.3 Faced with similar facts and circumstances, the co-or....
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....esident of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment". In the ruled so framed, as a result of these directions, the expression "ordinarily" has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any "extraordinary" circumstances. 9. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon'ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account....
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....re of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon'ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon'ble Bombay High Court itself has, vide judgment dated....