TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 1413
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.... with ITA Nos.4387 & 4388/Del/2016 (for AYs 2012-13 & 2013-14), are directed against the CIT(A), Ghaziabad's twin orders; both dated 12.05.2016 in case no 025/2015-16/GZB for AY 2012-13 and case no. 196/2015-16/GZB in latter assessment year respectively. The latter's appeal ITA No. 7291/Del/2018 (for AY 2015-16) arises against the CIT(A), Ghaziabad's order dated 08.08.2018 in case no. 364733251150118. Relevant proceedings in assessment years 2007-08 to 2009-10 and 2011-12 herein are under section 147 r.w.s. 143(3) and for the latter three assessment years 2012-13, 2013-14 and 2015-16 are under section 143(3) of the Income-tax Act, 1961 (in short "the Act"), respectively. As against this, the latter batch of twelve cases i.e. assessee's and Revenue's six cross appeals each i.e. ITA Nos. 4609 to 4614/Del/2016 and ITA Nos. 4791 to 4796/Del/2016 for assessment years 2007-08 to 2012-13; are directed against the CIT(A), Ghaziabad's common order dated 29.06.2016 in case nos. 341 to 346/2015-16/GZB; respectively, in proceedings under section 221(1) of the Act. Heard both the parties at length. Case files perused. 2. The Revenue's "lead" quantum appeal ITA No. 3850/Del/2016 for the first....
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....hat at the time of signing this Agreement, the First Party has allowed the Second Party to enter upon the schedule property to carry out measurements, surveys, prepare the scheme of development, preparation of building plans for construction of independent floors/dwelling units/flats/houses/apartments etc. However, the legal possession of the schedule property shall remain with the First Party." Clause 8.6 of the Original Development Agreements "That the Sale Deeds in respect of the independent floors/dwelling units/flats/houses/apartments so marketed/sold shall be got registered in favour of the purchasers/allottees/members/nominees/transferees on or before handing over possession of each unit by the First Party and the Second Party shall signs the same as the Confirming Party. The stamp duty, registration charges, out of pocket expenses etc. shall be borne by the prospective buyers." No authority is needed in support of the proposition that profit on sale of stock in trade u/s 28 of the Act can be assessed in the year of sale irrespective of the advance received even if substantial in accordance with the method of accounting regularly employed by assessee. This propositi....
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....ase of business transaction which is completed when the rights so acquired by the assessee are exercised; none can make profits by dealing with himself, as is the settled legal position in the light of the settled legal position in the case of Sir Kikabhai Premchand Vs. CIT [(1953)) 24 ITR 506 (SC)]. It is for this reason that we are unable to uphold the action of the authorities below on the facts of this case. No matter how reasonable is it to assume that the assessee will make these profits, these profits cannot be brought to tax at this stage. That is what the legal position, for the detailed reasons set out above, is. 20. In our considered view, therefore, the authorities below indeed erred in bringing to tax the anticipated business profits on assessee's entering into a development agreement with Menorah Realties Pvt. Ltd in respect of the land held by the assessee as stock in trade. The impugned addition of Rs. 17,28,81,276 is thus deleted. Second, the amount received by the Appellant company has been shown under the head Security deposit/advances till the final settlement was done in Assessment year 2015-16 wherein the income has been duly declared by the appellan....
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....e year of transfer and the non-refundable security deposit has been adjusted in the dues receivable by the appellant company in terms of the clauses of the development and 1 supplementary developments agreements. The same has been stated by the appellant in the written submissions as reproduced below: The Assessing Officer has wrongly interpreted the Clauses in Supplementary Agreements for all the three Projects which were duly accepted by the Developer (PDL) and the appellant Company and was not dislodged by the Assessing Officer and the appellant company has strictly followed all of the amended clauses executed in the Supplementary Development Agreements in respect of the security deposits received by it as referred as under: - a) Exotica Project-Clause No.1(a), 1(b) sub clause (i), (ii), and (iii)- PB Page No. 122-123 and Clause 4(i), (ii) and (iii). b) Regalia Project-Clause No.1 and Clause 4 sub clause (i), (ii) and (iii)-PB Page No. 76-77 c) Sterling Project-Clause 1 and Clause 4. PB Page No. 98-99 All the above clauses referred in the Supplementary Development Agreements read with Clause 10.1 of the main Development Agreements have been duly followed by the Ap....
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....* The Appellant Company right from the inception has been regularly following Mercantile Method of Accounting in respect of its Business Income. * This method has been duly accepted in all the assessments made upto and including the Assessment year 2012-13. * The Appellant being a Company under the provisions of the Companies Act, 1956 to which it is governed it can only follow Mercantile method of accounting. * According to the provision of section 145 of the Act as substituted by Finance Act, 1995 w.e.f. 01-04-1997 an assessee can follow either 'Cash' or 'Mercantile' method of accounting regularly employed by the assessee. As a result thereof 'Mixed' or 'Hybrid system of accounting which an assessee could employ upto assessment year 1996-97 was done away with. * There was no rejection by the Assessing Officer of the method of accounting being followed by the Appellant under section 145 of the Act as the same has been accepted by the Department in the original assessments under section 143(1) and the Scrutiny assessments under section 143(3) and even in the reassessments under section 147/143(3) there is no rejection of the Books of Accounts....
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....libhit. Your Honour's kind attention is invited to section para 9 and 10 of the order-PB No.2 Page no.130-132 (f) 2012 (5) TMI 148 ITAT Delhi in ITA No. 4085 (Delhi) 4009 dt. 20-04-12 in Dy. CIT Circle 1 (1) vs. Malibu Estates Pvt. Ltd. PB No.2-page 133-145 Method of Accounting Treatment of advance received from customers as sales - Application of AS-7 to construction contractors and to builder or real estate developers. The findings of the Assessing Officer for including the sale proceeds of the plots/floors in respect of which assessee has received advance. However, sale deeds have not been registered in this year. Now, the case of Assessing Officer is that merely on account of non-registration of sale deed, it cannot be construed that transaction has not been completed between the parties. The assessee cannot defer or postpone the recognition of the revenue in respect of these plots.-held that: - In the case of assessee, it is a developer and recognized the sale of the plots on execution of the conveyance deed duly registered. Taking into consideration all these aspects, we do not find any reason to change the method of accounting in this year Which was accepted in the....
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....oth dated 28.10.2004) and Sterling projects. We make it clear that Assessment Year 2004-05 does not form subject matter of our adjudication herein. And that it was thereafter in the relevant previous year 2006-07 i.e. 28.09.2006, 26.07.2006 and all followed the corresponding supplementary agreement regarding Regalia (dated 20.09.2006), Exotica (dated 14.06.2007) and Sterling (main agreement dated 26.07.2006); as the case may be, which are sought to be treated as involving "transfer" under section 2(47)(v) of the Act. There is no quarrel between the parties that the assessee had converted these three parcels of land earlier treated as capital asset(s) to stock in trade in financial year 2006-07 relevant to assessment 2007-08 in issue. 5. Coming to the learned Assessing Officer's assessment order dated 15.01.2015 in the "lead" assessment year 2007-08, he was of the view that the assessee's former twin projects i.e. Regalia & Sterling had not only transferred possession under section 2(47)(v) of the Act read with section 53A of the Transfer of Property Act, 1882, but also it had received non-refundable security deposits and assigned the authority of further alienation in favour of th....
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....he assessee's land herein continued to be vested exclusively in its name, the developer/second party had to merely act as the confirming party, than the title holder. 10. We have given our thoughtful consideration to the Revenue's and assessee's foregoing vehement contentions. There is indeed no dispute between the parties that such long-term capital gains are assessable on accrual basis only. We reiterate that the sole substantive question before us as framed in the preceding paragraphs is that of applicability of section 2(47)(v) of the Act in the given facts of the case. We are of the considered view that the assessee's foregoing development agreement(s) nowhere amounted to transfer so as to be assessed for the consequential capital gains or business income (supra), as the case may be. This is for the precise reason that the corresponding recitals in these three separate development agreements have nowhere assigned or conveyed or transferred any title or possession in favour of the developer attracting section 2(47)(v) of the Act. As rightly pointed out by learned counsel, the assessee had merely granted a limited permission to the developer to enter in the said premises for th....
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....vances received in the intervening years could not be held taxable in absence of project completion or reasonable certainty(supra). It would indeed not be out of place to observe here that the instant issue of a development agreement being treated as a transfer in the past had caused genuine hardships and the legislature later on introduced section 45(5A) by the Finance Act, 2017 w.e.f. 01.04.2018 that subject to certain conditions of registration etc., such an agreement would not attract the long-term capital gains till completion of the project. So far as Revenue's endevour to assess the assessee's capital gains herein is concerned, we quote Balbir Singh Maini [2017] 86 taxmann.com 94 (SC) that once the entire transaction of land forming subject matter of joint development agreement did not sail through since caught in various litigations and hurdles as in the present case, it does not amount to a transfer under section 2(47)(v) of the Act giving rise to assessment of capital gains. Their lordship's latter decision Seshasayee Steels Pvt Ltd Vs. PCIT 115 taxmann.com 5 (SC) has also settled the issue in assessee's favour that such a permissive licence as discussed hereinabove does ....