Andhra HC (Pre-Telangana)
Commissioner Of Income-Tax vs Moghul Builders And Planners on 26 July, 2001
Equivalent citations: [2001]252ITR488(AP)
JUDGMENT S.R. Nayak, J.
1. This income-tax case is at the behest of the Revenue. The respondent is the assessee. The assessee is a property developer dealing in construction and sale of flats, commercial complexes, etc. The assessee had undertaken construction of multi-storeyed buildings during the assessment years 1986-87 and 1987-88. The profit was ascertained on finalisation of construction and allotment of several portions and the entire profit was disclosed in the return of income for the assessment year 1986-87. The Assessing Officer allowed the profit for the assessment year 1986-87 on the ground that the assessee had made some investment in 1986-87 and, therefore, proportionate profits on the basis of investment are to be assessed for the assessment year 1986-87. The Commissioner of Income-tax (Appeals), confirmed the order of the Assessing Officer. On further appeal by the assessee, the Appellate Tribunal held that the decision of the Calcutta High Court in the case of Madgul Udyog v. CIT is applicable to the facts of the case and so opining it directed the Asses-
sing Officer to compute the income in respect of the profits and gains arising out of construction and sale of flats on the basis of handing over the possession of flats to the respective buyers. Aggrieved by the above order of the learned Appellate Tribunal, the Revenue filed a reference application under Section 256(1) of the Income-tax Act, 1961 (for short, "the Act"), to refer the following question of law for the opinion of this court :
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is correct in holding that the income from construction and sale of fiats accrued to the assessee on the basis of handing over the possession to the respective buyers and not on the basis of investment made by the assessee ?"
2. The learned Appellate Tribunal vide its order dated November 22, 1995, in M.A. No. 445/Hyd/95 rejected the reference application filed under Section 256(1) of the Act holding that no referable question of law arises out of its order as the order of the Tribunal was based on the judgment of the Calcutta High Court in Madgul Udyog's case .
3. Since the opinion of the learned Appellate Tribunal is based on the judgment of the Calcutta High Court in Madgul Udyog's case , it is appropriate to notice briefly the facts of that case.
4. In that case the assessee-firm was engaged in the business of construction of multi-storeyed buildings and sale of flats therein. The assessee-firm treated the constructed unsold area as stock-in-trade and not as capital asset. The assessee-firm sold and delivered possession of the flats to the respective buyers against payment of full consideration in terms of the agreement of sale entered into by it in the course of the business. The Income-tax Officer assessed the income arising from sale of these flats as business profits in the hands of the assessee under Section 28 of the Act for the years in which the construction was completed and possession of the flats was handed over to the respective buyers against payment of full consideration, by treating the flats as having been already sold, even though conveyance deeds had not been executed and registered. The buyers of the respective flats were in occupation and enjoyment of the flats. The buyers were also assessed to income-tax on the notional/annual rental income, as the case may be, arising from such flats from the date of their taking over possession. The Income-tax Officer assessed the assessee on the so-called notional income in respect of flats sold by it and for which possession was duly handed over to the respective buyers against payment of full consideration on the ground that no deeds of conveyance have been registered in respect of these units in favour of the buyers. The learned Tribunal, in the fact-situation of that case, held that there cannot be a valid transfer of ownership of immovable property of the value of more than Rs. 100 by mere delivery of possession and acceptance of price thereof without being evidenced by a registered instrument and hence the assessee was the owner of the flats within the meaning of Section 22 of the Act and as such the annual value of the flats had to be assessed in the hands of the assessee only. On a reference, the Calcutta High Court held that there cannot be a double assessment of the same income ; once in the hands of the assessee-firm and again in the hands of the buyers and opined that the Tribunal was not justified in holding that the assessee was the owner of the flats within the meaning of Section 22 of the Act and that the annual value of the flats has to be assessed in the hands of the assessee.
5. The ratio of the judgment of the Calcutta High Court in the above case squarely applies to the facts of this case also. In the instant case, admittedly, the assessee is not a contractor of a building but constructs flats, commercial complexes, etc., and sells them. The learned Tribunal has not committed any error, factual or legal, in applying the ratio of the judgment of the Calcutta High Court in Madgul Udyog's case . This case does not involve any referable question of law to this court.
6. In that view of the matter, the I.T.C. is dismissed with no order as to costs.