Income Tax Appellate Tribunal - Mumbai
Acit 30(3), Mumbai vs Suratchandra B. Thakkar -Huf, Mumbai on 12 August, 2022
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "G" MUMBAI
BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND
SHRI SANDEEP SINGH KARHAIL (JUDICIAL MEMBER)
ITA No. 4333/MUM/2018
Assessment Year: 2006-07
&
ITA No. 4334/MUM/2018
Assessment Year: 2007-08
&
ITA No. 4335/MUM/2018
Assessment Year: 2008-09
ACIT-30(3), Shri Suratchandra B. Thakkar
C-13, 5th floor, R. No. 510, (HUF),
Pratyaksha Kar Bhavan, BKC, Vs. Tipco Compound, Rani Sati
Bandra (East), Marg, Malad (E),
Mumbai-400051. Mumbai-400097.
PAN No. AAAHT 0788 G
Appellant Respondent
Revenue by : Mr. Hoshang B. Irani, DR
Assessee by : None
Date of Hearing : 28/07/2022
Date of pronouncement : 12/08/2022
ORDER
PER OM PRAKASH KANT, AM
These three appeals by the assessee are directed against a common order dated 06/04/2018 passed by the Ld. Commissioner Suratchandra B. Thakkar (HUF) 2 ITA Nos. 4333 to 4335/M/2018 of Income-tax tax (Appeals) (Appeals)-41, Mumbai [in short 'the CIT(A) for the Ld. CIT(A)'] assessment year 2006-07;
2006 2007-08 and 2008-9 respectively.
respectively Since a common issue-in-dispute dispute is involved in all the three appeals, same were heard together and disposed off of by way of this consolidated order for convenience.
2. Identical grounds have been raised in all the three assessment year except difference of amount and therefore therefore for brevity, we are reproducing the grounds raised by the assessee in ITA IT No. 4333/Mum/2018 for assessment years 2006-07, 2006 07, as under:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not treating of advances received by the assessee of ₹1,78,68,399/- from flat buyers as income of the assessee for AY 2006-07.2006
3. In assessment year 2007 2007-08, deletion of amount of ₹96,04,258/- and in assessment year 2008-09 2008 09 deletion of amount of ₹2,77,19,807/- has been challenged by the Revenue.
Suratchandra B. Thakkar (HUF) 3 ITA Nos. 4333 to 4335/M/2018
4. Briefly stated facts of the case are that assessee HUF had entered into a development agreement with M/s K Raheja Universal Private Limited (i.e. the developer) for development of residential flats and commercial units on certain land at Malad (East), Mumbai, Mumbai which was owned by the assessee along with other co co-owners (i.e. two brothers of Karta of HUF).
HUF As per the development agreement, the owners of the land and the developers were to share the sale proceeds in the ratio of 45.5% and 54.5% 54.5% respectively. The assessee was having 1/4th share in the land, and therefore it was entitled to receive 25% of the 45.5% share receivable by the landowners landowners. The project consisted of construction of four towers on the said land, out of which first two towers towers were completed in previous year corresponding to assessment year 2008-09, 2008 09, whereas the remaining two towers were completed in previous year corresponding to assessment year 2009-10.
2009 10. The assessee received advance of rupees 96,04,258/- and ₹2,77,19,807/- against sale of flats ₹1,78,68,399/-; ₹96,04, f Suratchandra B. Thakkar (HUF) 4 ITA Nos. 4333 to 4335/M/2018 in assessment year 2006-07, 2006 2007-08 and 2008-09 09 respectively.
However no income was offered by the assessee against the said advance received on the plea that assessee was following Project Completion Method and entire entire income was declared in assessment year 2008-09 09 and 2009-10, 2009 10, on completion of the projects, project receipt of occupation certificate and execution of conveyance deed in favour of the buyers.
5. According to the Assessing Officer the entire cost of construction n was being met by the developer and the project did not require any contribution from the side of the assessee, the advance received by the assessee became final and certain. The Assessing Officer further observed that no work-in-progress work progress was reported by the assessee in its books of accounts. In view of the Assessing Officer, there was no risk attached to the assessee and therefore advances becomes income of the assessee in the year of the receipt.
Suratchandra B. Thakkar (HUF) 5
ITA Nos. 4333 to 4335/M/2018
6. The Ld. CIT(A)
A) has summarized
summariz the contentionss of the assessee made before him, for assessment year 2006-07 2006 07 as under:
10. On the other hand, the Ld. AR of the appellant has stated that "10.
the appellant has contributed only land along with his 2 brothers (coparceners) while the Developer has contributed all material, labour, administration expenses, stamp duty, registration charges and all day to day expenses to construct the building. The appellant received advances from the prospective buyers through the Developer in the ratio fixed in the development a agreement, 1,78,68,399/ , which were related to Tower & II amounting to Rs. 1,78,68,399/-, (or Tower A and B), as shown in the balance sheet towards his contribution of cost of land.
11. During the appellate proceedings, the Ld. AR has highlighted thee development agreement to put forth his certain clauses. from th argument. According to him, as per as per clause no. 41 of the development agreement, the appellant has given only rights to the Developers to develop the property into residential & commercial transferring the right in the land although the right units without transferring to sale residential units, to the prospective buyers, is vested with the Developer. Furthermore, as per the clause no. 29 of the development agreement, the appellant was entitled to receive gross sale proceeds including interest components for delayed payment from the prospective buyers of flats against sale of his share in the property owned along with his two brothers as coparceners being the land component. Further as per clause 46 of the development agreeme agreement, after completion of the building, it is the responsibility of the Suratchandra B. Thakkar (HUF) 6 ITA Nos. 4333 to 4335/M/2018 co operative society or a limited company of the developer to form a co-operative purchasers of the newly constructed building. It is clearly mentioned in the said clause of the agreement that the ap appellant along with his 2 brothers and the Developer shall jointly convey their respective rights and interest in the said property and the said co operative society or limited company to building in favour of the co-operative premises. This execution of the be formed by the purchasers of the premises. conveyance deed in favour of the co operative society or limited co-operative company is to be done only after completion of the building, receipt of the occupation certificate, after all the residential premises have sale price of all the said premises have been been sold and the total sale received.
12. The Ld. AR has further brought to the notice of the undersigned the notes forming part of the accounts of the appellant which states that the appellant concern, in respect of real estate development business, is following consistently the completed building project method of accounting. Under this method the profit on the building project is determined only when the building project is completed. All the construction, administration, finance and other related expenses allowable directly in the project including land cost are carried forward as work in progress to the building project account till the year of completion of the building. All the advances received forward as advances received against the sale of flats are carried forward from the customers and the same is accounted on the completion of the building and handing over of the possession to flat buyer. In this regard, the Ld. AR has relied on the Hon'ble Banglore ITAT decision Housing Building Cooperative Society v. ACIT in case of Madhuvana Housing 76 TTJ 948 wherein it is held that the appellant is entitled to adopt Suratchandra B. Thakkar (HUF) 7 ITA Nos. 4333 to 4335/M/2018 such method of accounting as would give complete picture of true income of the assessee provided the same is regularly employed. The appellant is regularly employing the same method of accounting i.e. project completion method to determine complete picture of income.
13, It is also contended that during pendency of construction work, the appellant has received advances against his contribution of lland and not against construction of the building, therefore the advance received cannot be treated as income of appellant till the construction is completed or occupation certificate is received from Municipal Authority or possession is handed over or the full sale proceeds are received from the purchases. This is imminent because advances received from the flat buyers are refundable in case of cancellation of booking of flats. Moreover, projects runs for number denied. Hence, till the of years and price escalation cannot be denied. construction is complete and possession of the flats are given, determination of correct income is not feasible. As per the clauses of the Development agreement, the title of the land is transferred to operative society or limited company on behalf of the the co-operative purchasers only after completion of the project. Only then the income arising from the sale of property is taxable in the hands of the appellant i.e. in F.Y. 2007-2008 2007 09) when the (A.Y. 2008-09) proceeds of land (for Tower & II appellant offered tax on entire sale proceeds 8,97,11,407/ and paid tax or Tower A and B) amounting to Rs. 8,97,11,407/-
2,12,30,019/-.. It is further explained by the thereon totalling to Rs. 2,12,30,019/ Ld. AR that the AO has also cumulatively determined the same receipt of Rs. 8,97,11,407/- or the three years i.e., for A.Y. 2006 8,97,11,407/ for 2006-07, Rs. 1,78,68,399 for Tower & II (Advance), for A.Y. 2007-08, 2007 Rs.
Suratchandra B. Thakkar (HUF) 8 ITA Nos. 4333 to 4335/M/2018 96,04,258/- for Tower & II (Advance) and for A.Y. 2008-09, 2008 Rs.
6,22,38,750 for Tower & II (Final payment). Thus the amount computed by the AO for three three years is the same amount which is offered for taxation in A.Y. 2008 2008-09 09 i.e., Rs. 8,97,11,407/-.
8,97,11,407/ There is no variation at all. Once the appellant has already paid tax on total sale of Rs. 8,97,11,407/- 09, the year in which the 8,97,11,407/ in the A.Y. 2008-09, project iss completed, the AO is not justified in taxing the same amount in the preceding years, when the receipts were in the nature of advances. There is no loss to the revenue on account of taxation 8,97,11,407/ in the A.Y. 2008-09.
as the tax is fully paid on Rs. 8,97,11,407/- 2008 Hence, the Ld. AR pleaded that the impugned addition made by the AO should be deleted.
deleted."
7. After considering of the submission of the assessee, the Ld. CIT(A) accepted the income offered by the assessee following project completion method.
8. The Ld. DR before us relied on the order of the Assessing Officer and submitted that advance received against sale of the flat should have been assessed in the year of the receipt as same became income of the assessee on receipt of the said advance.
9. We have heard arguments of the Ld. Department Representative and perused the relevant material on record Suratchandra B. Thakkar (HUF) 9 ITA Nos. 4333 to 4335/M/2018 including the impugned order of the Ld. CIT(A). We find that the Ld. CIT(A) has summarised the various clauses of the development agreements entered into by the owners owners of the land and the developer. The relevant part of the impugned order is extracted as under:
"15. The above clauses of the agreement reveal that
(i) The legal and juridical possession of the land has always remained with land owners till the completion of the buildings and conveyance to the association of the flat purchasers. It is specifically mentioned that there is neither sale or transfer or intention to give possession of the land to the Developer under section 53A of the property Act, 1882. The Developer is merely given Transfer of property license to enter upon the said property for the purpose of development.
(ii) The land owners have the obligation to obtain FSI by way of TDR of approximately 1,00,157.08 sq.ft. as well as to obtain permissions for the re development of the land for commercial/residential uses at their own cost.
(iii) Entire cost of development works in respect of the said property is to be borne by the Developer alone without the land owners being required to contribute any amount amou Suratchandra B. Thakkar (HUF) 10 ITA Nos. 4333 to 4335/M/2018
(iv) The agreement for sale of flats in the said buildings will be a tripartite agreement executed by the land owners and the Developer with the buyers.
(v) Out of the gross sale proceeds, including interest compensation lats/residential premises, the land charged to the purchasers of fflats/residential owners are entitled to receive and retain 45.5% (in their respective shares) being the land component while the remaining 54.5% shall belong to the Developer.
(vi) As per the arrangement made with the Vijaya Bank, the proceeds of sale of flats upon receipt in the Escrow account will be directly transferred to the land owners' account in the ratio of 45.5% and the Developer @ 54.5%.
(vi) The land owners and the Developer shall jointly convey their respective right title and interest in the land and the said buildings co operative society or limited company to be formed in favour of a co-operative by the purchasers of the premises after completion of the buildings.
(vii) Finally, it is mentioned that the development agreement has er created any relationship of partner or as A.O.P. and/or as neither Joint venture between the land owners and the Developer. The relationship between them are that of 'principal to principal' for the purpose of development of the said property.
16. Apart from th at following facts are also important to determine that the issue under consideration Suratchandra B. Thakkar (HUF) 11 ITA Nos. 4333 to 4335/M/2018
1) Occupation certificates from BMC are received on 22/01/2008 for Tower A & B and on 24/04/2008 for Tower C & D i.e., in A.Y.s 2008-09 09 and 2009-10 2009
2) Land is conveyed in favour favour of the society after handing over the 2009-10 & 2010--11 possession to the flats buyer i.e. after A.Y. 2009 2004 05, the land was
3) As declared in the return of income of A.Y. 2004-05, converted into "stock in trade" valued at Rs. 7,37,50,000/ 7,37,50,000/- and all years, the appellant has consistently treated the land as subsequent yea its "stock in trade".
4) From the return of income of A.Y. 2008 09, it is observed that the 2008-09, appellant has offered the sale proceeds of tower no. A and B at Rs. 8,97,11,470/- under the head business inc ome on the plea that both income the towers are completed during the year under consideration, occupancy certificates are received and possessions are handed over. Simultaneously, income under the head capital gain on transfer of land u/s 45(2) of the I.T. Act, in in the ratio of FSI of land sold during the year, is also offered and after indexation the same is worked out at long term capital loss of Rs. 5,83,942/ 5,83,942/-. In the 2008 09, the Jt. CIT while assessment order u/s 143(3) of A.Y. 2008-09, offered for taxation recomputed the accepted the business income offered 30,03,122/- after getting the valuation of the LTCG u/s 45(2) at Rs. 30,03,122/ land done by the DVO as on 01.04.1981."
01.04.1981.
9.1 In background of the above facts, the Ld. CIT(A) in his detailed finding held that land in question was not transferred transferred to the developer till completion of the construction and therefore entire Suratchandra B. Thakkar (HUF) 12 ITA Nos. 4333 to 4335/M/2018 risk of the project remained with the landowners including the assessee, therefore, he justified in adoption of completed contract method (or Project Completion Method) followed by the assessee.
The relevant finding of the Ld. CIT(A) for assessment year 2006-07 2006 is reproduced as under:
17. From the above clauses of the agreement and various facts on "17.
record, it is clear that the appellant being land owner has and as per Joint Development Arrangement but does contributed land not transfer the land to the Developer during the year under consideration. The appellant HUF does not have joint control in construction and sale of the project except revenue sharing arrangement in Towers I, II, III and IV, ownership in the commercial part to be built up by the Developer and execution of the conveyance deeds in favour of the society/ LLP. The HUF is entitled to receive the sale consideration as fixed percentage of sale from the buyers of the flats. It is also specifically proceeds realized from mentioned in the clause 43 of the agreement that the arrangement between land owners and the Developer is not in the nature of partnership or joint venture. In such a scenario, the guidance note requiring adoption of percentage of completion methods (PCM) for revenue reorganization in the case of real estate transactions, as applicable to the Developer, cannot be applied to the appellant being land owners. Even the AO is consistent with the view that Suratchandra B. Thakkar (HUF) 13 ITA Nos. 4333 to 4335/M/2018 rtionate or completion method is not applicable to the proportionate appellant's case.
18. In my considered opinion, in such a case, the land owner can adopted a suitable revenue recognition criteria having consistency in the accounting policies being followed from year to year. Based on the accounting policies being followed and development agreement entered with the Developer, revenue can be recognised once the project is complete and occupation certificates are issued depend upon the by the municipal authorities. However, much will depend terms and conditions under which the development agreement was entered into and how the revenue flows. Before further dealing on this issue, it needs to be ascertained as to whether the land, in the asset or a business asset. In instant case, will constitute a capital asset this regard, the appellant has brought on record that in the return 2004 05, the land was converted into "stock in of income of A.Y. 2004-05, trade" and from that time, the appellant has consistently shown it as its "stock in trade". In the return of income for A.Y. 2004-05, 2004 the relevant remarks for conversion of land, from capital asset to "stock in trade" is found to be clearly mentioned. The value of the land in 7,37,50,000/ . Hence, there is no the balance sheet is taken at Rs. 7,37,50,000/-. doubt that the land in question is a business asset. Transfer of such business asset will not be covered within the definition of transfer as prescribed under section 2(47) of the IT Act. Transferring such cases of business asset will be governed by the transfer of ownership.of asset as per general law/Transfer of Property Act, 1882. In the case of business transactions, any benefit flowing from the business arrangement to any person is taxable as business income as per provision of section 28 of the IT Act. Transfer of asset Transfer Suratchandra B. Thakkar (HUF) 14 ITA Nos. 4333 to 4335/M/2018 in such a case may be recognised at the time of execution of sale deed. This would effectively mean adoption of Completed Contract Method (CCM). In my considered opinion, the year in which payment or advanced or part sale consideration is rec received eived by the land owner cannot be the year in which tax liability is attracted to the land owner. In the case of CIT vs Motilal C. Patel & Co. (1988) 40 Taxman 336 (Guj.), it has been held that unless and until sale pleted by means of transaction of immovable property is completed registered sale deed, there cannot be earning of any profit. The fact that a part of consideration was received prior to such registration, in pursuance of agreement to sale, would not make any difference. Also the fact that the assessee deals in immovable property would not change the position. On the facts of the case the receipts of a part of the agreed sale consideration in a previous year preceding to the previous year in which sale deed was registered needs to be receipt in the latter previous year and the same is considered as a receipt assessable in the subsequent assessment year.
19. It is further observed from clauses 11, 23 and 46 that the ownership of land was never passed over to the Developer and the appellant continued to be the legal and effective owner of the land legal till the flats in the 4 towers are sold to different buyers. It is particularly mentioned in clause 46 that the Developer, upon co operative society/ LLP of completion of the buildings shall form a co-operative the purchasers of the premises in the said buildings. The land premises owners, and the Developer shall jointly convey their respective right title and interest in the said property and the said buildings in favour of a co operative society or the LLP. Moreover, if the co-operative Developer decides to submit the said property to the provisions of Suratchandra B. Thakkar (HUF) 15 ITA Nos. 4333 to 4335/M/2018 the Maharashtra Apartment ownership Act, 1970, the land owner and the Developer shall jointly execute a "Declaration" as per section 2 of the said Act as well as the deeds of apartment in favour of the respective ctive purchasers. Such conveyance/deeds of apartment shall be executed only after the completion of the said buildings and receipt of occupation certificate and after all the residential flats and premises therein shall have been sold and the total purchase purchas price of all the said premises have been received. From the above, it is very clear that the transfer of land has not taken place from the land owner to the Developer as per definition of transfer under section 2(47) and there is no incidence of tax till the right in the undivided land is transferred to the flat owners or possession is given to them.
20. The whole scenario or arrangement can also be looked into from joint venture between the land owners and the the point of view of joint-venture notwithstanding the fact that the clause 43 of the Developers, notwithstanding agreement laid down that the agreement is not a partnership between the parties as contemplated under the partnership Act 1932 and/or Joint Venture/Association of Persons between the two parties. Such a view point can be considered in view of clauses 5 and can 10 of the agreement wherein it is stipulated that the land owners bear the obligation at their costs to obtain FSI of other properties by way of TDR of approximately 1,00,157.08 sq.ft. and load the same on the property under consideration. It is further mentioned property in the agreement that the land owners shall obtain permissions for development of the said property for commercial/residential the re-development user under section 22 of the ULC & R Act at their own cost within 60 days of the date of agreement. There are other clauses too, which Suratchandra B. Thakkar (HUF) 16 ITA Nos. 4333 to 4335/M/2018 joint venture between the indicate towards the aforesaid view of joint-venture land owner and the Developer. In such a situation, the land owner has stepped into the shoes of the Developer and he also shares the risks and rewards of the business being managed by the Developer. The revenue recognition criteria of land owner will then be linked with the revenue recognition criteria of the Developer. It is now well-settled settled that accounting standard 9 together with the revised Guidance Note 2012 governs the revenue recognition criteria of Developer and hence the same may be considered as applicable, in the instant case, on the appellant. A brief discussion of the same is being made here in the succeeding paragraphs.
21. The revised Guidance Note 2012 has recognised that revenue in such cases should be recognized when all the following conditions are satisfied:
(i) The seller has transferred to the buyer all significant risks and retains no effective control of rewards of ownership and the seller retains the real estate transferred to a degree usually associated with ownership.
(ii) At the time of transfer of all significant risks and rewards of ownership it is not unreasonable to expect ultimate collection; and ficant uncertainty exists regarding the amount of the
(iii) No significant consideration that will be derived.
In the instant case, the land owners and the Developer have not transferred all significant risk and/or possession of the flats in til 31/3/2008 as ownership of the Tower I & II (or Tower A and B) till flats and full control of the building remained with them till the end Suratchandra B. Thakkar (HUF) 17 ITA Nos. 4333 to 4335/M/2018 of the that year. Full payment was also not received till 31/3/2008. In addition to this, Occupation Certificate (OC) was received from BMC for Tower No I &ll (or Tower A and B) on 22nd Jan, 2008 when occupation of the flats were given to the buyers. In view of the above, I agree with the Ld. AR that advance payments received in part during A.Y.s 2006-07 2006 08 cannot be treated as sale in and 2007-08 those years.. The same has been correctly treated as sale in the year of completion i.e., A.Y.2008 09 of Towers and II (or Towers A and B).
A.Y.2008-09 It is also brought on record that the Towers C & D are completed in 10, OC was received in A.Y 2009 10 (on 24th April, 2008) A.Y 2009-10, and water & electricity connection were obtained much after the OC received. Possessions to the buyers were given much after water & electric connection was done. Hence, all the above mentioned conditions got satisfied in A.YS 2008-09 2008 10, for and 2009-10, fo the four Towers. It is further claimed that the commercial premises got 2009 10, which has remain unsold till date completed in the A.Y 2009- and is lying as stock in trade in the P & L A/c of the assessee.
22. Identical facts were considered by Hon'ble Gujarat Gujarat High Court in the case of CIT vs Ashaland Corporation [1981] 7 Taxman 393 assessee firm was a dealer in (Guj.). The facts of that case were the assessee-firm land, adopting the cash system of accounting. On 14 11-1970, it 14-11 executed an agreement to sell certain number of plots to a co-
co operative society, who also took over their possession by paying Rs. 5,000/ as an earnest money at the time of agreement and Rs. 2,08,772 as advance towards sale price in December 1970. The assessee credited the above aggregate receipts of Rs. 2,13,772 in its trading account in the calendar year 1970 relevant for the A.Y.
73. All the formal sale deeds were, however, executed on 1972-73.
Suratchandra B. Thakkar (HUF) 18
ITA Nos. 4333 to 4335/M/2018
different dates between 26-2-1971
26 1972 for a total
and 26-6-1972
consideration of Rs. 4,40,939 but the sale transactions transactions with the society were completed in the accounting year relevant to the A.Y. 1972-73.
73. For the A.Y. 1971 1971-72, 72, the ITO accepted the assessee's declared profit from the aforesaid receipts of Rs. 2,13,772/ 2,13,772/-. This assessment was set aside under section 263 by the Commissioner of Income Tax who held that, since the sale deeds were executed in the next calendar year 1971, the entire profit arising from the sale 1972 73. Based on these transaction would be taxable in the A.Y. 1972-73. sets of facts, Hon'ble High Court held that the assessee would continue to be the owner of the purchased land till it is divested of the ownership by completion of the sale transaction by executing a registered sale deed. It is only on such completion that the assessee have earned profit or suffered loss. The relevant could be said to have portion of the decision is reproduced hereunder:
Section 28 imposes a charge on profits of business of previous year. Such profits are real profits ascertained on ordinary principles of commercial trading and commercial accounting. In the instant case, the assessee was a dealer in land and the land would be its stock stock-in-
trade. Thus, the profits derived from the transactions of its purchase and sale would represent business profits chargeable to income income-tax.
The assessee would continue to be the owner of the purchased land till it is divested of the ownership by completion of the sale transaction by executing a registered sale deed. It is only on such completion that the assessee could be said to have earned profi profit or suffered loss.
In the instant case, in the previous year relevant to the assessment 72, no sale transaction admittedly took place and the year 1971-72, Suratchandra B. Thakkar (HUF) 19 ITA Nos. 4333 to 4335/M/2018 4 11-1970 to assessee only executed the aforesaid agreement dated 4-11 sell certain plots of land to the soc society.
iety. Thus, the said land continued to be its stock-in-trade.
stock trade. It is axiomatic that an agreement to sell does not create any interest in favour of the purchaser. It is on completion of the transaction of purchase and sale culminating into an extinguishment of the title of the vendor and simultaneous creation of the title of the vendee that the assessee earns profit or suffers loss. Receipt of Rs. 2,13,772 would, therefore, assume the character of income or profit only when sale transaction was completed in a accordance with law.
Doctrine of part performance embodied in section 52A of the Transfer of Property Act could not also be brought into aid to treat the said receipt of Rs. 2,13,772 as trading receipt. The agreement in writing to sell, coupled with parting of possession, would not confer any legal title on the purchaser, i.e., the society and take the land stock trade. The assessee's method of out of the assessee's stock-in-trade. accounting has no relevance in determining whether receipt of the above nature was trading receipt or income. The method of accounting, whether cash method or mercantile method, would have bearing only in respect of completed business transaction.
23. There is also merit in the argument of the Ld. AR that there is no loss to the revenue as the appellant has offered full income during 11 and paid the project completion years i.e., A.Y.2009-10 & 2010-11 taxes thereon. Income tax rates are same for all the years under consideration. find that the AO has cumulatively determined the same receipt of Rs. 8,97,11,407/- for the three years i.e., for A.Y. 07 Rs. 1,78,68,399 for Tower & II (advance), for A.Y. 2007-08 2006-07 2007 96,04,258/ for Tower I & II (advance) and for A.Y. 2008 Rs. 96,04,258/- 2008-09, Rs.
Suratchandra B. Thakkar (HUF) 20 ITA Nos. 4333 to 4335/M/2018 6,22,38,750 for Tower & II ( as full and final settlement amount againstt advances received from the Developer in earlier years). Thus the amount computed by the AO for the three years is the same that is being offered for taxation in A.Y. 2008-09 2008 09 i.e., Rs.
8,97,11,407/-.. There is no variation at all.
24. Considering the totality of the facts and the circumstances of the issue involved and discussion made in the preceding paragraphs, I donot find any justification for advances of Rs. 1,78,68,399/ 1,78,68,399/- being treated as income of the appellant for A.Y.2006 07. Hence, the AO is A.Y.2006-07.
directed irected to delete the same. Thus, ground of appeal no. 2 is allowed."
allowed.
9.2 For assessment year 2007 2007-08 and 2008-09 09 the Ld. CIT(A) has followed his finding in assessment year 2006-07.
20069.3 We further note that that assessee has already paid tax on the advancee received against the sale of flat in assessment year 2008-09 2008 and 2009-10.
10. The relevant submission of the assessee reproduced by the Ld. CIT(A) in sub-para sub 3 (three) three) of para 37, is extracted as under:
"3. The appellant has already paid tax on total sale of Rs.
2009 10, the year in which the project is 12,94,37,102/ in the A.Y. 2009-10, completed. There is no loss to the revenue on account of taxation 12,94,37,102/- in the A.Y. point of view as the tax is fully paid on Rs. 12,94,37,102/ Suratchandra B. Thakkar (HUF) 21 ITA Nos. 4333 to 4335/M/2018 2009-10.
10. i.e. Rs. 3,47,27,723/-. ate for the year under 3,47,27,723/ The tax rate consideration as well as for the subsequent year are the same and therefore no mala fide intention of your assessee to postpone the accrual of sale of the year to the subsequent year. Therefore there is no basis or justification in tthe addition made by the A.O."
9.5 The Ld. CIT(A) has pointed out that the land in question was treated as a stock in trade by the assessee in its books of accounts and therefore transfer of the same was not lia liable ble to be taxed as capital gain. Hon'ble Supreme Supre Court in the case of Seshasayee Steal Private Ltd 115 Taxman.com 5(SC) 5 considered a development agreement granting permission to start advertising, selling and construction tion and permitted to execuate sale agreement to the developer.. The Hon'ble Supreme Court held that such permission is not possession under section 53 of the transfer of the property Act.
We concur with the finding of the Ld. CIT(A) that possession of land has been handed over to the prospective buyers consequent to the conveyance in favour of co-operative operative Society of flat owners. The Ld. CIT(A) has further held that the assessee was regularly following Suratchandra B. Thakkar (HUF) 22 ITA Nos. 4333 to 4335/M/2018 accounting method of Completed Contract Method consistently from year to year.. The Ld. CIT(A) has further observed th that in the case of the developer also Contract Completed Method has been accepted.
The Ld. DR has not controverted any of the above factual finding of Ld. CIT(A).
9.6 In view of the above discussion,, we do not find any error in the finding of the Ld. CIT(A) in upholding the Project Completion Method or Completed Contract Method followed by the assessee for declaring income from the project under reference. The grounds of the appeal of the revenue in all the three years are accordingly dismissed.
10. In the result, all the three appeals of the Revenue are dismissed.
Order pronounced ounced in the Court on 12/08/2022.
Sd/- Sd/-
(SANDEEP
SANDEEP SINGH KARHAIL)
KARHAIL (OM
OM PRAKASH KANT)
KANT
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai;
Suratchandra B. Thakkar (HUF) 23
ITA Nos. 4333 to 4335/M/2018
Dated: 12/08/2022
Rahul Sharma, Sr. P.S.
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A)-
4. CIT
5. DR, ITAT, Mumbai
6. Guard file.
BY ORDER,
//True Copy//
Sr. Private Secretary)
(Sr. Secretary
ITAT, Mumbai