Gujarat High Court
Commissioner vs Jain on 25 July, 2011
Author: Akil Kureshi
Bench: Akil Kureshi
Gujarat High Court Case Information System
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TAXAP/861/2010 5/ 5 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 861 of 2010
=========================================================
COMMISSIONER
OF INCOME TAX-II - Appellant(s)
Versus
JAIN
INFRASTRUCTURE PVT LTD - Opponent(s)
=========================================================
Appearance
:
MR
MR BHATT, SR. ADV WITH MRS MAUNA M BHATT
for
Appellant(s) : 1,
None for Opponent(s) :
1,
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CORAM
:
HONOURABLE
MR.JUSTICE AKIL KURESHI
and
HONOURABLE
MS JUSTICE SONIA GOKANI
Date
: 25/07/2011
ORAL
ORDER
(Per : HONOURABLE MR.JUSTICE AKIL KURESHI) Revenue has challenged the judgment of the Tribunal dated 7.8.09 raising following question for our consideration :
"Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by CIT(A) and thereby deleting the addition of Rs.15 lakhs made by the Assessing officer on the basis of the fact that as per the agreement between the co-operative society and the developer ?"
The assessee was involved in development of residential units between assessee and the society for which assessee was developing such residences. There was an agreement dated 10.4.99 by virtue of which, the society had agreed to pay the developer an sum of Rs.1 crore by way of consultancy charges for developing land admeasuring 6436 sq. yards. It was further agreed that notwithstanding any eventuality of circumstances or whether the project is duly completed, the developer shall be entitled to receive such remuneration.
However, later on, the society and the developer entered into a fresh agreement dated 25.3.01 by virtue of which, it was provided as under:
"And whereas as per the agreement dated 10.4.99 the developer has to develop the aforesaid land of the Society and in consideration of that Society has to make the payment of Development fees of Rs.1,00,00,000/- (Rs.one crore only) on adhoc basis. Now it is mutually agreed to make a revision in development fees and reduced to the extent of Rs.66,00,000/0 (Rs.sixty six lacs only) above revision has been made due to following circumstances:
As the project is delayed in implementation which has made direct effect on cost of the project.
Due to earthquake and slow work progress the developer is not able to recover the sufficient amount from the members.
Members are not ready to bear the additional revised cost.
All the other terms and conditions of the original agreement dated 10.4.99 will remain unchanged."
The Assessing Officer was of the opinion that the subsequent agreement was not a bonafide agreement. The assessee had to pay tax on the basis of the previous terms contained in the agreement dated 10.4.99 to the extent the work was competed. The Assessing Officer analysed the extent of work already completed and added a sum of Rs.15 lacs to Rs.20 lacs offered by the assessee as income for the year in question.
The issue was carried further in appeal. CIT (Appeals) confirmed the view of the Assessing Officer. He was of the opinion that the subsequent agreement was made only for avoiding tax. The assessee thereupon approached the Tribunal. The Tribunal in the impugned judgment came to the conclusion that the Assessing Officer could not point out any defects in the books of accounts and merely by observing that the receipt accounted by the assessee company is not comparable with the percentage completion of project and the expenditure claimed added a sum of Rs.15 lacs in the income. Thus without giving proper instances, book results were rejected. The Tribunal was of the opinion that invoking of section 145 of the Income Tax Act in the present case was not justified. The Tribunal thus deleted the additions made by the Assessing Officer and confirmed by the CIT(A).
Counsel for the Revenue contended that the Tribunal committed a grave error in interfering he order passed by the Assessing Officer and confirmed by the CIT(A).
Having thus heard the learned counsel for the Revenue and having perused the orders on record, we find that the Tribunal has given cogent reasons for overruling the view of the Assessing Officer as well as the CIT (A). We may recall that though previously, the assessee had agreed to execute the work of development by charging development charge of Rs.1 crore by virtue of agreement dated 10.4.99, subsequently, because of the intervening circumstances, the society and the developer entered into fresh agreement dated 25.3.2001. This fresh agreement was necessitated on account of devastating earthquake and the resultant delay in execution of the project. Due to these reasons, the assessee agreed to accept reduced charges of Rs.66 lacs for the development work. This renewed agreement could not have been discarded without cogent reasons. The Tribunal also came to the conclusion that the book results were discarded without proper justification. It may be that at one point of time, the assessee had agreed for higher development charges for execution of the work. However, there were strong intervening factors of devastating earthquake that delayed the project and because of these reasons fresh agreement was entered between the assessee and the society. Under a fresh agreement the assessee had agreed to accept reduced development charges. We do not find that the Tribunal had committed any error in coming to the conclusion that addition of Rs.15 lacs was not justified. No question of law arises for our consideration.
In the result, tax appeal is dismissed.
(Akil Kureshi J.) (Ms.Sonia Gokani, J.) (vjn) Top