IT : Assessee being a developer of project, profit in its case would arise only on transfer of title of property and, therefore, receipt of any advance or booking amount could not be treated as trading receipt of year under consideration
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[2013] 40 taxmann.com 219 (Gujarat)
HIGH COURT OF GUJARAT
Commissioner of Income-tax-IV
v.
Shivalik Buildwell (P.) Ltd.*
AKIL KURESHI AND MS. HARSHA DEVANI, JJ.
TAX APPEAL NO. 1514 OF 2011
OCTOBER 8, 2012
Section 5 of the Income-tax Act, 1961 - Income - Accrual of [Booking amount received by builder] - Assessee was a builder and developer - He received certain amount as advance from different parties - Assessing Officer added said amount to assessee's taxable income - Tribunal set aside addition made by Assessing Officer holding that assessee being a developer of project, profit in its case would arise only on transfer of title of property and, therefore, receipt of any advance or booking amount could not be treated as trading receipt of year under consideration - Whether on facts, impugned order passed by Tribunal deleting addition was to be upheld - Held, yes [Para 4] [In favour of assessee]
Varun Patel for the Appellant.
ORDER
Akil Kureshi J. - Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 5.8.2011 raising following questions for our consideration :
| "(A) | Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs. 27 ,85,925/- in respect of estimated gross profit? | |
| (B) | Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.3,56,878/- in respect of deemed dividend under section 2(22)(e) of the I.T. Act, 1961?" |
2. Insofar as the question "A" is concerned, we notice that the Assessing Officer had made addition of Rs. 27.85 lakh (rounded off). The assessee carried the issue in appeal. The CIT (Appeals) deleted such additions on the ground that the Assessing Officer did not even issue a notice to the assessee before making such substantial additions and further that the assessee could not be stated to have earned income on booking amount collected as the assessee is an organizer and developer and is entitled to receive only supervision fees from the society for which it undertakes such development work.
3. On the revenue's appeal, the Tribunal confirmed the view of CIT (Appeals), however, on slightly different ground, namely, that the assessee being a developer of the project, profit in his case, will arise on transfer of title of the property and receipt of any advances or booking amount cannot be treated as trading receipt of the year under consideration. The Tribunal further noted that such method of accounting followed by the assessee had been accepted by the revenue in earlier years. The Tribunal was, therefore, of the opinion that the Assessing Officer's decision to reject the book results during the year under consideration was not justified.
4. We are of the opinion that the Tribunal committed no error. If as per the accounting standard available, the assessee was entitled to claim the entire income on completion of the project and if such accounting standard was accepted by the revenue in the earlier years, in the present year, the Assessing Officer could not have taken a different stand and that too, without hearing the assessee.
5. With reference to question "B", counsel pointed out that similar question is being considered in several appeals, including Tax Appeal No.1498 of 2011.
6. In the result, appeal is admitted only for question "B". To be heard with Tax Appeal No.1498 of 2011.
SUNILRegards
Prarthana Jalan
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