October 2022
Advances received by an Assessee landlord who has converted land into stock-in-trade, following project completion method, are not taxable on receipt basis.
29 ACIT vs. Suratchandra B. Thakkar (HUF)
TS-648-ITAT-2022 (Mumbai)
A.Y.s: 2006-07 to 2008-09
Date of order: 12th August, 2022
Section: 28
Advances received by an Assessee landlord who has converted land into stock-in-trade, following project completion method, are not taxable on receipt basis.
FACTS
The assessee was a 25 per cent owner of a land in respect of which development agreement was entered into with K. Raheja Universal Pvt. Ltd. Under the terms of the Development Agreement, the land owners and developers were to share sale proceeds in the ratio of 45.5 per cent and 54.5 per cent respectively. The Assessee had a 25 per cent share in land, and was entitled to 25 per cent of 45.5 per cent share receivable by the land owners. The project consisted of construction of four towers of which two were completed in previous year relevant to A.Y. 2008-09 and two were completed in previous year relevant to A.Y. 2009-10.
The Assessee received advances of Rs. 1,78,68,399, Rs. 96,04,258 and Rs. 2,77,19,807 against sale of flats in A.Ys. 2006-07, 2007-08 and 2008-09 respectively. However, no income was offered on the ground that the Assessee was following the project completion method of accounting, and entire income was declared in A.Ys. 2008-09 and 2009-10 on completion of the project, receipt of occupancy certificate and execution of conveyance deed in favour of buyers.
According
