3 Income in respect of sale of flats – accrued when possession of the flat was given – not when allotment letter was issued.

CIT vs. Millennium Estates Private Ltd.
ITA No.: 853 of 2015 (Bom. High Court)
A.Y.: 2007-08      Dated: 30th January, 2018
[Millennium Estates Private Ltd. v. DCIT; ITA No. 517/Mum/2011;  Dated: 16th May, 2012; Mum.  ITAT]

The assessee carries on
business as a contractor and developer. During the scrutiny proceedings the A.O
found that an amount was shown under the head current liabilities i.e. as
advances received from it buyers. The A.O did not accept the contention of the
Assessee that the aforesaid amounts from M/s. Siddhi Vinayak Securities Pvt.
Ltd. and M/s. Manomay Estates Pvt. Ltd. were received as advance at the time of
allotment on 14 & 15 March 2007 and that further consideration was received
on 1 April 2007, when the possession of the flats was given, thus chargeable to
tax in the next AY. The A.O made addition the aggregate amount received from
M/s. Siddhi Vinayak Securities Pvt. Ltd and M/s. Manomay Estates Pvt. Ltd. as
accrued income in the subject Assessment Year. 

Being aggrieved, the
assessee carried the issue in appeal to the CIT (A). The CIT (A) dismissed the
Assessee appeal.

On further Appeal, the
Tribunal  allowed the Assessee appeal.
Thus  after being examined all the
clauses of the allotment letter as well as the clauses of the possession letter
concluded that the sale of the flats took place only in the subject Assessment
Year i.e. on 1 April 2007 i.e. when the possession of the flats was given and
the balance amount was paid. The accrual of income took place in the next year.
Till then, the amount received was only in the nature of advances. The Tribunal
also records the fact that it was not the case of the Revenue that the possession
letter dated 1 April 2007 was not genuine. Nor has the Revenue brought on
record any evidence to show that the possession was given to M/s. Siddhi
Vinayak Securities (P.) Ltd. and M/s. Manomay Estates (P.) Ltd. prior to 1
April 2007. In the above view the addition was made by the A.O and upheld by
the CIT (A) was deleted.

The Tribunal also records
the fact that in the next AY , the Assessee has offered the income on the sale
of the flats to M/s. Siddhi Vinayak Securities Pvt. Ltd. and M/s. Manomay
Estates Pvt. Ltd. to tax. The same has also been accepted by the Revenue as
taxable income for the next AY.

The grievance of the
Revenue is that the sale of the flats under consideration had in fact taken
place on 14 and 15 March 2007 when they were allotted under an allotment
letters to M/s. Siddhi Vinayak Securities Pvt. Ltd. and M/s. Manomay Estates
Pvt. Ltd.

Being aggrieved, further
Revenue filed an appeal to the High Court. The Hon. High Court observed that
the Tribunal has reproduced the relevant clauses of the allotment letter dated
15 March 2007 which is similar to the allotment letter dated 14 March 2007 and
the relevant clause. The Tribunal, held that the amount of Rs.2.14 Crores was
an advance during the subject AY. It thus held that part of the above amount
had accrued as income during the AY 2007-08. From the above clauses of the
allotment letter and clause 9 of the possession letter referred to by the
Tribunal it is very evident that the possession of the flats was given on
receipt of total consideration only on 1 April 2007. The Tribunal records as a
matter of fact that there is no dispute about the genuineness of the letter of
possession dated 1 April 2007. Moreover, no statement of the buyers or other
evidence, even circumstantial in nature, was brought on record to indicate that
the facts are different from what has been recorded in the possession letter
dated 1 April 2007. In the aforesaid facts, the view taken by the Tribunal on
the self evident terms of allotment and possession letter does not give rise to
any substantial question of law. Accordingly, Appeal of dept was  dismissed.