By Jagdish T. Punjabi | Prachi Parekh | Chartered Accountants
Devendra Jain | Advocate
6. (2020) 82 ITR (T) 419 (Mum)(Trib) ITO vs. Abdul Kayum Ahmed Mohd. Tambol (Prop. Tamboli Developers) ITA No.: 5851/Mum/2018 A.Y.: 2009-10 Date of order: 6th July, 2020
Where receipt of consideration was dependent upon fulfilment of certain obligations, the income cannot be said to have accrued in the year in which relevant agreement is entered
FACTS
The assessee, an individual, civil contractor, transferred certain development rights for a total consideration of Rs. 3.36 crores vide agreement dated 23rd July, 2008 out of which Rs. 1 crore was received during F.Y. 2008-09. The assessee calculated business receipts after deducting expenditure incurred in connection with the above and finally offered 8% of the net receipts as income u/s 44AD. The A.O. brought to tax the entire consideration of Rs. 3.36 crores on the basis that, as per the terms of the agreement, the assessee parted with development rights and the possession of the land was also given. Therefore, the transfer was completed during the year and the taxability of business receipts would not be dependent upon actual receipt thereof. On further appeal to the CIT(A), the latter concluded the issue in the assessee’s favour. Aggrieved, the Revenue filed an appeal before the ITAT.
HELD
The whole controversy in this matter pertained to year of accrual of the afore-mentioned income and consequent year of taxability of the income. The ITAT took note of an important fact that only part payment, as referred to above, accrued to the
assessee in the year under consideration since the balance receipts were conditional receipts which were payable only in the event of the assessee performing various works, obtaining requisite permissions, etc. The payments were, thus, subject to fulfilment of certain contractual performance by the assessee. The said facts were confirmed by the payer, too, in response to a notice u/s 133(6).
The ITAT also confirmed the view of the CIT(A) that the term ‘transfer’ as defined in section 2(47)(v) would not apply in the case since the same is applicable only in case of capital assets held by the assessee. The development rights in the instant case were held as business assets. The assessee had also offered to tax the balance receipts in the subsequent years. It concluded that since the balance consideration was a conditional receipt and was to accrue only in the event of the assessee performing certain obligations under the agreement, the same did not accrue to the assessee.
Thus, the ITAT dismissed the appeal of the Revenue.
