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Issues Involved:
1. Determination of the year of taxability for long-term capital gains. 2. Exclusion of excise duty from the total turnover for the purposes of computation of deduction under section 80HHC. 3. Alternative plea regarding credit for taxes paid in subsequent years. Detailed Analysis: 1. Determination of the Year of Taxability for Long-Term Capital Gains: The primary issue was whether the long-term capital gains from the sale of land should be taxed in the assessment year 2002-03 or spread over subsequent years based on the execution of sale deeds. The assessee admitted long-term capital gains of Rs. 1,71,82,270 for the assessment year 2002-03, whereas the Assessing Officer determined the gains to be Rs. 13,20,29,940, arguing that the entire capital gain should be taxed in the year 2002-03 as the possession of the property was handed over and construction activities began in that year, invoking section 2(47)(v) of the Income-tax Act and section 53A of the Transfer of Property Act. The Commissioner of Income-tax (Appeals) accepted the assessee's contention that possession was not fully handed over and directed the Assessing Officer to accept the returned long-term capital gain. However, the Tribunal found that the transfer took place within the accounting period relevant to the assessment year 2002-03, as the possession of the land was indeed handed over on May 25, 2001, and construction commenced on June 4, 2001. Hence, the entire capital gain was taxable in the year under consideration, setting aside the order of the Commissioner of Income-tax (Appeals) and restoring that of the Assessing Officer. 2. Exclusion of Excise Duty from the Total Turnover for the Purposes of Computation of Deduction Under Section 80HHC: The second issue involved the exclusion of excise duty of Rs. 4,70,13,935 from the total turnover for computing the deduction under section 80HHC. The Tribunal upheld the order of the Commissioner of Income-tax (Appeals) in favor of the assessee, relying on the Supreme Court's decision in CIT v. Lakshmi Machine Works [2007] 290 ITR 667, which held that excise duty and sales tax do not form part of the "turnover" for the purposes of section 80HHC as they do not emanate from the turnover. 3. Alternative Plea Regarding Credit for Taxes Paid in Subsequent Years: The alternative plea raised by the assessee was that if the entire capital gain is taxed in the assessment year 2002-03, then the taxes paid on this gain in subsequent years should be credited in the year 2002-03 to avoid double taxation. The learned Judicial Member rejected this plea based on the Supreme Court's decision in ITO v. Murlidhar Bhagwan Das [1964] 52 ITR 335, which held that the Tribunal cannot give directions regarding the proceedings of earlier or subsequent years. However, the learned Accountant Member disagreed, emphasizing that taxing the same income twice is against the fundamental principles of taxation. He argued that the taxes already paid should be credited in the assessment year 2002-03, and the Tribunal should direct the Assessing Officer accordingly. The Third Member agreed with the Accountant Member, stating that the direction to credit the taxes already paid is necessary for the disposal of the appeal and does not enlarge the jurisdiction of the Tribunal, thereby supporting the view that the Assessing Officer should give credit for taxes paid in subsequent years. Conclusion: The Tribunal concluded that the entire long-term capital gain should be taxed in the assessment year 2002-03, and the excise duty should be excluded from the total turnover for the purposes of deduction under section 80HHC. Additionally, the Tribunal directed the Assessing Officer to give credit for taxes paid in subsequent years to avoid double taxation, aligning with the fundamental principles of taxation. The appeal of the Revenue was partly allowed, with the decision on the first issue favoring the Department and the second issue favoring the assessee.
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