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2013 (11) TMI 266 - AT - Income TaxNature of advance received - Addition of 1.5 crore on account of business income Held that - Sum of Rs. 1.5 Crs as an interest free security deposit/advance, refundable to the SDPL subject to the fulfillment to the conditions specified in the said agreement dated 28.5.2007. Assessee has duly accounted the same in the balance sheet. It is an undisputed fact that the said amount of Rs 1.5 cr is subsequently refunded too Decided against the Revenue. Violation of Rule-46A(3) of the IT Rules, 1962 by accepting the additional evidence for addition of Rs.1.5 crore Held that - Additional evidences were actually furnished by the assessee vide the covering letter dated 31.12.2010, which is not rebutted by the Revenue. In fact, at the directions of the Bench, Ld DR produced the assessment records and it is noticed that the said papers were duly found in the assessment records Decided against the Revenue.
Issues:
1. Addition of Rs. 1.5 Crs as business income. 2. Acceptance of additional evidence in contravention of Rule-46A(3) of IT Rules, 1962. 3. Interpretation of the terms and conditions of the agreement regarding security deposit and surplus FSI. 4. Recognition of the amount received from Success Developers Pvt. Ltd. as business income. Issue 1 - Addition of Rs. 1.5 Crs as business income: The case involved an appeal by the Revenue against the CIT (A)'s decision to delete the addition of Rs. 1.5 Crs made on account of business income for the assessment year 2008-2009. The assessee, engaged in real estate development, had received a refundable advance of Rs. 1.5 Crs from Success Developers Pvt. Ltd. The AO treated this amount as business receipts without considering the nature of the transaction. The CIT (A) examined the details provided by the assessee and concluded that the amount was a security deposit refundable to SDPL after project completion. The Tribunal upheld the CIT (A)'s decision, emphasizing that the amount was a security deposit and not business income, as per the agreement terms. Issue 2 - Acceptance of additional evidence: The Revenue contended that the CIT (A) erred in admitting additional evidence in violation of Rule-46A(3) of IT Rules, 1962. However, during the proceedings, it was revealed that the additional evidence had been furnished to the AO before the assessment proceedings. The Tribunal found that the evidence was already on record and not new, thus dismissing the Revenue's argument of contravention. The Tribunal held that the CIT (A)'s decision to admit the evidence was reasonable and did not warrant interference. Issue 3 - Interpretation of agreement terms on security deposit and surplus FSI: The Tribunal analyzed the agreement between the assessee and SDPL, highlighting clause 4(e) which specified the refundable nature of the Rs. 1.5 Crs deposit. The agreement outlined that the amount was a security deposit against any violation of guidelines by SDPL and was to be refunded upon project completion. The Tribunal noted that the deposit was interest-free and refundable, as per the agreement terms, and had been duly recorded in the balance sheet. Issue 4 - Recognition of amount received from Success Developers Pvt. Ltd. as business income: The Tribunal scrutinized the facts presented by both parties and concluded that the Rs. 1.5 Crs received from SDPL was not business income but a refundable security deposit. The Tribunal highlighted that the amount was not treated as business income by the assessee and was subsequently refunded, indicating its non-business nature. The Tribunal dismissed the Revenue's appeal, affirming the CIT (A)'s decision to delete the addition of Rs. 1.5 Crs as business income. In conclusion, the Tribunal upheld the CIT (A)'s decision, emphasizing the refundable nature of the amount received as a security deposit and rejecting the Revenue's arguments regarding the addition of Rs. 1.5 Crs as business income and the acceptance of additional evidence.
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