1988 (4) TMI 36 - HC - Income Tax

Summary

Issues Involved:
1. Whether the amount of Rs. 66,066 received by the assessee-firm during S.Y. 2027 is includible in the assessment for the assessment year 1973-74.
2. Whether the conclusion of the Income-tax Appellate Tribunal that the receipt of Rs. 66,066 became taxable as business income for the assessment year 1972-73 and not again includible for the assessment year 1973-74 is correct in law.

Summary:

Issue 1: Includibility of Rs. 66,066 in Assessment Year 1973-74
The assessee-firm, a dealer in land, entered into an agreement with Sharda Raje to purchase land and subsequently agreed to sell the same land to a co-operative housing society. The assessee received Rs. 66,066 from the society during S.Y. 2027, which it disclosed as income for the assessment year 1972-73. The Income-tax Officer, however, considered this amount as an advance towards expected profits and included it in the income for the assessment year 1973-74, along with another Rs. 66,066 received in S.Y. 2028. The Tribunal held that the amount received in S.Y. 2027 was taxable in the assessment year 1972-73 and should not be included again in 1973-74. The High Court disagreed, stating that the amounts received in S.Y. 2027 were advances and only became profit upon the completion of the sale in S.Y. 2028. Therefore, the entire amount of Rs. 1,32,132 was includible in the assessment year 1973-74.

Issue 2: Tribunal's Conclusion on Taxability in Assessment Year 1972-73
The Tribunal concluded that the amount of Rs. 66,066 received in S.Y. 2027 was taxable as business income for the assessment year 1972-73. The High Court found this conclusion incorrect, as the Tribunal failed to establish that the amount represented profit earned in S.Y. 2027. The High Court clarified that the amounts received were advances and only became profit upon the completion of the sale in S.Y. 2028. Consequently, the High Court held that the entire amount of Rs. 1,32,132, including the Rs. 66,066 received in S.Y. 2027, was taxable in the assessment year 1973-74.

Conclusion:
The High Court answered question No. (1) in the affirmative and against the assessee, and question No. (2) in the negative and against the assessee. The reference was answered accordingly with no order as to costs. The Revenue assured that the assessee's assessment for the assessment year 1972-73 would be suitably amended to avoid double taxation.