2019 (11) TMI 1080 - HC - Income Tax

Income recognition - year of assessment - sale of land - HELD THAT - We note that the finding of fact arrived at by the Tribunal that the Respondent was not able to comply its obligations under the MOU in the previous year relevant to the subject assessment year so as to be entitled to receive ₹ 20 crore is not shown to be perverse. In fact, the issue is covered by the decision of the Apex Court in the case of CIT v. Shoorji Vallabdas Co. 1962 (3) TMI 6 - SUPREME COURT wherein it is held that Income tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income, if income does not result at all, there cannot be a tax. So also in Morvi Industries Ltd. 1971 (10) TMI 5 - SUPREME COURT has held that income accrues when there is a corresponding liability on the other party. In the present facts, in terms of the MOU, there is no liability on the other party to pay the amounts. In any event, the amount of ₹ 20 crore has been offered to tax in the subsequent assessment year and also taxed. In the aforesaid circumstances, the view taken by the Tribunal on facts is a possible view and calls for no interference. In any event the tax on the amount of ₹ 20 crore has been paid in the next year. No substantial question of law

Summary

Issues:
Challenge to the order of the Income Tax Appellate Tribunal regarding the taxability of a sum of ?20 crore in the assessment year 2012-13.

Analysis:
The case involved a dispute over the taxability of a sum of ?20 crore in the assessment year 2012-13. The Respondent, engaged in the business of Promoter & Developer, had sold land to another party under a Memo of Understanding (MOU) for ?120 crore, with ?20 crore payable upon certain conditions. The Respondent declared only ?100 crore for tax, arguing that the remaining ?20 crore was not taxable as conditions were not met during the assessment year. The Assessing Officer disagreed, taxing the entire ?120 crore. The Commissioner of Income Tax (Appeals) upheld this decision, leading to an appeal before the Tribunal.

The Tribunal, citing the Supreme Court's decision in Morvi Industries Ltd. v. CIT, held that income accrues only when it becomes due and is accompanied by a corresponding liability. As the conditions for the ?20 crore payment were not fulfilled in the relevant year, it was not taxable. Additionally, the ?20 crore was declared and taxed in the subsequent assessment year. The Tribunal allowed the appeal of the Respondent based on these findings.

The Appellant, representing the Revenue, sought to challenge the Tribunal's decision by relying on the Assessing Officer and CIT(A) orders. However, the High Court found the Tribunal's factual determination reasonable and in line with legal principles. Referring to previous court decisions, the High Court emphasized that income tax is levied on income, and if income does not result, there cannot be a tax liability. The Court also highlighted that the tax on the ?20 crore had been paid in the following year, rendering the proposed question of law insubstantial.

In conclusion, the High Court dismissed the appeal, affirming the Tribunal's decision that the ?20 crore was not taxable in the assessment year 2012-13 due to non-fulfillment of conditions and subsequent declaration and taxation in the following year. The Court found no grounds for interference, as the Tribunal's view was reasonable and legally sound, and the tax had been paid accordingly in the subsequent year.