1986 (7) TMI 160 - AT - Income Tax

Summary

Issues:
- Whether the AAC erred in deleting additions made by the ITO on profits earned from the sale of plots.
- Whether income from instalments received for the sale of plots is taxable before the execution of the sale deed.
- Whether the judgments of the Gujarat High Court and the Bombay High Court are applicable in determining the taxability of such income.
- Whether the High Court judgment in the case of Smt. Kala Rani vs. CIT supports the Revenue's position on assessing income from property under the IT Act.

Analysis:
1. The appeals before the ITAT Chandigarh concerned the deletion of additions made by the ITO on profits earned from the sale of plots by the assessee. The AAC had deleted the additions, leading to the Revenue's appeal.

2. The key issue was whether the income from instalments received for the sale of plots was taxable before the execution of the sale deed. The ITO contended that such income was taxable, while the assessee argued that no profits could be taxed until the sale deed was executed. The ITO relied on judgments from the Bombay High Court and the Patna High Court to support the taxability of the income.

3. The assessee relied on the judgment of the Gujarat High Court in CIT vs. Asha Land Corporation, arguing that income should not be included until the sale deed was executed and registered. The AAC favored the assessee's position and deleted the additions made by the ITO for all three years under appeal.

4. The Revenue, represented by the departmental representative, contended that the judgment of the Punjab and Haryana High Court in Smt. Kala Rani vs. CIT supported their position. The High Court had held that income could be assessed even if the sale deed was not registered, based on beneficial ownership and occupation of the property.

5. The ITAT, in its judgment, considered the possession of lands by the assessee, distinguishing between registered and unregistered lands. It noted that the assessee had sold properties without acquiring legal ownership through a registered deed but had passed possession and easement rights to the purchasers. The ITAT concluded that the receipts from such sales were business income from real estate, reversing the AAC's orders and restoring those of the ITO.

6. Ultimately, the ITAT allowed the appeals in favor of the Revenue, emphasizing the nature of the transactions and the possession of lands by the assessee as key factors in determining the taxability of the income from the sale of plots.