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Issues involved: Whether the value of work-in-progress of a building contractor constitutes "turnover" for the purpose of section 44AB of the Income-tax Act.
Summary: The appeal involved the question of whether the value of work-in-progress of a building contractor should be considered as "turnover" for the purpose of section 44AB of the Income-tax Act. The assessee, a building contractor, developed properties by constructing flats/shops based on development agreements and Power of Attorney. The Assessing Officer contended that the assessee, acting as a contractor, did not acquire ownership rights but only developmental and selling rights. The Assessing Officer initiated penalty proceedings under section 271B, which was upheld and a penalty was levied. However, the CIT(A) deleted the penalty, stating that the work-in-progress constituted turnover but certain costs needed to be excluded. The Revenue appealed this decision, arguing that the value of work-in-progress should be part of turnover. The Revenue contended that the value of work-in-progress should be included in turnover, relying on definitions of "Turnover" from legal sources. The assessee's counsel argued that work-in-progress should not be considered as turnover, citing relevant legal precedents and definitions from the Sales-tax Act. The Tribunal considered the arguments and emphasized the importance of interpreting statutory provisions purposively, focusing on the intent of the Legislature. It was held that turnover and sales require the transfer of title to the goods, which was not the case for work-in-progress. The Tribunal concluded that work-in-progress does not constitute turnover as per section 44AB of the Income-tax Act, upholding the CIT(A)'s decision to cancel the penalty. In conclusion, the Tribunal dismissed the appeal, stating that the value of work-in-progress does not qualify as turnover under section 44AB of the Income-tax Act, and therefore, the penalty was unjustified.
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