2018 (2) TMI 308 - HC - Income Tax

Accrual of income - Income in respect of sale of flats accrued when possession of the flat was given and not when allotment letter was issued - genuineness of the letter of possession - Held that - From the clauses of the allotment letter and clause 9 of the possession letter referred to by the Tribunal it is very evident that the possession of the flats was given on receipt of total consideration only on 1 April 2007. Clause 8 of the allotment letter which is been relied upon by the Revenue does not in any manner indicate that possession was given on 15 March 2007. It only states that the electricity and other charges in respect of the flat being sold to two buyers would be borne by the buyers after the possession of the two flats are handed over to buyers. It does not even remotely suggest that the responsibilities for payment of charges in respect of the said flat was on the buyer from the date of the allotment. This coupled with the fact that the Tribunal records as a matter of fact that there is no dispute about the genuineness of the letter of possession dated 1 April 2007. Moreover, no statement of the buyers or other evidence, even circumstantial in nature, was brought on record to indicate that the facts are different from what has been recorded in the possession letter dated 1 April 2007. In the aforesaid facts, the view taken by the Tribunal on the self evident terms of allotment and possession letter does not give rise to any substantial question of law. It must also be borne in mind that the aforesaid amount which is being sought to be brought to tax in the subject Assessment Year 2007-08 has been offered to tax as income by the Respondent in the next Assessment Year. It is not the case of the Revenue that there are circumstances to indicate that by bringing the said transactions to tax in the next Assessment Year instead of this, there is likely to be a loss to the Revenue. No substantial question of law

Summary

Issues:
- Interpretation of income tax law regarding the accrual of income from the sale of flats.
- Determination of the correct assessment year for taxing the income from the sale of flats.

Analysis:
1. The appeal challenged the order of the Income Tax Appellate Tribunal regarding the accrual of income from the sale of flats for Assessment Year 2007-08 under the Income Tax Act, 1961.
2. The main question was whether the income from the sale of flats accrued when possession was given or when the allotment letter was issued.
3. The Assessing Officer added the amount received from buyers as accrued income in the subject Assessment Year, rejecting the Assessee's claim that the amounts were advances received at the time of allotment and not taxable until possession was given.
4. The Commissioner of Income Tax (CIT) (Appeals) upheld the Assessing Officer's decision, but the Tribunal allowed the appeal, stating that income accrued when possession was given in the next Assessment Year.
5. The Tribunal examined the allotment and possession letters, concluding that the sale of flats occurred when possession was given, not when the allotment letter was issued, and deleted the addition made by the Assessing Officer.
6. The Revenue argued that possession occurred when the flats were allotted, based on clause 8 of the allotment letters, but the Tribunal found that possession was given only upon receipt of total consideration on 1 April 2007.
7. The Tribunal's decision was based on the clauses of the allotment and possession letters, which clearly indicated that possession was handed over only upon full payment of consideration on 1 April 2007.
8. The Tribunal held that the amount in question was an advance during the subject Assessment Year and part of it accrued as income in the next Assessment Year when possession was given.
9. The Tribunal's decision was supported by the self-evident terms of the allotment and possession letters, with no dispute about the genuineness of the possession letter dated 1 April 2007.
10. The Tribunal also noted that the Respondent had offered the income to tax in the next Assessment Year, and there was no loss to the Revenue by taxing it in the subsequent year.
11. Citing past judgments, the Tribunal concluded that the question of the year of taxability, not the amount to be taxed, was the key issue, and the appeal was dismissed with no costs awarded.