2018 (7) TMI 2363 - HC - Income Tax

Sale of immovable property as stock-in-trade - lands which are subject matter of the JDA - as decided by ITAT when an immovable property is held as stock-in-trade the same is to be considered as sold only when the sale is conveyed by means of a registered sale deed and not before that - CIT (A) has also expressed the same view in the impugned order in the case on hand and the said view in our considered opinion is in order HELD THAT - As Revenue submitted that for the next Assessment Year 2010-11 also and other subsequent years some appeals are pending before the learned Tribunal and therefore these observations a sale being made only on registered sale deed may come in the way of the Revenue and adversely affect the interest of Revenue. To this argument Assessee submitted that the Tribunal may decide those appeals un-influenced by these observations and all contentions of the parties may be kept open. We are of the opinion that no substantial question of law in the present appeal filed by Revenue for Assessment Year 2009-10 would arise for our consideration.

Summary

The Karnataka High Court considered an appeal filed by the Revenue against the order of the Income-tax Appellate Tribunal in the case of Joint Commissioner of Income Tax (OSD) Vs. M/s. Chaitanya Properties Private Limited. The key issues presented and considered in the judgment are as follows:1. Whether the lands subject to a Joint Development Agreement (JDA) were stock-in-trade of the assessee at the time of entering into the JDA.2. Whether the tax liability arises only when the stock-in-trade is sold.3. Whether the completed contract method of accounting followed by the assessee was acceptable.4. Whether the assessee should adopt the percentage completion method of accounting.5. Whether the Chennai Bench of the ITAT decision regarding the sale of immovable property as stock-in-trade applies to the present case.6. Whether the observations on sale being made only on a registered sale deed would impact future appeals.The Court analyzed the conclusions of the Tribunal, which highlighted that no sale of stock-in-trade had occurred during the relevant assessment year. The Tribunal also noted that the assessee had consistently followed the completed contract method of accounting, which was accepted by the revenue. The Court further considered the Chennai Bench of the ITAT decision, which stated that immovable property held as stock-in-trade is considered sold only upon the execution of a registered sale deed.The Court concluded that since no sale of stock-in-trade had taken place during the relevant assessment year, the observations on the sale being made only on a registered sale deed were not relevant to the issue at hand. The Court disposed of the appeal, leaving the question open for consideration in future cases.The significant holdings of the judgment include the acceptance of the completed contract method of accounting by the revenue and the clarification that the sale of stock-in-trade occurs only when conveyed through a registered sale deed. The Court emphasized that no substantial question of law arose in the present appeal for the assessment year 2009-10, leading to the disposal of the appeal while keeping the question open for future cases.