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TMI Blog2012 (7) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... connection with the development of the remaining part of the land. As the assessee was following mercantile system of accounting as per which income accrues when it becomes due for payment, thus the entire amount became due to the assessee in the relevant year on signing of development agreement and on handing over of the possession of the land - postponement of payment does not stop accrual of income - alternate claim of the assessee that in case the entire income was assessed, the cost of acquisition of development right has to be allowed as deduction is acceptable - partly in favour of assessee. - ITA No. : 402/M/2008 ITA No. : 2643/M/2010 ITA No. : 3046/M/2010 ITA No. : 2644/M/2010 ITA No. : 2645/M/2010 - - - Dated:- 30-5-2012 - SHRI D. MANMOHAN, SHRI RAJENDRA SINGH, JJ. Appellant by : Ms. Aarti Vissanji Respondent by : Shri G. Srinivas Rao O R D E R PER RAJENDRA SINGH, AM: These appeals by the assessee are directed against different orders of CIT(A) dated 8.10.2010, 27.1.2010, 25.1.2010, 25.1.2010 and 25.1.2010 for the assessment years 2004-05, 2004-05, 2005-06, 2006-07 and 2007-08 respectively. As the issue raised in all the appeals is identica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee on the same basis as in case of development project. The AO however did not accept the contentions raised. It was observed by him that the assessee was following mercantile system as per which the income from transfer of development rights had accrued during the year irrespective of the fact that part of the payment had been received subsequently. The AO therefore held that the entire income of Rs.2.52 crores had to be assessed in the assessment year 2004-05. The assessee jointly with the trust had paid a sum of Rs.20.00 lacs to four persons for removing encroachments in relation to the land. The AO, therefore allowed 32% of the said payment i.e. Rs.6,40,000/- as deduction from the income of the transfer of development rights. The assessee also allowed other expenses incurred in connection with the transfer. Thus total deduction allowed by the AO was Rs.24,11,909/- and balance amount of Rs.2,27,88,091/- was added to the total income. The assessee had made alternate claim before AO that in case the entire income was assessed, the proportionate cost of land should be allowed as deduction which was rejected by the AO on the ground that the assessee had transferred only interest i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght was integral part of the entire development project which was indivisible, and therefore, income had to be recognized on the same basis as done by the assessee. Alternatively it was submitted that in case entire income was recognized in this year, the project cost of acquisition of joint right, interest in the land and prorata expenditure incurred on the acquisition should be allowed. The ld. AR placed reliance on the judgment of Hon'ble High Court of Bombay in the case of K.H. Mody (8 ITR 179) for the proposition that in case of single venture the profit arises only when the venture, comes to an end. The ld. DR on the other hand supported the order of CIT(A) and placed reliance on the findings given in the orders of authorities below. 5. We have perused the records and considered the rival contentions carefully. The dispute is regarding assessment of income receivable by the assessee from the transfer of development rights. The assessee along with Mukund Bhawan Trust had acquired development rights in land admeasuring 108 acres and 26 gunthas in which share of the assessee was 32%. During the relevant year, assessee jointly with the trust granted development rights in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of land which was divided in 1000 plots out of which 208 plots were sold during the year and the issue was regarding taxability of income from sale of these plots. The amended question in that case admitted by the Hon ble High Court reproduced at page 185 was whether there was any evidence to support the finding of the Astt. Commissioner that the profit if any made on sale and purchase of land or any part thereof was profit earned by the assessee in the business of purchasing developing and selling land, which has been answered by the Court in the affirmative. Thus only the limited question of fact slated above had been answered by the Hon ble High Court who did not go into any other aspect. The case therefore, cannot be considered as precedent for the issue raised in this appeal regarding assessability of income. Moreover, we have already held that the outright transfer of part of development right was a different activity which did not depend on the development of the remaining land. The judgment therefore is distinguishable and not applicable. We, therefore, for the reasons given earlier hold that the entire income has to be assessed in the relevant year and accordingly con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken in the assessment under section 143(3) for assessment year 2004-05 held that the entire sum receivable as per agreement was assessable as income of the relevant year against the claim of the assessee to assess income @ 25%, the method followed by the assessee in case of the main project treating the entire project as one individual project. In appeal, CIT(A) has upheld the view taken by the AO to assess the entire amount receivable in the relevant years. However, he has allowed the claim of the assessee that prorata cost of land incurred by the assessee in relation to right/interest in the land transferred by the assessee has to be allowed as deduction. Aggrieved, by the decision of CIT(A), the assessee is in appeal in these years also claiming that the income had to be assessed only @ 25% as per basis adopted by the assessee to recognize income from the project treating the same as single individual project. 7. Before us, the ld. AR for the assessee reiterated the submissions made before lower authorities that income has to be assessed @ 25% treating the transfer of development rights as part of one individual project. The ld. DR on the other hand supported the orders of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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