9911796707
TMI Blog2017 (4) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessment year 2008-09 was filed on May 8, 2008 declaring nil income in response to notice under section 142 of the Income-tax Act (hereinafter called "the Act"). Subsequently the assessment was completed under section 143(3) of the Income-tax Act after issuing the requisite notice under section 143(2) of the Act vide order dated December 29, 2009 at a total income of Rs. 2,37,37,172. While doing so, the learned Assessing Officer had not accepted the method of recognising the income adopted by the appellant in respect of sale of plots. The appellant recognised revenue only in the year in which the plots were sold and registration of conveyance deed. The Assessing Officer is of the view that the revenue should be recognised at every ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net profit of Rs. 2,34,27,955 is determined as income for the year and accordingly brought to tax." 3. Thus the Assessing Officer is of the opinion that the revenue should be recognised based on the stage of receipt of consideration. Being aggrieved, an appeal was preferred before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) confirmed the addition vide para 10 of the impugned order which is as follows : "10. The facts relating to third ground are that the appellant submitted return of income on project completion method at Rs. nil since the project was going on during the year under consideration. As against this, the Assessing Officer arrived income under mercantile system of deriving income on ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had adopted the correct method of recognising the income in respect of sale of plots by adopting completed contract method. Thus, he prayed that the assessment made by the Assessing Officer be quashed. On the other hand, the learned Departmental representative placed reliance on the order of the Commissioner of Income-tax (Appeals). 6. We heard the rival submissions and perused the material on record. The only dispute in this appeal is with regard to the method of recognising the income for the assessment to tax in respect of sale of plots. The appellant firm had recognised the income in respect of sale of plots by adopting completed contract method, whereas, the Assessing Officer is of the view that income should be offered to tax receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set into or its treatment by him as stock-in-trade of business carried on by him shall be chargeable to Income-tax as his income of the previous year in which such stock-in- trade is sold or otherwise transferred by him. Therefore, in so far as stock-in-trade is concerned, the relevant year in which the capital gain tax is leviable is the previous year in which such stock-in-trade is sold. The word used is sold or otherwise transferred by him. In view of the expressed words used in section 45(2), it is clear that section 45(1) deals with capital gains on transfer of capital asset, section 45(2) deals with payment of capital gains in a transaction where stock-in- trade is sold or otherwise transferred by him. Under section 45(1), the capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The object of using the words 'otherwise transferred' as it is in the other provisions in the same section is to prevent avoidance of payment of capital gains by the owners thereof by resorting to modes which are not recognised in law, but which in substance has the same effect. In other words, if the owner by such transfer ceases to have any interest in the property and transfers all his interest in the property to the transferee and earns profits and gains, but declines to pay the capital gain, on the ground that such transfer is not one such transfer recognised in law, then the law in such cases to plug the loop hole has used the term otherwise transferred. Once it is sold, the question of considering whether it has been ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not delivered. It would not become a transfer and question of payment of capital gains would not arise." 7. Thus the provisions of section 2(47) of the Act have no application to the transactions of stock-in-trade. In this case, the stock-in-trade in immovable property and the title in immovable property can be transferred or alienated in accordance with the provisions of the Transfer of Property Act. The right, title or interest in the immovable property can be transferred only by way of registering the conveyance deed executed in this behalf. Even the Accounting Standard-9 dealing with the recognition of income also lays down that the income in respect of transfer of immovable property can be recognised only when the risks, rewards and ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
