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TMI Blog2017 (4) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 ownership of the property is transferred to the buyer. Therefore in our considered opinion, the matter requires a fresh examination by the Assessing Officer in the light of the above position of law. Therefore, we remand this matter back to the file of the Assessing Officer with a direction that the income in respect of sale of plots can be recognised only in the year in which conveyance deed executed is registered in favour of the buyers and to allow the development expenditure incurred as expenditure or the expenditure likely to be incurred on the plots sold as expenditure. - I. T. A. No. 783/Bang/2015 - - - Dated:- 4-11-2016 - Asha Vijayaraghavan (Judicial Member) And Inturi Rama Rao (Accountant Member) For the Appellant : Balachandar, Advocate For the Respondent : Kamaladhar, Standing Counsel ORDER Inturi Rama Rao (Accountant Member) 1. This appeal filed by the assessee directed again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopment cost 56,61,952 Closing stock 1,49,44,660 Gross profit 2,43,97,774 The gross profit of ₹ 2,43,97,774 has to be set off against the administrative expenses claimed for ₹ 9,69,819.50. Thus, the net profit of ₹ 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 yearly basis. In the appellate order of the Commissioner of Income-tax (Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of stock-in-trade in the business of appellant- firm and are immovable properties. The title in the immovable property can be passed on only in terms of the provisions of the Transfer of Property Act. In this connection, the observations made by the hon'ble jurisdictional High Court in the case of Wipro Ltd. v. Deputy CIT [2016] 382 ITR 179 (Karn) at paragraphs 136 to 138, page 246 are as under : Section 45(1) deals with profits or gains arising from the transfer of a capital asset. Therefore, it does not deal with transfer of a business asset or a stock-in-trade. It provides that the profits and gains arising from the transfer of the capital asset shall be chargeable to Income-tax under the head capital gains and shall be deemed to be the income of the previous year in which the transfer took place. It is here that the definition of transfer under section 2(47) assumes importance. The definition of transfer contemplated in the provision is only in relation to the capital asset and not in relation to the stock- in-trade or a business asset. However, sub-section (2) contains a non obstante clause by saying notwithstanding anything contained in sub-section (1), the prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red' 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 otherwise transferred would not arise. In the instant case, the assessee entered into an agreement with M/s. Prestige Estates Pvt. Ltd. on February 9, 2000, to sell the afore said property for a sum of rupees twelve crores fifty thousand. Clause (6) of the said agreement provides that, as desired by the purchasers, in order to enable the purchasers to process with the preparation of the plan, sanction and other orders required for commencement of the construction in the schedule property, the vendors ..... X X X X Extracts X X X X X X X X Extracts X X X X
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