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TMI Blog2018 (9) TMI 1547X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to acquire of the capital asset, it cannot be considered as a revenue receipt. We find that ld. CIT(A) has correctly directed the Assessing Officer to delete the addition and also directed corresponding expenditure would not be allowed as revenue expenditure. Disallowance under section 40(a)(ia) - as submitted before the ld. CIT(A) that TDS was effected and remitted to government account - CIT(A) directed the Assessing Officer to verify the claim and if it is found that TDS was effected and remitted to government account within the time prescribed, then the impugned addition may be deleted - no infirmity in the order passed by the ld. CIT(A). Thus, this ground of appeal raised by the revenue is dismissed. Allowable revenue expenditure incurred towards collection of deposits - Held that:- Assessing Officer treated the plot advance received by the assessee from the customers is a revenue receipt and taxed accordingly. The assessee only received advance and not allotted any plot to the customers and the assessee also not started any developmental activity. Therefore, it has to be considered that assessee not started its activities for which the advance received from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the fact that the assessee had claimed only expenses of its layouts/ projects without admitting any relatable receipts which is patently erroneous accounting. 5. The Ld.CIT(A) should have directed the AO to ascertain the profits considering all receipts and expenditures of each layout /project carried out in the previous year. 6. The Ld.CIT(A) erred in overlooking the fact that the assessee was perennially postponing the ascertainment of the profit and thereby consequently postponing the payment of Income tax on the ground that plots were not registered / sold. 7. The Ld.CIT(A) erred in overlooking the fact that the nomenclature of refundable plot booking advances cannot change its nature from a revenue receipt to a liability which is not exigible to tax. 8. Any other ground that may be urged at the time of hearing. 3. Ground Nos. 1 8 are general in nature, no adjudication is required, therefore, same are dismissed. 4. Ground Nos. 2 to 7 relate to advance received by the assessee from the customers to allot plots in future, whether it has to be treated as capital receipt or revenue receipt and also the expenses collected in connection with receivin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is practically impossible in the absence of identification of such plot of land by the assessee. The Assessing Officer inferred that assessee is resorting to collection of deposits in the guise of allotment of undivided share of land. The Assessing Officer also noticed that even after completion of three years the plots were not registered to the customers. The Assessing Officer further noted that assessee though acquired lands, it has never completed or undertaken any developmental activity in the lands, no plotting or earmarking of the lands towards the amounts received from the customers is done. The Assessing Officer further found that the entire amounts collected from the customers were not utilized for the purchase of lands and developmental activities etc. and the total area of lands acquired by the assessee not proportionate to and not commensurate with the plot amounts collected. The Assessing Officer also noted that there is a clear violation of the Companies Act which clearly stipulated the approval from the competent authority to undertake activity of the collection of amounts from customers/public. The Assessing Officer called upon the assessee to explain why income w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies have not been obtained, and hence, the balances are subject to confirmation. The audit report also failed to indicate the nature of business of the assessee. Further, on perusal of profit loss account ending 31/03/2009, it was noted that all the expenses pertaining to the year including those incurred for the collection of plot booking advances are also claimed as expenditure and in contrast, the assessee company convincingly claimed the plot booking advances as liability in the balance sheet instead of admitting the same as receipt/revenue. Thus, the net loss arrived at ₹ 2,80,99,285/-. In view of the above finding, the Assessing Officer noted that the profit and loss account and balance sheet submitted by the assessee give a distorted picture of the affairs of the company. Hence, the Assessing Officer took the view that the claim of loss as discussed previously cannot be allowed and the assessment was completed as per the provisions of section 144 of the Act based on the material available on record. The refundable plot booking advances at ₹ 7,58,14,368/- was assessed as receipts in the hands of the assessee company for the year under consideration and the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greed. The customer may also opt to get out of the scheme after payment of certain expenses, but would be entitled to certain element of interest on the instalment amounts paid by him and no interest over land is conveyed to the customers. The agreements only show mere promises to convey certain specified area of land. The customer does not get any right or any sort of interest in respect of land shown to him for which he pays the instalments. Thus, the money collected from the customers cannot be considered as plot advance . It cannot be conceived as advance paid towards purchase of plot. It is a misnomer to characterize these amounts as refundable plot booking advance , and it is a mere device to collect money from the public on the pretext that certain piece of land will be registered after payment of the instalments. It is also pertinent to note that the assessee has not admitted any single instance of sale of plot to the customers. Hence, the scheme floated by the assessee-company is a mechanism to collect money/deposits from the public with a promise to allot plot in future. Therefore, it can be said that the assessee has engaged itself in collection of money from the publi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allments as agreed. The customer may also opt to get out of the scheme after payment of certain expenses, but would be entitled to certain element of interest on the installment amounts paid by him. Thus, a careful perusal of the agreement show that no interest over land is conveyed to the customers. The said agreements are mere promises to convey certain specified area of land. The customer does not get any right or any sort of interest in respect of land shown to him for which he pays the installments. Thus the money collected from the customers cannot be considered as plot advance . It cannot be conceived as advance paid towards purchase of plot. It is a misnomer to characterize these amounts as 'Refundable Plot Booking is also pertinent to note that the assessee has not admitted any single instance of sale of plot to the customers. Similarly no evidence could be filed that development works have been carried in regard to the land purchased to allot them as plots. Hence the scheme floated by the assessee-company is a mechanism to collect money/deposits from the public with a promise to allot plot in future. Therefore it can be said that the assessee has engaged itself in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The expenditure incurred towards earning of the above receipts could be reasonably estimated at 30% which would be ₹ 14,43,543/-. Thus the income from other sources to be subjected to tax would be ₹ 33,68,269/-. I find that the other expenses claimed in the P L account are not revenue expenditure as they are all incurred towards collection of deposits and as the revenue activity in relation to such collection of deposits have not commenced and they are liable to be disallowed as revenue expenses. Consequently, it would be appropriate, in the circumstances of the case, to estimate and determine the income under other sources at ₹ 33,68,269/- which may be taken as the total income for the subject year. 11. The revenue receipts admitted from other sources during the year relevant to Assessment Year 2009-10 was ₹ 48,11,812/-. The expenditure incurred towards earning of the above receipts could be reasonably estimated at 30% which would be ₹ 14,43,543/-. Thus, the income from other sources to be subjected to tax would be of ₹ 33,68,269/-. We find that the ld. CIT(A) by considering all the facts and relevant material, he came to a conclusion that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition made in treating those receipts as revenue receipts. However, the expenditure incurred towards collection of these deposits would not take the character of revenue expenditure and are liable to be disallowed. Consequently, the income with reference to receipts admitted from other sources can be reasonably estimated and determined after allowing estimated expenditure of 30% for earning of such receipts which would be ₹ 44,44,766/-; thereby the income from other sources may be determined at ₹ 1,03,71,120/- (Rs.1,48,15,886 ₹ 44,44,766) which may be taken as the total income for the subject year. We find that year under consideration also, the Assessing Officer treated the plot advance received by the assessee from the customers is a revenue receipt and taxed accordingly. The assessee only received advance and not allotted any plot to the customers and the assessee also not started any developmental activity. Therefore, it has to be considered that assessee not started its activities for which the advance received from the customers. The ld. CIT(A) has rightly held that the advances received by the assessee from the customers is only a capital receipt. ..... 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