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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 ..... ified in the names of the buyers. 3. The Ld.CIT(A) erred in not giving a finding to arrive at the profit of the year after considering all the receipts and expenditures of each layout/project. 4. The Ld.CIT(A) erred in overlooking 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are 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 was not admitted. In response, the assessee has submitted as under:- "As far as the sale of goods are concerned the revenue has to be recognized when the seller has passed on the right over the property to the buyer. The t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 Rs. 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 Rs. 7,58,14,368/- was assessed as receipts in the hands of the assessee company for the year under consideration and the same are treated as income in the profit & loss account. Against this income, the assessee claimed expenditure of Rs. 3,92,63,194/- and accordingly the profit was worked out to Rs. 3,65,51,174/-. The Assessing Officer further noted that from the Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 public in violation of RBI norms. The ld. CIT(A) further observed that the amounts collected in the name of plot advance are in the nature of capital receipts, and as a result, the expenditure incurred towards acquiring such capital has to be adjusted against such capital receipts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 collection of money from the public in violation of RBI norms. In this background the various contentions raised by the AR and the inferences drawn by the AO has to be seen. 4.3 The money collected from the public is shown as 'plot advance' under "provisions" in the balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure 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 Rs. 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 Rs. 48,11,812/-. The expenditure incurred towards earning of the above receipts could be reasonably estimated at 30% which would be Rs. 14,43,543/-. Thus, the income from other sources to be subjected to tax would be of Rs. 33,68,269/-. We find that the ld. CIT(A) by considering all the facts and relevant material, he came to a conclusion that the amount collected by the assessee for allotment of the plots in future, though not allotted, has to be treated as a capital receipt because the assessee has collected the deposits from various customers to acquire the capital asset and therefore, the amount received by the assessee has to be treated as a capital re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed after allowing estimated expenditure of 30% for earning of such receipts which would be Rs. 44,44,766/-; thereby the income from other sources may be determined at Rs. 1,03,71,120/- (Rs.1,48,15,886 - Rs. 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. So far as expenditure claimed by the assessee is concerned, we find that these expenditure claimed by the assessee in connection with the plot advance received by the assessee. Therefore, the plots advance has already treated as a capital receipt, therefore, this cannot be considered as a revenue receipt. The ld. CIT(A) rightly held that the expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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