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TMI Blog2020 (3) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... aid provisions nowhere permit the A.O. to assess receipts of prior years in one lump sum in later year on the ground that in prior years the receipt was not taxed. It is further observed that section 41(1) has no application, because the liability contemplated by that section relates to trading liability for which deduction was allowed to the assessee the computation of income of any earlier year. In this case, the amount assessed was never allowed as a deduction in any earlier year. AO was incorrect in taxing advances received by the assessee up to the A.Y. 2011-12 as income chargeable to tax under the head income from other sources. Taxability of lease rental - Held that:- Merely because grant of lease was provided in the Agreement dated 02.01.1995 but when in fact the lease deed was never executed in favour of the parties, then said Ferani Ivory could not presume that lease rights were in fact awarded in their favour by the Administrator. In absence of any formal registered lease agreement, Ivory Ferani could not legally infer that the lease of land was granted by the Administrator in respect of the lands. Enforceable lease was not in operation was not disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay and the Administrator had vested right to demand payment of monthly lease rent. These accounts were opened by these companies by providing details information about themselves. The Administrator of Estate of EFD had never authorized or permitted either of the companies to open the account nor had it provided any information enabling either of the companies to open these accounts. On account of unilateral acts of the project coordinators, no income in law could be inferred particularly when no part of the income assessed was either legally due to the assessee or when the amounts were not actually received by the Administrator. CIT(A) after considering relevant facts has rightly held that the AO was incorrect in taxing lease rent as income chargeable to tax under the head income from other sources. Hence, we are inclined to uphold findings of the ld. CIT(A) and reject grounds taken by the revenue. - ITA No.1389/Mum/2015, ITA No.334/Mum/2017 - - - Dated:- 19-2-2020 - SHRI SAKTIJIT DEY AND SHRI G. MANJUNATHA, JJ. For the Appellant: Shri Parag Vyas, Sr. Counsel Shri Sreekar, CIT-D.R. For the Respondent: Shri Dilip S. Damle, A.R. ORDER G.MANJUNATHA, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside and that of the Assessing Officer restored. 6 The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 3. The brief facts of the case are that the assessee, administrator of estate of late Mr. Edulji Framrize Dinshaw, is assessed as an individual and in the capacity of representative of the assessee filed its return of income for the AY. 2011-12 on 29.07.2011 declaring total income of ₹ 1,33,34,503/-, comprising of income from short term capital gains and income from other sources. In addition, the assessee had also disclosed long term capital loss of ₹ 18,99,26,806/- and carried forward said loss u/s 74 of the Income Tax Ac,1961. The case of the assessee was selected for scrutiny, and notices under section 143(2) and 142(1) of the Income Tax Ac,1961 were issued. In response to notice, the authorised representative of the assessee Shri Dilip S. Damle attended from time to time and filed various details as called for. 4. During the course of assessment proceedings, the AO noticed that the AIR information available in the departmental data base system shows the records of 19 number of reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d period of 5 years and developers would clear the land of encroachers at their own cost and develop the properties by construction thereupon. It was agreed between the parties that whenever the spaces in the constructions are sold, NNW, acting as the sole Administrator of the estate of the said Dinshaw would be entitled to receive from the customers. 12% of the consideration. Clause 12 of the said Agreements with the developers reads as under: All gross realizations from the disposal/transfer, (by any and all different formats) as aforesaid, of the different developed segments, are to be divided between the Owner and the Company respectively towards the respective price of the land and sale-price of the building/s (segment-wise) as per the table set out hereunder: a) 12% (twelve percent) of all such gross receipts/realizations shall be receivable by the Owner (directly from the purchasers/prospective purchasers/ unitholders /flat holders by Payee's A/c cheques) and the same shall belong to and shall be the property of the Owner. b) 88% (eighty eight percent) of all such gross receipts/realizations shall be receivable by the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 414 of 2008 and Suit No.1628 of 2008 respectively. Assessee notified the members of the public at large by publishing public notices in the newspaper about termination of the Development Agreements as also about the revocation of the Powers of Attorneys issued in their favour. Assessee filed criminal complaints against Ivory and Ferani and their Directors with the Economic Offences Wing (EOW) Mumbai; under Sections 406, 409, 420 read with 120(b) of the Indian Penal Code for perpetrating fraud by employing disingenuous modus operandi and thereby misappropriating the assessee s land by selling it to itself and not to genuine third party purchasers. Based on the complaints filed before the EOW an FIR was registered against the Ferani and its Directors in January 2011. As regards Ivory; in 2008 EOW registered the FIR under Section 406, 409, 420 read with 120(b) against Mr. C.L. Raheja and his sons for cheating and criminal breach of trust. The EOW has completed investigation and have also collected the necessary details and documents corroborating the fraud perpetrated by them on the Appellant. Based on the statements recorded EOW was satisfied that fraud / cheating and misappropriati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of agreement and power of attorney and also orders of the Hon ble Bombay High court in civil suits came to the conclusion that although the assessee had received 12% share in sale proceeds of developed area in building constructed on the leased land, but income from said transaction has not been recognised for want of conveyance of land title. The AO further observed that if you go through the contents of agreement between the parties coupled with power of attorney given to developers, it is very clear that the assessee had voluntarily entered into lease agreement in the year 1995 and also entered into a development agreement for development of a property for agreed revenue sharing. Further, the assessee had received his share of 12% revenue from sale proceeds of developed building upto financial year 2008 and shown under the head advances from customers. He further, observed that although, there was dispute cropped up between the parties in respect of share of revenue and matter went to the Hon ble Bombay High Court, but on perusal of orders of the Hon ble Bombay High Court in various civil suits, the Hon'ble Bombay High court did not granted injection to the assessee nor stop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but a liability which has ceased to exist or a liability which has been legally watered down by the due process of law. Therefore, he opined that entire advances received upto 31.03.2010 of ₹ 269,48,90,886/- is treated as non existing liability and assessed under the head income from other sources. Similarly, the amount of advance received for the assessment year 2011-12 has been treated as non existing liability and assessed under the head income from other sources. Further, the AO had also assessed lease rental receivable from M/s. Ivory Properties and Hotels Pvt. Ltd., Mumbai and rent received from M/s. Ferani Hotels Pvt. Ltd. under the head income from other sources. 7. Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee has filed elaborate written submissions on this issue which has been reproduced at para 5 on pages 47 to 127 of Ld. CIT(A) order. The sum and substance of arguments of the assessee before the Ld. CIT(A) are that the AO has completely ignored the judicial decisions/judgements given by the Jurisdictional ITAT as well as Hon ble Bombay High Court, in assessee s own case while assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lats including for A.Y. 2001-02 and 2002-03 under the head long term capital gains, however, the AO while passing the assessment order for AY. 2003-04 assessed the income under the head income from business. Subsequently, on appeal the appellate authorities, including the ITAT and the jurisdictional Hon ble Bombay High Court has held that profit/gain arising on transfer of ownership rights in the land was assessable under the head capital gains. Therefore, he opined that there is no merit in the finding of the AO in first part of the assessment order that income received towards sale of flat is assessable under the head income from business/profession. 9. In so far as, the findings of the AO in regard to addition towards advances received from customers from sale of flats under the head income from other sources, the Ld. CIT(A) observed that when income was chargeable to tax only under the head capital gains as the charge of tax is inextricably linked with the transfer of a capital asset and hence the question of taxing the advances shown under the head liabilities under any head of income including income from other sources as there is no transfer of capital assets in the give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts', the appellant has already offered a sum of ₹ 9,02,94,990/- as income of the appellant under the head 'Capital Gains' in F.Ys 2001-02 85 2002-03 in the year when the relevant conveyances were executed in respect of sale/transfer of land. However, the appellant did not recognize the income for the remaining 'Deposits'/ 'Advances' aggregating ₹ 269,48,90,886/- in his books of accounts or in the income-tax returns on the ground that relevant conveyances were not executed. I find that while completing the assessment of the appellant u/s. 143(3) of the Act for A.Y.2003-04, the AO merely changed the head of income as Business Income' instead of 'Capital Gains' as disclosed by the appellant but did not dispute the year of taxability of the income which accrued in the hands of the appellant on execution of conveyance in favour of the purchaser of the spaces constructed in terms of Development Agreement dated 02.01.1995. It is also a fact on record that the AO accepted the appellant's method of revenue recognition in all the preceding assessment years as disclosed by the appellant. Except changing the heads of income as recorded a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay High Court in the case of N.N. Wadia Vs Ferani Hotels Limited in Appeal No. 817 of 2010 in Suit No. 1628 of 2008 dated 19.07.2012. However, the AO's this assertion is completely incorrect and without having any basis for the same. The AO completely ignored this hard truth that the appellant's right of 12% share of sale proceeds of any sale agreement with the prospective purchaser of the flat/premises exists only in lieu of the .appellant's liability to execute the conveyance deed in favour of the intending purchasers of the constructed spaces with the specific intention of acquiring the ownership rights and interests in the land over which the Developers had constructed the buildings. The payments were not intended for any other purpose but for the specific purpose of acquiring the rights in the land owned by the appellant. Besides this, the decision of Division Bench of Bombay High Court dated 19.07.2012 was merely interim directions which did not in any manner resolve the disputes between the parties as wrongly assumed by the AO. Hence, the AO was in error in concluding that the disputes between the parties stood resolved and 12% share received by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hence, the gains/profit arised from the transfer of land was chargeable to tax in the year in which the transfer of such capital asset takes place. Hence, I have no hesitation to hold that the action of the AO in taxing the sum of ₹ 269,48,90,886/- which was 'Deposits/Advances' shown by the appellant in its books of accounts pertaining to F.Y. 1995-96 to 2008-09 cannot be brought to tax in the year A.Y.2011-12 as 'Income from Other Sources' keeping reliance on the decision of jurisdictional Bombay High Court's judgment in the appellant's own case in A.Y. 1987-88 to 1989-90 and also A.Y.2003-04. Accordingly, I consider it proper and appropriate to hold that the AO's action of taxing the entire sum of ₹ 269,48,90,886/- which was received by the appellant in a period of 14 years as Income from Other Sources' in A.Y.2011-12 is completely incorrect and unjustined under the provisions of Income-tax Act as well as against the accounting principles. Therefore, the addition so made by the AO of ₹ 269,48,90,886/- stands deleted. Therefore, the appellant's these grounds of appeal are allowed. 7.4 Even it is also very important fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant, but as the appellant/administrator of the estate initiated legal proceedings against M/s.FHPL as detailed above, hence, the appellant instructed his Banker, ICICI Bank not to accept payments from the intending purchasers or from the Developers. In this situation, I find that the Developer M/s.FHPL without the consent of the appellant opened an account with Indian Bank, Bandra under the name style of Ferani Hotels Pvt Ltd A/c N.N. Wadia Share having A/c No.843184512 in which it has deposited various sums being 12% share of the sale proceeds received from the intending purchasers. I find that in the course of assessment proceedings, the AO gathered the information of deposits made in this bank account of ₹ 6,35,29,260/- ₹ 2,62,55,640/- in FYs 2008-09 2009-10 respectively from the Developers and the Bank by issuing notice u/s. 133(6) of the Act. I find that the AO having taken note to the decision of the Bombay High Court referred as above, held that the amounts so collected/deposited by M/s.FHPL was an act of the agent of the appellant and hence, the same represented minimum share in the sale proceeds for which the appellant had no liability to ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intending purchasers of the premises. Thus, the appellant's this initiative of depositing 12% share suo moto in separate account was much prior to the order delivered in July, 2012 by the Hon'ble Bombay High Court. Hence, in my considered view, there is no sanctity in taxing the aforesaid sum in the hands of the appellant on the basis of High Court Judgment which was delivered in July 2012 after the closure of the accounting year. In view of the same, I consider it proper and appropriate to hold that the action of the AO of taxing the aforesaid sum of ₹ 6,35,29,260/- and ₹ 2,62,55,640/- received in F.Y.2008-09 and 2009-10 in A.Y.2011-12 is completely incorrect and unjustified under the provisions of Income-tax Act. Accordingly, the addition made by the AO stands deleted. 9. Through Ground NO. 14 to 16, the appellant has agitated against the AO's action of making addition of Rs. ₹ 17,32,37,955/- on account of alleged 12% share of the sale realization with reference to M/s.FHPL. The appellant also contended that the said addition was made without giving opportunity of being heard and hence, the AO violated the principles of natural justice. Further t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , taking note of investigation conducted by EOW against the IPHPL and FHPL and also after admission of Suits filed by the appellant before the Bombay High Court for cancellation of the Development Agreement dated 02.01.1995, it is explicitly evident that the terms and conditions for the development which was stated in the Development Agreement dated 02.01.1995 was subjudice and therefore, in view of the fact that the aforesaid sum which was deposited by the Developer M/s.FHPL without having consent from the appellant in the Indian Bank Account to which the appellant has no access nor the appellant has any right over such money to use in any manner. In my considered view, the act of the AO in bringing the said sum of ₹ 17,32,37,95s/- to tax was completely unjustified and incorrect when in the given facts of the appellant case, where the rights and obligations of the parties arising .from the interpretations and execution of the agreement dated 02.01.1995 are indeterminate and inchoate. Even, it is also observed from the submission of the appellant on record that the lis pendence notice were served by the appellant to the Sub-Registrar, Borivali, for restraining for registratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuments or material except the agreement dated 02.01.1995 under which the leasehold rights were intended to be granted. Moreover, the agreement itself provided for grant of lease only for a period of five years and not beyond, therefore, he opined that the AO was not having sufficient and cogent material on the basis of which he could infer that assessee had subsisting and enforceable right to claim lease rent as the assessee never executed any registered document by which lease of property was granted in favour of the developers. Accordingly, he deleted additions towards lease rental amounting to ₹ 39,60,000/- under the head income from other sources. The relevant findings of the Ld. CIT(A) are as under: 10. Through Ground No. 19 to 21, the appellant has agitated against the AO's action of taxing the lease rent income of ₹ 39,60,000/- as income of the appellant assessable in A.Y. 2011-12. The appellant contended that the AO erred in assessing alleged lease rental of ₹ 19,80,000/- each from the FHPL and IPHPL without bringing any document on record to suggest that the appellant had in fact granted lease of demised land and such lease was legally in force i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Administrator stopped accepting the monthly payments. Subsequent to that the Developers had deposited monthly amounts in the accounts unilaterally opened by both the Developers in their own names. However, the appellant's AR claimed that such unilateral act did not result in accrual of any income in the hands of the appellant. Hence, it was requested that addition so made by the AO should be deleted. 10.3 Having perused the AO's order and appellant AR's submission, I find that the lease rental amount i.e. ₹ 39,60,000/- which was assessed as income of the appellant for AY 2011-12 relates to the period F.Y.2008-09 to 2010-11 meaning thereby payment pertaining to A.Y.2009-10 and 2010-11 were also assessed as income of the appellant in A.Y.2011-12. After taking note of the submission and documents on record, I find that a sum of ₹ 26,40,000/- which is forming part of ₹ 39,60,000/- allegedly pertained to FYs 2008-09 2009-10 relevant to AYs 2009-10 2010-11 respectively. Therefore, I find that the action of the AO in charging such sum i.e. ₹ 26,40,000/- in the hands of the appellant in A.Y.2011-12 is completely unjustified and incorrect. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sisting legal right to claim or receive lease rentals from the Developers. It is true that the Agreements dated 02.01.1995 envisaged granting of lease of the demised lands in favour of the Developers. Save except the clause (2) of the Agreements dated 02.01.1995 there was nothing more on record which established that the lease of land was in fact granted in favour of the Developers. The agreements of 02.01.1995 specifically provided that the lease would be granted in the form agreed between the parties. Format of the lease was annexed to the Agreements. However it is an admitted fact that such lease agreement was never formally executed by the Administrator in favour of either of the Developers. A lease creates an interest in an immovable property, such lease is required to be evidenced by a registered deed, duly stamped as per the provisions of the Indian Stamp Act. In the present case admittedly the Developers have claimed that lease rent payable was ₹ 55,000/- per month. In other words the consideration payable for grant of lease was in excess of ₹ 100/- and therefore in - order to acquire any enforceable legal leasehold rights, it was necessary that the lease was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Developers, In view of the foregoing therefore I hold that the AO was not justified in assessing lease rent of ₹ 13,20,000/- allegedly pertaining to FY 2010-11. For the reasons set out in the aforesaid the AO is directed to delete the addition of ₹ 39,60,000/-. 11. The Ld. Sr. Counsel, Shri Parag. A. Vyas, appearing for the Revenue submitted that the Ld. CIT(A) was erred on the facts and in the circumstances of the case and in law, deleting additions made by the AO towards advance of ₹ 269.48 crores on transfer of assets in light of serious dispute between the developer and the assessee regarding the validity of lease agreement as well as development right agreement. The Ld. Sr. Counsel further submitted that the Ld. CIT(A) has failed to appreciate the facts in light of various reasons given by the AO to assess advances under the head income from other sources which is evident from the fact that the Hon ble Bombay High Court has not granted any interim relief to the assessee for cancellation of agreement dated 02.01.1995 and power of attorney. The Ld. Sr. Counsel further submitted that the first and foremost question needs to be answered is whether income a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of equity. This is also confirmed by the Division Bench of the Bombay High Court in 2012 hence the whole of the income of the assessee shown as advance pertaining to the period from 1995 to 2008- 09 is income relating to the year 2011-12. The ld. Sr. Counsel further submitted that on taxability of income deposited in designated bank accounts for sale of flats during 2009-10 to 2011-12, it seems these deposits are under court order and as per court order dated 19th July 2010, ad interim stay has been rejected only a direction has been given that future sale of flats would be subject to concurrence of both parties. The income pertaining to sale of flats prior to the filing of the suit would be taxable for the A.Y.2011-12 as stated above while the one relating to the period after filing of the suit may be subject to the application of section 52 of the Transfer of Property Act and the order of the Bombay High Court dated 19th July 2010. 12. The. Ld. Sr. Counsel, further, submitted that as per the doctrine of Lis Pendens incorporated in section 52 of the Transfer of Property Act, 1882, the transfers of third parties although not illegal (as held by the Supreme Court of India in Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either as a co-operative society or as company or an association of flat owners, his right title and interest in the land and execute all relevant documents, therefore in accordance with the agreement executed under section 4 and if no period for the execution of the conveyance is agreed upon, he shall execute the conveyance within the prescribed period and also deliver all documents of title, relating to the property which may be in his possession or power. The Ld. Sr. Counsel further submitted that the plain reading of section 11 in conjunction with section 52A of transfer of property Act 1882, makes it very clear that once an agreement for sale is entered into between the parties, then the title and interest in the said property passed on to the buyer and consequently transfer take place within the meaning of section 2(47)(v) of the Income Tax Ac,1961. The Ld. Sr. Counsel further submitted that in this case although assessee continued to receive 12% share of income from transfer of property, but deferred recognition of revenue for indefinite period even though the developer has conveyed ownership to the flat buyers by citing a reason that he had cancelled development agreement a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department in any of the grounds of appeal and once the findings of the Ld. CIT(A) goes unchallenged, then ground No.1 becomes only academic, because nowhere in any grounds it is claimed by the Revenue that transfers of the capital assets took effect in assessment year 2011-12 and some received represents consideration in respect of asset transfer. 15. The Ld. A.R. for the assessee further replying to argument of the Ld. Sr. Counsel for the Revenue submitted that when income from sale of flats has been consistently assessed under the head capital gains and such treatment has been finally approved by the Hon ble Bombay High Court, then there is no reason for the AO to hold that the land has been converted into stock in trade when development agreement is entered. In fact, it is not the case of the AO that the assessee has converted investments into stock in trade thereby provisions of section 45(2) of the Income Tax Act, 1961 and subsequent sale of flats is a sale of stock in trade and resultant income is assessable under the head income from business/ profession. The Ld. A.R. further submitted that no doubt the assessee had entered into a development agreement in the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the dispute between the parties. Therefore, it does not mean that the income in respect of amount deposited in designated bank account is accrued to the assessee for the year under consideration; consequently, it can be assessed under the head income from other sources. The Ld. A.R. for the assessee further submitted that the AO has assessed total advances received by the assessee upto assessment year 2011-12 under the head income from other sources as nonexistent liability, but provisions of section 56 does not permit the AO to assess income of earlier years in the year under consideration. The Ld. A.R. further submitted that assuming for a moment but not accepting, the liability is ceased to exist, but provisions of section 41(1) of the Income Tax Act, 1961 cannot be invoked, if income is assessed under the head income from other sources. In this regard, he relied upon various judicial precedents including the decision of ITAT Kolkata Bench in the case of DCIT vs. M/s. Everyday Industries India Ltd. in ITA No.94/Kol/2004 dated 03.02.2016. The assessee had also relied upon the decision of ITAT Mumbai, in assessee s own case, in ITA No.1033/M/2018 dated 27.03.2019 and argued that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth developers was withdrawn. The hearing of the motion was conducted on 24 'June 2010. The order thereon as pronounced by the Single Bench of the Bombay High Court on 19t1 July 2010. In its order dated 19.07.2010 the Hon'ble Bombay High Court found primafacie case in favour of the Administrator of EFD and observed in Para-68 (Page-771-772) as follows: It may be mentioned that a defendant, who is on the wrong side of the law, upon having committed acts of fraud and deceit and put up construction after having committed such fraud cannot make bold to state to Court that no matter what his act is; he must be entitled to construct and develop the property. Once a prima-fade case is made out by the plaintiff for grant of interim relief in equity, the defendant cannot defeat the relief being granted upon his own convenience and to seek to balance it with the prima-fade case. It is only if the convenience of the defendant is such as can be balanced with plaintiffs case that the concept and doctrine of the term 'balance of convenience', can weigh in favour of the defendant. 18. We further noted that During the hearing on the Notice of Motion before Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitation. (iii) ..................... (iv) .Pending the hearing and final disposal of the preliminary issue, Ferani Hotels Private Limited is directed to maintain accounts and to continue depositing an amount equivalent to 12% of the gross sale consideration in a designated bank account. The amount upon deposit shall be invested in a fixed deposit to abide by further orders of the Learned Trial Judge: (v) Liberty is reserved to the Plaintiff to apply before the Learned Single Judge for appropriate interim reliefs after the final decision on the preliminary issue; (vi) We clarify that all the observations contained in this judgment are confined to the issues which have arisen before this Court at the present stage and the view expressed by the Court on the merits of the rival contentions shall not come in the way of the disposal of the Notice of Motion or the suit in terms of the directions issued. 19. We further noted that from bare perusal of the judgment dated 19.07.2012, it is very clear that the Division Bench of the High Court did not adjudicate the Suit filed by the appellant wherein the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ending hearing and final disposal of the preliminary issue; Ferani would maintain the accounts and to continue depositing an amount equivalent to 12% of the gross sale consideration in the designated Bank account. The Court further directed that the amount upon deposit would be invested in Fixed Deposits to abide by the further orders of the Ld. Trial Judge. From bare perusal of the order of the High Court's judgment: it was evident that nowhere the High Court had in any manner expressed any opinion or made any observation that the moneys deposited in the designated A/c by Ferani could be appropriated by Estate EFD or that the Estate EFD could exercise control or domain either over the amounts deposited in the designated A/c or over the fixed deposits made by Ferani out of the sums deposited in the designated A/c. Nowhere the Court had even indicated that in its opinion Estate EFD could have any access to the sums collected by Ferani. Keeping in mind the fact that Estate of EFD in the Suit filed had requested for cancellation of the Agreement dated 02.01.1995 and had sought restitution of the property in its original form, the Court had categorically directed that the amounts i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o income arising from Agreements for Sale unilaterally executed by Ferani during F.Y.2010- 11 was legally chargeable to tax in assessee's hands because the entire matter was sub-judice and assessee was never a party to the Agreements for Sale executed by Ferani and for which the amounts were deposited in the Bank A/c opened by Ferani in its own name. But it is to be mentioned that these facts itself is enough to create the debate and this order of CIT(A) is pending adjudication before Tribunal. Moreover, we make it clear that this order of ours will in no way affect the hearing of that appeal. Copy of the appellate order for the A.Y. 2012-12 is enclosed at Pages 172 to 347 of the assessee's Paper Book. The same view was taken by the CIT (A) for A.Y. 2012-13 as well. The appeal against the order u/s 143(3) for A.Y. 2013-14 is pending before CIT (A). However, it is evident that on the same set of facts as prevailed in the prior years and the appellate authorities have held that since the assessee was not a party to any of the Sale Agreements after the Agreement dated 02-01-1995, which was terminated in May 2008, no income could be legally inferred with reference to amounts un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the amounts being kept in FDs the funds remained in the custody of the Court. In the circumstances therefore interest accruing on these fixed deposits also constituted integral part of the funds under the custody of the Court and not accessible to the Administrator. 20. We further noted that after the Agreement for development was terminated in May 2008 and the Suit was filed in Bombay High Court, only one of the Developer viz. Ferani unilaterally continued to execute Agreements for Sale in favour of the Flat purchasers by using the Power of Attorney executed in its favour in January 1995, even though said Power of Attorney was legally revoked in 2008. Since Administrator was never party to any of the Agreements unilaterally executed by Ferani and no part of the consideration ever reached the Bank A/c of Estate EFD, the assessee rightly neither accounted the receipt of the part consideration in its books nor reported any gain or profit accrued on execution of Sale Agreements in the I T returns filed 21. In this factual back ground, the question that needs to be first answered is whether the AO was right in stating that income from sale of flats under agreement dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich profit on sale of inherited lands was assessed as business income, but held to be assessable under the head Capital gains by the appellate authorities including Hon ble Bombay High Court. In respect of lands which were subject matter of development agreements dated 02.01.1995, the assessee had recognized income on execution of four conveyance in AY 2002-03 and AY 2003-04 respectively. The income was offered under the head Capital gains. In the assessment under section 143(3) for the AY 2003-04, the A.O. assessed the same under the head profit and gains of business. It may be noted that in AY 2003-04 CIT(A) relying on the ITAT order for AY 1987-88 to 1989-90 and 1991-92 to 96-97 decided that the income from sale of land should be taxed as capital gains. The same was confirmed by ITAT. The High Court also decided the issue in favour of the assessee by relying on the courts order of AY 1997-98. The Hon ble Supreme Court has dismissed SLIP filed by department for AY 2003-04 on 07.01 .2013. Therefore it is very clear that for AY 2003-04 the subject land which is covered by the development agreements dated 02.01.1995 was considered and held by the Hon ble Bombay High Court to be capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e out an altogether new case when factual matrix of the case did not change in the FY 2010-11. Further, virtue of signing of development agreement dt. 02.01.1995, land did not change the colour/character from investment/capital asset to stock in trade. We further noted that land was acquired way back in 1923 and since then it was held as capital asset/investment. The Administrator along with Bachoobal Woronzow (BW) being the sole beneficiary of the Estate of late E.F.Dinshaw entered into the development agreement in 1995 even though the land was inherited as far back in 1936. In other words, the Administrator of the Estate and the sole beneficiary dealt with the land for the first time, almost after 60 years from the time land was inherited. All the above fact clearly demonstrates that holding of land cannot be construed as stock in trade thereby the resultant gain also cannot be taxed under the head business income. In any case, the AO in his order ultimately taxed the income under head Income from other sources while computing the total income of the assessee. This clearly proves that AO himself was not convinced that taxability of this income under the head business Income . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resumption that the sanctioned scheme was still under operation and, therefore, bar under Section 22 of the S/CA applied. For this reason, it directed that the only remedy left for the Revenue was to approach the Board for lifting of bar under Section 22 of the 3/CA. From the facts and events noted above, this premise and assumptions are clearly erroneous and contrary to record. (19) .. The Income Tax Department shall be entitled to take steps for attachment of the properties of the Company, including Ville Pane Land as per the provisions of the Income Tax Act and shall be entitled to sell the same. If there are any secured creditors in respect of these properties, such attachment and sale shall be subject to rights of those creditors. Out of the proceeds, the principal amount of tax due to the income tax Department and even the admitted excise dues shall be paid to the Revenue. In so far as payment of interest and penalty is concerned, that would be dependent upon the decision which the Board would give. (33)' 25. From the plain reading of the findings of the Supreme Court in the case of GTC, it was evident that the court was neve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land holding in the hands of the Administrator was capital asset and therefore income on it's transfer was assessable as capital gains but not as business income. Even though the CIT(A) in his order has elaborately discussed this judgment of the jurisdictional High Court which has become final and therefore binding on the Revenue, the Ld. Counsel for the Revenue has not brought on record any material to distinguish the same. Therefore we are of the considered view that the in judgment relied upon by the ld Counsel, no principle of law per se was laid down nor the court was called upon to decide the question about characterization of income when the land admittedly was acquired as a business asset and it was given for development by a sick company to raise financial resources. In fact, it appears that it was sick company's assertion that land being business asset was converted by it as stock in trade. No such averment has ever been made in the present case by the assessee at any time before any authority. Further, no immovable property of the assessee was converted into stock in trade in any of the years and also not put the entire property on sale and hence the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt agreement in respect of 7.1. Acres of land with a developer who agreed to pay part consideration in cash and part consideration in the form of 20% of the constructed area in the proposed new building which the developer was to construct. The AO held that the gain realized by the assessee on transfer of the development rights was assessable as business income. On appeal, the CIT(A) ITAT concurrently held that the gain was assessable as Capital Gains and not as business profit. The ITAT held that under the agreement the assessee land owner was to receive a definite consideration and the assessee did not participate in any manner in the activity of development, construction and sale of the new building. All the cost and expenses associated with development and construction of the new buildings was to be borne by the developer and assessee had no obligation to perform. All risks associated with the venture of development of real estate were solely borne by the developer and no risk was shared by the land owner. The ITAT, therefore agreed with the assessee contention that the assessee itself never took part in trade and no risks associated with the adventure in the nature of trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Estate of EFD in terms of Section 168 of the Act. As such, the mere reference to the name of N.N. Wadia in the account opened and operated by Ferani Hotels Pvt. Ltd., could not lead to conclusion that the amounts deposited by Ferani belonged to Estate of EFD. The Administrator Estate of E.F. Dinshaw does not have any control or domain over neither the said account nor such account can be operated by the assessee. 29. We further noted that the coordinate bench of this tribunal in its order 27 03.2019 in ITA No. 1033/Mum/2018 for AY 2013-14 had taken note of this factual and legal background. Taking into account specific directions contained in the High Court's order dated 19.07.2012, the tribunal agreed that the rights and obligation of the parties flowing or arising from or under the agreements dated 02.01.1995 where indeterminate. The ITAT also agreed that the fixed deposits made by Ferani under the order of the High Court did not belong to the Administrator as he neither had control or domain over the said amounts and these fixed deposits were to be governed by the order of the Trial Court before whom the suit was pending. Once the tribunal has held that the amounts coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s original form, the transfer of the capital asset if any can happen only when the suit of the assessee is finally decided by the Court and the decision of the court becomes final. In view of these facts, the amounts which the assessee received during the period 1995-96 to 2010-11 could not be charge to tax as income in AY 2011-12, under the head income from other source or any other head of income. 30. In so far as the observations of the AO in para. 26 of the assessment order, we find that although the A.O. considered the advances received in the prior years as income for AY 2011-12 on the ground that there was cessation of liability, but nothing more has been elaborated on this point. In this regard, it is pertinent note that in the assessment order, the A.O. assessed the income under the head income from other sources. We further note that section 56 of the Income tax Act, 1961 defines the scope of the income which is chargeable to tax under the head Other Source. The residuary head of income can be invoked only when the income is not found assessable under any other head of income. In the instant case, as admitted by the A.O., the advances were received against the transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1984 was treated as advance and was never disputed. The fact that from 1984 till date there had being no change in the status of the transaction and there was neck deep litigation was also not disputed by the Revenue. Keeping in mind these facts, the ITAT held that for an amount to be added back under section 41(1) which should bear the charter of income. Nowhere from the orders of Revenue authorities it appeared that during the year, something new happened had which converted the advances into remission of liability to be treated as income. The Tribunal held that invocation of section 41 (1) was uncalled for. We find that facts of the present case are pari materia to the case considered by the Tribunal. Even in this case, the entire transaction with the developers is in neck deep in litigation and the assessee has filed suit requesting for cancellation and restitution of the lands. Even at the beginning and the close of the FY 2010-11, the disputes between parties was sub judice and bearing the order passed on Notice of Motion seeking interim relief and there was no process on the main suit which remained pending. As such, during the relevant year, there was no material change in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on 22/11/2019, the Ld. AR for the assessee submitted that the Hon ble Supreme Court, vide its order dated 04/10/2019 passed by the three judge Bench in Ivory SLP and Ferani review petition, decided the reference of question of law in favour of the administrator holding that the issue of limitation cannot be decided u/s 9A of Civil Procedure Code and all the issues, including limitation of petition filed by the parties and the merit of the matter to be decided by the trial court on the basis of contentions of both the parties and also, decide any applications seeking interim injunction/ relief if any. From the above, it is very clear that as of date, there is no material change in factual matrix, because after the administrator determinated the agreements dated 02/01/1995, revoked the power of attorney granted to Raheja and filed the suits in the Hon ble Bombay High Court in 2008, there is practically no progress and the entire matter is sub-judice. Therefore, we are of the considered view that there is no merit in the contention of the Ld. AR for the revenue that the decision of Division Bench of Hon ble Bombay High Court in review petition filed by Ferani Hotels Pvt.Ltd, has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause (iv)(b) of the deed of conveyance dated 25.10.2001 executed between the assessee and Ivory properties and hotels Pvt. ltd and Toyota Lakozy Auto Pvt. Ltd., which clearly talks about contractual monthly tenancy on the expiry of the lease. From the above, it is evident that even if one accepts the claim of the developers that lease for the period of five years was granted the same came to conclusion in January 2000 on expiry of five year period. Thereafter the relationship between the parties was that of landlord and contractual monthly tenant. Before the lower authorities, the assessee had filed requisite documentary evidence to prove that in 2008 the assessee had taken necessary legal steps to terminate the contractual tenancy of each developer. In the circumstances, once the assessee had taken legal steps to terminate the contractual monthly tenancy, the developers could not unilaterally claimed themselves to be having leasehold rights in the land in terms of covenants contained in the agreement dated 02.01.1995. 37. We further noted that the Assessing Officer before concluding that income by way of lease rent had accrued, failed to bring on record sufficient, adequate an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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