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TMI Blog2021 (9) TMI 978X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the AO was incorrect in coming to the conclusion that the assignment agreement would be complete when the assessee has given bank guarantee on 28.11.2007. Assessee has withdrawn amount from Escrow account and utilized for its business purpose and therefore, he opined that assignment is complete and fees received is taxable for the assessment year 2008-09 - We do not agree with the AO for the simple reason that once assessee has furnished bank guarantee equivalent to the value of amount paid by the assignee in pursuant to assignment agreement, then the rights of assignee is protected and the money received from assignee can be utilized as wished by the assessee. In this case, the assessee has furnished bank guarantee to the assignee and such bank guarantee is irrevocable and unconditional. Therefore, merely for the reason that money has been withdrawn from Escrow account, it does not mean that assignment is complete in all aspects and fees received from assignment agreement is accrued for the assessee in assessment year 2008-09. It is not a case of the AO that amount received under assignment agreement is not offered to tax at all. In fact, the assessee itself had admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals)-4, Chennai, dated 31.08.2017 and pertains to assessment year 2008-09. 2. The Revenue has raised the following grounds of appeal:- 1. The order of the ld CIT(A) is contrary to law and facts and circumstances of the case. 2.1 The ld CIT(A) erred in deleting the addition made by the AO towards receipt Assignment of Fee to the tune of ₹ 14,74,78,764/-, as not assessable for the current assessment year. 2.2 The 1d CIT(A) ought to have noted that as per the terms of the Escrow Agreement, the main condition imposed is that the assessee has to give bank guarantee and as evident from the Addendum Agreement, bank guarantee was provided on 28-11.2007 itself, which pertains to FY 2007-08, relevant to Ay 2008-09,, i.e., the year under consideration and accordingly the impugned receipt has to be taxed in the current year in full. 2.3 The ld CIT(A) failed to note that it was the contention of the assessee that unless the conditions imposed in the Escrow Account are fulfilled, the assessee cannot use the money advanced / deposited into the Escrow Account. There are several withdrawals from the Escrow Account during the FY 2007-08, relevant to Ay 2008-09, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance of donation and charity amounting to ₹ 5 lakhs and further disallowance of claim of depreciation on Wind Turbine Generators (WTGs) for ₹ 2,29,54,319/- as against the claim of full depreciation at ₹ 4,59,08,637/-. The AO had also made additions towards assignment fee received from M/s. HTMT Global Solutions Ltd., for ₹ 14,74,78,764/- on the ground that income from assignment is accrued for the assessment year. The assessee challenged additions made by the AO before the CIT(A). The ld.CIT(A) in his appellate order dated 30.03.2012, confirmed addition made towards disallowance of donation and charity, however deleted addition made towards depreciation after analyzing the facts and materials available on record. The ld.CIT(A) had also deleted addition made by the AO towards assignment fee received from M/s. HTMT Global Solutions Ltd., by considering the distinctive features in the assignment agreement entered into between said company and other agreements entered into by the assessee with third parties by holding that assignment with M/s. HTMT Global Solutions Ltd., is conditional and conditions of assignment agreement are satisfied during assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived from assignment agreement in the return of income for the assessment year 2009-10 and further, tax rates for assessment year 2008-09 and 2009-10 is same and also there was no accumulated and current year business loss with the assessee to set-off the income in the subsequent assessment year. Thus, there was no ultimate loss of revenue to the Department. 4.1 The ld.CIT(A) had also deleted additions made towards partial disallowance of depreciation by holding that evidences brought on record clearly indicate that out of 5 wind turbine generators, 3 wind turbine generators were commissioned on 28.09.2007 and the remaining 2 were commissioned on 30.09.2007 and had started generating electricity. The electricity readings provided for the month of October 2007 issued by the office of the Superintending Engineer also reveal that the initial meter reading was taken on 28.09.2007 and up to the date of 13.10.2007 in the case of 2 WTGs and with regard to the remaining 3 WTGs, the initial meter reading was taken on 30.09.2007 and up to the period of 13.10.2007. The above facts clearly support the case of the assessee that said WTGs were commissioned and started generating power in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a Bank Guarantee equivalent to amount of assignment fee. The assessee has utilized part of assignment fee by furnishing a bank guarantee in favour of the assignee i.e., M/s. HTMT Global Solutions Ltd., in the financial year 2007-08 relevant to assessment year 2008-09. But, since the builder has obtained planning permission from concerned authorities in the financial year relevant to assessment year 2009-10, the assignee has agreed for utilization of consideration and thus, income from assignment was recognized in the return of income filed for the assessment year 2009-10. 7. The AO however, was not convinced with the explanation furnished by the assessee and according to him, even if you go by the arguments of the assessee that revenue would be recognized only when the conditions of the Escrow agreement are fulfilled, a reading of the Escrow agreement shows that the basic requirement to be fulfilled was to give a bank guarantee and the assessee has given bank guarantee on 28.11.2007 itself and hence, the conditions for Escrow agreement was fulfilled during the financial year 2007-08 relevant to assessment year 2008-09. Secondly, the Escrow account shows several withdrawals. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount as per the Escrow agreement with Indian Overseas Bank and further the assessee has furnished bank guarantee on 28.11.2007 and the same has been extended from time to time upto 28.07.2008 till such time the builder obtained planning permission from concerned authorities. Therefore, from the above it is very clear that income from assignment / nomination agreement was accrued in the financial year 2008- 09 relevant to assessment year 2009-10 and thus, the assessee has rightly recognized revenue from assignment agreement in the assessment year 2009-10. The CIT(A) after considering relevant facts has rightly deleted addition made by the AO and his order should be upheld. 10. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The facts borne out from record indicate that assignment agreement with M/s. HTMT Global Solutions Ltd., dated 29.10.2007 was conditional, as per said agreement, assignor and assignee have agreed to park the consideration in Escrow account till such time, the builder has obtained planning permission from concerned authorities. We further noted that as per said agreement, the assessee has r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven by the assignee is irrevocable and unconditional and shall have a validity period of 180 days or till such time, the builder obtains planning permission from CMDA. The said bank guarantee has been extended from time to time and upto 28.07.2008. We further noted that the builder has obtained planning permission from CMDA on 12.08.2008. From the above, it is very clear that the assignment agreement with M/s. HTMT Global Solutions Ltd., is complete in all aspects in the financial year relevant to assessment year 2009-10 after fulfilling the conditions imposed upon the assessee and hence, we are of the opinion that the AO was incorrect in coming to the conclusion that the assignment agreement would be complete when the assessee has given bank guarantee on 28.11.2007. 10.2 Another reason, the AO has assessed assignment fee for the impugned assessment year is withdrawal from Escrow account. According to the AO, the assessee has withdrawn amount from Escrow account and utilized for its business purpose and therefore, he opined that assignment is complete and fees received is taxable for the assessment year 2008-09. We do not agree with the AO for the simple reason that once assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that the assessee has furnished relevant evidences to prove that all 5 WTGs were commissioned before 30.09.2007 and thus, entitled for 100% depreciation as per law. 13. The ld.DR submitted that the ld.CIT(A) has erred in deleting disallowance of depreciation on WTGs without considering the fact that invoices for supply of WTGs was dated 30.09.2007 and as per the certificate issued by the supplier, after commissioning it takes atleast 2 to 3 days for the windmill to start generation and accordingly, the WTGs could not have been put to use for production before 30.09.2007. The ld.DR further submitted that if you go by the invoice date, the WTGs had to be transported from Pondicherry to Tirunelveli and it will take a minimum of 2 to 3 days for the windmill to start generation after commissioning and thus, it is impossible to say that windmills were put to use in the business for more than 182 days. 14. The ld.AR for the assessee on the other hand strongly supporting order of the CIT(A) submitted that the WTGs were put to use for more than 182 days, which is evidenced from the fact that supplier has delivered and installed windmills on 18.09.2007, 20.09.2007 and 22.09.2007 resp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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