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TMI Blog2023 (1) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... to assess the gains as income from business instead of short term capital gains The reasoning assigned by the ld. CIT (A) is cogent and we find no infirmity with the findings and the decisions rendered by the ld. CIT (A). Appeal of the assessee is dismissed. - ITA No. 468/PUN/2018 - - - Dated:- 22-11-2022 - Shri Inturi Rama Rao, Accountant Member And Shri Partha Sarathi Chaudhury, Judicial Member For the Appellant : None For the Respondent : Shri Ramnath P. Murkunde ORDER PER PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER This appeal preferred by the assessee emanates from order of the ld. Commissioner of Income Tax (Appeals)-1, Pune dated 30-01-2015 for A.Y. 2010-11 as per the following grounds of appeal. 1. The ld. CIT(A) Pune, erred in law and on facts in holding that the income arising from transfer of AMABAI HEP Project is taxable in A.Y. 2010-11 as per the provisions of MOU executed on 30-10-2009. Ld. CIT(A)-1, Pune and ld. A.O ought to have appreciated the fact that income from transfer of AMABAI HEP Project arises in A.Y. 2012-13 considering the test of transfer of significant risk and rewards. 2. The appellant craves leave to add/mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit and loss account drawn in this regard is being provided to you. The company has not paid Advance tax on this profit, which will be paid in March 2010, provided approval from State Government is received in this regard. 4. During the course of assessment proceedings, it was submitted by the assessee that as the approval for transfer of project was not received from State Govt. on or before 31-03-2010, the profit from transaction was not recognised in the books of account for the year. The A.O was not satisfied with the explanation of the assessee. The A.O summarized sequence and chronology of events relating to the said project as mentioned in his assessment order which is on record. The A.O has observed that the assessee has entered into agreement vide MOU on 30-10-2009 for transfer of Ambai HEP as per clause A-14 of the contract. The A.O further noted that M/s. R.M. Mohite Textiles Pvt. Ltd. (hereinafter referred to as RMMTL) has made payment of 90% of the consideration which was accepted by the assessee-company. Subsequently, said RMMTL has taken over possession of the property and started the work. Thereafter, the A.O issued a summons to the Director of RMMTL and on v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red development expenditure of Rs. 2,09,34,320/- on this project which is shown as 'work in progress' under head 'Inventories '. The company offloaded Ambal Hydro Project to RMMTL as per the MoU dated 30.10.2009 for a consideration of Rs, 4.87 Cr. and out of which, the appellant received an amount of Rs. 4.37 Cr. during the year and the same was shown as 'advance from 'customer' in the balance sheet. The case of the, appellant is that role of appellant in the execution of project got marginalized (though not totally extinguished) only after approval from WRD, Govt, of Maharashtra on 03/06/2011 and therefore the gains, if any, from the transfer of the project cannot be brought to tax in the veer under consideration. The other contention of the appellant is that provisions of sec. 2(47} and sec. 53A, as relied upon by the Assessing Officer, deal with the situation of transfer of an immovable property, whereas present case relates to intended transfer of interest in the Hydro Project arid such proposed transfer transaction cannot be subjected to provisions of TPA and capital gains u/s 45. On the other hand, the stand of the .Assessing Officer is that the al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deciding the timing of recognition of income from sale of said flats, it is necessary to refer to the Accounting Standard (AS}-9. As stipulated in theAS-9J a key criterion For determining when to recognize revenue is transfer of significant risks and rewards of ownership to the buyer. Another important criterion for recognition of income from such transactions is that there is no significant uncertainty regarding ultimate collection of the amount of consideration. The facts of the' present case are now tested vis-a-vis these criteria laid down in Accounting Standard (AS)-9. a) Transfer of all significant risk and rewards to the buyers. 4.3.2 By virtue of MoU entered into by the appellant, certain rights are assigned to the transferee on payment of 90% of the consideration and the transferee company RMMTL has taken over the project and commenced spade work at the site of the project. The Director of RMMTL also filed the details before the Assessing Officer and these details and the books of account of RMMTL indicate that RMMTL has incurred substantial amount of expenditure at the subject project site and the year wise expenditure incurred by RMMTL as noted in the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant as per the clauses of the tender document and that by itself does not postpone the accrual of income from transfer of subject project.. The dominion over execution of the project was. passed on to the transferee on Signing MoU and payment of 90% of the consideration as per MoU and therefore amount received by appellant could not be held to be mere advance and the profit from transfer of subject projects liable to be assessed in this year. 4.3.6 The next point to be decided whether the profits arising from the transfer of the subject project are liable to be assessed as business profit or under the head capital gains' as considered by the Assessing Officer. As already mentioned, the appellant has been engaged in the business of execution of irrigation projects for Govt. of Maharashtra and the Director's report for this year also confirms this position. Even the expenditure incurred on the subject project as on 31.03.2010 is shown under the head 'inventories' In the books of account of the appellant company. This is not a case where the appellant transferred the land by virtue of MoU entered with RMMTL. What is transferred or assigned to RMMTL as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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