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TMI Blog1991 (7) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... year, total expenditure, including value of land, at Rs. 4,02,50,871 and the same had been transferred to the Project Account as 'work-in-progress'. In terms of its letter dated 8-2-90, addressed to the Assessing Officer, the assessee stated that it had not carried out any construction activity ; that method of accounting followed by it was Project Method wherein total profit was offered for taxation as and when the project was completed and, till then, all expenses were capitalised and debited to the Project Account. The Assessing Officer found, while verifying the details, that the assessee had received advances or deposits from the prospective buyers to the tune of Rs. 13,81,000 and, further, that the assessee had appointed selling agents for flats and shops and had received by way of sale selling agency. Rs. 20,00,000. The Assessing Officer, therefore, came to the conclusion that the moment the assessee purchased the land and started incurring expenditure on the project, the construction activity of the assessee commenced although the piling work and other super-structural work had not started. He had received advances from prospective buyers and had also engaged services of so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sole selling agents. The position of work-inprogress on 31-12-86 was Rs. 4,02,00,000. On 22-10-87, the conveyance of the property was excuted. Approval from the Urban Development Department allowing change of user was obtained on 20-11-87 (page 58 of the compilation). Bhoomi puja for starting the project was performed on 23-1-88. A copy of the newspaper advertisement as well as reply to the invitation extended in this regard by the Mayor of Bombay Municipal Corporation have been filed at pages 54 to 57 of the compilation. Intimation of the disapproval (what is called IOD) was given on 12-4-88 and the first agreement of sale was entered into on 22-8-89. 6. After stating all these facts, the ld. counsel for the assessee pointed out that in a detailed letter dated 27th Oct., 1990, addressed to the CIT(A) (copy filed) all these facts were stated at great length. The question for consideration was whether any profit can be ascertained on these facts in respect of the project under consideration. The ld. counsel pointed out that even Rs. 10 lakhs was received in 1985 in two instalments. All that was really received was deposit from sole selling agents (page 39 of the compilation) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble and, for this purpose, he referred to para 18 of the Tribunal's order at page 507. Since there was no work done during the accounting year and there was no sale in the present case no profits were assessable to tax. Finally, he stated that the decision of the Supreme Court in British Paints India Ltd.'s case was not relevant. 9. We have heard the ld. counsel for the assessee and also to the departmental representative. We have also gone through the papers filed. In our opinion, there is considerable substance in what the ld. counsel has to say. We find that for assessment year 1986-87, for which accounting period was the calendar year 1985, ITO accepted the business income at nil, almost on the same set of facts, and although some income was brought to tax, it was income from other sources being unexplained loans etc., but no estimate of profit on the figure of work-in-progress was made. Copies of the balance sheet and the profit and loss account for the year concerned have been filed (pages 42 to 49 of the compilation). Scrutiny of the profit and loss account shows the balance brought forward from earlier year of the expenses incurred amounting to Rs. 2,59,32,292. Out of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Account showing capital work-inprogress on 31-12-85 was Rs. 2,59,32,292 (page 29 of the compilation) and deposits from customers included deposits from prospective buyers of Rs. 82,51,000. Deposit of Vidhi Construction of Rs. 10 lakhs and of Hira Housing Agency of Rs. 11 lakhs. Thus, although substantial deposits were received from prospective buyers, an amount of Rs. 10 lakhs was from Vidhi Construction in terms of letter dated 30-5-85 (page 28 of the compilation). This amount was received in earlier year (1985). Even then, effort was made to bring to tax profit by estimating G-p-on work in progress which was substantial during the accounting period ended 31-12-85, mainly because no construction activity was carried on during this year. An amount of Rs. 2,35,00,000 was paid towards purchase of plot, nevertheless, no work was done. Commencement certificate from the Bombay Municipal Corporation under section 69 of the Maharashtra Regional Town Planning Act, with intimation of its IOD under section 346 of the Bombay Municipal Corporation Act was received by the appellant as late as on 20-2-88 (pages 50 to 53 of the compilation). Bhoomi Puja was done on 23-1-88. The Urban Developmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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