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TAXAP/861/2010 5/ 5 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 861 of 2010
=========================================================
COMMISSIONER
OF INCOME TAX-II - Appellant(s)
Versus
JAIN
INFRASTRUCTURE PVT LTD - Opponent(s)
=========================================================
Appearance
:
MR
MR BHATT, SR. ADV WITH MRS MAUNA M BHATT
for
Appellant(s) : 1,
None for Opponent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE AKIL KURESHI
and
HONOURABLE
MS JUSTICE SONIA GOKANI
Date
: 25/07/2011
ORAL
ORDER
(Per
: HONOURABLE MR.JUSTICE AKIL KURESHI)
Revenue
has challenged the judgment of the Tribunal dated 7.8.09 raising
following question for our consideration :
“Whether
the Appellate Tribunal is right in law and on facts in reversing
the order passed by CIT(A) and thereby deleting the addition of Rs.15
lakhs made by the Assessing officer on the basis of the fact that as
per the agreement between the co-operative society and the developer
?”
The
assessee was involved in development of residential units between
assessee and the society for which assessee was developing such
residences. There was an agreement dated 10.4.99 by virtue of which,
the society had agreed to pay the developer an sum of Rs.1 crore by
way of consultancy charges for developing land admeasuring 6436 sq.
yards. It was further agreed that notwithstanding any eventuality
of circumstances or whether the project is duly completed, the
developer shall be entitled to receive such remuneration.
However,
later on, the society and the developer entered into a fresh
agreement dated 25.3.01 by virtue of which, it was provided as
under:
“And
whereas as per the agreement dated 10.4.99 the developer has to
develop the aforesaid land of the Society and in consideration of
that Society has to make the payment of Development fees of
Rs.1,00,00,000/- (Rs.one crore only) on adhoc basis. Now it is
mutually agreed to make a revision in development fees and reduced
to the extent of Rs.66,00,000/0 (Rs.sixty six lacs only) above
revision has been made due to following circumstances:
As
the project is delayed in implementation which has made direct
effect on cost of the project.
Due
to earthquake and slow work progress the developer is not able to
recover the sufficient amount from the members.
Members
are not ready to bear the additional revised cost.
All
the other terms and conditions of the original agreement dated
10.4.99 will remain unchanged.”
The
Assessing Officer was of the opinion that the subsequent agreement
was not a bonafide agreement. The assessee had to pay tax on the
basis of the previous terms contained in the agreement dated 10.4.99
to the extent the work was competed. The Assessing Officer analysed
the extent of work already completed and added a sum of Rs.15 lacs to
Rs.20 lacs offered by the assessee as income for the year in
question.
The
issue was carried further in appeal. CIT (Appeals) confirmed the
view of the Assessing Officer. He was of the opinion that the
subsequent agreement was made only for avoiding tax. The assessee
thereupon approached the Tribunal. The Tribunal in the impugned
judgment came to the conclusion that the Assessing Officer could not
point out any defects in the books of accounts and merely by
observing that the receipt accounted by the assessee company is not
comparable with the percentage completion of project and the
expenditure claimed added a sum of Rs.15 lacs in the income. Thus
without giving proper instances, book results were rejected. The
Tribunal was of the opinion that invoking of section 145 of the
Income Tax Act in the present case was not justified. The Tribunal
thus deleted the additions made by the Assessing Officer and
confirmed by the CIT(A).
Counsel
for the Revenue contended that the Tribunal committed a grave error
in interfering he order passed by the Assessing Officer and
confirmed by the CIT(A).
Having
thus heard the learned counsel for the Revenue and having perused
the orders on record, we find that the Tribunal has given cogent
reasons for overruling the view of the Assessing Officer as well as
the CIT (A). We may recall that though previously, the assessee
had agreed to execute the work of development by charging
development charge of Rs.1 crore by virtue of agreement dated
10.4.99, subsequently, because of the intervening circumstances,
the society and the developer entered into fresh agreement dated
25.3.2001. This fresh agreement was necessitated on account of
devastating earthquake and the resultant delay in execution of the
project. Due to these reasons, the assessee agreed to accept reduced
charges of Rs.66 lacs for the development work. This renewed
agreement could not have been discarded without cogent reasons. The
Tribunal also came to the conclusion that the book results were
discarded without proper justification. It may be that at one point
of time, the assessee had agreed for higher development charges for
execution of the work. However, there were strong intervening
factors of devastating earthquake that delayed the project and
because of these reasons fresh agreement was entered between the
assessee and the society. Under a fresh agreement the assessee had
agreed to accept reduced development charges. We do not find that
the Tribunal had committed any error in coming to the conclusion that
addition of Rs.15 lacs was not justified. No question of law arises
for our consideration.
In
the result, tax appeal is dismissed.
(Akil
Kureshi J.)
(Ms.Sonia
Gokani, J.)
(vjn)
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