INCOME TAX OFFICER v. PRATIKSHA ENTERPRISES
[Citation -2007-LL-0928-16]

Citation 2007-LL-0928-16
Appellant Name INCOME TAX OFFICER
Respondent Name PRATIKSHA ENTERPRISES
Court ITAT
Relevant Act Income-tax
Date of Order 28/09/2007
Assessment Year 2002-03
Judgment View Judgment
Keyword Tags project completion method • change in constitution • completion certificate • computation of profit • method of accounting • accounting policy • composite project • show-cause notice • protective basis • share of profit • housing society • working partner • gross receipt • tax planning • take over
Bot Summary: 1 to 3 the assessee is objecting in sustaining the rejection of the project completion method regularly and consistently adhered to by the assessee and consequently in confirming that the AO was justified in estimating the profit pertaining to the Chaitanya project in the assessment year under appeal and therefore, objecting in estimating the profit derived from the Chaitanya Tower project at Rs. 14,02,44,150 as against the claim of the assessee that nothing is assessable in the year under consideration. Under the project completion method the profits of the project are offered to tax only on finalization of the whole project. 1st June, 1994 between the assessee firm and the Orbit stipulates that if the assessee firm utilizes any FSI belonging t o Orbit, the assessee firm shall reimburse to Orbit the sales proceeds after deducting therefrom 20 per cent being the construction cost incurred by the assessee firm in respect of such surplus deployment of FSI. It was argued that the aforesaid methodology cannot be implemented unless and until the exact profitability of Chaitanya Tower project is identified on completion of the project. Installation of lift in the project cannot be considered as an event to support the completion of the project in this case when there are other evidences to suggest that the project is not complete in asst. The Hon ble Bombay High Court in the case of Dempo Co. Ltd. as well as Mumbai Tribunal in the case of Rajesh Builders have laid down the law that the assessee can adopt a project completion method and the income from the project can be taxed only when the project is complete. The properties belonging to both the parties had a common access from the main road. The Bombay Municipal Corporation has sanctioned the plans for the whole project as a single composite project. As stated above the Chaitanya Tower project is a single composite project and if in respect of the said project if the IT Department has accepted a fact that it is complete in asst.


R.K. Gupta, J.M.: These are two appeals by assessee and Department against order of CIT(A) relating to asst. yr. 2002-03. In ground Nos. 1 to 3 assessee is objecting in sustaining rejection of project completion method regularly and consistently adhered to by assessee and consequently in confirming that AO was justified in estimating profit pertaining to Chaitanya project in assessment year under appeal and therefore, objecting in estimating profit derived from Chaitanya Tower project at Rs. 14,02,44,150 as against claim of assessee that nothing is assessable in year under consideration. Department, on other hand, through ground No. 1 in its appeal objecting in reducing profit of Chaitanya Tower project at Rs. 14,02,44,150 against profit of Rs. 19,45,59,276 determined by AO. These grounds are common grounds in appeal of assessee and Department, therefore, they are disposed off together. Briefly stated facts of case are described as under: assessee is partnership firm constituted on 6th May, 1989 with object of undertaking activity of property development of residential and commercial buildings. assessee company followed project completion method of accounting since beginning. said method has been accepted by IT Department year after year. Under project completion method profits of project are offered to tax only on finalization of whole project. T h e assessee company entered into agreement on 6th May, 1989 with Standard Mills Co. Ltd. in respect of Plot Nos. 952 (Part) and 954 (Part) TPS IV situated at Mahim division admeasuring 14,886 sq. mtrs. Orbit Finance (P) Ltd. (Orbit) one of partners of assessee firm, had retired from one another partnership firm M/s Solar Developer w.e.f. 1st June, 1992 and on retirement and full settlement and satisfaction of their share Orbit received Plot Nos. 952 (Part) and 954 (Part) of TPS IV admeasuring 7544.74 sq. mtrs (approx.) situated t Mahim division. sub-division of abovementioned properties was neither possible nor commercially viable as also fact that these properties were contiguous to each other enjoying common access. It was considered desirable by assessee firm and Orbit to develop said property jointly to ensure effective utilization of floor Space Index (FSI). assessee firm and Orbit executed development agreement dt. 1st June, 1994 wherein it was agreed that entire property consisting of aforesaid plots shall be developed as single and composite project. sale proceeds of project attributable to 70 per cent of total FSI would belong to assessee firm and Orbit will get 30 per cent of aggregate FSI. aforementioned project consisted of two residential buildings wherein one building comprised of three wings, A, B and C, known as "Chaitanya Towers" each made of 23 floors each, basement and stilt. said project is referred to as Chaitanya Tower project. second building involving single tower. second building consisting of single tower was sold to Jindals in asst. yr. 1998-99 on as it is where it is basis. As Building No. 2 was sold and no further activity was required to be done profit attributable to Building No. 2 was offered for tax in asst. yr. 1998- 99. As regards Chaitanya Tower project work commenced in asst. yr. 1992-93. Mr. Vallabh Thakkar who was main working partner and director of two private limited companies being partner of assessee firm was looking after Chaitanya Tower project from 1992 till his death in 1997. Due to sudden demise of Mr. Vallabh Thakkar whole project came to stand still as there was no other responsible person who could take over said project. whole project came to stand still and practically from 1997 to 1999 no activity was undertaken. There was panic among flat purchasers and several parties instituted legal proceedings against assessee. At this juncture Twinkle Property Developers (P) Ltd. (Twinkle) came in picture and played very important key role in bringing about compromise between flat owners and assessee firm. In year 1999 due to efforts of Twinkle society known as "Chaitanya Towers Co-op Housing Society Ltd." was formed. Twinkle undertook all responsibilities and liabilities in respect of Chaitanya Tower project and started liasioning with society. flat owners contributed amount to society and monitored progress of construction. Twinkle also assisted assessee firm in various legal disputes. Twinkle was admitted as partner in assessee firm as per partnership deed dt. 14th April, 2001. assessee firm thereafter completed structural work of and B Wings upto 23rd floor and C Wing upto 17th floor. Bombay Municipal Corporation issued Part Occupation Certificate dt. 20th Nov., 2001 upto 20th floor only subject to fulfilment of various prerequisites and requirements stipulated therein. Chaitanya Tower project was completed only to extent of 75 per cent as per certificate of architect dt. 16th April, 2002. Subsequently construction upto 23rd floor in respect of all wings was completed on 31st Jan., 2003 and Bombay Municipal Corporation issued final occupation certificate on 25th Feb., 2003. In respect of Chaitanya Tower project sum of Rs. 10,71,57,107 was spent after 31st March, 2002. There was change in constitution of assessee from 13th Sept., 2002 and Twinkle took over said project. For asst. yr. 2002-03 assessee firm filed return of income declaring total income of Rs. 77,350. assessee firm had clearly stated in accounting policy that they are following completed contract method. No income of Chaitanya Tower project was offered for tax. AO in assessment proceedings came to conclusion that income of Chaitanya Tower project should be assessed to tax in asst. yr. 2002-03 and therefore, issued show-cause notice as to why income of assessee firm should not be assessed at Rs. 65,28,54,369. assessee firm in assessment proceedings submitted before AO that in asst. yr. 2002-03 project was not complete and no income can be taxed in asst. yr. 2002-03. assessee firm relied upon fact that in respect of single indivisible project viz. Chaitanya Tower project, IT Department has accepted claim of Orbit that income attributable to 30 per cent is taxed in asst. yr. 2003-04. assessee firm also relied upon facts that post 31st March, 2002 total expenditure of Rs. 10,71,57,107 has been incurred in respect of Chaitanya Tower project. Bombay Municipal Corporation also issued completion certificate on 25th Feb., 2003 and possession to various flat owners of society was also given in asst. yr. 2003-04. project comprises of A, B and C Wings of 23 floors, basement, stilt and common facilities, amenities and advantages and said project has to be considered in totality which was completed on or after January, 2003. assessee company also drew attention of AO of fact that cl. 15 o f joint development agreement dt. 1st June, 1994 between assessee firm and Orbit stipulates that if assessee firm utilizes any FSI belonging t o Orbit, assessee firm shall reimburse to Orbit sales proceeds after deducting therefrom 20 per cent being construction cost incurred by assessee firm in respect of such surplus deployment of FSI. It was argued that aforesaid methodology cannot be implemented unless and until exact profitability of Chaitanya Tower project is identified on completion of project. As on 31st March, 2002 it was impossible and inconceivable to find out and determine effect of cl. 15 of joint development agreement. total advances received from flat owners towards sale of flats do not exclusively belong to assessee firm and it is not feasible to determine profits embedded therein and this exercise can be undertaken only on completion of project and which event has taken place post January, 2003 which is relevant for asst. yr. 2003-04. AO thereafter issued letter dt. 17th March, 2005 wherein he has directed appellant to calculate correct profits derived from Chaitanya Tower project. assessee company vide letter dt. 25th March, 2005, wherever applicable, factual averment made by AO in his letter dt. 17th March, 2005 and stated that no profit could be computed in asst. yr. 2002-03. AO rejected claim of appellant and estimated net profit from Chaitanya Tower project at Rs. 19,45,59,276. assessee firm filed appeal before CIT(A) and disputed determination of income on various grounds. assessee firm relied upon various decisions in support of claim that income cannot be taxed in asst. yr. 2002-03. CIT(A) rejected claim of assessee firm to effect that income is not taxable in asst. yr. 2002-03. CIT(A) relied upon decision of Mumbai Tribunal in case of Champion Construction Co. vs. ITO (1983) 5 ITD 495 (Bom). CIT(A) recomputed taxable income of Chaitanya Tower project and determined income at Rs. 14,02,44,150 as against estimation of AO of Rs. 19,45,59,276. assessee firm has filed appeal before Tribunal mainly on two grounds that income of Chaitanya Towers project cannot be taxed in asst. yr. 2002-03 and determination of income at Rs. 14,02,44,150 is not correct and justified. Revenue has filed appeal against order of CIT(A) to effect that CIT(A) has erred in reducing taxable profit at Rs. 14,02,44,150. learned counsel of assessee has filed written submissions giving date-wise position of project, date-wise position of correspondence with AO and CIT(A). He has also filed summary of arguments. He has relied upon various decisions of Tribunal and High Courts in support of his claim that income is not taxable in asst. yr. 2002-03. learned Authorised Representative has also made proposition that decision in case of Champion Construction Co. (supra) is not applicable and said decision has been overruled by subsequent decisions of Mumbai High Court and decisions of Tribunals. It was further explained by learned counsel of assessee that status of project as on 13th Sept., 2002 was practically same as on 31st March, 2002. Twinkle thereafter completed project in all respect and obtained certificate of completion on 25th Feb., 2003 and offered income in asst. yr. 2003-04 based on completion of Chaitanya Tower project and said income has been taxed in hands of Twinkle in asst. yr. 2003-04 by Department in proceedings under s. 143(3) on protective basis as income from Chaitanya Tower project is already taxed in 2002-03 in hands of assessee firm. It was further observed that other party i.e. M/s Orbit who was also following project completion method and co-developer as per development agreement dt. 1st June, 1994 offered income attributable to their portion in asst. yr. 2003-04. IT Department has accepted in case of Orbit that Chaitanya Tower project is complete in asst. yr. 2003-04 and income from single indivisible project namely Chaitanya Tower project is taxable in asst. yr. 2003-04 in hands of Orbit in proceedings under s. 143(3). In support of this contention, learned counsel of assessee placed reliance on decision of various Courts wherein it has been held that it is not open for Department to take one view in case of one assessee and different view in case of another assessee on same set of facts and law. (a) Berger Paints India Ltd. vs. CIT (2004) 187 CTR (SC) 193: (2004) 266 ITR 99 (SC); (b) Union of India vs. Kaumudini Narayan Dalal (2001) 168 CTR (SC) 3: (2001) 249 ITR 219 (SC); (c) CIT vs. Narendra Doshi (2002) 174 CTR (SC) 411: (2002) 254 ITR 606 (SC); (d) CIT vs. Shivsagar Estate (2002) 177 CTR (SC) 107: (2002) 257 ITR 59 (SC). learned Authorised Representative argued that in respect of single composite project Department has accepted proposition in case of Orbit that project is complete in asst. yr. 2003-04 and hence in case of assessee firm also Department cannot take different view and hold that project is complete in asst. yr. 2002-03. learned CIT Departmental Representative on other hand has filed written submissions controverting arguments of learned Authorised Representative and also in support of grounds taken in appeal before Tribunal. learned CIT Departmental Representative has stated that project completion method cannot be sole criteria since what is required to be determined is income of person and method is only means to arrive at profit. method cannot be end in itself, which is being done by assessee firm. learned CIT Departmental Representative has submitted that according to assessee firm they are following project completion method i n respect of Chaitanya Tower project which consists of two buildings viz. Building No. 1 comprising of A, B and C Wings and Building No. 2 and Department has not accepted fact of project completion method. assessee firm has sold in asst. yr. 1998-99 Building No. 2 to Jindal Iron & Steel Co. Ltd. and Jindal Strips Ltd. vide two separate agreements dt. December, 1977 for consideration of Rs. 4,87,51,100. According to him assessee firm sought to hide from Department actual status of work in Chaitanya Tower project. It had produced copy of architect certificate wherein it was shown that 50 per cent of work was completed in Building No. 1 but nothing was mentioned about Building No. 2. Department, after certain investigation regarding utilization of FSI had come to be informed that Building No. 2 was sold to Jindals. assessee firm had argued that project was not complete as per books of account as regards Building No. 2 is concerned. AO thereafter on facts of case that Building No. 2 has been sold to Jindal had brought to tax 15 per cent of net sale consideration. said order was accepted by assessee firm. According to Departmental Representative assessee firm having accepted computation of profit for Building No. 2 it can be construed that Department has not accepted method followed by assessee firm and profit of Building No. 2 was taxed in asst. yr. 1998-99. learned CIT Departmental Representative further argued that assessee firm is not justified in taking stand that project has been completed in asst. yr. 2003-04 on ground that final occupation certificate is obtained on 25th Feb., 2003. According to learned CIT Departmental Representative it is commonly known in building trade that final occupation certificate is mere formality as physical occupation of building is with part occupation certificate wherein purchasers of flats are able to occupy building. final occupation certificate is delayed for certain incidential and insignificant matters. Final occupation certificate is not significant evidence regarding completion of project. According to him final occupancy certificate is only indication that incidential work of project is complete. According to him only importance of final completion report allows builder to obtain refund of deposit from BMC. learned CIT Departmental Representative has further argued that part completion certificate from Bombay Municipality is already obtained by part completion certificate from Bombay Municipality is already obtained by assessee firm. According to him project was completed upto 90 per cent. He also emphasized that there is change in constitution of assessee firm in 13th Sept., 2002 and income of assessee firm cannot be taxed in hands of Twinkle who has taken over project in asst. yr. 2003-04. learned CIT Departmental Representative has relied upon following decisions in support of his claim that income should be taxed in asst. yr. 2002-03. (a) Tuticorin Alkali Chemicals & Fertilizers Ltd. vs. CIT (1997) 141 CTR (SC) 387: (1997) 227 ITR 172 (SC); (b) Greater Ashoka Land & Development Co. (P) Ltd. vs. Asstt. CIT (2004) 89 TTJ (Del) 281: (2001) 79 ITD 595 (Del); (c) CIT vs. Britsh Paints India Ltd. (1991) 91 CTR (SC) 108 (d) Tirath Ram Ahuja (P) Ltd. vs. CIT (1976) 103 ITR 15 (Del); (e) Jamna Das Rameshwar Das vs. CIT (1952) 21 ITR 109 (Punj); (f) Prerna Premises (P) Ltd. (unreported decision of Mumbai Tribunal in ITA Nos. 6015/8126/5023/3754 decided 21st Oct., 2005 G Bench) learned CIT Departmental Representative also emphasized that Chaitanya Co-op Housing Society was formed and they had completed project. said society was registered on 24th May, 2000. said society has not filed any accounts nor has paid any tax on profits that they have made. learned Authorised Representative in rejoinder has dealt with issues raised by learned CIT Departmental Representative and has filed written submissions dealing with each of issues raised by learned CIT Departmental Representative. We have perused written submissions filed by learned Authorised Representative and learned Departmental Representative and also have perused facts of case based on material available before us and considering judicial pronouncements on which learned Authorised Representative and learned Departmental Representative have relied. arguments advanced by learned Authorised Representative through his written submissions and arguments of learned Departmental Representative through his written submissions are summarized in following manner: gist of his arguments of learned counsel of assessee is under: (a) Chaitanya Tower project comprising of three wings, A, B and C each of 23 floors is one single composite, integrated and inseparable project. (b) recitals G, H, I and J and operative cls. 2, 3(G), 4, 6, 7, 11, 14, 15, 17, 18, 19 and 21 of development agreement between assessee firm and Orbit dt. 1st June, 1994 highlight correct status of development arrangement. (c) commencement certificate is for entire 23 floors of all 3 wings which was obtained on 4th May, 2000. final occupation certificate dt. 25th Feb., 2003 is also in respect of entire single one project. (d) Huge and colossal expenditure of Rs. 10,71,57,117 has been spent after 31st March, 2002. (e) assessee firm follows project completion method which is accepted method under provisions of IT Act, 1961 and profit has to be determined based on said method of accounting. Hon ble Bombay High Court in case of CIT vs. V.S. Dempo & Co. (P) Ltd. (1996) 131 CTR 203 (Bom) has also accepted project completion which was followed by assessee year after year. (f) He also emphasized on decision of Malad Shopping Centre (P) Ltd. vs. ITO (1983) 17 TTJ (Bom) 125 wherein it has been held that completion and occupation certificate and possession of flats given to all flat owners would be test for completion project. (g) He relied upon decision in case of Asstt. CIT vs. Rajesh Builders (2004) 3 SOT 917 (Mumbai) wherein all authorities have been weighed and ultimately Tribunal has followed ruling in case of V.S. Dempo & Co. (P) Ltd. (supra) and has considered judgment in case of Champion Construction Co. (supra). (h) He stated that part occupation certificate obtained by assessee firm on 12th Nov., 2002 was subject to fulfilment of various terms, conditions, contingencies and covenants. assessee firm did not authorize any flat purchasers to occupy flats as on 31st March, 2002 because various terms n d conditions of part occupation certificate were yet to be complied with. Subsequently to 31st March, 2002 approx. 30,000 sq. ft. was to be constructed. part occupation certificate date cannot be taken as date for completion of project. (i) learned Authorised Representative also gave submissions as to why decision in case of Champion Constructions Co. (supra) cannot be applied. According to learned Authorised Representative decision of Champion Constructions (supra) is no more good law in view of decision of Rajesh Builders (supra) and decision of Mumbai High Court in case of Dempo & Co. (P) Ltd. (supra). He also stated that in case of Champion Construction (supra) finding has been given by Tribunal that entire construction of "Mona Lisa" was completed during asst. yr. 1978-79 whereas in case of assessee firm stage of completion is at 75 per cent which is without amenities, facilities and infrastructure. He also stated that in para 17 at p. 507 of decision of Champion Construction (supra) Tribunal has laid down that if profits cannot be ascertained reasonably, builder cannot be assessed year-wise. According to him case of assessee falls within this exception. He relied upon observation of Tribunal to effect that if there is possibility of liabilities effecting profitability of project principle reduced by them will have to be waived. According to him there was lot of uncertainties, contingencies in respect of project in question and case of assessee firm falls within observations made by Hon ble Tribunal in case of Champion Construction Co. (supra). (j) learned Authorised Representative also has dealt with issues on which CIT(A) has relied upon. (k) learned Authorised Representative has also argued that AO, since inception has made speculation and base is founded on suspicion, surmise and speculation. He drew attention to para 4 on p. 3 of assessment order wherein it is stated that "This led to suspicion towards intention of assessee". According to him AO was shooting in dark. AO started within assumption that income of Chaitanya Tower project could be Rs. 65,28,54,369 and ultimately has determined profit of Rs. 19,46,36,630. He also drew attention to letter of 17th March, 2005 issued by AO wherein he has stated that last opportunity is given to assessee firm to calculate correct profit. According to him entire exercise of assessment undertaken by her is eyewash and futile one to justify prejudicial conclusion that assessee firm has earned imaginary profits from Chaitanya Tower project in asst. yr. 2002-03. (l) He also emphasized that Department has accepted proposition that single composite project is complete in asst. yr. 2003-04 in hands of Orbit which is one of co-developers and based on legal decisions Department cannot take different view in case of assessee firm holding that same project is complete in asst. yr. 2002-03. summary of arguments of learned CIT Departmental Representative is as under: (a) project has been completed in asst. yr. 2002-03 and income from Chaitanya Tower project should be taxed in asst. yr. 2002-03. (b) assessee firm having followed project completion method and offered tax at end of project results in avoidance of tax. (c) Department has not accepted project completion method. (d) project is completed upto 90 per cent. (e) lift has been installed at sight and hence it amounts to completion of project. (f) There is change in constitution and income has to be taxed in hands of assessee firm and assessee firm has indulged into method of tax avoidance. After taking into consideration submissions as summarized above and orders of authorities below and also various case law, we are of view that AO and CIT(A) have erred in concluding that Chaitanya Tower project is completed in asst. yr. 2002-03. After taking into consideration factual aspects of project, we found that project was not complete in asst. yr. 2002-03. project was completed upto 75 per cent and this is supported by certificate of architect. assessee firm has given possession to flat owners in asst. yr. 2003-04. Bombay Municipal Corporation has issued final completion certificate on 25th Feb., 2003. After 31st March, 2002 substantial expenditure amounting to Rs. 10,71,57,107 has been spent on project. As on 31st March, 2002 approx. 30,000 sq. ft. was yet to be constructed. various other facilities were not available in project till 31st March, 2002. project is not completed upto 90 per cent as argued by learned CIT Departmental Representative as no evidence in support of this aspect was produced. AO in his order has also not given finding to this effect. Installation of lift in project cannot be considered as event to support completion of project in this case when there are other evidences to suggest that project is not complete in asst. yr. 2002-03. On factual finding we hold that Chaitanya Tower project was not completed in asst. yr. 2002-03 but was completed in asst. yr. 2003-04. Under IT Act, 1961 income of assessee is chargeable to tax under s. 4. said income has to be computed based on method of accounting followed under s. 145. assessee firm has followed completed contract method in respect of their single project viz. Chaitanya Tower. Year after year assessee firm has followed same method and every year expenditure incurred on project is capitalized. amount received from flat purchasers is treated as advance. In balance sheet of company said advances are duly reflected and total expenditure on construction is also treated as work-in-progress. IT Department has accepted method of accounting followed by assessee firm. In this project there were two buildings. Building No. 1 had three wings A, B and C with 23 storeys in each wing. Building No. 2 was separate building though originally part of same project. said building was under construction and in asst. yr. 1998-99 said building was sold on as it is where it is basis to Jindals. profit of said building was offered for tax on ground that project vis-a-vis that building is concerned is complete and no further step or action is required to be taken in respect of Building No. 2. This fact itself supports proposition advanced by assessee firm that they followed completed contact method. Department did not tax income in respect of Building No. 2 prior to asst. yr. 1998-99 as assessee firm was following completed contract method. In asst. yr. 1998-99 complete building was sold on as it is where it is basis and income was rightly taxed in asst. yr. 1998-99. As regards Building No. 1 we have already given finding that it was not completed in asst. yr. 2002-03 and hence income cannot be taxed in asst. yr. 2002-03. Hon ble Bombay High Court in case of Dempo & Co. (P) Ltd. (supra) as well as Mumbai Tribunal in case of Rajesh Builders (supra) have laid down law that assessee can adopt project completion method and income from project can be taxed only when project is complete. We further noted that assessee firm had undertaken single composite project jointly with Orbit. ownership of two plots was with assessee firm as well as with Orbit. It was not possible to undertake construction project individually by either assessee firm or by Orbit. sub- division of property was not feasible and both parties were left with no option but to develop said property only with co-operation and understanding between themselves. properties belonging to both parties had common access from main road. Bombay Municipal Corporation has sanctioned plans for whole project as single composite project. share of assessee firm in FSI is to extent of 70 per cent and share of Orbit in FSI is to extent of 30 per cent. From perusal of share of Orbit in FSI is to extent of 30 per cent. From perusal of clauses of joint development agreement dt. 1st June, 1994 it is very clear that profit of whole project has to be determined at one point of time only. It is not possible to separately identify and determine profit for each of party. profit of project could only be determined when project is complete and share of profit of each of party can be crystallized at that point of time. Orbit has treated this project as being complete in asst. yr. 2003-04 and income from said Chaitanya Tower project is offered for tax in asst. yr. 2003-04 and Department has taxed said income in asst. yr. 2003-04 while passing order under s. 143(3). This aspect clearly establishes fact that Department has accepted proposition that Chaitanya Tower project which is single composite project is complete in asst. yr. 2003-04. As stated above Chaitanya Tower project is single composite project and if in respect of said project if IT Department has accepted fact that it is complete in asst. yr. 2003-04 then IT Department cannot on same facts take different view and hold that said project is complete in asst. yr. 2002- 03. Various decisions of Supreme Court have laid down law very clearly that if Department has taken one view in case of one assessee then different view in case of another assessee on same facts cannot be taken. facts in both cases are identical. income is to be determined in respect of same project. Based on two of these decisions we hold that Department cannot take different view in case of assessee firm to effect that project is completed in asst. yr. 2002-03 when it has been accepted that said single project is complete in case of Orbit in asst. yr. 2003-04. As regards decision in case of Champion Construction Co. Ltd. (supra) as well as decision in case of Prerna Properties (P) Ltd. (supra), on which CIT Departmental Representative relied upon we hold that facts in both these decisions are different from facts of case before us. In Champion Construction Co. Ltd. (supra) there is clear-cut finding given by Tribunal that said project is complete in asst. yr. 1978-79. Further in said decision it has also been held that profit can only be taxed in year in which project is substantially complete. ratio of Champion Construction Co. Ltd. (supra) has been further diluted in view of subsequent decisions in cases of Dempo & Co. (P) Ltd. (supra) (Mumbai High Court) and Rajesh Buildings (supra) (Mumbai Tribunal). As regards case of Prerna Properties (P) Ltd. (supra) is concerned there is finding given by Tribunal that assessee most of time when project is about to be complete obtained sanction of additional FSI and commenced further construction so that profit emerging from project is deferred. In Prerna s case (supra) project was completed to extent of 93 per cent and was occupied to extent of 89 per cent. In present case before us facts are totally different and there is no allegation that assessee firm is trying to defer income on ground of taking extra construction on extra FSI. In present case project is completed only upto 75 per cent as against completion at 93 per cent in case of Prerna Properties (P) Ltd. (supra). next issue raised by learned CIT Departmental Representative is regarding tax avoidance method adopted by assessee firm. learned Departmental Representative stated chronology of events of admission and retirement of various partners in partnership firm of M/s Pratiksha Enterprises and M/s Twinkle included in partnership firm on 14th April, 2001 without bringing into any finance. He also stated that M/s Pratiksha Enterprises was dissolved on 13th Sept., 2002 i.e. during year 2003-04 and M/s Twinkle had claimed heavy losses due to its construction project. He stated that in view of on-going case before Debt Recovery Tribunal, M/s Twinkle had to settle its dues with bank and in view of compromise terms, M/s Twinkle had sold its Worli project and suffered heavy losses. He also revealed that heavy losses of Twinkle were used to set off against profit of M/s Pratiksha Enterprises with clear intention to evade taxes and thereby appellant firm had indulged into method of tax avoidance in year under reference. learned counsel for assessee has contended that as on date of admission of M/s Twinkle on 14th April, 2001, said company had neither incurred any losses nor it was possessing any carried forward unabsorbed business losses or depreciation. He also stated that in view of tremendous efforts put in by M/s Twinkle settlement has been arrived between purchasers of flats and work has been restarted again. This fact has been mentioned in recital of partnership deed executed on 14th April, been mentioned in recital of partnership deed executed on 14th April, 2001. He also stated that as on date of take over of Chaitanya Tower project i.e. 13th Sept., 2002, when construction of said project was in progress, M/s Twinkle again at this point of time did not possess any accumulated or incur any losses. He submitted that as on 13th Sept., 2002, suit before DRT lodged by Bank of India was pending. It was only on 19th Feb., 2003, judgment of DRT was delivered by virtue of which Twinkle had surrendered its share in Worli project at Rs. 16.50 crores in full and final satisfaction of its liabilities due and payable to its bankers. He vehemently contended that Twinkle had never envisaged and anticipated losses of Rs. 23.50 crores in Worli project when it was admitted as partner on 14th April, 2001. He also submitted that Worli project in respect of which loss is incurred was commenced in year 1995-96 much before transaction, which was transpired in years 2001 and 2002 and induction of Twinkle as partner vide partnership deed dt. 14th April, 2001 was for overriding commercial purposes as elaborated in recitals of said deed. Department has accepted genuineness and credibility of deed in assessments of both appellant and Twinkle. learned counsel further propounded that tax planning within framework of law is permissible as advocated in following judicial precedence. Each and every transaction undertaken by assessee which is legitimate and as per law cannot be considered as colorable just because it results in reducing tax liability. (i) Union of India vs. Azadi Bachao Andolan (2003) 184 CTR (SC) 450: (2003) 263 ITR 706 (SC); (ii) Banyan & Berry vs. CIT (1996) 131 CTR (Guj) 127: (1996) 222 ITR 831 (Guj); (iii) Macniven (HM Inspector of Taxes) vs. Westmoreland Investments Ltd. (2002) 255 ITR 612 (HL); (iv) CIT vs. George Williamson (Assam) Ltd. (2004) 187 CTR (Gau) 499: (2004) 265 ITR 626 (Gau). learned counsel of assessee also has stated that fact of c h n g e in construction (sic-constitution) was raised by AO during assessment proceedings and he was informed that status of project as on 13th Sept., 2002 was same as on 31st March, 2002 and there was no income during period 1st April, 2002 to 13th Sept., 2002 earned by assessee firm. After considering all these facts AO has finalized assessment and has held that project is completed in asst. yr. 2002-03. Accordingly, it was submitted that there is no merit in submission of learned CIT Departmental Representative. We have perused these facts and other material on record. It emerges from record that assessee firm had started Chaitanya Tower project in asst. yr. 1992-93. Shri Vallabh Thakkar one of main partners expired in 1997. Twinkle played major role in registration and settling various disputes, co- ordinated between flat owners and society, attended to legal matters. Twinkle was admitted as partner in firm w.e.f. 14th April, 2001. recital of partnership deed revealed facts leading to admission of Twinkle as partner. At time Twinkle was admitted into partnership firm there was no loss determined or claimed by Twinkle. There was change in constitution on 13th Sept., 2002 after period of 17 months. Twinkle has settled its all liabilities with bank in consent term approved by Debt Recovery Tribunal (DRT) on 13th Feb., 2003. settlement of liability in DRT has taken place 22 months after admission of Twinkle in partnership firm. Chaitanya Tower project completed on 25th Feb., 2003. events of suffering loss by Twinkle could not be envisaged either at time when Twinkle was admitted as partner as well as at time when there was change in constitution. loss has suffered in hands of Twinkle only because case in DRT was settled and Twinkle was forced to sell their own property at substantial loss to settle dispute pending in DRT. In view of these facts, we are of view that argument of learned CIT Departmental Representative that Twinkle has adjusted losses against profit of Chaitanya Tower project amounts to evasion of tax is ill- founded and against facts of case. In view of above facts, we hold that project was not completed in asst. yr. 2002-03 but was completed in asst. yr. 2003-04. Therefore, we set aside orders of CIT(A) and AO in this respect and finally hold that income from Chaitanya Tower is not assessable in year under consideration. Accordingly, grounds of assessee are allowed and ground of Department is dismissed. Ground No. 4 in appeal of assessee is against in not deciding ground No. IV (2), (3), (4) and (5) of grounds of appeal filed before CIT(A) on premise that they have become infructuous and academic. Since we have already allowed main ground of assessee by which it has been held that project was not completed during year under consideration as same was completed in subsequent year i.e. asst. yr. 2003- 04, therefore, same need not be decided being consequential in nature. Ground No. 5 is against charging of interest under ss. 234B and 234C. This ground has become consequential because we have already allowed main ground in appeal of assessee and entire addition has been deleted, therefore, has become consequential and AO is directed to give consequential relief, if any to assessee. There is no other ground in appeal of assessee. There is one more ground in appeal of Department i.e. ground No. 2 which is against findings of learned CIT(A) that receipt of Rs. 3,12,73,178 is not chargeable to tax because it relates to common amenities and infrastructure facilities. AO has considered Rs. 3,12,73,178 while determining profit of Chaitanya Tower project in asst. yr. 2002-03. This amount relates to common amenities and infrastructure to be developed in project. No common amenity or infrastructure was provided till 31st March, 2002. Based on this CIT(A) has held that this amount should be excluded from gross receipt of project for determining taxable income in asst. yr. 2002- 03. We have already disposed of assessee s appeal where we have held that income is not taxable in hands of assessee firm in asst. yr. 2002- 03. Therefore, said amount of Rs. 3,12,73,178 has to be considered in asst. yr. 2003-04 when project was completed by M/s Twinkle. This ground of Department has become consequential ground, which does not require any adjudication upon. In result appeal of assessee is allowed and appeal of Department is disposed of as above. *** INCOME TAX OFFICER v. PRATIKSHA ENTERPRISES
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