Case Law Details
Ind Sing Developers Pvt. Ltd. Vs DCIT (ITAT Bangalore)
Held that the transaction has not been concluded in the AY under consideration when the assessee received nomination fee. Thus, the transaction was not complete so as to assess the income under complete contract method.
Facts- The assessee had entered into an MOU with M/s. Shobha Developers for acquisition of 75 acres of land. In connection with this transaction the assessee had entered into a nomination agreement on 17.11.2006 with Sri. R.B. Nataraj and in pursuance thereof had received 7 crores from Sri. R.B. Nataraj, in consideration of nomination of all the rights acquired by the assessee company from the original vendors of the property. The assessee had shown the nomination fees received as advance and not as income. The A.O. held that the same is compensation received in addition to sale consideration, The AO proposed to treat it as income and issued a show cause notice.
Conclusion- Held that the addition made by AO on this count is at Rs.7 crores is part of this consideration received by assessee. This amount of Rs.7 crores out of Rs.53 crores cannot be treated in isolation. The MOU was entered by assessee for arranging 75 acres of land to be handed over to Shobha Developers. There is a litigation between the parties, which is subject matter of arbitration which is pending for award. Further, as per MOU, assessee has to arrange total land of 75 acres out of this assessee arranged only 55 acres of land and 20 acres of land still to be procured and the issue is under litigation. The AO is not justified in bringing an amount of Rs.7 crores to taxation unless the contract is completed.
CIT(A) justified in holding that the transaction has not been concluded in the AY under consideration when the assessee received nomination fee of Rs.7 crores. The transaction was not complete so as to assess the income under complete contract method. Even percentage completion method cannot be adopted in respect of the properties which were transferred, quite a number of pending issues were there.
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