Case Law Details
Arch Hydro Power Projects Pvt. Ltd Vs DCIT (ITAT Pune)
ITAT Pune held that profits and gains arising from transfer of interest in Hydro Projects is income from business and not income under the head ‘short term capital gains’.
Facts- The assessee is engaged in the business of developing Hydro Power projects on BOT basis, for Govt. of Maharashtra. 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 Government the profit from transaction was not recognized in the books of account for the year. The AO was not satisfied with the explanation of the assessee.
The A.O found that during the year under consideration, the assessee has received an amount of Rs. 4,37,00,000/- out of total sale consideration Rs. 4,87,00,000/- for transfer of said project which was 90% of total consideration. As per the AO, M/s. R.M. Mohite Textiles Pvt Ltd has incurred substantial amount of expenditure at the site. Thereafter the A.O came to the conclusion that the assessee has transferred the possession to the transferee who has commenced the work relating to the said project.
The AO emphasised that major risk and reward associated with the project has been transferred during the year itself and the transferee has taken possession of the property and done some act in furtherance of the contract. Therefore, according to the A.O there is transfer of property as per section 2(47) of the Income Tax Act and the gains from the transaction are liable to be assessed u/s. 45 of the Act. As the assessee has held the capital asset for less than 36 months immediately preceding the date of its transfer, the gain was brought to tax as short term capital gains. Aggrieved the assessee went in appeal before the ld. CIT(A).
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