INCOME TAX ACT, 1961

Section 4

Income - Part sale consideration on sale of land received in subsequent assessment year - Year of chargeability -

Assessee was engaged in business of promoter and developer. It sold land to a concern which transaction took place in the previous year relevant to the subject assessment year. The land was sold under the Memo of Understanding (MOU) for a total consideration of Rs. 120 crore. However, assessee offered only a sum of Rs. 100 crore for tax in the return because MOU provided that a sum of Rs. 20 crore was to be paid by purchaser on execution of the sale-deed after getting the plan sanctioned and on inclusion of the name of the purchaser. However, assessee was not able to meet the conditions of MOU during the subject assessment year, a sum of Rs. 20 crore, according to assessee, could not be recognized as income for the subject assessment year. AO did not accept the same and held that the entire sum of Rs. 120 crore was taxable in the subject assessment year. Held: Income tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income, if income does not result at all, there cannot be a tax. In the present facts, in terms of the MOU, there was no liability on the other party to pay the amounts. In any event, the amount of Rs. 20 crore was offered to tax in the subsequent assessment year and also taxed.

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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