Thursday, April 23, 2015

Parking charges collected on vacant land were taxable even if developer was following project completion method


Where assessee-developer was following project completion method for payment of taxes, parking charges collected by him on vacant land had nothing to do with the completion of his project; he was obliged to pay on parking charges in year of receipt of parking charges.

Facts:


a)The assessee, being a builder and developer was following project completion method for purposes of paying taxes.

b)He had generated income in assessment year 2000-01 on account of parking charges collected on the vacant land. Since assessee had not filed his return of income of AY 2000-01, a notice under section 148 was issued and income received from parking charges was assessed to tax.

c)On appeal, the CIT (A) set-aside the order of AO on the ground that the amount earned by assessee by exploiting vacant land was an amount relatable to costs of the project and therefore, was taxable in subsequent years. Further the Tribunal set aside the order of the CIT(A)

d)Consequently, AO charged interest u/s 234A and 234B in respect of default in payment of advance tax for the assessment year 2000-01. CIT (A) and Tribunal upheld AO action of AO. The aggrieved-assessee filed the instant appeal before High Court.

The High Court held in favour of revenue as under :

1)The non-filing of return of income by assessee was on the ground that the income earned on parking charges would have to be returned when the project would be completed. This was not accepted as the amount received on account of parking charges was not a part of any project. Thus parking charges was brought to tax in Assessment Year 2000-01.

2)It had been held by the Tribunal that the amount received on parking charges had nothing to do with the appellant's project and was assessable to tax in Assessment Year 2000-01. This has been accepted by the assessee. Thus, the assessee was obliged to pay advance tax and non-payment of the same would carry with it the further burden on interest under Section 234B of the Act.

3)Therefore, the AO was right in charging interest in respect of default in payment of advance tax for the assessment year 2000-01. - SUDHIR G. BORGAONKAR V. ACIT - (2015) 56 taxmann.com 188 (Bombay)
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