Whether when assessee-developer following project completion method receives certain sum towards parking charges from vacant land, it is liable to pay advance tax on the same - YES: HC

THE issue before the Bench is - Whether when assessee-developer following project completion method receives certain sum towards parking charges from vacant land, it is liable to pay advance tax on the same. YES is the answer.

Facts of the case

The assessee is engaged in business as builder and developer and follows the project completion method for purposes of paying its taxes. During assessment of A.Y 2003-04, it was noticed that a miscellaneous income of Rs.1.32 Crores offered to tax in A.Y 2003-04, was claimed to have been received during the A.Ys 1995-96 to 2003-04. It was also found that an amount of Rs.15.48 lakhs was income chargeable to tax in A.Y 2000-01 being income generated on account of parking charges collected on the vacant land available with the assessee and had nothing to do with any of the projects being executed by the assessee. Thereafter, as the assessee had not filed his return for A.Y 2000-01, a notice u/s 148 was issued. Consequent thereto, the income received from parking charges of Rs.15.48 lakhs was assessed to tax for the A.Y 2000-01.

On appeal, the CIT(A) set aside the order of AO on the ground that the amount earned by exploiting vacant land was an amount rateable to the costs of the project and therefore, properly offered to tax in the A.Y 2003-04. On further appeal, the Tribunal set aside the order of the CIT(A) holding that amount received on account of parking charges was not a part of any project and was business income and chargeable to tax for the A.Y 2000-01. Thereafter, while giving effect to the order of the Tribunal in quantum proceeding, the AO charged interest u/s 234A and 234B, inter alia in respect of default in payment of advance tax for the A.Y 2000-01. On appeal, the CIT(A) upheld the charging of interest. On further appeal, the Tribunal confirmed the order of CIT(A) by holding that levy of interest u/s 234A and 234B were mandatory and compensatory in nature.

Having heard the parties, the High Court held that,

++ it is seen that the assessee had not originally filed its return, and, therefore, there was no occasion for him to make any advance payment. This non-filing of return was on the basis of the assessee's stand that in view of project completion method followed by him, the income earned on parking charges would have to be returned when the project was 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 A.Y 2000-01. On facts in quantum proceedings, it has been held by the Tribunal that the amount received on parking charges has nothing to do with the assessee's project and was assessable to tax in A.Y 2000-01. This has been accepted by the assessee. If this be so, the assessee was obliged to pay advance tax and nonpayment of the same would carry with it the further burden of interest u/s 234B;

++ this Court in case of Prime Securities, further held that at the time of making payment of advance tax, it was not possible to anticipate events and make payment of advance tax on that basis. However, in the present case, it is the case of the Revenue that there is default on the part of assessee in paying advance tax on account of parking charges received by it for A.Y 2000-01. Therefore, the order of the Tribunal is sustained.