| Case ID |
053ba18a-9177-4561-913e-d671b648dc8d |
| Body |
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| Case Number |
Income tax Reference No. 377 of 1977 |
| Decision Date |
Jul 22, 1981 |
| Hearing Date |
|
| Decision |
The Gujarat High Court ruled that the amounts of Rs. 5,000 received as earnest money and Rs. 2,08,772 as part payment do not constitute taxable income for the assessment year 1971-72. The court emphasized that income tax is levied on actual earnings, which occur upon the completion of a sale transaction and transfer of title. The mere receipt of money prior to completion does not qualify as income. The court noted that the real profits of a business must be assessed based on the actual transactions completed in the relevant accounting period. Thus, since the sale deeds were executed in a subsequent year, the amounts received could not be treated as income for the year in question. |
| Summary |
This case revolves around the interpretation of taxable income under the Income Tax Act, 1961. The Gujarat High Court examined whether amounts received by the assessee, a partnership firm engaged in land transactions, constituted taxable income for the assessment year 1971-72. The core issue was whether the receipt of earnest money and part payment prior to the execution of sale deeds could be considered as income. The court concluded that income tax is applicable only when a sale is completed and the title is transferred, aligning with the principles of commercial trading and accounting. The decision underscores the importance of actual sales transactions in determining taxable income, thereby providing clarity on the treatment of advance payments in real estate transactions. This case is significant for tax professionals and businesses involved in property transactions, as it delineates the boundaries of income recognition in accordance with the law. |
| Court |
Gujarat High Court
|
| Entities Involved |
Not available
|
| Judges |
M. P. Thakkar,
R. C. Mankad
|
| Lawyers |
S. N. Shelat,
R. P. Bhatt,
K. C. Patel
|
| Petitioners |
COMMISSIONER OF INCOME TAX
|
| Respondents |
ASHALAND CORPORATION
|
| Citations |
1982 SLD 53,
1982 PTD 241,
(1982) 45 TAX 275
|
| Other Citations |
In re: Kunjamal & Sons (1941) 91 T R 358 (All),
Chidambaram Chettiar v. C. I. T. (1936) 4 I T R 309 (Mad.),
C. I. T. v. Shah Doshi & Co. (1982) 133 I T R 23 (Guj.),
Badridas Daga v. C. I. T. (1953 4 I T R 10 (S C),
Calcutta Co. Ltd. v. C. I. T. (1959) 37 I T R 1 (S C),
C. I. T. v. Bai Shirinbai K. Kooka (1962) 46 I T R 86 (S C),
Gresham Life Assurance Society v. Styles (1892) 3 S C 185 (H L),
Pondicherry Railway Co. v. C. I. T. (1931) 5 I T C 363 (P C)
|
| Laws Involved |
Income Tax Act, 1961
|
| Sections |
256(1),
263(1)
|