SKYLINE BUILDERS Vs. THE COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE above appeals have been filed against the orders of the Income -tax Appellate Tribunal, Cochin Bench for the assessment years 2005 -06 and 2006 -07. The appellant/assessee, a builder, is aggrieved by the assessments made under Section 143(2) of the Income Tax Act, 1961 (hereinafter referred to as the "Act") pursuant to a search in the business premises of the appellant. The dispute revolves around the consideration of the amounts which remain outstanding under the so -called "consumer deposit account" as income for the respective years. Since we are disposing of the appeals at the stage of admission and since the context of the orders we propose to pass does not require answering any questions of law; we do not extract the questions of law framed by the assessee. It was noticed by the Assessing Officer, on verification of the seized records as against the returns filed, that the assessee was receiving deposit from its clients for the purpose of meeting the expenditure towards electricity connection, water connection and so on and so forth. Rejecting the contention of the assessee that the deposits were never treated as assessee's income and are not taken into profit and loss account of the assessee, the Assessing Officer added back the total unutilized balance available in such customer deposit account to the total income of the assessee, treating the same as coming under the head business income. The reasoning was that the receipts coming into the customer deposit account is made on the specific agreement that such payments would be routed through the assessee only and assessee having made provisions for such services, there are still amounts remaining in credit in the said accounts. These amounts have not been utilized for the purpose of providing various services to the customers and having not been refunded to such customers; the same was held to be business income and hence the assessee was found liable to tax on such income under the provisions of the Act. The Tribunal having assessed each of the heads under which amounts were received and appropriated, remanded the matter back to the Assessing Officer for consideration of the accounts with respect to 'Transfer and Cable', 'Village tax and tax assessment expenditure' and 'KCWWB', but confirmed the addition on other heads.

(2.) THE learned Senior counsel Sri. A.K. Jayasankar Nambiar, on our direction, produced the agreements entered into with the clients of the assessee being purchasers of independent apartments as also documents showing the details of the deposit for the projects completed in each year as also the balance sheet disclosing how the amounts were treated as liability in the books of accounts. Our intention was not to examine the facts of the issue, but to arrive at a clear picture of the respective claims of the department and the assessee. The sale agreement produced by the assessee shows that these amounts are not the part of the total sales consideration. As noticed above, the customer deposit accounts are with respect to various services in the apartments, like power connection, water connection, Cable TV connection etc. These necessarily are to be taken out by the individual owners of the apartment after the respective apartments are certified fit for occupation by the local authority. The assessee being a builder for the convenience of its customers; as also taking into account the competition in the market posed by other builders; undertakes to make arrangements for the provision of the same, since no consumer would enjoy the hassle of being entangled in red -tape. It is also more convenient for the builder to embark upon such a venture collectively, since such provision has to be made for each apartment in each of its projects. Hence the assessee undertakes such arrangements, however, with a condition that the statutory fees and expenses thereon are to be met by the individual customer.

(3.) LOOKING at the documents relied on by the assessee, as also the order of the lower authorities, we are of the opinion that the aspects relevant for examination are: