In the case of DCIT v. G.H.P.Corp. (107TAX133) the assessee engaged the services of a developer for development and construction of FSI on a piece of land. Under the agreement the land cost payable to the assessee was adopted at RS. 125 per sq. ft. The assessee who received an advance of RS. 15 Lac from the developer treated such sum as deposit and subsequent payments received as advances. The assessing officer treated such sum as trading receipt. Upon reading of the terms of agreement the Mumbai Tribunal noted that by virtue of the agreement the assessee had acquired a right only to receive ad hoc payment as the work progressed. But the ad hoc payment received by virtue of the said clause could not be equated as income under the Act because the parties had agreed to determine the same on the completion of the project. At the end of the project, the venture might result into a loss and in that event, the assessee might have to refund some money and, hence, the stipulation for refund also. From clause ‘7’ of the agreement, it was clear that the amount payable to the assessee could be determined only when saleable area was determined, and saleable area could be determined only when substantial construction was completed. In other words the parties had stipulated that income would be determined only when the saleable area was known. Till then no income could accrue to the assessee. It was only on the determination of the saleable area that the assessee would acquire an enforceable right over the payment stipulated at the rate of RS. 125 per sq. ft. On the issue of assessing officer’s reliance on the treatment of such sums in the developer’s books of account the Bench held that in any way, the mode of recording a transaction by one of the parties to the transaction can not be binding to the other party to the transaction. Its nature has to be seen on its own strength.
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