What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision, stating that advances received under disputed agreements, where there's an obligation to refund, cannot be taxed as income. The matter remained sub-judice with no definitive resolution.

The assessee received advances on the transfer of assets, but there was a dispute regarding the validity of the lease and development agreements. The Assessing Officer (AO) treated these advances as income, but the CIT(A) deleted the additions.

What were the issues?

Whether advances received on transfer of assets are taxable as income when the underlying agreements are disputed and the matter is sub-judice.

ITO vs Estate of Shri Edulji Framrize… | ITAT Mumbai 2026

Before: SHRI SAKTIJIT DEY & SHRI BIJAYANANDA PRUSETH

For Appellant: Shri P.J. Pardiwala-Sr. Adv./ Shri Sukhsagar, Ms. Mansi

For Respondent: Ms. Arju Garodia, CIT (DR)

Hearing: 30.06.2026Pronounced: 02.07.2026

IN THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI “I” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA Nos.659, 660, 661, 2763, 2764 & 2765/MUM/2026 (AYs: 2007-08, 2008-09, 2010-11, 2009-10, 2014-15 & 2015-16) Income Tax Officer (International vs. Estate of Shri Edulji Framrize Dinshaw Taxation)-2(1)(1) Island City Centre (ICC) Marketing Kautilya Bhawan, G Block, BKC, Office G D Ambedkar Road Naigaon Mumbai-400051. Dadar(E) Bombay Dyeing Spring Mall Compound, Mumbai-400014. PAN/GIR No: AAEPD8394A (Appellant) (Respondent)

CO Nos.106, 107, 108 & 186/MUM/2026 (AYs: 2007-08, 2008-09, 2010-11 & 2009-10) (Arising out of ITA Nos. 659, 660, 661 & 2763/MUM/2026) Estate of Shri Edulji Framrize vs. Income Tax Officer (International Dinshaw Taxation)-2(1)(1) Island City Centre (ICC) Marketing Kautilya Bhawan, G Block, BKC, Office G D Ambedkar Road Naigaon Mumbai-400051. Dadar(E) Bombay Dyeing Spring Mall Compound, Mumbai-400014. PAN/GIR No: AAEPD8394A (Appellant) (Respondent)

Assessee by Shri P.J. Pardiwala-Sr. Adv./ Shri Sukhsagar Syal & Ms. Mansi Revenue by Ms. Arju Garodia, CIT (DR) Date of Hearing 30.06.2026 Date of Pronouncement 02.07.2026 O R D E R PER BENCH:

These appeals filed by the revenue and cross objections filed by the assessee emanate from the orders passed under section 250 of the Income-tax Act, 1961 (in short, ‘Act’) by the Commissioner of Income-tax (Appeals)-49, Mumbai [in short, ‘CIT(A)’], all dated 21.11.2025, for the assessment years (AY) 2007-08, 2008-09, 2010-11, 2009-10, 2014-15 and 2015-16. Since the facts and grounds are similar, with the consent of both parties, the appeals were clubbed and heard together and a common order is being passed for the sake of convenience and brevity. ITA No.659/Mum/2026 (AY: 2007-08) is taken as the “lead case.” 2. The grounds of appeal raised by the revenue in ITA No.659/Mum/2026 (AY

2007-08) are as under:

“1. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the advance of Rs 37.26cr, received by the assessee on transfer of asset, as income by the AO in the light of serious dispute between developer and the assessee regarding the validity of lease rent agreement as well as development right agreement.

Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the advance Income of Rs 37.26cr received by the transfer of asset without appreciating the fact that in the relatively new circumstances the AO analyzed and concluded that Revenue has arisen on account of transfer of asset and the tax on the Revenue generated cannot be postponed indefinitely

Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that the advances received in different years, though credited in the account of the assessee in the previous year relevant to the AY-2007-08, is not taxable in that assessment year without appreciating the fact that these amounts had been shown as the contingent receipts by the assessee and were not offered to tax in year of receipt.

Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that the lease rent and 12% of sale proceeds pertaining to the AY 2009-10, 2010-11, 2011-12 and the instant assessment year 2007-08 deposited in the Bank A/c of the assessee on the Bombay High Court's directions, cannot be taxed in this year, without 2 appreciating the fact that these amount had been shown as the contingent receipt by the assessee and were not offered to tax in year of receipt.

The Appellant prays that the order of the Ld. CIT(A)'s on the above grounds be set aside and that of the Assessing Officer restored.

The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary."

The grounds of appeal raised by the revenue in ITA No.660/Mum/2026 (AY

2008-09) are as under:

“1. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the advance of Rs.28.13cr, received by the assessee on transfer of asset, as income by the AO in the light of serious dispute between developer and the assessee regarding the validity of lease rent agreement as well as development right agreement.

Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the advance Income of Rs28.13cr received by the transfer of asset without appreciating the fact that in the relatively new circumstances the AO analyzed and concluded that Revenue has arisen on account of transfer of asset and the tax on the Revenue generated cannot be postponed indefinitely. 3. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that the advances received in different years, though credited in the account of the assessee in the previous year relevant to the AY-2008-09, is not taxable in that assessment year without appreciating the fact that these amounts had been shown as the contingent receipts by the assessee and were not offered to tax in year of receipt. 4. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that the lease rent and 12% of sale proceeds pertaining to the AY 2007-08, 2009-10, 2010-11, 2011-12 and the instant assessment year 2008-09 deposited in the Bank A/c of the assessee on the Bombay High Court's directions, cannot be taxed in this year, without appreciating the fact that these amount had been shown as the contingent receipt by the assessee and were not offered to tax in year of receipt.

The Appellant prays that the order of the Ld. CIT(A)'s on the above grounds be set aside and that of the Assessing Officer restored. 6. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”

The grounds of appeal raised by the revenue in ITA No.661/Mum/2026 (AY

2010-11) are as under:

“1. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the advance of Rs.23.66cr, received by the assessee on transfer of asset, as income by the AO in the light of serious dispute between developer and the assessee regarding the validity of lease rent agreement as well as development right agreement. 2. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the advance Income of Rs.23.66cr received by the transfer of asset without appreciating the fact that in the relatively new circumstances the AO analyzed and concluded that Revenue has arisen on account of transfer of asset and the tax on the Revenue generated cannot be postponed indefinitely 3. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that the advances received in different years, though credited in the account of the assessee in the previous year relevant to the AY-2010-11, is not taxable in that assessment year without appreciating the fact that these amounts had been shown as the contingent receipts by the assessee and were not offered to tax in year of receipt. 4. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that the lease rent and 12% of sale proceeds pertaining to the AY 2007-08, 2008-09, 2009-10, 2011-12 and the instant assessment year 2010-11 deposited in the Bank A/c of the assessee on the Bombay High Court's directions, cannot be taxed in this year, without appreciating the fact that these amount had been shown as the contingent receipt by the assessee and were not offered to tax in year of receipt. 5 The Appellant prays that the order of the Id. CIT(A)'s on the above grounds be set aside and that of the Assessing Officer restored. 6 The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”

The grounds of appeal raised by the revenue in ITA No.2763/Mum/2026

(AY 2009-11) are as under:

“1 Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the advance of Rs 6.35cr, received by the assessee on transfer of asset, as income by the AO in the light of serious dispute between developer and the assessee regarding the validity of lease rent agreement as well as development right agreement

2 Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the advance Income of Rs 6.35cr received by the transfer of asset without appreciating the fact that in the relatively new circumstances the AO analyzed and concluded that Revenue has arisen on account of transfer of asset and the tax on the Revenue generated cannot be postponed indefinitely

Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that the advances received in different years, though credited in the account of the assessee in the previous year relevant to the AY-2009-10, is not taxable in that assessment year without appreciating the fact that these amounts had been shown as the contingent receipts by the assessee and were not offered to tax in year of receipt.

Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that the lease rent and 12% of sale proceeds pertaining to the AY 2007-08, 2008-09, 2010-11, 2011-12 and the instant assessment year 2009-10 deposited in the Bank A/c of the assessee on the Bombay High Court's directions, cannot be taxed in this year, without appreciating the fact that these amount had been shown as the contingent receipt by the assessee and were not offered to tax in year of receipt.

The Appellant prays that the order of the Ld. CIT(A)'s on the above grounds be set aside and that of the Assessing Officer restored

The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary."

The grounds of appeal raised by the revenue in ITA No.2764/Mum/2026

(AY 2014-15) are as under:

“"1. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the advance of Rs 9.25cr, received by the assessee on transfer of asset, as interest on the same as income by the AO in the light of serious dispute between developer and the assessee regarding the validity of lease rent agreement as well as development right agreement.

Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the advance Income of Rs 9.25cr received by the transfer of asset without appreciating the fact that in the relatively new circumstances the AO analyzed and concluded that Revenue has arisen on account of transfer of asset and the tax on the Revenue generated cannot be postponed indefinitely.

Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that the advances received in different years, though credited in the account of the assessee in the previous year relevant to the AY-2014-15, is not taxable in that assessment year without appreciating the fact that these amounts had been shown as the contingent receipts by the assessee and were not offered to tax in year of receipt.

Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that the lease rent and 12% of sale proceeds pertaining to the AY 2007-08,2008-09 2009-10, 2010-11, 2011- 12 and the instant assessment year 2014-15 deposited in the Bank A/c of the assessee on the Bombay High Court's directions, cannot be taxed in this year, without appreciating the fact that these amount had been shown as the contingent receipt by the assessee and were not offered to tax in year of receipt.

Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the interest income of Rs. 8.18 Cr on FD, without appreciating the fact that these amount had been deposited in Indian Bank Account of the assessee and were not offered to tax in year of receipt.

The Appellant prays that the order of the Ld. CIT(A)'s on the above grounds be set aside and that of the Assessing Officer restored.

The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary."

The grounds of appeal raised by the revenue in ITA No.2765/Mum/2026

(AY 2014-15) are as under:

"1. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the advance of Rs 11.65cr, received by the assessee on transfer of asset, as interest on the same as income by the AO in the light of serious dispute between developer and the assessee regarding the validity of lease rent agreement as well as development right agreement. 2. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the advance Income of Rs 11.65cr received by the transfer of asset without appreciating the fact that in the relatively new circumstances the AO analyzed and concluded that Revenue has arisen on account of transfer of asset and the tax on the Revenue generated cannot be postponed indefinitely. 3. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that the advances received in different years, though credited in the account of the assessee in the previous year relevant to the AY-2015-16, is not taxable in that assessment year without appreciating the fact that these amounts had been shown as the contingent receipts by the assessee and were not offered to tax in year of receipt. 4. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that the lease rent and 12% of sale proceeds pertaining to the AY 2007-08 2008-09 2009-10, 2010-11, 2011- 12, 2014-15 and the instant assessment year 2015-16 deposited in the Bank A/c of the assessee on the Bombay High Court's directions, cannot be taxed in this year, without appreciating the fact that these amount had been shown as the contingent receipt by the assessee and were not offered to tax in year of receipt. 5. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in deleting the interest income of Rs. 8.66 Cr on FD, without appreciating the fact that these amount had been deposited 7 in Indian Bank Account of the assessee and were not offered to tax in year of receipt. 6. The Appellant prays that the order of the Ld. CIT(A)'s on the above grounds be set aside and that of the Assessing Officer restored. 7. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary."

The grounds of cross objection raised by the assessee in ITA

No.106/Mum/2026 (AY 2007-08) are as under:

“1. Adjudication of the ground challenging the validity of the order passed under section 143(3) read with section 147 of the Income-tax act, 1961 ("the reassessment order") in the event department's appeal is allowed.”

The grounds of cross objection raised by the assessee in ITA

No.107/Mum/2026 (AY 2008-09) are as under:

“1. Adjudication of the ground challenging the validity of the order passed under section 143(3) read with section 147 of the Income-tax Act, 1961 ("the reassessment order") in the event department's appeal is allowed.”

10.

The grounds of cross objection raised by the assessee in ITA

No.108/Mum/2026 (AY 2010-11) are as under:

11.

The grounds of cross objection raised by the assessee in ITA

No.186/Mum/2026 (AY 2009-10) are as under:

ITA No.659/Mum/2026 (AY 2007-08) 12. The facts of the case, in brief, are that the assessee filed its return of

income for the AY 2007-08 on 31.07.2007, declaring total income at

Rs.95,30,430/-. The return was processed u/s 143(1) of the Act on 19.03.2009,

accepting the returned income. No scrutiny assessment u/s 143(3) of the Act was

made for the subject AY. However, during the assessment proceedings for the AY

2011-12, notice u/s 133(6) of the Act was issued to M/s Ferani Hotels Pvt. Ltd. and

M/s. Ivory Properties & Hotels; in response to which, the flat/unit wise details of

properties sold and assessee's share in the sale proceeds for AY 2007-08, being

12% of the total sale proceeds, were provided. Further, notice u/s 133(6) of the

Act was also issued to M/s. Ivory Properties &Hotels Pvt. Ltd., Mumbai. In

response thereto, similar flat/unit wise details of properties sold were provided

and the assessee's share in the sale proceeds for AY 2007-08 was Rs.6,92,459/-,

being 12% of the sale consideration received for relevant financial year. It was

seen that the same was not offered by the assessee for taxation. Accordingly,

notice u/s 148 of the Act dated 30.03.2014 was issued with prior approval of the

competent higher authority for the subject AY, after recording reasons for

reopening. The said notice was duly served on the appellant. The assessee

submitted that taxing the advance amounts received towards sale of flats/units

will result in taxation of income twice. The AO observed that the assessee has received the sale proceeds of Rs.37,26,18,698/- (Rs.37,19,26,239/- and

Rs.6,92,459/-) during the year pursuant to the development agreements of the

land. The issue as to taxability of year-wise sale proceeds were not examined

earlier. The AO also noted that the ITAT, Mumbai in assessee’s own case for AY

2011-12 has held that the receipts are taxable as and when the suit between

assessee and developer reaches finality. However, the department has not

accepted the decision and has filed appeal before Hon'ble High Court against the

said decision. The AO further stated that as the addition in AY 2011-12 is not in

existence and matter is pending before the Hon'ble High Court. In order to protect

the interest of revenue, he made protective addition of Rs.37,26,18,698/- under

the head LTCG, taxable @20%. In this regard, he relied on the following decisions:

(i) CIT v. Seshasayee Paper Boards Ltd. (1996) 217 ITR 358 (Mad), (ii) CIT v. G.M.

Mittal Stainless Steel (P) Ltd. (2003) 263 ITR 255 (SC) and (iii) Hindustan Tin Works

Ltd. vs DCIT (2005) 274 ITR 157 (Delhi). As a result, order u/s 143(3) r.w.s. 147 was

passed on 30.05.2024, determining the total income at Rs.38,21,79,130/-.

13.

Aggrieved by the order of AO, the assessee filed appeal before the CIT(A).

Before the CIT(A), the assessee challenged validity of reopening as well as merits

of the addition. The CIT(A) has reproduced the submission of the appellant at para

4 (pages 5 to 29) of the appellate order. He has dismissed the ground on validity

of the impugned order by stating that the appellant is not prejudiced in any manner by non-quoting of DIN and that the assessment order was passed by the

AO after following due procedures of law. Further, the approval on the same day

does not in any manner justify and prove the claim of appellant that there was no

application of mind by the sanctioning authority. There is always discussion

between AO and the superior authorities before the formal proceedings are

started in the cases for reopening. Accordingly, the ground was dismissed.

13.1 Regarding the merits of the addition, the CIT(A) noted that similar issue

was involved in the AY 2011-12 in the assessee's own case, wherein the CIT(A), in

the order in appeal No. CIT(A)-10/ITO(IT)-1(1)/IT-26/2014-15 dated 28.10.2014

deleted the similar addition, being 12% share in the realization on account of sale

of flats by holding that this income is not liable to tax because the appellant has

not transferred right in immovable property during the relevant period due to

cancellation of development agreement dated 02.01.1995 and also due to

revocation of the power of attorney given to Ferani Hotels Pvt. Ltd. The relevant

findings of the CIT(A) order are at pages 32 to 40 of the appellate order. The CIT(A)

further observed that the findings of the CIT(A) has been upheld by the ITAT in

the revenue's appeal in the appellant's case in AY 2011-12 in ITA No.

1389/Mum/2015 dated 19.02.2020. The CIT(A) also observed that the disputes in

respect of the above referred properties are going on before the Hon'ble Bombay

Bombay High Court and the conveyance deeds have also not been executed till date. Hence, the advances received against the said properties cannot be

considered as income till the disposals of the such suits and till the assets are

transferred legally. In view of the above facts and following the decision of the

ITAT cited supra, he allowed the grounds raised by the assessee and directed the

AO to delete addition of Rs.37,26,18,698/- under the head LTCG.

14.

Aggrieved the order of the CIT(A), the revenue filed appeal before the

Tribunal. The assessee has also filed cross objection challenging validity of

reopening which was dismissed by the CIT(A). The Ld. AR, at the outset, submitted

that the factual situations of the instant appeals are identical with the facts of the

appellant for AY 2011-12. The AO had made similar addition in the said AY, which

was deleted by the CIT(A) and the said order was upheld by the ITAT in ITA

No.1389/Mum/2015 (AY 2011-12) and ITA No.334/Mum/2017 (AY 2012-13). The

Ld. AR has enclosed copy of the above order in the paper book filed before the

Tribunal. The Ld. AR also submitted that the impugned re-assessment order is bad

in law because income has not escaped assessment. He also submitted that

approval u/s 151 was granted in a mechanical manner. He also submitted that DIN

is not mentioned by the AO in the order. These jurisdictional issues are raised in

the cross objection.

15.

On the other hand, the Ld. CIT-DR supported the order of AO. He submitted

that the CIT(A) has allowed relief simply by relying upon the order of ITAT which has not been accepted by the department and further appeal has been filed

before the Hon’ble High Court.

16.

We have heard both the parties and perused the materials on record. We

have also carefully gone through the orders of lower authorities and the decision

of ITAT in appellant’s own case for AYs 2011-12 and 2012-13 in ITA

No.1389/Mum/2015 and ITA No.334/Mum/2017 (supra). We find that the co-

ordinate Bench of the Tribunal has decided the issue in favour of the assessee by

passing a detailed order incorporating the facts of the case, decisions of the

Hon’ble Bombay High Court in respect of the dispute between the parties, order

of the CIT(A), decision of the ITAT E-Bench, Mumbai for AY 2013-14 in ITA

No.1033/Mum/2018 dated 20.03.2019 and other relevant issues including

decisions of Hon’ble Courts. The relevant part of the decision of the Tribunal is

reproduced below for ready reference and clarity:

“28. The Id. Counsel (revenue) has made statement that 'income pertaining to sale of flats prior to filing of suit would be taxable for AY 2011-12 as stated above while the one relating to period after filing of the suit may be subject to application of section 52 of the Transfer of property Act, 1882 and the order of the Bombay High Court dated 19th July 2010. In this regard, it is important to note that since the Agreement itself stands determinated, the question of declaring an income from the proceeds calculated on the alleged Agreement cannot be part of taxable income. Under such circumstances, the amounts received from the flat purchasers will be liable for tax subject to outcome of the decision in civil suit. Therefore, entire amount assessed by A.O. for A.Y. 2011-12 is incorrect. Further, it is noted that the bank account was opened by Ferani in the name of Ferani Hotels Pvt. Limited A/c - N N Wadia share", but the bank statement shows in the name of Ferani Hotels Pvt. Limited" only and not the Administrator of EFD. The said account was never opened by the Administrator nor had the Administrator consented for opening of such an account. The Administrator had never provided his PAN 13 nor the Bank completed KYC formalities in respect of this account. The account title includes the name of 50 Shri. N.N. Wadia; nowhere it clarifies as to in what capacity name of Shri NN Wadia has been mentioned. It is material and pertinent to note that Shri N.N. Wadia is assessed to tax in his own name and in his own right in respect of income which he earns in his individual capacity as Administrator of the Estate of EFD in terms of Section 168 of the Act. As such, the mere reference to the name of N.N. Wadia in the account opened and operated by Ferani Hotels Pvt. Ltd., could not lead to conclusion that the amounts deposited by Ferani belonged to Estate of EFD. The Administrator Estate of E.F. Dinshaw does not have any control or domain over neither the said account nor such account can be operated by the assessee.

29.

We further noted that the coordinate bench of this tribunal in its order 27 03.2019 in ITA No. 1033/Mum/2018 for AY 2013-14 had taken note of this factual and legal background. Taking into account specific directions contained in the High Court's order dated 19.07.2012, the tribunal agreed that the rights and obligation of the parties flowing or arising from or under the agreements dated 02.01.1995 where indeterminate. The ITAT also agreed that the fixed deposits made by Ferani under the order of the High Court did not belong to the Administrator as he neither had control or domain over the said amounts and these fixed deposits were to be governed by the order of the Trial Court before whom the suit was pending. Once the tribunal has held that the amounts collected by Ferani during the pendency of the suit and kept in FD's are amounts kept in custody of the court and not accessible to the Administrator till disposal of the suit and to be governed by the final order of the high court, then the amounts so 51 collected cannot be considered to be income of the assessee. Further, the AO has brought to tax advances which the assessee had received during the period 1996-97 to 2008-09 totally Rs 269,48,90,856/- under the head other source. We are surprised to note that the AO had made additions contrary to the provision of section 56 of the Income Tax Act which govern the assessment of income under the residuary head. Further, said provisions nowhere permit the A.O. to assess receipts of prior years in one lump sum in later year on the ground that in prior years the receipt was not taxed. The A.O., on one side has admitted that Rs 269.48 Crores was received for transfer of asset and there were serious disputes between the developer and the assessee and on the other hand an advance shown under liabilities in balance sheet is income of the assessee without assigning any reasons as to how a liability takes character of income for the AY year 2011-12. The 'asset in question is inherited land which was acquired in 1923 by FED and inherited in 1936 by E.F.D. The Bombay High Court in its judgment considered the circumstances in which the entire land was inherited by the children of F.E.D. and held that the Administrator was 14 holding this land as capital asset and therefore income on its transfer can only be taxed under the head 'Capital Gains". In the circumstances, once the A.O. has admitted that Rs. 269.48 crores was received as Advance against transfer of asset, then he could not under the provisions of section 56 of the Act assess the same as income because none of the taxable events contemplated under section 56 took effect in FY 2010-11. Moreover as held by the High Court, the land in question is capital asset of the assessee, and hence, income embedded in advances against the transfer can only be assessed under the head capital 52 gains and that too in the year in which 'transfer" of the capital asset legally takes effect and not in any year. Since, in the suit the assessee has claimed for cancellation of development agreement in its entirety and has prayed for repossession of the entire land in its original form, the transfer of the capital asset if any can happen only when the suit of the assessee is finally decided by the Court and the decision of the court becomes final. In view of these facts, the amounts which the assessee received during the period 1995-96 to 2010-11 could not be charge to tax as income in AY 2011-12, under the head income from other source or any other head of income.

30.

In so far as the observations of the AO in para. 26 of the assessment order, we find that although the A.O. considered the advances received in the prior years as income for AY 2011-12 on the ground that there was cessation of liability, but nothing more has been elaborated on this point. In this regard, it is pertinent note that in the assessment order, the A.O. assessed the income under the head income from other sources. We further note that section 56 of the Income tax Act, 1961 defines the scope of the income which is chargeable to tax under the head Other Source. The residuary head of income can be invoked only when the income is not found assessable under any other head of income. In the instant case, as admitted by the A.O., the advances were received against the transfer of land and therefore any consideration received for transfer of immovable properties could not be assessed under the head other sources. Further, the A.O has also accepted the fact that there were serious disputes between the developer and the assessee regarding the validity of the lease 53 agreement as well as development right agreement. The documents on records prove beyond doubt that such disputes were sub judice even till March 2011 being the end of previous year. Once it is evident that the disputes were sub judice then, it could not be argued that during the pendency of the legal proceedings there was cessation of liability. As such on the facts of the case, it could not be established that there was cessation of liability. It is further observed that section 41(1) has no application, because the liability contemplated by that section relates to trading liability for which deduction was allowed to the assessee the computation of income of any earlier year. In this case, the amount assessed was never allowed as a deduction in any earlier year.

31.

In this regard, the assessee placed his reliance on the decision of the coordinate bench of this tribunal in I.T.A. no. 5508/Mum/2015 dated 06.02.2015 for AY 2010-11 in the case of Bombay Gowrakshak Mandali vs I T.O. In this case, the assessee trust owned a property in Mumbai. The trust had entered into a development agreement with M/s Lokhandwala Construction Industries Limited for which consideration of Rs 11 Crores or Rs 50 per square feet of available FSI whichever is higher was to be paid. The said trust received Rs 32.50 Crores from the developer. However, since there were disputes with the developer with regards to quantum of available FSI, advance of Rs 32.50 Crore received from the developer was shown as liability in its books. The manner in which the advance received was shown in the balance sheet and the disclosure in relation thereto by way of Notes in the audited accounts was consistently same in all the 54 past years and was accepted by the Revenue in past assessments. In AY 2010-11, the A.O assessed the said sum on the ground that it was income of that year because there was cessation of liability. On appeal by the assessee, the ITAT observed that development agreement was entered in 1984 and advance was received was never disputed. Till preceding year, advance received in 1984 was treated as advance and was never disputed. The fact that from 1984 till date there had being no change in the status of the transaction and there was neck deep litigation was also not disputed by the Revenue. Keeping in mind these facts, the ITAT held that for an amount to be added back under section 41(1) which should bear the charter of income. Nowhere from the orders of Revenue authorities it appeared that during the year, something new happened had which converted the advances into remission of liability to be treated as income. The Tribunal held that invocation of section 41 (1) was uncalled for. We find that facts of the present case are pari materia to the case considered by the Tribunal. Even in this case, the entire transaction with the developers is in neck deep in litigation and the assessee has filed suit requesting for cancellation and restitution of the lands. Even at the beginning and the close of the FY 2010-11, the disputes between parties was sub judice and bearing the order passed on Notice of Motion seeking interim relief and there was no process on the main suit which remained pending. As such, during the relevant year, there was no material change in the factual matrix in the assessee case. We therefore are of the opinion that the decision of the ITAT squarely applies to the facts of present case.

32.

Further, in our considered view in order to tax any receipt as income, it is necessary for the Revenue to show that the receipt of the money is without any conditions attached and the recipient has complete domain, control and 16 ownership over the money received. Wherever money is received in terms of agreement which by itself is disputed and pending for decision in court, then no income embedded in such receipts can be made exigible to tax as income for the simple reason that the recipient has inherent obligation to refund the same to the payer in the case in the event the court decides the other way. In this regard, reliance is placed on the decision of the Karnataka High Court in the case of CIT vs. L. Sambashiva Reddy (62 Taxmann.com 174). In this case, it is the case of the revenue that once the single judge in her order refused to grant injunction against Ferani to proceed with construction, then it automatically lead to conclusion that all agreements with flat purchasers become final and thereby income accrued. We are unable to agree with arguments of the ld. Sr. Counsel for the revenue for the simple reason that in the first place it is to be noted that in the order dated 19.07.2010 the Court restrained Ferani from handing over possession of flats to related as well as non-related third parties till the Notice of Motion was disposed. Once the court restrained Ferani from handing over possession, it implied that the agreements with flat purchasers could not have been given effect to and thereby there would not have been transfer of property in law. Even in the decision of the division bench of the High Court in July 2012, the Court directed the Trial Court to first decide the preliminary issue of limitation in terms of Section 9A of CPC and thereafter to proceed with the suit. It also granted liberty to the assessee at 56 that stage to seek interim relief by moving Notice of Motion. Therefore, it is factually and legally incorrect for the Id. Counsel to contend that upon disposal of assessee Notice of Motion seeking ad interim relief the agreements with the parties become final and income chargeable to tax accrued in AY 2011-12.

33.

We further noted that when, the appeals were fixed for clarification on 22/11/2019, the Ld. AR for the assessee submitted that the Hon’ble Supreme Court, vide its order dated 04/10/2019 passed by the three judge Bench in Ivory SLP and Ferani review petition, decided the reference of question of law in favour of the administrator holding that the issue of limitation cannot be decided u/s 9A of Civil Procedure Code and all the issues, including limitation of petition filed by the parties and the merit of the matter to be decided by the trial court on the basis of contentions of both the parties and also, decide any applications seeking interim injunction/ relief if any. From the above, it is very clear that as of date, there is no material change in factual matrix, because after the administrator determinated the agreements dated 02/01/1995, revoked the power of attorney granted to Raheja and filed the suits in the Hon’ble Bombay High Court in 2008, there is practically no progress and the entire matter is sub-judice. Therefore, we are of the considered view that there is no merit in the contention of the Ld. AR for the revenue that the decision of Division Bench of Hon’ble Bombay High 17 Court in review petition filed by Ferani Hotels Pvt.Ltd, has rest the matter of dispute between the parties regarding development agreement and sharing of sale consideration, and consequently, income accrues to the assessee for the impugned asst year.

34.

In this view of the matter and considering facts and circumstances of this case, we are of the considered view that the ld. CIT(A) after 57 considering relevant facts has rightly held that the AO was incorrect in taxing advances received by the assessee up to the A.Y. 2011-12 as income chargeable to tax under the head income from other sources. Hence, we are inclined to uphold findings of the ld. CIT(A) and reject grounds taken by the revenue. “

17.

The Ld. CIT-DR has not brought anything on record to distinguish the

decision of the Tribunal in appellant’s own case for AY 2011-12 and 2012-13,

either on facts or in law. Since the facts are similar, following the decision of the

ITAT reproduced above, we uphold the order of CIT(A) and dismissed the grounds

raised by the revenue.

18.

In the result, the appeal of the revenue is dismissed.

ITA Nos. 660, 661, 2763, 2764 & 2765/MUM/2026 (AYs: 2007-08, 2008-09, 2010-11, 2009-10, 2014-15 & 2015-16)

19.

As the grounds of appeal as well as the facts and circumstances for

assessment years 2008-09, 2010-11, 2009-10, 2014-15 and 2015-16 are similar to

the grounds and factual situations of the case for AY 2007-08, therefore, the

findings given in the appeal for AY 2007-08 in ITA No.659/Mum/2026 (supra) shall

apply mutatis mutandis to the assessment years 2008-09, 2010-11, 2009-10,

2014-15 and 2015-16. The appeals of revenue are, accordingly, dismissed.

CO Nos.106, 107, 108 & 186/MUM/2026 (AYs: 2007-08, 2008-09, 2010-11 & 2009-10)

20.

We have already decided the appeals of revenue on merit and upheld the

order of CIT(A) in allowing the ground of appellant on merit. Hence, the other

issue on validity of the re-assessment order becomes academic in nature and

hence, does not require adjudication.

21.

In the combined result, the appeals of the revenue are dismissed and the

cross objections of the assessee are kept open.

Order is pronounced on 02.07.2026.

Sd/- Sd/- (SAKTIJIT DEY) (BIJYANANDA PRUSETH) VICE PRESIDENT ACCOUNTANT MEMBER

*Aniket Chand; Sr. PS MUMBAI Date: 02.07.2026 Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, MUMBAI 6. Guard File

By Order

Assistant Registrar ITAT, MUMBAI

ITO(IT)-2(3)(1), MUMBAI, BKC, MUMBAI vs. ESTATE OF SHRI EDULJI FRAMRIZE DINSHAW, MUMBAI

What did the Tribunal hold?

What were the facts?

What were the issues?

Which sections of the Income-tax Act were involved?

Recent GST High Court judgments