TMI Blog2024 (4) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... It is also observed that the addition to the capital work-in-progress is only Rs. 3.33 Cr, which is much lower than the available free funds in the form of Reserves and Surplus. The AO has worked out the disallowance based on the closing balance of CWIP at the rate of 12%. While doing so, AO has ignored the availability of own funds and wrongly assumed that the addition to CWIP was entirely out of borrowed funds. Therefore, in view of the wrong application of facts by the Ld.AO and judicial precedents on the above subject, we find no merit in the order of Ld.CIT(A) in confirming the addition under section 36(1)(iii) of the Act and we hereby delete the same. In the result, Ground of the appeal is allowed. Addition in view of the Provisions of section 50C on the Gift of Plots - Transfer of property by a Company as a gift - AO concluded how the gift by one company to other company can be genuine, considering the fact that the company is an Artificial Judicial Person and the element of natural love and affection cannot be exist and why not to invoke the provisions of section 50C of the Act for the above Gift transaction - HELD THAT:- Section 5 of the Transfer of Property (TP) Act, 188 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at rate of 60% as was applicable to a 'computer'. Decided in favour of assesee. - Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member For the Assessee : Shri M.K. Patel, AR For the Revenue : Shri Kamlesh Makwana, CIT-DR and Shri Ashok Kumar Suthar, Sr.DR ORDER PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER These cross-appeals are filed by the Assessee and the Revenue as against the appellate order dated 02.01.2017 passed by the Commissioner of Income-tax (Appeals)-1, Vadodara [ CIT(A) for short] dated 02.01.2017, arising out of assessment order dated 31.12.2015 passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) relating to the Assessment Year (AY) 2013-14. For the sake of convenience, these appeals were heard together and are being disposed of by way of this consolidated order. 2. The brief facts of the case are that the assessee is a company engaged in the business of manufacturing of pipe fittings. The assessee-company filed its e-Return of Income on 29.09.2013 declaring total loss of Rs. 2,64,74,150/- and book loss of Rs. (-)3,50,86,844/-. Assessee s Return was selected for scrutiny and assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as advised. 5. Ground No.1: The issue of disallowance on account of late payment of employees contribution to PF under section 43B of the Act is covered in favour of Department by the Judgment of the Hon ble Supreme Court in the case of M/s. Checkmate Services (P) Ltd. vs. CIT (2022) 143 taxmann.com 178 (SC), following the same, this ground is dismissed. 6. Ground Nos.2 to 3 are relating to disallowance on account of prior period expenses of Rs. 91,956/-. The AR placed on record the unreported judgment of the Hon ble Jurisdictional High Court in case of PCIT-1 Vs. Adani Enterprises Ltd. (in Tax Appeal No.566 of 2016 order dated 20.07.2016). Ground No. 4 is relating to non-deduction of TDS on International Transaction of Rs. 54,000/- and Ground No. 6 is relating to disallowance of Rs. 60,517/- u/s. 40A(3) of the Act. Since the amounts involved in all these issues are very small, the same are dismissed without going into the merits of the case, for which the Ld. Counsel for the assessee has no objection. Thus the above Grounds No. 2 to 4 and Ground No. 6 are hereby dismissed. 7. Ground No.5: The Ld.CIT(A) has erred in sustaining disallowance of interest amounting to ₹47,37,168 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iating the fact that the transfer of property act talks about life of donor and donee under gift, and the same can only be talked about living persons. Here the company is only an artificial juridical person and not a living person, for the purpose of gift and section 47(iii) of the Act. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the depreciation claimed on software license, without appreciating the fact that the assessee had not purchased any software, only license to use it was purchased by the assessee company, thereby contravening the provisions of Appendix-I of IT Rules 1962. 3. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary. 11. Ground No.1 relates to addition of Rs. 6,71,29,538/- in view of the Provisions of section 50C of the Act on the Gift of Plots. On 12.06.2009 the assessee-company acquired from Collector, Vadodara Nine plots of land admeasuring 27,720 sq.mtrs. for Rs. 57,78,511 for industrial purpose. Due to various financial, administrative and infrastructural problems, the assessee were not able to start their proposed Industrial Project on the above plots. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arket value as determined for stamp duty valuation should not be adopted as the consideration for transfer of the land as per the provisions of sec.50C of the Act, the appellant had claimed that since the land was gifted by it, hence no transfer as per the provisions of sec.2(47) of the I.T.Act r.w. clause (iii) of sec.47 of the I.T.Act had taken place and hence sec.50C was not applicable in this case. The appellant has also relied upon decisions in the case of Nandatur Holdings Investments Pvt. Ltd (supra) and DP World Pvt. Ltd (supra) to the effect that a corporate entity can also make a gift. The AO did not accept the contention by stating that a gift can be made only by living person and not by the appellant company which was artificial juridical person. He also stated that on account of the fact that appellant is not living person, element of natural love and natural affection cannot be said to exist in the case of company. Accordingly he adopted the market value determined for the purposes of stamp duty valuation as consideration for transfer of land and made addition as per the provisions of sec. 50C of the Act. 7.3.1. During the course of the appellate proceedings, the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erning the subject matter of transfer of property is Transfer of Property Act, 1882. Section 5 of the Transfer of Property Act, 1882, defines the term transfer of property , as an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, or to himself and one or more other living persons; and to transfer property is to perform such act. This is the master definition of transfer of property . Other forms of transfers like gift are subject to this master provision. The law provides in the same section 5 of the TP Act, 1882 that living person includes a company or association or body of individuals, whether incorporated or not. Thus, TP Act, 1882 considers a company not only as a person but literally speaking as a living person ; a person with life. The same expression person provided in section5 is transplanted in section 122 of the TP Act, which defines a gift . Gift is the transfer of certain existing movable or immovable property made voluntarily and without consideration by one person, called the donor, to another, called the donee and accepted by or on behalf of the donee. When the provisions of law contained in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than the said certain category of shares is not taxable till date, under any provisions of the Income Tax Act. Even the legislative history shows that gifts received by companies other than certain kind of shares by certain category of companies mentioned under section 56(2)(viia) and (viib) are not taxable under Income-tax Act or any other Act. During the period, when Gift Tax Act was in existence, gifts by companies as well as by any other person were taxable under the Gift Tax Act only and there was no provision for taxing it under the Income-tax Act. Therefore, gifts were not separately taxed under any provisions of the Income- tax Act during the period when the Gift Tax Act was in existence and the question of taxing the gifts separately under Income- tax Act, did not arise. When the Gift Tax Act was repealed in 1998, legislature indicated its intention that the gifts will be no more taxable under the Gift Tax Act, but no corresponding change was made under the Income tax Act and, therefore, taxability of gift remained outside the tax net for a long time until section 56(2) was amended for bringing tax on gifts received by individuals and HUFs with certain conditions with eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther company. Further Section 122 of the TP Act does not prescribe any attributes like love and affection . 15.2. In light of the law discussed above, there is no restriction in law against a company making Gift of its property, to another company. A transfer without consideration when claimed as a gift is always a gift. Further Section 47(iii) of the I.T. Act, specifically provides that any transfer of a capital asset under a Gift is not regarded as a transfer. Therefore the Plots transferred by the assessee company by way of executing Gift Deed in favour of M/s. Ratnakar Estate Developers Pvt. Ltd. is a valid Gift and not liable for capital gain. Consequently invoking the provisions of Section 50C of the I.T. Act, does not arise in the above transaction. Thus we do not find any infirmity in the order passed by the Ld. CIT(A). Therefore the Ground No. 1 raised by the department is devoid of merits and the same is hereby dismissed. 16. Ground No.2 relates to disallowance of depreciation of Rs. 4,58,137/- on Computer software. The AO disallowed the claim stating that the assessee has only purchased license to use the software and therefore not entitled to claim depreciation at 60%. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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