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2013 (11) TMI 410 - AT - Income TaxDiversion of income by overriding title or application of income - loan was discharged in pursuance of the decree order of the Jurisdictional High Court - on the basis of consent agreements between assessee and PGFICL, decrees of the High Court, development agreement with Piramal Holdings Ltd., final sale proceeds and treatment of the income by the assessee, submitted that the assessee has not received the amount of ₹ 225 crores at all, as the same was given directly by the seller to the PGFICL in terms of decree passed by the Hon'ble Jurisdictional High Court, therefore, it is a clear cut case of diversion of income by overriding title. - Held that:- For allowability of business deduction or loss, it has to be seen, whether the same business has been continued i.e., whether there is any inter-connection, inter-lacing, inter-dependence and unity of control in the two businesses by way of existence of common management, common business organisation, common business administration, common funds and common place of business. Even if one business is closed without affecting the conduct of other business, there would still be strong indication that the two business construed the same business. However, this aspect has not be examined either by the Assessing Officer or by the Commissioner (Appeals) at all - decision in the case of CIT v/s Prithvi Insurance Co. Ltd. [1966 (10) TMI 49 - SUPREME Court] followed - matter remanded back for reconsideration. Disallowance of value of stock-in-trade - conversion of land into stock-in-trade - joint development agreement - The assessee had received a sum of ₹ 32 crores for assigning the development rights on the said land - Held that:- Ideally, once the assessee has received a sum of ₹ 32 crores from Piramal Holdings Ltd., the assessee has as developer should have adjusted the amount against the cost and should have taken the amount to the Balance Sheet as reduced work-in-progress rather than showing it as business income. In any case, this claim of deduction has to be allowed on the peculiar facts of the assessee’s case. The findings and the conclusion drawn by the learned Commissioner (Appeals) as well as the Assessing Officer cannot be upheld for this reason alone. In fact, this is merely an arithmetical adjustment of accounts so as to disclose the correct profit from the sale of stock, otherwise either the income offered and assessed in the assessment year 2004-05 is incorrect or the claim for reduction in the stock of ₹ 8,20,25,000 is incorrect. Both cannot be held to be incorrect simultaneously because it will leading to a double jeopardy to the assessee - Decided in favour of assessee. Sharing of rental income with the developer of land / property - transfer of income by overriding title or not - Held that:- AO himself while treating the income from sales, has accepted the revenue sharing basis of 78% and 22%. Therefore, this principle and ratio was to be applied on rental income also. The findings of the CIT(A) that the entire development agreement is a kind of financial arrangement for obtaining the loan is wholly erroneous because the sum of ₹ 32 crores, which was paid by the developers to the assessee at the time of entering the development agreement, has been shown as business income in the assessment year 2004-05, which has been assessed and accepted as such by the Department. Thus, the said reasons given by the learned Commissioner (Appeals) cannot be upheld that this was some kind of loan / finance arrangement - Decided in favour of assessee.
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