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2015 (3) TMI 644 - AT - Income TaxLong term capital gain - treatment to agriculture land - whether the assessee is liable to pay tax only on the capital gain earned on the sale of its agricultural land situated at village Kishora, Sonepat, Haryana, as the same being out of the purview of definition of capital asset as per Section 2(14)(iii)? - Held that:- We find that the A.O. has relied upon the information dated 14.03.2013 of the District Town Planner, Sonepat and the learned CIT(A) has also referred their letter dated 16.05.2014 in this regard that village Kishora is within 8 kms. limits of Municipal Council, Sonepat. This information has been contradicted by the District Town Planner, Sonepat, vide its letter dated 30.12.2013 that village Kishora is more than 8 kms. from the Municipality, Sonepat (page 106). We thus find that the District Town Planner is not clear on their stand nor they have mentioned about the mode, either aerial or motorable road adopted for the measurement of the distance. We, therefore, in the interest of justice, set aside the matter to the file of the Assessing Officer to examine the veracity of these two letters, one issued by Tehsildar, Sonepat and the another by Council Engineer, Municipal Council, Sonepat, as well as the mode i.e. aerial or motorable road for calculation of the distance adopted by the District Town Planner, Sonepat, followed by the A.O. as well as learned CIT(A) and decide the issue afresh about the distance in view of notification dated 06.01.1994 as land in question has been sold during the period falling in the A.Y. 2010-11, and our observations, after affording opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Disallowance of business expenses - AO disallowed the claim of the assessee on the basis that there were no business receipts - Held that:- Genuine expenditure incurred in the business cannot be denied only on the basis that there was no business receipts. The further contention of the learned AR remained that similar expenditure was allowed to the assessee in the assessment years 2006-07 to 2008-09 while in the assessment year 2009-10, there was no interest expenditure claimed by the assessee company. In the present year under consideration, interest income has been declared and various expenditures under the different heads was claimed. The further contention of the learned AR remained that the business expenditure relates to business activities of the assessee and during the year, no such expenditure was found which was either capital or personal in nature and there is nothing personal in nature, once expenditure relates to the assessee company. It was also submitted that the assessee has declared not only business income from agricultural activities but also earned interests on the funds kept in the bank. We find that the AO has made disallowance merely on the basis that no business activities were carried during the year, without examining the nexus between those expenses and the purpose on which those were spent for. We thus set aside the matter to the file of the A.O. to examine the claim and dispose of the issue by passing a speaking order after hearing the assessee. - Decided in favour of assessee for statistical purposes. Disallowance of agricultural income - Held that:- Issue raised needs fresh consideration also keeping in mind that the assessee has not claimed benefit of exemption of agricultural income and the affidavit of the farmer confirming that the land was on batai filed as additional evidence before the learned CIT(A) has remained to be examined. The Assessing Officer is thus directed to decide the issue afresh after verifying the above submission of the assessee as well as the affidavit filed before the learned CIT(A) and after affording opportunity of being heard to the assessee.- Decided in favour of assessee for statistical purposes. Treatment of interest income - income from other sources or business income - Held that:- when interest income is part of assessee’s business activities and regularly been assessed, the action of the A.O. in making assessment under the head “income from other sources” cannot be justified. We also find substance in the alternative contention of the learned AR that even otherwise interest income has to be assessed after deducting interest expenditure. We thus set aside the matter to the file of the Assessing Officer to verify the above claim of the assessee and decide the issue afresh, after affording opportunity of being heard to the assessee - Decided in favour of assessee for statistical purposes.
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