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The DCIT-2 (1) , Mumbai Versus The Estate Investment Co. P. Ltd. and vica-Versa

2016 (2) TMI 826 - ITAT MUMBAI

Claim of expenditure under the head business income - CIT(A) allowed the claim - Held that:- CIT(A) had noted that the business activity of the assessee continues and therefore the relevant corresponding expenditure is allowable. While observing that the expenditure claimed by the assessee’s in its business of trading in derivates, other securities and money lending was substantial when compared to meagre income/revenue therefrom, the Ld. CIT(A) held that the expenditure necessary for maintainin .....

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trading of derivates, other securities, and money lending continues in the year under consideration, even though on a much reduced volume and scale, the expenditure claimed in respect of such business income is to be allowed to the extent that they are necessary for maintaining the corporate existence of the assessee or those expenses which are related to such business - Decided against revenue

Sale consideration received on sale of ‘ownership land’ - business income or capital gain - .....

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ed as capital gains, since the assessee had declared the same as income from capital gains, no cogent reasons or evidence has been put forth by the Ld. DR to controvert the factual findings of the Ld. CIT(A) and also those of the AO that the income from sale of ‘ownership lands’ is to be assessed as business income. In the facts and circumstances of the case as discussed above, we concur with the findings and reasoning of the Ld. CIT(A) that, in view of the frequency of sale of ‘ownership lands’ .....

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pplicable in the case of in case business income in view of the decision of inter alia, Indralok Hotels P. Ltd.(2009 (2) TMI 235 - ITAT BOMBAY-I ) - Decided against revenue

Allowance of expenses claimed by the assessee as the computation has started from net profit - Held that:- we concur with the observation of the Ld. CIT(A) that the AO at para 9 of the Order of assessment, while assessing the transfer of ‘ownership lands’ as business income, has allowed all expenses claimed by the .....

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rectors etc. In this factual matrix as laid out above, we concur with the order of the Ld. CIT(A) in holding that all expenses, other than that part of the legal expenses, relating to ‘Eksali lands’ and those for maintaining the corporate existence of assessee and for the assessee’s trading in derivatives, other securities and money lending, are to be allowed against business income from sale of ‘ownership lands’. - Decided against assessee - ITA No. 1105/MUM/2013, CO No. 65/MUM/2014 - Dated:- 2 .....

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nvestment in derivatives, other securities and money lending and also derives income from sale of land and sale of rights in land situated in Bhayander, Mira Road and Ghodbunder in Thane District, Maharashtra. For Asst. year 2009-10, the assessee filed its return of income on 30/09/2009 declaring income of ₹ 2,80,70,760/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (in short the Act ) and the case was subsequently taken up for scrutiny. 2.2 From the record, it is seen .....

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bjadar land ), the AO held them to be business activity and allowed business expenses, making the assessment thereunder on a protective basis. Apart from this, the assessee is also right holder (Eksali lands) in various plots of land in Mira, Bhayandar and Ghodbunder in Thane District, Maharashtra. The assessee has offered capital gains or loss on transfer of such lands. The assessee adopted the cost as on 01/04/1981 at market value as per Regd. Valuer s report and the consideration received as .....

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s determined by the DVO . In respect of Eksali lands , the AO has taken the cost as on 01/04/1981 at 10% of the ownership lands in the ratio of the reckoner value of ownership lands and actual sale consideration of Eksali lands as declared by the assessee. The capital gains declared by the assessee on account of Kabjadar lands have also been assessed by the AO as business income on a protective basis. 2.3 In addition to the above, the AO also disallowed brokerage of ₹ 4 lacs and profession .....

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manner laid out in paras 2.1 to 2.3 of this order (supra), the AO concluded the assessment for Asst. year 2009-10 u/s 143(3) of the Act vide order dt. 30/12/2011, wherein the income of the assessee was determined at ₹ 10,54,79,550/- and the assessment of business income on protective basis was determined at ₹ 6,28,08,800/-. 3. Aggrieved by the order of assessment for Asst. year 2009-10 dt. 30/12/2011, the assessee preferred an appeal before the CIT(Appeals)- 4, Mumbai raising variou .....

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is hardly any activity relating to derivatives and finance during the previous year. 3. (a) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in treating the sale consideration received on sale of ownership land as business income. The Ld. CIT(A) did not appreciate the fact that the land was owned by the assessee for a long period of time and it had shown in the Balance sheet as investments. (b) On the facts and in the circumstances of the case and in law, th .....

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AO of an identical amount in the computation forming part of the order. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that income from transfer of ownership lands is to be assessed as business income, thereby overlooking that the fact the assessee had shown it as income from capital gains and he assessing officer also had assessed it under the head capital gains. 6. For these and other grounds that may be urged at the time of hearing, the de .....

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purposes . The Ld. DR was heard in the matter and supported the action of the AO in disallowing the said expenditure on the grounds that there is no sufficient business activity or income therefrom, to justify the voluminous expenses claimed under the head business income. 5.2 Per contra, the Ld. AR supported the order of the Ld. CIT(A) in allowing the expenditure claimed against business income during the year under consideration. It was submitted that the same business activity has been carri .....

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the assessed is in the business of derivative transactions, other securities and money lending for the last 2 decades, but though their revenues have reduced considerably recently, the assessee s business activity is in existence in the year under consideration. The Ld. AR submits that it is in this context that the Ld. CIT(A) allowed the expenses necessary for both maintaining the corporate existence of the assessee and for the assessee s trade in derivatives, other securities and money lending .....

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under consideration, whereas the expenditure claimed against meagre income was substantial and not justified. It is seen that the AO inspite of acknowledging that the assessee s business activity in trading of securities, derivates and money lending still continues in this year also, though on a smaller scale, proceeded to summararily disallow the entire expenditure claimed in this regard on the ground that the same were not incurred for business purposes. This action of the AO, in our view, was .....

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from, the Ld. CIT(A) held that the expenditure necessary for maintaining the assessee s corporate existence or expenditure relating to the assessee s trade in derivates, securities and money lending are to be allowed. The finding of the Ld. CIT(A), in our considered view, is reasonable in the facts and circumstances of the case. Before us, except for raising this ground, Revenue has filed to controvert the finding of the Ld. CIT(A) on this issue. In this view of the matter, we uphold the finding .....

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issed. 6. Grounds No. 3 and 5 6.1 In these grounds, which are interconnected, Revenue contends that the Ld. CIT(A) erred in treating the sale consideration received on sale of ownership land as business income, without appreciating the fact that the lands were owned by the assessee for a long period of time, and being shown as an investment in the balance sheet, as such it should have been assessed as capital gains. It was also contended that the provisions of Section 50C were applicable on sale .....

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record. It is seen from the order of assessment that the assessee had declared the income from sale of Ownership Lands as capital gains/loss. The AO while completing the order of assessment, at para 9 thereof has also assessed the income from sale of ownership lands as business income on a protective basis, while at the same time accepting the same as capital gains as declared by the assessee in the return of income. We find that on appeal, the Ld. CIT(A) observing that since the actively of sa .....

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income from capital gains, no cogent reasons or evidence has been put forth by the Ld. DR to controvert the factual findings of the Ld. CIT(A) and also those of the AO that the income from sale of ownership lands is to be assessed as business income. In the facts and circumstances of the case as discussed above, we concur with the findings and reasoning of the Ld. CIT(A) that, in view of the frequency of sale of ownership lands ; the fact that the same was treated as stock-in-trade and the exten .....

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capital assets for computing LTCG, we find from a perusal of the impugned order that the Ld. CIT(A) has rendered no such finding. The Ld. CIT(A) has in fact held that the provisions of Section 50C of the Act are not applicable in the case of in case business income in view of the decision of inter alia, Indralok Hotels P. Ltd.(32 SOT 419)(Mum). We therefore reject ground no.3 (b) raised by revenue. 6.3.3. In respect of revenues claim in grounds no.4, that the Ld. CIT(A) erred in concluding that .....

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