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2016 (5) TMI 702 - ITAT KOLKATA

2016 (5) TMI 702 - ITAT KOLKATA - TMI - Addition towards capital gains - invoking provisions of section 50C - Held that:- AO had simply disregarded the stand of the assessee by observing that a single unit (i.e Unit No. 407) cannot be divided as capital asset and stock in trade as shown by the assessee. We find that this observation is totally contrary to the order of amalgamation approved by the Hon’ble Calcutta High Court , wherein the manner of treatment of assets by M/s Nice View Properties .....

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s also not in dispute that M/s Nice View Properties Private Limited had held 850 Sq. ft amounting to ₹ 10,48,320/- as closing stock of commercial flats as Stock in Trade as on 31.3.2000 comprising of Unit No. 407B. The same treatment was followed by assessee in its books of accounts post amalgamation period. Hence the gains arising on transfer of the same would only result in business income. The same treatment was followed by assessee in its books of accounts post amalgamation period. It .....

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heet of the assessee for the financial year 2007-08, that the assessee had duly reflected the value of Unit No. 407B at ₹ 10,48,320/- as stock in trade as on 1.4.2000. Hence there is no question of treating the same as capital asset and invoking section 50C for the purpose of computing capital gains on sale of the same. - Decided against revenue

Addition towards alleged bogus construction expenses - Held that:- Revenue had not brought any evidence on record to prove that the dev .....

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his premises, we find that the Learned CIT(A) had observed that no person could be expected to always remain available at his place of work and secondly it is not the case of the Inspector that there was no such person at the place. This aspect also has not been controverted by the Learned DR before us. In view of the aforesaid facts and findings, we hold that the assessee had duly bifurcated the development expenses of ₹ 11,44,634/- towards Unit No. 407A (capital asset) at ₹ 2,86,6 .....

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fairly agreed. Hence we deem it fit and appropriate, in the interest of justice and fairplay, to set aside this issue to the file of the Learned AO, to decide this issue afresh, in accordance with law, in the light of evidences and documents submitted by the assessee before him.

Disallowance of expenses - Held that:- We have held in the previous ground no.1, that the sale of Unit No. 407B which was held as stock in trade should be treated as income from business and had also given re .....

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4A - Held that:- The total value of investments included investment in commercial flats amounting to ₹ 58,25,442/- wherein, the resultant income would definitely not fall under the ambit of exempt income. The legislature never wanted to consider the entire investments for making disallowance u/s 14A. It only contemplated expenditure incurred for earning any income which do not form part of total income. Admittedly, the income that would arise out of investment in commercial flats would onl .....

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ld.AR ORDER SHRI M.BALAGANESH, AM This appeal of the revenue arises out of the order of the Learned CIT(A), VIII, Kolkata in Appeal No. 111/CIT(A)-VIII/Kol/10-11 dated 16-02-2012 against the order of assessment framed for the Asst Year 2008-09 u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ). 2. The first issue to be decided in this appeal is as to whether an addition towards capital gains could be made in the sum of ₹ 42,05,664/- in the facts and circumstances .....

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office units : Unit No. 407A measuring about 284 Sq.ft and the adjoining Unit No. 407B measuring about 850 Sq.ft - both aggregating to 1134 Sq.ft and that the entire Unit No. 407 was sold during the year under appeal. It was also pleaded that Unit No. 407A was held as Capital Asset and Unit No. 407B was held as Stock in Trade in the books right since the beginning. The Hon ble Calcutta High Court approved the order of amalgamation of various companies with the assessee company with effect from .....

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of M/s Nice View Properties Private Limited as on 31.3.2000, the following assets were reflected:- (in Rs.) Office premises at WDV 8,56,122.60 Cash in hand and at Bank 1,149.46 Income Tax deducted at source 5,00,676.00 Loans, Advances and Deposits Loans including interest 4,55,453.00 Security deposit against rent 3,00,000.00 Closing stock of commercial flats 10,48,320.00 18,03,773.00 Miscellaneous Expenditure to the extent not written off or Adjusted 2,394.00 Hence from the above balance sheet o .....

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income and the amount to be taxed thereon on sale of the said immovable properties. The Learned AO substituted the value determined by the stamp valuation authority for Unit No. 407B as full value of consideration and worked out capital gains. The assessee stated that the provisions of section 50C per se would not be applicable to Unit No. 407B as the same were held only as stock in trade and provisions of section 50C is applicable only for capital assets and not for stock in trade for the asst .....

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e being pointed out by reference to financial statements and Amalgamation order of Hon ble High Court , Calcutta, that the sold out immovable properties comprised two units : Unit No. 407A measuring about 284 sq.ft held as capital asset at book value of ₹ 8,56,122.60 as on 1.4.2000 and Unit No. 407B measuring about 850 Sq.ft held as Stock in Trade at book value of ₹ 10,48,320/- as on 1.4.2000 right since the beginning. As a matter of fact, these book values were the book values of M/ .....

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s Capital Asset and Unit No. 407B is being held as Stock in Trade by the assessee. Hence the objection raised by the Learned AR about the applicability of provisions of section 50C of the Act on asset held as stock in trade (Unit No. 407B) is appreciated and justified. We find that the Learned AO had simply disregarded the stand of the assessee by observing that a single unit (i.e Unit No. 407) cannot be divided as capital asset and stock in trade as shown by the assessee. We find that this obse .....

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reatment was followed by assessee in its books of accounts post amalgamation period. Hence the gains arising on transfer of the same would only result in capital gains. It is also not in dispute that M/s Nice View Properties Private Limited had held 850 Sq. ft amounting to ₹ 10,48,320/- as closing stock of commercial flats as Stock in Trade as on 31.3.2000 comprising of Unit No. 407B. The same treatment was followed by assessee in its books of accounts post amalgamation period. Hence the g .....

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s High Court in the case of CIT vs Thiruvengadam Investments Pvt Ltd reported in (2010) 320 ITR 345 (Mad) is very well placed. We also find from the balance sheet of the assessee for the financial year 2007-08, that the assessee had duly reflected the value of Unit No. 407B at ₹ 10,48,320/- as stock in trade as on 1.4.2000. Hence there is no question of treating the same as capital asset and invoking section 50C for the purpose of computing capital gains on sale of the same. In view of the .....

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ssee claimed that ₹ 11,44,634/- was spent for development of the property that were subjected to sale during the asst year under appeal. The Learned AO deputed his Inspector to verify the persons who performed the work. In the assessment order, the Learned AO had observed that the Inspector collected the profit and loss account and IT return details from the concerned parties except one, Anup Kr.Sukla. The Learned AO further observed from the IT returns of those parties that they had done .....

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nce nobody appeared before the Learned AO, he disallowed the entire development expenses of ₹ 11,44,634/- in the assessment while computing capital gains in respect of sale of Unit No. 407 by the assessee. On first appeal, the Learned CIT(A) observed as under:- After careful consideration of the submissions of the appellant, perusing the facts of the issue and the materials on records and the impugned assessment order, I observe that the A. O. records that all the concerned parties except .....

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bserve that the A.O. disallowed the expenses because Sri Anup Kumar Shukla could not be contacted when the Inspector visited his place and that no confirmation was given by said Anup Kumar Shukla in support of development works done by him for the appellant. The A/R of the appellant submitted that non-availability of Anup Kumar Shukla at one particular point of time when the Inspector visited his place cannot be the sole ground for making disallowance because no person is always available at his .....

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3.2008 is fallacious because it is normal in usual course of business. In the face of the above discussion, I am of the view that the A. O. was not justified in disallowing development expenses of ₹ 11,44,634/- Therefore, the addition of ₹ 11,44,634/- made by the A. O. is deleted. Aggrieved, the revenue is in appeal before us on the following ground:- 2. On the facts and in the circumstances of the case, the ld. CIT(A)-VIII erred in law in deleting the addition of Bogus construction .....

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icable. We find that the revenue had not brought any evidence on record to prove that the development work on the property was never carried out by the assessee through these parties. It only alleged that the parties had not done any development work in the past and had done only for the assessee during the asst year under appeal. This observation of the Learned AO had been found to be irrelevant consideration by the Learned CITA which has not been controverted by the Learned DR before us. With .....

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pment expenses of ₹ 11,44,634/- towards Unit No. 407A (capital asset) at ₹ 2,86,664/- which is to be granted deduction while computing capital gains and balance sum of ₹ 8,57,970/- towards Unit No. 407B (stock in trade) which is to be granted deduction while computing business income. Accordingly, the ground no. 2 raised by the revenue is dismissed. 4. The next ground to be decided in this appeal is as to whether an addition u/s 68 of the Act could be made in the facts and circ .....

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bmitted that the assessee along with its Director Sri Anurag Bindawala appeared before the Learned AO on 30.11.2010 togethe with the written submissions and documentary evidences including balance sheets of Smt.Gendi Devi Bindawala and Mr Raghav Bhartia and copies of their respective IT return acknowledgements to establish that the said amounts were earnest monies against immovable properties and not cash loans, but the Learned AO informed them that the order had already been passed and hence no .....

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n deleting the addition u/s. 68 of the I.T Act 1961 to the tune of ₹ 2,40,000/-. 4.2. We have heard the rival submissions. The Learned DR prayed that the additional evidences admitted by the Learned CIT(A) were never submitted before the Learned AO and hence prayed for set aside of this issue to the file of the Learned AO, for which the Learned AR fairly agreed. Hence we deem it fit and appropriate, in the interest of justice and fairplay, to set aside this issue to the file of the Learned .....

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. The next issue to be decided in this appeal is as to whether the Learned CIT(A) is justified in deleting the disallowance of expenses of ₹ 4,33,699/- in the facts and circumstances of the case. 5.1. The brief facts of this issue is that the assessee claimed the following as business expenditure :- Office Rent Rs.51,240/- Travelling Expenses Rs.1,04,918/- Printing & Stationery ₹ 21,194/- Professional Tax ₹ 2,500/- Internal Audit Fees ₹ 562/- Trade Licence ₹ 900 .....

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at a flat rate of 30% of net annual value. The Learned CIT(A) observed that the balance expenses of ₹ 4,33,699/- ( 507654-73955) are very much incurred for the purpose of business of the assessee company and also observed that it is not the prerogative of the Learned AO to decide what is necessary business expenditure and also held that there is no specific finding given by the Learned AO as to whether the said expenditure are personal in nature or are not exclusively incurred for the pur .....

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e the disallowance of expenses has been rightly made by the Learned AO. In response to this, the Learned AR vehemently relied on the order of the Learned CIT(A). 5.3. We have heard the rival submissions. We find that we have held in the previous ground no.1, that the sale of Unit No. 407B which was held as stock in trade should be treated as income from business and had also given relief to the assessee in ground no. 2 with regard to grant of deduction towards development expenses against the sa .....

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in this appeal is as to whether the disallowance u/s 14A of the Act could be made in the sum of ₹ 74,315/- in the facts and circumstances of the case. 6.1 The brief facts of this issue is that the assessee earned dividend income of ₹ 4,639/- and did not offer any amount for disallowance u/s 14A of the Act. The Learned AO invoked Rule 8D(2)(iii) of the IT Rules and calculated the disallowance u/s 14A of the Act at ₹ 74,315/-. On first appeal, the Learned CITA reduced the same t .....

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