TMI Blog2016 (5) TMI 702X X X X Extracts X X X X X X X X Extracts X X X X ..... ock 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 is well settled that prior to introduction of provisions of section 43CA in the Statute Book by the Finance Act 2013 w.e.f. 1.4.2014, the provisions of section 50C of the Act could not be made applicable for assets held as stock in trade. The case relied on by the Learned AR in this regard on the decision of the Hon’ble Madras High Court in the case of CIT vs Thiruvengadam Investments Pvt Ltd reported in (2009 (12) TMI 48 - MADRAS HIGH COURT ) 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. - Deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the aforementioned expenditure are not business expenditure. We hold that these expenditures are regularly incurred for the purpose of business of the assessee in its normal course. - Decided against revenue Disallowance u/s 14A - 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 only result in taxable income and therefore outside the scope of primary intention of section 14A of the Act. Hence we hold that the Learned CIT(A) had rightly reduced the same while computing 0.5% of average value of investments. - Decided against revenue - ITA No. 505/Kol/2012 A.Y 2008-09 - - - Dated:- 6-4-2016 - Shri N.V. Vasudevan, Judicial Member, and Shri M. Balaganesh, Accountant Member For The Appellant : Shri Pinaki Mukherjee, JCIT, ld.Sr.DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of M/s Nice View Properties Private Limited as on 31.3.2000, there is an item comprising closing stock of commercial flats amounting to ₹ 10,48,320/- held as stock in trade in its balance sheet. The assessee, pursuant to amalgamation, brought forward the same as Stock in Trade in its books. This admittedly represent the value of Unit No. 407B which was subjected to sale during the asst year under appeal along with other asset. Hence the dispute before us is on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Private Limited were simply carried over by the assessee at book values pursuant to amalgamation with effect from 1.4.2000. It is not in dispute that M/s Nice View Properties Private Limited had held 284 Sq. ft amounting to ₹ 8,56,122/- (book value) as on 31.3.2000 as Fixed Assets comprising of Unit No. 407A. 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 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 gains arising on transfer of the same would only result in b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve that they had performed the work for the assessee. Since 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 Anup Kumar Shukla independently confirmed having developed the properties in question but nevertheless, the A. O. disregarded their confirmation merely on the ground that during the year they worked only for the appellant and that they had shown the receipts from the appellant under the head, Income from Other sources . On this point, I agree with the submissions of the A/R that these are irrelevant considerations for making disallowances. As regards the case of Anup Kumar Shukla, I observe that the A.O. disallowed the expenses because Sri Anup Kumar Shukla could not be contacted when the Inspector visited his place and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to the non-availability of Mr.Anup Kumar Shukla at the time at which Inspector visited 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 ₹ 2,86,664/- 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 circumstances of the case in the sum of ₹ 2,40,000/-. 4.1. The brief facts of this issue is that the assessee was in receipt of monies from Smt.Gendi Devi Bindawala amounting to ₹ 1,30,000/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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/- Medical Expenses Rs.1,22,952/- Service Charges ₹ 48,000/- Staff Welfare ₹ 2,247/- Repairs (office) ₹ 73,955/- Prof Consult. fees Rs.46,500/- Telephone Exp. Rs.32,686/- Total: Rs.5,07,654/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 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 to ₹ 45,188/- by reducing the average value of investments in commercial flats as not eligible for disallowance under Rule 8D(2)(iii) of the Rules. Aggrieved, the revenue is in appeal before us on the following ground:- 5. On the facts and in the circumstances of the case, the ld.CIT(A)-VIII erred in law in deleting the addition u/s. 14A of ₹ 29,127 as non-business expenses. 6.2. The Learned DR vehemently relied on the order of the Learned AO. In response to this, the Learned AR vehemently relied on the order of the Learned CIT(A). 6.3 We have heard the rival submissions. We find that the invoking the provisions of Rule 8D(2)(iii) of the IT Rules, being 0.5% of average value of investments, for the purpose of making disallowance u/s 14A of the Act, is not in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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