TMI Blog2019 (1) TMI 1330X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. Once a benevolent circular has been issued to remove the hardship for the assessee then it cannot he held that any such payment made prior to the said circular which was causing hardship to the assessee should continue. It is a well settled proposition that CBDT Circular removing the hardship in favour of the assessee has to be treated as retrospective and accordingly, we hold that no disallowance u/s 40(a)(ia) can be made for non deduction of TDS. In the result this issue is decided in favour of the assessee. Disallowance u/s 14A - Held that:- Admittedly there is no dividend on exempt income earned by the assessee and accordingly no disallowance u/s 14A can be made in view of the issue in the case of Cheminvest vs. ITO. [2015 (9) TMI 238 - DELHI HIGH COURT] wherein as held that once there is no exempt income earned by the assessee, then no disallowance u/s 14A can be triggered. Accordingly, in view of the binding judicial precedent in the case of Cheminvest Ltd. (SUPRA), we hold that in absence of any exempt income earned by the assessee, no disallowance can be made u/s 14A. Thus, this issue is allowed in favour of the assessee. - ITA No.:- 1823/Del/2015 - - - Da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Planning, Haryana. From the said letter he inferred that assessee has no intention to develop the said land for its own house, but the reason for development sought by the assessee was purely for business activity. The assessee used to provide land to the developer who in turn used to develop the said land. He has referred the judgment including of Supreme Court in the case of G. Venkataswami Naidu and Company vs. CIT 35 ITR 594 and held that assessee has purchased and sold the land which was clearly an adventure in the nature of trade and therefore, sale proceed has to be treated as business income of the assessee and accordingly he taxed sum of ₹ 119,86,86,889/- as business income. 4. Ld. CIT (A) has decided the appeal ex parte after noting that various notices sent to the assessee remained uncomplied with. She also referred to Memorandum of Association and the main objects of the assessee company which was to carry on the business of construction of residential houses, etc.; and to act as builder/colonizers; to purchase, take on lease, sell and mortgage any estate, to buy any immovable property etc. She has also referred the income tax return for the assessment year 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the transactions are adventure of the nature of trade is determined on the basis of nature of activity, intention and conduct. The appellant company is purchasing and selling land on regular basis. These do not appear to be any compulsion for the appellant to sell land which it had purchased. No steps were taken by the appellant to utilize the land purchased either by way of cultivation or farming or to build on it. It could not be assumed that the purchase of open plots land could involve any pride of possession to the appellant. The appellant has purchased land, with the sole intention to sell them consolidate its holding and sell them in series of transactions at a convenient time. The appellant s main objects of business, the intention of the appellant company in purchasing the property, the length of its ownership and holding the conduct and subsequent dealings of the appellant in respect of the properties, the manner of its disposal and frequency and multiplicity of transaction proves that the appellant was carrying on trading activity and the transactions are adventure in the nature of trade. Therefore, the income from sale of land is to be assessed as business inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account and has also disclosed the same as capital asset in the annual accounts for the financial year 2005-06 i.e. A.Y. 2006-07. This classification as capital asset has continued in the subsequent years as well. There is no adverse material or finding in relation to this land being held as capital asset. The assessee has also not claimed any expenditure in relation to this land. On going through the profit and loss account for each year it is also evident that the assessee had a column of purchase land whereby it has shown 'nil' figure every year. Thus the assessee in the accounts for each of the year has not been holding any land as stock-in-trade. In the preceding assessment year 2008-09 when a small portion of the land was sold, the assessee incurred a loss of ₹ 23,33,205/-. This loss was also declared as capital loss and was not set of against any other income. From these facts it is quite clear that the intention as well as declaration both confirms the assessee's stand that the land was being held as a capital asset. There, is no change of position in the year under consideration also. 19. The Assessing Officer as well as learned CIT(A) are silent on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) in the case of such conversion also the income till the date of conversion is computed on -the basis of fair market value as on the date of the transfer is to be assessed as capital gain and income arising over and above fair market value after such conversion is to be assessed as business income and that too in the year in which the ultimate sale takes place. Thus the agreement entered into with M/s Vatika about the other land will not change the transaction under consideration keeping in view the fact that the land from the date of its purchase is being continuously held as a capital asset and there is no material or evidence whatsoever to allege that the land so held was not a capital asset. Considering these facts we do not consider it relevant to go into further arguments advanced by the learned AR that the gain arising by entering into an agreement with M/s Vatika will also not be chargeable as business income as the holder of a capital asset is entitled to maximize its gain if it can be so achieved by entering into such arrangement. 22. As regards the contention of the learned DR that the assessee has shown this gain as part of the profit and loss account and hence it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y stock in trade, consumables, stores or raw materials held for the purposes of the business or profession. . 25. On going through the above definition it is quite clear that capital asset does not include any stock-in-trade, consumable stock or raw material held for the purpose of business or profession, In the present case, as is evident from the facts on record, this land was not held as stock-in-trade. Thus the reliance by the Assessing Officer as well as learned CIT(A) on the objects clause of the Memorandum and Articles of Association is not justified. An assessee carrying on the business and holding the asset as stock-in-trade, the income arising there from will definitely be business income. But if the assessee though having object clause of carrying on the business of real estate 'in the Memorandum and Articles of Association but holding land as capital asset, that land will not become stock-in trade because the Memorandum and Articles of Association has an object clause to carry on the business of the real estate. An income has to be assessed under the head as per the provisions of the Income Tax Act. The judgment of the Honourable Supreme Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al has correctly applied the principle of law in accepting the position that it is open to an assessee to maintain two separate portfolios, one relating to investment in shares and another relating to business activities involving dealing in shares. The Tribunal held that the delivery based transactions in the present case, should be treated as those in the nature of investment transactions and the profit received there from should be treated either as short-term or, as the case may be, longterm capital gain, depending upon the period of the holding. The Tribunal has observed in its judgment that the assessee has followed a consistent practice in regard to the nature of the activities, the manner of keeping records and the presentation of shares as investment at the end of the year, in all the years. The Tribunal correctly accepted the position that the principle of res judicata is not attracted since each assessment year is separate in itself. The Tribunal held that there ought to be uniformity in treatment and consistency when the facts and circumstances are identical, particularly in the case of the assessee. This approach a/the Tribunal cannot be faulted. 27. The SL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m capital gain and the Assessing Officer and Learned CIT (Appeals) were not right in treating the income as business income. Accordingly the Assessing Officer is directed to assess the income as capital gain. Thus the appeal is allowed, 3l. In result, the appeal is allowed. 9. The judgment of the Tribunal was appealed by the revenue before the Hon ble Delhi High Court, wherein the Hon ble Court has confirmed the order of the Tribunal and dismissed the revenue s appeal in the following manner :- 1. This appeal by the Revenue is directed against the order dated 23rd October 2015 passed by the Income Tax Appellate Tribunal ( ITAT ) in ITA No. 5754/Del/2013 for the Assessment Year ( AY ) 2009-10. 2. The question sought to be urged by the Revenue is whether the ITAT was correct in holding that the Assessing Officer ('AO') and the Commissioner of Income Tax (Appeals) ['CIT (A)'] were not right in treating the income of the Assessee as business income and in accepting the plea of the Assessee that the income should be assessed as capital gain from the sale of land? 3. The Assessee was formed with the main object of dealing in The Assessee entered i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain chargeable u/s 45(2). Thus, the order of the AO and Ld. CIT (A) in treating it as a business income is reversed and the assessee s claim for taxability of such gain on sale of land under the head capital gain is affirmed. In the result, ground raised by the assessee on this score is allowed. 11. In so far as disallowance u/s 40(a) (ia) is concerned, it is seen that AO has made disallowance on the ground that assessee should have deducted TDS and bank commission / guarantee fee. He has also took note on CBDT Circular No. 56/2012 and held that the said notification was only applicable from 1st January, 2013; and therefore, this notification will not apply upon the assessee. Ld. CIT (A) too has confirmed the said addition. 12. On perusal of the said CBDT circular, it is seen that CBDT has clarified that no TDS is required to be deducted on bank guarantee Commission, etc. Such a circular was brought to reduce the hardship and the compliance cost of the assessee. Once a benevolent circular has been issued to remove the hardship for the assessee then it cannot he held that any such payment made prior to the said circular which was causing hardship to the assessees should co ..... 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