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TMI Blog2019 (10) TMI 775X X X X Extracts X X X X X X X X Extracts X X X X ..... S on certain cases, issued by CBDT vide F.No. 275/53/2012-IT(b)/SO 3069(E), dated 31.12.2012. 3. The Appellant craves to be allowed to add any fresh ground(s) of appeal and / or delete or amend any of the ground(s) of appeal." (B) The case was selected for scrutiny assessment and the original assessment was completed U/s 143(3) of the Income Tax Act, 1961 ("I.T. Act", for short) on 26.02.2014 by determining the assessable income as under: 1. Disallowance u/s 40(a)(ia) Rs. 4,05,970/- 2. Disallowance u/s 14A Rs. 40,55,600/- (B.1) Thereafter, penalty U/s 271(1)(c) of I.T. Act was levied by the Assessing Officer ("AO", for short) vide order dated 26.02.2016, amounting to Rs. 16,47,08,371/- which was @ 100% of tax sought to be evaded. Against the penalty order dated 26.02.2016, assessee appealed before the Ld. CIT(A), who, vide her order dated 26.09.2016 deleted the aforesaid penalty U/s 271(1)(c) of I.T. Act, and allowed the appeal of the assessee. The present appeal before Income Tax Appellate Tribunal ("ITAT", for short) has been filed by Revenue against the aforesaid order dated 26.09.2016 wherein Ld. CIT(A) deleted the penalty. At the time of hearing before us, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts for each of the year has not been holding any land as stockin- trade. In the preceding assessment year 2008-09 when a small portion of the land was sold, the assessee incurred a loss of Rs. 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 above aspects and in fact have not brought any material or evidence relating to the preceding three years whereby the intention and declaration of the assessee company is so categorical to demonstrate that what was declared and intended was not true. Thus the finding of the Assessing Officer and learned CIT(A) both are without any supporting material to hold that income arising from sale of land is not from the sale of a capital asset but business income. 20. The Assessing Officer and learned CIT(A) both have referred to another agreement entered into during the year by the assessee compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 is to be considered as business income. This contention of the learned DR is not sustainable. Income whether it is from rent, business or income from other sources such as interest, etc. including capital gain is to be shown in the profit and loss accounts of the company. As per the Companies Act every company is required to prepare its profit and loss account and in such profit and loss account it is supposed to include every type of income not only the business income. 'On the contrary, as rightly argued by the learned AR, the profit and loss account supports the contention of the assessee that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock-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 of Sultan Bros (P) Ltd. vs. CIT 51 ITR 353 (SC) also supports the case of the assessee on this issue. As stated by us hereinabove, there is no material or evidence brought on record by the AO or referred to by the Ld. CIT'(A) that the land held by the assessee was not a capital asset particularly, keeping in view the fact that its statement in the books of account and the disclosure in the balance sheet is certified by the auditors and also filed with the Registrar of Companies. We have also perused the profit and loss account of the preceding years starting from F.Y. 2005-06. On going through the same it is apparent that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 SLP filed against the above judgment stand dismissed by the Hon'ble Supreme Court vide order dated 15th November, 2010. The judgment of the Hon'ble Supreme Court in the case of G. Venkataswami Naidu vs ClT 35 ITR 594(S.C) relied upon by the Assessing Officer as well as learned CIT(A) in fact supports the case of the assessee whereby the Honourable Supreme Court has held as under :- "If a person invests money in land intending to hold it, enjoys its income for some time and then sells it at a profit, then it would be a clear case of capital accretion and not profit derived from an adventure in the nature of trade." 28. The Hon'ble Supreme Court in i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 into an agreement with M/s Vatika Ltd. in respect of development of its land during the AY in question which it had acquired in the year 2005-06 and had shown as a capital asset. There was no conversion of capital asset into stock-in-trade. The ITAT found that there was no transaction for the AY in question in relation to said capital asset. 4. Significantly, the ITAT noticed that the Assessee had classified the land in question as capital asset from AY 2006-07 onwards. It had not claimed any expenditure in relation to such land. In the accounts for each of the year it had not shown any land being held as stock-in-trade. In the AY 2008-09, a small portion of the land was sold and the loss th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmed 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 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. 13. Lastly, in so far as disallowance u/s 14A is concerned, Ld. Counsel has submitted 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 of the Judgement of Hon'ble Jurisdictional High Court in the case of Cheminvest vs. ITO. (2015) 378 ITR 33 (Delhi) wherein Hon'ble Court has held that once there is no exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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