TMI Blog2013 (9) TMI 1258X X X X Extracts X X X X X X X X Extracts X X X X ..... f 60%. In its ground No.4, grievance of the Revenue is on directions of the CIT(Appeals) to scale down the disallowance of business promotion expenses from 20% to 10%. 4. As against above, assessee in its cross appeal is aggrieved that E-Store Software expenditure and digitalization development charges claimed as revenue outgo was not allowed. Assessee is also aggrieved on the sustenance of the disallowance on business promotion expenses at 10% by ld. CIT(Appeals). 5. Ground No.1 of the Revenue on short term capital gains is taken up first for disposal. 6. Facts apropos are that assessee had acquired 2.5 acres of agricultural land in Survey Nos.206/1, 212/3, 212/4, 212/5, 212/6, 214/2A, 214/3, 214/4, 214/7 and 204/8 at Uthandi Village, Tambaram Taluk in Kancheepuram District of Tamil Nadu on 29.3.2006 for a total consideration of ₹ 81,04,464/-. These were sold by the assessee on 24.12.2007 through an agreement for sale. A registered power of attorney was also executed on 5.12.2007. The consideration, as per agreement, was ₹ 7,50,00,000/-. Assessee in his return of income claimed that the gains arising on the sale could not be taxed as capital gains since wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd provided, for which a notification was issued by the Central Government. In other words, as per ld. CIT(Appeals), if an agricultural land was located out of jurisdiction of a Municipality, Cantonment Board, then it would not be a capital asset unless it was situated within a limit of 8 KMs from a Municipality or Cantonment Board which was notified for this purpose. As per ld. CIT(Appeals), land sold by the assessee was located at a distance of more than 18 KMs from outer limits of Tambaram Municipality and more than 8 KMs outside the limit of Chennai Municipal Corporation. Ld. CIT(Appeals) noted that there were no other Municipalities or cantonments nearer to the location of the lands other than Tambaram Municipality or Chennai Municipal Corporation. Ld. CIT(Appeals) held that A.O. fell in error in relying on Notification issued by the Government on 19.7.2011, which expanded the limits of Chennai Corporation on a subsequent date. As per the ld. CIT(Appeals), this was brought to the notice of the Assessing Officer by the assessee on 30.12.2011 itself. Thus he held that the land, which was certified as agricultural land by the revenue authorities in the Adangal record and whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... December, 2011 filed by the assessee before the Assessing Officer, copy of which has been placed at paper-book pages 9 10, it was explained that Uthandi was included in Chennai Corporation only in July, 2011 by Government Order No.97 dated 19.7.2011. It was after such expansion, Uthandi Village fell within St. Thomas Mount Taluk, Kancheepuram District. Prior to this, it was not within Chennai Municipal Corporation. That Uthandi was not within the limits of Chennai District or Chennai Municipality was certified by the Village Administrative Officer by his certificate dated 10.1.2009 placed at paper-book page 8. Despite all these records, the A.O. held that the land was agriculture in nature. Further, as per the learned A.R., assessee had in his return of income showed agricultural income of ₹ 52,500/-, which was not disputed by the Department. Assessing Officer having accepted the agricultural income could not say that the land was not agricultural. Therefore, according to her, the CIT(Appeals) was justified in holding that gains arisen out of sale of such land could not be considered as exigible to tax. 11. We have perused the orders and heard the rival submissions. Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette; 12. Once an agricultural land is located beyond 8 KMs from the local limits of nearest Municipality or Corporation, then it would automatically go out of definition of capital asset . Ld. CIT(Appeals) had given a clear finding, after going through the Government Order No.97 dated 19.7.2011, that in the year in which assessee sold the land, it was not within Chennai Municipal Corporation limits. No doubt, the price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, held that the invoices produced by the assessee did show digitalization work as well as acquisition of software from M/s Raising Solutions P. Ltd. As per the CIT(Appeals), just because the work was done by a group concern, it could not be considered as not genuine. Nevertheless, according to him, it could only be considered as capital expenditure. As per ld. CIT(Appeals), the payment resulted in acquisition of an intangible asset in the nature of computer software. He held that assessee was entitled for depreciation at 60%. Thus, while upholding the disallowance, he directed the A.O. to give the benefit of depreciation at 60%. 18. Now before us, Revenue is aggrieved on the directions of CIT(Appeals) to give 60% depreciation considering the expenditure as resulting in acquisition of software, whereas, assessee is aggrieved that the amounts spent were not allowed as revenue outgo. 19. Learned D.R., strongly assailing the order of CIT(Appeals), submitted that assessee could not show that any software was acquired from M/s Raising Solutions P. Ltd. Further, according to learned D.R., the purchase was made from a related party. 20. Per contra, and in suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified in claiming the outgo as revenue in nature and not treating it as capital expenditure. We are, therefore, inclined to accept the grounds raised by the assessee. 22. Since we are allowing the claim of assessee for revenue outgo, grounds raised by the Revenue in this regard have become infructuous. 23. Ground No.3 of the Revenue stands dismissed, whereas, grounds 1,2 and 3 of the assessee are allowed. 24. The last issue in these appeals is on business promotion expenditure. Assessing Officer had disallowed 20% of the claim, whereas CIT(Appeals) scaled down the disallowance to 10%. Assessee is aggrieved on sustenance of 10%, whereas, Revenue is aggrieved on the scaling down of the disallowance to 10% 25. Disallowance of 20% on business promotion expenditure was made by the Assessing Officer for a reason that proper evidence was not produced by the assessee. Total claim for business promotion expenses was ₹ 40,19,830/-. Ld. CIT(Appeals) considering the nature of business of the assessee and volume of his turnover, gave a finding that 20% disallowance made was excessive and unreasonable. He scaled down it to 10%. 26. We find no good reason to interfere wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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