TMI Blog2021 (4) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... view, there is no contradiction between the versions of agreements for sale and the submissions made by the assessee- firm to the arbitrator that the assessee- firm was desirous to develop the plots of land for earning profit and that there were fall in prices of properties. No adverse inference can be drawn. Before arbitrator, ld. Counsel stated that the assessee entered into the agreement with the hope they will be able to arrange a partner who will finance and that they tried to arrange finances for this deal. There is no evidence to controvert this submission. The arbitrator has given a finding of fact that the value of the property declined between the period 04. 01.2013 to 18. 02. 2013. The Assessing Officer has not found any evidence to controvert these findings of the arbitrator. Genuineness of this agreement to sale cannot be disputed by the Assessing Officer unless he examined the sellers of the land and unless he collects evidence to show that these are manipulated agreements which are arranged in connivance with other parties, for financial gain of the assessee and others involve in the events. This observation cannot lead into a conclusion that the agreements are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tners are merely releasing or relinquishing all their rights and interest in the firm on retirement and receiving the value of one s interest in the firm. No such documentary evidence was produced before us or before the lower authorities. No relief can be granted to the assessee in the absence of any details. This issue requires investigation into fresh facts which are not on record. Hence this additional ground cannot be admitted. Under these circumstances, we dismiss this ground of Cross Objection. - I.T.A. No. 26/KOL/2021 And C.O. No. 8/KOL/2021 (in I .T.A. No. 26/KOL/2021) - - - Dated:- 22-4-2021 - Shri J. Sudhakar Reddy, Accountant Member And Shri A.T. Varkey, Judicial Member For the Assessee : Shri S.M. Surana, Advocate For the Revenue : Shri John Vincent Donkupur Longistick, CIT ORDER PER SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER:- This appeal I.T. A. No. 26/KOL/ 2021 is filed by the Revenue directed against the order of ld. Commissioner of Income Tax (Appeals)- 13, Kolkata dated 08.06.2020, passed under section 250 of the Income Tax Act, 1961 ( the Act ). 2. There is a delay of 52 days on the part of the Revenue in filing this appeal befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to long- term capital gain, to this income. Aggrieved, the Revenue is in appeal before the Tribunal on the following grounds:- (1) On the facts and in the circumstances of the case and in law the ld. CIT(Appeals)-13, Kolkata erred in allowing relief to the assessee to the tune of ₹ 9,92,00, 000 /- being loss on purchase of land or earnest money paid. (2) On the facts and in the circumstances of the case, the ld. CIT(A) erred in law as well as on facts of the case by deleting the additions of ₹ 17,10,000 /-, made by the AO being brokerage paid by the assessee which rely upon judgment of Hon ble Calcutta High Court in the case of Alpha Hydronics Pvt. Limited in ITA No. 549 of 2004 dated 10.11.2014. (3) On the fact and in the circumstances of the case, the ld. CIT(A) erred in law as well as on the facts by not considering the amount of ₹ 22, 28,28,000 /- to be taxed as normal rate instead of taxed at special rate as LTCG. 4. The assessee filed the Cross Objection on the following grounds:- (1) For that the ld. CIT(Appeals) should have held that the capital gain declared u/s 45(4) was not at all taxable since the partners who contrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance the purchase of land. It was stated by the arbitrator as per his award dated 28.02. 2013 that, it was alleged the prospective buyer were not forthcoming in view of the decline in the price of the land during the intervening period. He submitted that the assessee without making solid provisions to raise funds by due dates, had agreed to pay the balance value of the land by 18.02. 2013 in two instalments which is not believable. He submitted that it does not make any commercial sense and hence the Assessing Officer has rightly disallowed the claim of loss. Referring to the order, he submitted that the ld. CIT(Appeals) was wrong in believing that the transactions are bonafide in allowing the claim of the assessee. He prayed that the order of the ld. CIT(Appeals) be reversed and the order of the Assessing Officer be restored. 6. On the issue of payment of commission, the ld. CIT D.R. relied upon the order of the Assessing Officer and submitted that the commission was paid for facilitating arbitration in connection with the so- called forfeiture of advance paid for the so-called agreement of purchase of plots of land. He referred to the arguments made, on the issue of loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aws cited, we hold as follow:- Disallowance of ₹ 9,92,00,000/-: The facts of the case are brought ut by the ld. CIT(Appeals) at pages 12 13 of his order as follows:- The assessee during the year decided to purchase a property at Village- Sikaria, near Brindaban, Dist. Mathura, U. P. so that he can also enter into the business of development of the properties. The details of the said land are as under:- Name of seller Land area Total consideration Earnest money paid Sri Harish C. Agarwal 17. 96 acres 9,87,80,000 1,97,00,000 Rajat Agarwal 8.12 acres 90,00,000 90,00,000 Suresh C. Agarwal 17. 27 acres 1,90,00,000 - 1,90,00,000 Triple K. Distributors Co. Pvt. Ltd. 17.28 acres 1,90,00,000- 1,90,00,000 Dhanprakash Gupta 17.28 acres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee for the following reasons:- (i) The entire events do not suggest that the deals entered by the assessee were a bona fide one and as a part of the business activities of the firm; (ii) The statement that the prices/ values of these properties, which are supposed to be purchased declined between the period 04. 01.2013 to 18. 02.2013 cannot be believed, as there is no extra- ordinary events such as war, civil unrest, famine, earthquake, deluge or sudden collapse in money market etc. (iii) As per the agreements to sale dated 04. 01. 2013, the assesese firm expressed its desire for development all these plots of land for profit and whereas it was stated by the arbitrator in his award dated 28. 03. 2013, that it was alleged the prospective buyers are not forthcoming in view of the decline in the price of the land during the intervening period. That the subsequent forfeiture of so- called advance money suggests malafide motives before the staged deal. (iv) It is most surprising that without making solid provisions to raise funds by due dates, the assessee-firm agreed to pay balance value of the land i.e. ₹ 39, 66, 25,000/- by 18.02.2013 in two instalments. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rawal dated 18. 10.2012 in Civil Appeal No. 7588 of 2012. The Hon ble Supreme Court in the case of Satish Batra came to the conclusion that the seller in this case was justified in forfeiting the amount of ₹ 7,00,000/- as per the relevant clause, since the earnest money was primarily a security for the due performance of the agreement and the seller is entitled for forfeit the entire deposit. The undisputed fact is that the assessee is engaged in the business of real estate and that these payments were made in the course of business and that the earnest money was forfeited resulting into business loss of the assessee. 13. Such loss is allowable as a deduction as held in the following cases:- (i) Jawala Prosad Radha Kishan [ 79 ITR 580 (Allh.); (ii) Inden Bislers [ 91 ITR 427 (Madras)]; (iii) Kishangunge Madira Sangh [167 ITR 393]. Applying the proposition of law laid down in the case law to the facts of this case, we uphold the order of the ld. CIT(Appeals) on this issue and dismiss this disallowance of commission of ₹ 17, 10, 000/-. 14. The assessee has disputed the disallowance of ₹ 17, 10,000/- being brokerage paid for which the evidences were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year 2008-09. After retirement on 27.05.2012, these partners are stated to have taken back this land so contributed and the partnership firm has returned the land so contributed by them, when the partnership firm was formed in the year 2008- 09. 19. The assessee- firm computed capital gains as per section 45(4) of the Act on these transactions and offered to tax the same as per provisions of long-term capital gain and the rate of tax applicable thereon. The Assessing Officer was of the view that this amount is assessable as business income at normal rate. On appeal, the ld. CIT(Appeals) held that the amount in question is taxable at the rate applicable to long-term capital gain. 20. In this Cross Objection, the assessee has raised the fundamental issue as to whether the amount in question is taxable or not. The assessee relied on the judgment of the Hon ble Madras High Court in the case of M/s. National Company vs.- ACIT in Tax Case Appeal No. 365 of 2009 judgment dated 08. 04. 2019. Ld. Counsel argued that re-constituency of partnership firm cannot result in transfer of assets and urged that section 45(4) of the Act would not apply to the facts of the present case. He a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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