TMI Blog2023 (11) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Agreements have to be read and understood holistically to get a clear picture of business understanding between the two parties, and one cannot be swayed solely by how the revenues are distributed or the operations have to be carried out. Unfortunately, we do not have the benefit of either of the agreements before us and therefore, in absence of the same, we are of the considered view that the matter deserve to be set-aside to the file of the ld CIT(A) to examine the same a fresh taking into consideration the aforesaid discussions and decide the same as per law. The ld CIT(A) shall also take into consideration the decision of Sheetal Khurana Food Private Limited [ 2011 (1) TMI 763 - PUNJAB AND HARYANA HIGH COURT ] as well as Tranvancore Sugar and Chemicals [ 2022 (4) TMI 396 - KERALA HIGH COURT ] and any other authority which the assessee, as advised wishes to bring on record and decide the applicability thereof in the facts of the present case. In the result, the ground of appeal is allowed for statistical purposes. Characterization of the transaction - Allowing cost of improvement claimed by the assessee against the Short Term Capital Gain (STCG) on sale of land at vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the AO under rule 8D r.w.s. 14A to apportion interest expenditure incurred to invest in shares in view of the fact that no separate accounts are maintained by the assessee in relation to investments whose income is exempt from tax, ignoring Apex Court decision in 91 Taxman.com 154(SC). 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has not erred in law and fact in following the decision of Hon ble High Court In Lakhani Marketing decided following decisions in the case of Hero Cycles Ltd., 323 ITR 204 and CIT vs. Winsome Textile Industries Ltd., 319 ITR 204 whose facts are distinguishable from the taxpayers, ignoring the principal laid down by Honble Supreme Court decision in CIT vs. Walfort Share and stock Brokers P Ltd. 326 ITR 1(SC), which has been confirmed in 91 Taxman.com 154(SC). 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has not erred in law and fact in ignoring that the Department is in SLP in several cases on this issue (Nilgiri Infrastructure Development Ltd. ITA No. 135 of 2016 A.Y. 2009-10 of Delhi High Court and Instant Holding Ltd. ITA No. 20168 of 2011). 5. Whether on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of property, ignoring jurisdictional High Court decision in Sheetal Khurana Foods and ignoring the rationale laid down in apex court decision in Rayala Corporation Pvt. Ltd., vs. ACIT (Supreme Court) and Chennai Properties and Investments Ltd. Vs. CIT [2015] 373 ITR 673 (SC). 10. Whether on the facts and circumstances of the case the Ld. CIT(A) has not erred in law and fact in holding that an expenditure of Rs. 18 Lakhs be allowed when the said sum has already been booked as an expense in the year of purchase i.e. A.Y.2013-14, and also assessee has failed to discharge its primary onus of adducing evidence in support of its claim, in such case, in which under section 114 of Indian Evidence Act, an adverse view is to be inferred. 2. At the outset it is noted that the appeal of the Revenue in ITA No. 398/Chd/2018 was dismissed on account of low tax effect and cross appeal filed by the Assessee in ITA No. 172/Asr/2018 was dismissed as withdrawn by the Coordinate Bench by a consolidated order dt. 23/08/2019. Subsequently, the Revenue moved Misc. Application stating that the tax effect involved in this appeal was Rs. 50,44,836/- which was above the monetary limit as prescrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that similar notice has been issued in another SLP filed by the Department against the decision of the Hon ble Gujarat High Court in case of PCIT Vs. Adani Wilmar Ltd. [2021] 133 taxmann.com 443 (Guj.) 8. It was accordingly, submitted that it cannot be said that the law has settled in this regard. In view of the same the order of the Ld. CIT(A) on this ground may be set aside and the order of the AO may be upheld. 9. Per contra, the Ld. AR has relied on the order of the Ld. CIT(A). It was submitted that during the year under consideration, the assessee company has earned no dividend on the investment made in the group companies and has earned meager income of Rs. 1,80,903/- from agriculture operations and the Ld. CIT(A) has rightly restricted the disallowance to the extent of exempt income. 10. Regarding decision of the Coordinate Guwahati Bench in case of Williamson Financial Services Ltd. (supra) and the retrospective applicability of the explanation brought in to Section 14A by the Finance Act 2022, it was submitted that the Hon ble Delhi High Court in case of Pr. CIT(Central)-2 Vs. M/s Era Infrastructure (India)Ltd. in ITA 204/2022 dt. 20/07/2022 has clearly hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t appeal is dismissed being covered by the judgment passed by the learned predecessor Division Bench in PCIT vs. JL FS Energy Development Company Ltd (supra) and Chem invest Limited vs. Commissioner of Income Tax-VI, (2015) 378ITR 33. 10. Accordingly, the appeal and application are dismissed. However, it is clarified that the order passed in the present appeal shall abide by the final decision of the Supreme Court in the SLP filed in the ease of PCIT vs. IL FS Energy Development Company Ltd (supra). 13. In view of the above, we upheld the order of the ld CIT(A) and the ground of appeal so taken by the Revenue is dismissed. 14. In Grounds Nos. 5 and 6, the Revenue has challenged the action of the Ld. CIT(A) in allowing the claim of depreciation @ 30% on the buses as against 15% allowed by the AO. 15. During the course of hearing, the Ld. DR submitted that the assessee was engaged in the business of running buses on various routes in Punjab, for which permit was issued by the State Govt. The buses are run on fixed routes as per permit issued by the State Govt. at a fixed time. The buses stop at the predetermined stops. Any passenger can board the bus, purchase a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is engaged in the business of running of passenger buses and thus the buses are being used for the own business of the assessee. Thus, the assessee s case is covered under normal rate of depreciation of 15%, on the buses as per section 43(3) of the Income Tax Act, 1961 since the assessee utilized the buses for its own business purpose of carrying the passenger and not utilizes these buses for purpose of hiring business. 17. It was submitted that the assessee has claimed depreciation amounting to Rs. 2,07,08,607/- on buses/lorries. The depreciation on all such vehicles has been claimed @30%. However, as observed above, the assessee is entitled to claim depreciation @ 15% on all such vehicles. Hence of the total depreciation claimed on these vehicles i.e of total depreciation claimed on such vehicles at Rs. 1,03,54,305/- was disallowed and the amount of Rs. 1,03,54,305/- was added back to the returned income of the assessee which has been wrongly deleted by the ld CIT(A). 18. Per contra, the Ld. AR relied on the order of the Ld. CIT(A). It was submitted that the similar addition were made in A.Y 2013-14 which were deleted by the Ld. CIT(A), Bathinda in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instead of 15%). The definition of contract carriage and stage carriage as per sections 2(3) 2(29) of the Motor Vehicles Act of 1939 was extracted to infer that the buses used in the transportation business were hired by the passengers, thus, entitling the buses for a higher rate of depreciation. With regard to the allowability of claim of depreciation at 30%, the appellant placed reliance on the following decisions: (a) Balakrishna Transports.[1998] 233ITR 133 (Kerala); (b) Sarojini Transports (P.) Ltd.[1986] 17 LTD 1014 (Madras); (c) Sharma Motors Service. [1999] 235 TTd 89 (MP) (d) Pepsu Road Transport Corporation. [2007] IT A No. 956/Chandigarh The submissions of the appellant have been considered and the cited judicial precedents have been carefully and respectfully perused. Depreciation allowance under section 32 is a statutory allowance expressly provided for diminution in the value of the business assets by reason of their wear and tear. In terms of the table of rates at which depreciation is admissible under Rule 5 read with New Appendix I, Part A of the Income Tax Rules, 1962, in item III (2), depreciation at 15% is admissible on Mot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t buses carrying passengers on different routes determined by the transport authorities. In the said facts, the Hon'ble High Court of Kerala held that the passengers who travel in such buses travel on hire, which would obviously mean that the buses in regard to which depreciation was claimed would have to be understood in the necessary context of the situation with regard to the claim for depreciation that the buses were running on hire. It may be that in a given situation it must be an individual, in another situation a group or in different situations it may be a marriage party. The situation would not make any difference. When vehicle in regard to which depreciation is claimed, runs on hire, higher rate of depreciation is allowable.'' The Madras Bench of the IT AT, while deciding a kindred issue in the case of Sarojini Transports (supra) held the following: We are unable to subscribe to the view canvassed by the learned DR that unless a single person takes an entire bus on hire, it would not amount to the business of running buses on hire merely because separate fares happen to be collected from different passengers . The passenger who takes a single seat pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pur Siddheshwar Sahakari Bank Ltd.'[2015] 57 taxmann.com 183 (Pune - Trib.) 5.2.2 In consideration of similarity of facts and circumstances of the present case with the above-mentioned two decisions, the addition made by the Assessing Officer is deleted. The ground of appeal is allowed. 20. In the result, the ground of appeal so taken by the Revenue is dismissed. 21. In Grounds Nos. 7 to 9, the Revenue has challenged the action of the Ld. CIT(A) in accepting the rental income under the head Income from Business Profession as against income from House Property treated by the AO. 22. In this regard, the Ld. DR submitted that the assessee has leased out its building for running of McDonald's and KIC restaurants vide two separate lease agreements with two companies for 30 years in one case and 40 years in the other case. The assessee has treated the rent received as business income in its P/L Account and has claimed depreciation on this building. The AO treated this receipt as Rental Income chargeable under the head Income from house Property under section 22 of the Act and disallowed the depreciation claimed by the assessee under section 32 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew to find out whether the letting was the doing of a business or the exploitation of his property by an owner. We do not further think that a thing can by its very nature be a commercial asset. A commercial asset is only an asset used in a business and nothing else, and business may be carried on with practically all things. Therefore it is not possible to say that a particular activity is business because it is concerned with an asset with which trade is commonly carried on. We find nothing in the cases referred, to support the proposition that certain assets are commercial assets in their very nature. 26. Further, reference was drawn to the decision in the case of Travancore Sugars and Chemicals Ltd (2022| 137 taxmann.com 187 (Kerala) wherein it was held that The crux of the matter is whether the object of the transaction, whether the assessee continues to do business or not, chances of revival, nature of asset in which third-party enjoyment right is created for consideration are relevant and essential. Looking at the circumstance stated by the assessee, it is clear that the assessee was doing the same business before the subject Assessment Year and continued to do the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by the appellant is absolutely variable and totally dependent on the sales made. Thus, it would be appropriate to argue that the appellant has also undertaken the risk in the said business and is party to the risk and reward associated herein. 2. In this connection, it is respectfully submitted that the appellant entered into a Joint-Venture agreement with two brands Le. McDonald's Family Restaurant and KFC Restaurant on 21.11.2011. During the relevant assessment year under consideration i.e. A.Y. 2014-15, the appellant claimed an amount of Rs. 34,66,179/- [credited to its Profit Loss Account] derived from its Building situated at Bhucho to M/s Connaught Plaza Restaurant Pvt. Ltd. and M/s A.N. Traders Pvt. Ltd. for running restaurants under the name McDonald's Family Restaurant and KFC Restaurant respectively as Income from Business. 3. However, the Ld. Assessing Officer alleged that the said Income should be assessed under the Head Income from House Property , and, accordingly made a disallowance of depreciation on such Building u/s 32 of the Income-Tax Act, 1961. The said contention of the Ld. Assessing Officer was based upon the Judgement of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness. From the above, it could be plainly deduced and inferred that the facts of case of the appellant and M/s Sheetal Khurana Foods (P.) Ltd. are noticeably and evidently distinguishable. Thus, the consideration earned by the appellant in the instant case did not fall under fall under the Head Income from House Property . Therefore, considering the above submissions in entirety with respect to the said issue, in any case, the Income earned by the appellant under a Joint-venture Agreement should be assessed as Income from Business . Hope Your Honor would find the above fully explained with respect to the Issue in consideration, and, shall proceed to adjudicate the appeal accordingly. 29. Further, our reference was drawn to the findings of the Ld. CIT(A) which reads as under: 6. I have given careful consideration to the facts of the case and at the outset the following observations of the Constitution Bench of Hon'ble Supreme Court in Sultan Bros. (P) Ltd. v. CIT, (1964) 5 SCR 807 would set the legal preposition in place: 7. ... We think each case has to be looked at from a businessman's point of view to find out whether the letting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was as high as 2,20,685/-. In the month of June 2014 it was 1,70,811/-. These figures fully show that the appellant has undertaken a conscious decision to run a risk of not earning a fixed rent but to venture with the growth of business of the tenants. Similar is the situation in the case of other Tennant Cannaught Plaza restaurant private limited where for the month of January 2013 the rent was as high as 2,26,917/- and for the June 2013 it was 1,91,541/- whereas it to Rs. 1,28,155/- for the month of November 2014. The receipt from the property or one can say remuneration on exploitation of property has a wide fluctuation. Such an adventure necessarily indicates that the appellant was interested in exploiting the property in the form of business and not interested in getting a fixed rent. 5.2.3 The Memorandum of Association of the appellant company contained a clause that point 34 that the company was entitled to carry out any joint venture in the nature of any business and trade for direct or indirect benefit of the company. 5.2.4 In consideration of totality of circumstances as mentioned above, it is noted that the appellant company is not enjoying rent from the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Hon ble Kerela High Court in case of Tranvancore Sugar and Chemicals and any other authority which the assessee, as advised wishes to bring on record and decide the applicability thereof in the facts of the present case. In the result, the ground of appeal is allowed for statistical purposes. 31. In Ground No. 10, the Revenue has challenged the action of the Ld. CIT(A) in allowing cost of improvement claimed by the assessee against the Short Term Capital Gain (STCG) on sale of land at village amounting to Rs. 18,00,000/-. 32. In this regard, the relevant facts and the findings of the Ld. CIT(A) which are under challenge before us reads as under: 6.2 I have considered the ground of appeal and it would be useful to firstly epitomise the facts of the case. The appellant company on 05/07/2013 sold/transferred 23K 16M of land at village Pallanpur Sub-Tehsil Majri Tehsil Kharar Dist. SAS Nagar Mohali to Metro Eco Green Resorts Ltd. for a total consideration of Rs. 60 lakhs. This land was purchased by the appellant on 28/10/2010 for a consideration of Rs. 2,826,250/- from Sh Nek Ram. Ram Chand, Harpal Singh and Ranjodh Singh. After including the incidental expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be developed into ecotourism resort. After all these efforts, the alleged forest land along with the permission was transfer for consideration. It is not a case where any Capital asset has been sold by the appellant but it purchased a land for which further investment was done on other formality so as to maximize profits out of it. This was in the nature of adventure in the trade, therefore, AO is directed to tax profit from this transaction by allowing expenditure of Rs. 18 lakhs as expense. The ground of appeal is partly allowed. 33. In this regard, the Ld. DR relied on the order of the AO and the relevant findings are contained at para 6 of the assessment order which read as under: 6. During the course of assessment proceedings, it was observed that the assessee has transferred a capital asset for a sale consideration of Rs. 60 lacs and has declared short term capital gain of Rs. 13,73,100/-. The assessee has claimed cost of acquisition at Rs. 28,26,900/- and cost of improvement at Rs. 18 lacs. The assessee was required to furnish complete evidence in this regard. The assessee furnished copy of ledger account of the particular property and no other evidence was prod ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
