TMI Blog2021 (7) TMI 1447X X X X Extracts X X X X X X X X Extracts X X X X ..... the new plea raised by the assessee, it is quite clear that all the facts necessary to adjudicate the same are available on record and, therefore, we had made known to the parties that the said plea is admissible, and accordingly, both sides had addressed us on the merits of the same also. Addition u/s 22 - We are in concurrence with the assertion made by the learned CIT-DR that the matter stands fully covered in favour of the Revenue even with regard to the plea of the assessee based on the judgment of Neha Builders P. Ltd. (supra). In fact, in the case of Ansal Housing Finance Leasing Company Ltd. ( 2016 (11) TMI 208 - DELHI HIGH COURT] considered the ratio of the judgment Chennai Properties Investments Limited (supra) and held that the same was not applicable to the facts of the case and, accordingly, had reiterated its earlier judgment on the instant issue in the case of Ansal Housing Finance Leasing Company Ltd. (supra). Notably, assessee s own case was also clubbed with the case of Ansal Housing Finance Leasing Company Ltd. (supra) before the Hon ble High Court. Therefore, in this view of the matter, we find no merit in the plea raised by the assessee. Accordingly, the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... QIBs qualify to be treated as public shareholders in terms of the SEBI listing requirements. Therefore, the most pertinent condition prescribed in Section 35D(2)(c)(iv) of the Act, i.e., the expenditure is in connection with public subscription of shares stands fulfilled. Whether matter may be remanded back to the Assessing Officer to ascertain whether QIBs are public shareholders or not? - In our considered opinion, remanding the matter on this aspect to the Assessing Officer would only prolong the litigation and not achieve any substantive purpose. It is not a case where the fresh alternate plea of the assessee, based on Section 35D of the Act, is required to be examined on the basis of any fresh facts or material, which was hitherto not before the Assessing Officer. The short point is as to whether the ratio of the judgment of Hon'ble Supreme Court in the case of Brooke Bond India Limited (supra) would apply in the context of claim under Section 35D or not? This aspect is clearly answered in the case of Shasun Chemicals Drugs Limited ( 2016 (9) TMI 1199 - SUPREME COURT ). Furthermore, on the issue of classification of QIBs as a part of public shareholders is concerned, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and such transfer being to a 100% subsidiary, cannot be treated as a transfer for the purpose of Section 45 of the Act in view of Section 47(iv) of the Act. The reliance placed by assessee on the decision of our Coordinate Bench in the case of Mother Diary Fruits Veg.(P) Ltd. ( 2011 (1) TMI 66 - ITAT DELHI ) is quite apt under the present circumstances. The case of the Income-tax Authorities, that it was a transfer of an asset employed in the business and therefore Section 47(iv) is not attracted, is quite unjustified and untenable. It is a well-settled legal proposition that the claims made by the assessee have to be examined in the light of the applicable factual and legal position and not merely on the basis of the position taken in the financial statements or otherwise. In this view of the matter, we do not find the stand of the CIT(A) or the Assessing Officer to be tenable in this regard. Insofar as the plea of the learned DR to remand the matter back to the lower authorities is concerned, the same, in our view, is not, at all, merited. It has been demonstrated by the assessee before us, and which has not been controverted by the learned DR, that the entire material was befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantially different. The issue should have been reconsidered and decided in the light of the amended provisions. 3. That on the facts and circumstances of the case, the learned CIT(Appeals) has erred in rejecting the claim of the appellant for deduction of Rs.34,08,17,701/- u/s 80IA(4)(iii) of the Act on the ground that due notification by the Central Government of the assessee s project was not available in the appellant s case. In the light of the fact and the evidence adduced that the appellant s petition for approval from the Central Government was under process and there was likelihood of the Notification being issued with retrospective effect, the learned CIT(Appeals) should have given direction that in case the Notification was issued by Central Government with retrospective effect covering the year under appeal, his decision to confirm disallowance would accordingly stand reversed. 4. That the Appellant craves leave to add, alter or amend or forego any grounds of appeal at the time of hearing. 4. Thereafter, the assessee has filed the following Revised and Additional Grounds of Appeal which, inter-alia, also subsume the Grounds of Appeal originally filed along with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejudice to the above ground no.1.1, learned CIT(A) erred (a) In not appreciating that the question of taxation of ALV of unsold flats/office spaces, lying vacant and held as stock-in-trade, arises only when a finding is recorded, having regard to the objects of the Memorandum and Articles of Association of the Appellant-company, that income from such unsold properties is liable to be taxed under the head Income from House Property , and not as Business Income in the light of the decision of Hon'ble Supreme Court in the case of Chennai Properties and Investments Ltd. vs Commissioner of Income Tax Central II Tamil Nadu (in Civil Appeal Nos 4491 to 4494 of 2004). (b) In not appreciating that without examining the Memorandum of Association (MOA) and its Object Clauses, it is not permissible to arrive to any finding or conclusion that income from unsold flats/office spaces, lying vacant and held as stock-in-trade, is liable to be taxed as income from house property on the basis of the Notional ALV. (c) In not appreciating that one of the main objects of the assessee is to sell, lease, let, mortgage or otherwise dispose of the lands, houses, buildings and other property, apart from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was likelihood of the Notification being issued with retrospective effect, the learned CIT(Appeals) should have given direction that in case the Notification was issued by Central Government with retrospective effect covering the year under appeal, his decision to confirm disallowance would accordingly stand reversed. 3. That the Appellant craves leave to add, alter or amend or forego any grounds of appeal at the time of hearing. 5. The appellant before us is a company incorporated under the provisions of The Companies Act, 1956 and, is inter-alia, engaged in the business of real estate, including development of infrastructure projects, affordable housing, township, integrated townships for work and residence, constructing and operating holiday homes, etc. In an assessment finalized under Section 143(3) of the Act, the Assessing Officer assessed the total income at ₹ 75,30,19,546/- as against the returned income of ₹ 34,22,05,962/- wherein the difference between the assessee and the Revenue was on account of disallowance of claim of deduction under Section 80IA; charging of notional Annual Letting Value (ALV) of unsold vacant properties; depreciation on computers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal issue for which the necessary facts are clearly available on record and that the same be considered for adjudication. 8. The learned DR asserted that the issue was fully covered in favour of the Revenue by the judgment of Hon'ble Delhi High Court in assessee s own case itself and referred to Ansal Housing Finance Leasing Company Ltd. [2013] 354 ITR 180 (Delhi) in this regard. He also referred to subsequent judgment of Hon'ble Delhi High Court in the case of Ansal Housing Construction Ltd. [2016] 389 ITR 373 (Delhi) to show that even the ratio of the judgment of Hon'ble Supreme Court in the case of Chennai Properties Investments Limited [2015] 373 ITR 673 (SC) has been considered. 9. Having considered the rival stands, in our view, so far as the revised and Additional Grounds relating to the assessment of income by way of notional ALV under Section 22 of the Act is concerned, there is no substantive difference in the dispute raised vis-a-vis the Grounds in the original Memorandum of Appeal. The only difference between the original Grounds of Appeal and the revised one is the fresh plea of the assessee based on the judgment of Hon ble Gujarat High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons to accede to the aforesaid plea once having noted that Hon'ble Delhi High Court in the case of Ansal Housing Finance Leasing Company Ltd. (supra) has already considered the ratio of the judgment of Hon'ble Supreme Court in the case of Chennai Properties Investments Limited (supra) and found it inapplicable to the given facts; and, in any case, it is not the case of the assessee that any fresh facts have arisen which would require any review. In sum and substance, the dispute remains the same as in the past, and thus, we hereby affirm the order of learned CIT(A) and the Grounds raised by the assessee are dismissed. 12. Insofar as Ground of appeal No.3 of the original Grounds and renumbered as Ground No.2 in the Additional Grounds is concerned, they are similar and relate to the assessee s claim for deduction of ₹ 34,08,17,701/- under Section 80IA(4)(iii) of the Act. Pertinently, assessee had claimed deduction under Section 80IA(4)(iii) with respect to the profits from industrial park. The Assessing Officer as well as learned CIT(A) have denied the claim of the assessee on the plea that the requisite notification by the CBDT in terms of the Industrial Park Scheme, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal Grounds as well as revised and additional grounds filed (which, inter-alia, subsume the original Grounds of appeal), are reproduced hereunder :- Original Grounds :- 1.1 That on the facts and in the circumstances of the case, the learned CIT(A) has erred in law in confirming the addition of notional Annual Letting Value of Rs.4,83,96,980/- (out of Rs.5,90,67,704/-) on closing stock of flats/spaces by following the Hon ble Delhi High Court s decision in which various relevant facts were not fully brought out before their Lordships and therefore could not be considered by them. 1.2 That without prejudice to the Ground No.1.1 above, the appellant has also filed an appeal before the Apex Court which has been admitted and is pending for decision. 2. That without prejudice to the foregoing ground, the decision rendered y Hon'ble Delhi High Court related to the assessment year 1988-89 and rendered in the context of the provisions of section 23 as they existed prior to substitution by the Finance Act, 2001 w.e.f. 1.4.2002. The learned CIT(A) failed to consider the issue in the light of the amended provisions as applicable to the year under appeal which were substantially different. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oper perspective, and; (ii) The additional Grounds go to the root of the matter and does not require consideration of any material evidence outside the record. 1.2 It is settled law that legal grounds are allowed to be taken before the Hon ble Tribunal. The Hon'ble Supreme Court reiterated this settled legal position in the case of the CIT vs Singhad Technical Education Society, Civil Appeal No.11080 of 2017, where the legal ground on recording of satisfaction u/s 153C was taken for the first time as additional Ground before the Hon ble Tribunal, which the Revenue had objected. Reliance is also placed on the decision of the Larger Bench (3 Member) of Hon'ble Supreme Court in National Thermal Power Co.Ltd., (1998) 229 ITR 383 (SC). 1.3 For the sake of clarity and convenience, the additional Grounds and the revised/reframed Grounds are merged and set-out as under. REVISED AND ADDITIONAL GROUNDS OF APPEAL NOTIONAL ANNUAL LETTING VALUE (ALV) 1.1. That in the facts and circumstances of the case and in law learned CIT(A) erred in upholding an addition of Rs. 4,83,96,980/ (out of Rs.5 90,67,704/-) under the head 'income from house property without appreciating that the propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acant as stock-in-trade, the ALV of the properties is not liable to be taxed on notional basis as it is illegal to reside / occupy such property and hence could not have been let out. (e) In upholding the addition without returning a finding of fact as to whether it was factually feasible and practically possible at all to earn any rental income from the said unsold flats / space as the said flats were meant for sale and were not ready for immediate occupation by the prospective tenants and did not have the basic necessities like electric fittings, pucca wall painting, completion certificates etc. (f) In upholding the addition without returning a finding of fact as to whether it was factually possible for the assessee to take the risk of letting out unsold flats / spaces and asking the prospective buyer to wait till the tenant vacates the flat for it to be sold and given possession. (g) In not appreciating that even notional ALV needs to be arrived at based upon realities and actual facts on the ground and could not have been determined through a guess work. 1.4. That in the facts and circumstances of the case, learned CIT(A) erred in law as the amendment by way of insertion of sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of hearing. For these and other Grounds that may be urged at the time of hearing, it is prayed that the Hon'ble Tribunal may be pleased to allow the appeal in the interest of equity and justice. 20. Insofar as ground Nos.1.1 to 1.4 relating to ALV is concerned, the facts and circumstances are pari-materia to the dispute decided by us in the earlier part of this order for assessment year 2010-11. Our decision in the earlier paragraphs in relation to assessment year 2010- 11 applies mutatis mutandis herein also. The said Grounds are accordingly dismissed. 21. The only other issue which arises in this appeal is with regard to the claim made by the assessee for deduction of ₹ 9,46,22,358/- representing expenses incurred in connection with issue of equity shares to Qualified Institutional Buyers (QIBs). Pertinently, the relevant facts in this context, as emerging from the orders of the authorities below as well as the other material on record, are as follows. 22. During the course of assessment proceedings, the assessee company staked a claim for deduction of expenses aggregating to ₹ 9,46,22,358/- incurred during the year in connection with the issue of equi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under Section 37(1) of the Act, the impugned expenditure incurred in connection with issue of equity shares to QIBs also qualifies for deduction in terms of the provisions of Section 35D of the Act. Explaining the rationale of the aforesaid plea, which was hitherto not raised before the lower authorities, the learned representative of the assessee referred to the judgment of Hon'ble Supreme Court in the case of Shasun Chemicals Drugs Limited Vs. CIT [2016] 388 ITR 1 (SC), whereby it has been held that the ratio of the judgment of Hon'ble Supreme Court in the case of Brooke Bond India Limited (supra) would not be attracted in cases where the expenditure related to public issue of shares as the judgment in the case of Brooke Bond India Limited (supra) was rendered when the relevant provisions of Section 35D were not on the Statute. Elaborating his argument, the learned counsel pointed out that the issue of shares to QIBs is liable to be regarded as issue of shares to Public inasmuch as having regard to the SEBI Guidelines and the relevant Securities Contracts (Regulation) Rules, 1957, QIBs are liable to be regarded as Public shareholders as distinct from Promoter shareho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of its claim for deduction of expenditure incurred on issue of shares to QIBs. According to the learned representative, Rule 11 of the Appellate Tribunal Rules, 1963 clearly empowers the Tribunal to consider and decide the instant plea. Assailing the assertion of the learned CIT-DR that in the absence of a formal filing of Additional Ground, the aforesaid plea cannot be entertained, the learned representative referred to the judgment of Hon'ble Jurisdictional High Court in the case of Sanjay Sawhney Vs. PCIT [2020] 116 taxmann.com 701 (Delhi), wherein it has been observed that there is no prescribed format for filing an Additional Ground and, in any case, an issue, a plea of which is interlinked with a Ground already taken, ought to be permitted to be urged by the parties. Justifying the raising of the said plea at this stage, the learned representative pointed out that since the plea was based on the judgment of Hon'ble Supreme Court in the case of Shasun Chemicals Drugs Limited (supra) which was rendered after the passing of the impugned order of the CIT(A), the said plea could only have been raised by the assessee at the present stage; and, therefore, it was also not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bond India Ltd. (supra). Furthermore, it has been brought to our notice that our Coordinate Benches at Mumbai and Hyderabad in the cases of Yes Bank Limited (supra) and DCIT Vs. Deccan Chronicle Holdings Limited [2015] 60 taxmann.com 240 (Hyd-Trib.) respectively held that the QIBs are to be regarded as Public in terms of the Securities Contracts (Regulation) Rules, 1957, SEBI Guidelines, etc., which are applicable to all public listed companies. 28. It is quite obvious that due to the advent of the aforesaid legal situation, which has evolved after passing of the impugned orders by the lower authorities, the assessee has raised this plea for the first time before the Tribunal. There is no controversion to the point made by the learned representative for the assessee that the judgment of Hon'ble Supreme Court in the case of Shasun Chemicals Drugs Limited (supra) was rendered subsequent to the impugned order of learned CIT(A) and, therefore, it is only in the light of the later-evolved legal position, the said plea is being raised before the Tribunal. 29. In our considered opinion, the aforesaid fresh plea which involves a pure point of law deserves to be admitted and adjudicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive claim based on a legal position propounded by the Hon'ble Supreme Court. In this context, we may refer to the following observation of Hon ble Punjab Haryana High Court in the case of M/s VMT Spinning Co.Ltd. 389 ITR 326, wherein it has been held that the Tribunal would be within its power to entertain such like alternative claims made by an appellant in terms of Rule 11 of the Appellate Tribunal Rules, 1963:- the Rule 11 of the ITAT Rules in fact confers wide powers on the Tribunal and although it requires a party to seek the leave of the Tribunal, it does not require the same to be in writing. It merely states that the appellant shall not, except by leave of the Tribunal, urge or to be heard in support of any ground not set forth in the memorandum of appeal. In a fit case it is always open to the Tribunal to permit an appellant to raise an additional ground not set forth in the memorandum of appeal. The safeguard is in the proviso to rule 11 itself. 31. In view of the aforesaid, we find no reasons to restrict the assessee from raising a plea for deduction of the impugned expenditure based on Section 35D of the Act. At the time of hearing, the aforesaid was put across to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeping in view the provisions of Section 35D of the Income Tax Act, 1961 (hereinafter called 'the Act'). In any case, it warrants repetition that in the instant case under the very same provisions benefit is allowed for the first two Assessment Years and, therefore, it could not have been denied in the subsequent block period. We, thus, answer question No. 1 in favour of the assessee holding that the assessee was entitled to the benefit of Section 35D for the Assessments Years in question. (Underlined for Emphasis by us) 33. The aforesaid discussion clearly shows that the impugned expenditure incurred in connection with issue of shares be considered in terms of Section 35D of the Act even if before the lower authorities, the claim revolved around Section 37(1) of the Act only. In fact, in the case before the Hon'ble Supreme Court, the matter by the lower authorities was considered in the light of the earlier judgment of Hon'ble Supreme Court in the case of Brooke Bond India Limited (supra), an approach which was not approved by Hon'ble Supreme Court having regard to the fact that Section 35D of the Act came on the Statute after the rendering of the decision in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e SEBI-ICDR. Chapter VIIIA has been included to provide for fresh issue of shares to comply with minimum shareholding requirement in Rule 19(2) and 19A of SCRR. Reg. 91B defines IPP as a further public offer made only to QIBs. These regulations provide that when a company has a public shareholding lower than the requirements specified, then the company may issue IPP to QIBs and raise the public shareholding to the required levels. It thus implies that QIBs form part of public. Further, even Reg. 82 which gives conditions for QIP, provides that the same must be in compliance with the requirements of public shareholding. That a section of public qualifies as public has been clarified in Nitta Gelatine India Ltd. (supra) and Andhra Chamber of Commerce (supra) (Underlined for Emphasis by us) 35. The aforesaid detailed discussion by our Coordinate Bench clearly establishes that the QIBs qualify to be treated as public shareholders in terms of the SEBI listing requirements. Therefore, the most pertinent condition prescribed in Section 35D(2)(c)(iv) of the Act, i.e., the expenditure is in connection with public subscription of shares stands fulfilled. 36. At this stage, we may also refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms of Section 35D of the Act. So, however, while upholding that the expenditure in question qualifies for the deduction under Section 35D of the Act, we restore the matter to the Assessing Officer for the limited purpose for quantifying such expenditure having regard to the provisions of Section 35D of the Act. 37. In conclusion, we reiterate that so far as the claim of deduction under Section 37(1) of the Act is concerned, the same is decided against the assessee but the claim under Section 35D of the Act is allowed in terms of our above discussion. Thus, assessee partly succeeds in this Ground of appeal. 38. Now, we take up the appeal of the assessee in ITA No.792/Del/2015 for assessment year 2012-13, which is directed against the order of learned CIT(A)-24 (erstwhile CIT(A)-31), New Delhi dated 27th November, 2014, which in turn has arisen from the order of DCIT, Central Circle-20, New Delhi dated 28th May, 2014. 39. As was the case in assessment year 2010-11, herein also, the assessee has filed revised and Additional Grounds of appeal as well as the Grounds filed originally along with the Memorandum of Appeal. The original Grounds as well as revised and additional grounds file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 47(iv) were squarely applicable in the case. 4. That the Appellant craves leave to add, alter or amend or forego any grounds of appeal at the time of hearing. Revised Additional Grounds :- The Appellant most respectfully prays that the Hon ble Tribunal may be pleased to allow the admission of additional Grounds of Appeal and redrafting of Ground Nos.1.1, 1.2, 2 originally taken in Form No.36 for the following reasons. (i) The Grounds are not conscience and they are not assigned any distinct heads, (ii) It is considered necessary as well as appropriate to reframe the Grounds of appeal to set-out the relevant facts in right and proper perspective, and; (iii) The additional Grounds go to the root of the matter and does not require consideration of any material evidence outside the record. 1.2 It is settled law that legal grounds are allowed to be taken before the Hon ble Tribunal. The Hon'ble Supreme Court reiterated this settled legal position in the case of the CIT vs Singhad Technical Education Society, Civil Appeal No.11080 of 2017, where the legal ground on recording of satisfaction u/s 153C was taken for the first time as additional Ground before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as stock-in-trade, is liable to be taxed as income from House property on the basis of the Notional ALV. (c) In not appreciating that one of the main objects of the assessee is to sell, lease, let, mortgage or otherwise dispose of the lands, houses, buildings and other property, apart from acquiring and developing of properties and therefore, the rental income, if at all earned, from unsold properties held as stock-in-trade is liable to be taxed under the head, Income from Business. (d) In not appreciating that that unless the certificate of completion of construction of the property is obtained in respect of the properties lying vacant as stock-in-trade, the ALV of the properties is not liable to be taxed on notional basis as it is illegal to reside / occupy such property and hence could not have been let out. (e) In upholding the addition without returning a finding of fact as to whether it was factually feasible and practically possible at all to earn any rental income from the said unsold flats / space as the said flats were meant for sale and were not ready for immediate occupation by the prospective tenants and did not have the basic necessities like electric fittings, pucc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Grounds of Appeal numbered 4 now renumbered as 3). 3. The Appellant craves leave to add, alter or amend or forego any grounds of appeal at the time of hearing. For these and other Grounds that may be urged at the time of hearing, it is prayed that the Hon'ble Tribunal may be pleased to allow the appeal in the interest of equity and justice. 40. Insofar as Ground Nos.1.1 to 1.4 relating to ALV are concerned, the facts and circumstances are pari-materia to the dispute decided by us in the earlier part of this order for assessment year 2010-11. Our decision in the earlier paragraphs in relation to assessment year 2010- 11 applied mutatis mutandis here also. The said Grounds are accordingly dismissed. 41. The only other issue which arises in this appeal is with regard to the claim of the assessee with regard to the surplus of ₹ 70.06 crores arising on transfer of its capital asset, viz., infrastructure assets to its wholly owned subsidiary M/s Ansal API Infrastructure Ltd. (in short, AAIL). The primary dispute on this aspect is with regard to Section 47(iv) of the Act whereby the claim of the assessee is that the transfer in question is not exigible to the charge of capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired the assessee to explain the position and accordingly, assessee made submissions by reiterating the Note annexed to the return of income, which we have noted above. The Assessing Officer did not accept the submission of the assessee primarily for the reason that the assessee itself has offered for taxation and further that the assessee did not furnish anything to prove that the amount was exempt from tax. 44. Before the CIT(A), assessee submitted that the conclusion drawn by the Assessing Officer was not justified and that Section 47(iv) of the Act clearly brought out that transfer of such infrastructure assets/capital work-in-progress was not regarded as a transfer for the purpose of charge of capital gains. We find that the CIT(A) also sustained the decision of the Assessing Officer by a very brief discussion in Paragraph 4.7.2 of his order. The sum and substance of the reasoning taken by the CIT(A) is to the effect that the instant surplus was on account of the transfer of assets employed in the business and, therefore, the same was not exempt as claimed by the assessee. 45. In this background, the learned Representative for the assessee vehemently pointed out that both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the matter back to the lower authorities. It was pointed out that merely because there was no adverse finding with regard to any of the clauses of the Infrastructure Maintenance Development Agreement dated 17th March, 2012, it could not be said that the necessary transfer arrangement before the assessee and its 100% subsidiary i.e., AAIL has not been examined by the lower authorities. Our attention was drawn to the copy of the agreement placed in the Paper Book which, according to the learned counsel, was very much before the lower authorities. It was pointed out that in the absence of any contrary material or the finding pointed out by the learned DR as to how the conditions prescribed in Section 47(iv) are not satisfied in the instant case, merely making out a new case for remanding of the matter back to the lower authorities, was not justified. It was pointed out that the necessary material required to decide the impugned controversy clearly forms a part of record of proceedings before the lower authorities and therefore, the plea of the learned DR be rejected. 49. We have carefully considered the rival submissions. Section 47(iv) of the Act prescribes that nothing contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Trunk Infrastructure to any party without prior consent of the assessee. AAIL was also authorized to connect and linking of the infrastructure for which it was to receive payments from assessee on the basis of running bills. The subsidiary was responsible for the operation upkeep and maintenance of the infrastructure facilities. The subsidiary was also responsible to provide the maintenance services to end users in the Mother City and also charge and collect end user fees which shall go into the Trust and Retention Account of the lenders. The agreement also provided that in order to enable AAIL to carrying out its responsibilities, assessee undertook to stand guarantee to the lenders/financiers and to make advance payments in case of shortfalls faced by AAIL in servicing its debts. 51. In sum and substance, the terms of the agreement bring out that the development and maintenance of the Trunk Infrastructure was the responsibility of the assessee in terms of the project awarded by the Government of Uttar Pradesh. The assessee was to earn user charges etc. from this asset in terms of the Award by the Government of Uttar Pradesh. This Trunk Infrastructure was transferred to AAIL fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a transfer of an asset employed in the business and therefore Section 47(iv) is not attracted, is quite unjustified and untenable. It does not require much gain saying that even the capital assets owned by a business are employed in the business but the same does not obliterate the difference between the capital asset and revenue/trading assets. The second aspect considered by the Income-tax Authorities viz., that assessee had itself offered the same for taxation in the Return of income does not take the case of the Revenue any further. Ostensibly, the assessee did not exclude such income from the total income in the Return of income but claimed it by way of a Note forming part of the Return of income, and more importantly, also raised this issue during the assessment proceedings. Obviously, during assessment proceedings, the Assessing Officer has considered the efficacy of such a claim and disagreed with the assessee and denied the exemption claimed under Section 47(iv) of the Act. It is a well-settled legal proposition that the claims made by the assessee have to be examined in the light of the applicable factual and legal position and not merely on the basis of the position ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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