2018 (5) TMI 419 - AT - Income Tax

Tribunal upholds CIT(A) decision on Income Tax Act sections 50C and 41(1)

The Tribunal upheld the CIT(A)'s decision to delete additions made under Sections 50C and 41(1) of the Income Tax Act. It dismissed the Revenue's appeal, ... Section 50C applicability - transfer of leasehold rights by the appellant - Held that:- The issue under consideration is squarely covered by the decision in the case of Greenfield Hotels and Estates Pvt. Ltd. [2016 (12) TMI 353 - BOMBAY HIGH COURT] as held Section 50C is not applicable while computing capital gains on transfer of leasehold rights in land and buildings. - Decided in favour of assessee Addition u/s 41 - Held that:- Following the order of Tribunal in assessee’s own case no infirmity in the order of CIT(A) deleting addition made u/s.41(1) as held there is no remission or cessation of liability of the sundry creditors appearing in the books of assessee in the impugned assessment year- Decided in favour of assessee Issues Involved:1. Deletion of addition made under Section 50C of the Income Tax Act.2. Deletion of addition made under Section 41(1) of the Income Tax Act.Detailed Analysis:Issue 1: Deletion of Addition Made Under Section 50CThe Revenue contested the deletion of an addition of Rs. 49,95,500 made by the AO under Section 50C, arguing that leasehold land should be treated as a capital asset. The CIT(A) deleted the addition, noting that the AO himself recognized the transaction as involving 'leasehold land' and failed to justify treating it as a capital asset. The CIT(A) relied on the ITAT Mumbai decision in Atul G. Puranik vs. ITO, which held that leasehold land is not a capital asset under Section 50C. The Bombay High Court in Greenfield Hotels and Estates Pvt. Ltd. supported this view, confirming that Section 50C does not apply to leasehold rights. The Tribunal upheld the CIT(A)'s decision, citing the Bombay High Court's ruling and the absence of any distinguishing features in the current case.Issue 2: Deletion of Addition Made Under Section 41(1)The AO added Rs. 7,52,781 under Section 41(1), arguing that the assessee's sundry creditors had ceased to exist due to their long-standing nature and lack of confirmations. The CIT(A) deleted this addition, referencing a previous CIT(A) decision for A.Y. 2009-10, which found no evidence of remission or cessation of liabilities. The Tribunal confirmed this view, noting that the AO failed to prove any benefit obtained by the assessee from the outstanding liabilities or any unilateral act of writing off these liabilities. The Tribunal emphasized that the genuineness of the transactions should be examined in the years they originated, not in the current assessment year. The Tribunal also referenced judicial precedents, including the Delhi High Court in Jain Exports (P) Ltd. and the Gujarat High Court in Matruprasad C Pandey, which supported the assessee's position that mere long-standing liabilities do not imply cessation or remission under Section 41(1).Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletion of additions made under Sections 50C and 41(1) of the Income Tax Act. The Tribunal relied on judicial precedents and the lack of evidence provided by the AO to support the additions. The order was pronounced in the open court on 26/04/2018.