2022 (1) TMI 592 - AT - Income Tax

Tribunal rules in favor of assessee in tax case on short-term gains, TDS, business expenses

The Tribunal ruled in favor of the assessee in a tax case involving short-term capital gains, TDS on export revenue, and examination of business expenses ... Revision u/s 263 by CIT - As per CIT Purchase of commercial property at Andheri vide agreement dated 31st March 2015 registered on 4th April 2015 cannot be added to the block of asset and therefore u/s 50, the sale of office premises at Bandra which forms part of the block would result into capital gain - HELD THAT:- No doubt Assessing Officer verified the additions made in the block of asset and not discussed anything on applicability of section 50 of the Act in the present case. From the records submitted before us clearly indicates that Assessing Officer has carried out verification on the aspect of additions/deletions and allowability of depreciation on the fixed assets scheduled. The issue raised by the Ld. Pr.CIT with regard to applicability of the section 50 considering the fact that Registration date as per document is on 04.04.2015 whereas execution of the agreement is dated 31.03.2015. From the records submitted before us shows that assessee has made substantial payments of sale consideration before 31.03.2015 and executed the agreement as on 31.03.2015. Only the registration was completed on 04.04.2015. We noticed that assessee has already paid substantial payments and the seller by written submission has already confirmed the passing of ownership to the assessee when the substantial payments were made When there is reasonable certainty, and the transferee has performed part performance and taken possession in part performance, has done some Act in furtherance of the contract then the mere registration process in next few days does not alter the legal rights of the parties involved. We observe that assessee added the property in the block of asset and claimed depreciation as well. However, Assessing Officer denied the depreciation considering the fact that assets were not put to use. As relying on M/S. INDOGEM VERSUS ITO-19 (1) (5) , MUMBAI [2016 (8) TMI 1095 - ITAT MUMBAI] when the entire sale consideration was paid, the terms of agreement reduced into to writing and purchaser proceeded to take over the building, the rights of both the parties are crystalized as on the date of allotment letter or taking over the possession of the property, for the legal formalities like execution of a proper covenant and issuance of occupation certificate by the authorities. It is only a regular formality, it is a settled principle of law that the transaction relates back to the date original agreement itself, as such, formal execution of the covenant would only evidence and reinforce the rights accrued. As discussed in the above Para that even the Section 53A of the Transfer of Property Act, comes into play and subsequent execution and registration of the property is merely a formality and the rights have already accrued to the assessee. It is presumed that Assessing Officer has considered those aspects on which he has called the information and it is fact on record that he has taken one of the possible views. In our considered view, Assessing Officer has examined the issues of addition to the block of asset as well as deletion / depreciation and taken one of the possible view in accordance with binding provisions and decisions submitted before him. In such case provisions of section 263 cannot be invoked Income received on which no TDS is deducted - applicability of TDS provision on professional fee received by the assessee - In the given case assessee has declared all the professional fee received by it and offered the same to tax. Ld. Pr.CIT has directed the Assessing Officer to verify the receipt from foreign source, which does not come under the provisions of withholding tax. Particularly where assessee has declared all the receipts for taxation and paid the applicable tax on its income. We further noticed that Ld. Pr.CIT has only given a direction to the Assessing Officer to verify the same. Even if the Assessing Officer finds that TDS is applicable, the consequence will be absolutely nothing. Therefore, mere giving direction to the Assessing Officer without quantifying loss to the interest of the revenue the Ld. Pr.CIT cannot invoke provisions of section 263 Genuineness of business promotion expenses - We observe from the record that during the assessment proceedings Assessing Officer has collected all the information relating to business promotion expenses by issuing notice u/s. 142(1) of the Act. Assessee also submitted the detailed submissions in this regard before the Assessing Officer and it is brought to our notice at Page No. 94 of the Paper Book wherein assessee has submitted all the information relating to business promotions incurred by the assessee to the extent of ₹.19,04,585/-. Even in this case Ld. Pr.CIT has directed the Assessing Officer to verify the genuineness of the expenses claimed by the assessee without really quantifying what is the loss to the revenue. Thus CIT has invoked provisions of section 263 of the Act in the present case where he has differed from the view which Assessing Officer has taken which is one of the possible view and further he has directed the Assessing Officer to verify the professional fee received by the assessee and business promotion expenses without really quantifying what is the loss to the revenue, it clearly indicates that he has invoked provisions of section 263 of the Act to redo the assessment or to implement his point of view in the assessment which is already completed. Therefore, we set aside the order passed u/s. 263 of the Act with the above observations. - Decided in favour of assessee. Issues Involved:1. Short Term Capital Gain u/s 50 of the IT Act on sale of office premises.2. Non-examination of applicability of TDS on Export Revenue.3. Non-examination of business promotion expenses and loan sanction documents.Issue-wise Detailed Analysis:1. Short Term Capital Gain u/s 50 of the IT Act on sale of office premises:The main contention was whether the office premises acquired by the assessee at Dev Plaza, Andheri (W), Mumbai, could be considered as acquired during the previous year ended 31.03.2015, given that the registration was completed on 04.04.2015. The Principal Commissioner of Income Tax (Pr.CIT) argued that since the registration was after the financial year, the capital gain arising from the sale of the office premises at Pinnacle Corporate Park should be taxable as short-term capital gain u/s 50 of the Act. The assessee contended that substantial payments were made, possession was taken, and the agreement was executed before the fiscal year-end. The Tribunal referred to the Transfer of Property Act and various judicial pronouncements, concluding that the transaction relates back to the date of the agreement (31.03.2015), thus the asset was acquired within the financial year. The Tribunal held that the Assessing Officer (AO) had conducted sufficient inquiry and taken a plausible view, making the invocation of Section 263 unwarranted.2. Non-examination of applicability of TDS on Export Revenue:The Pr.CIT noted that the AO did not verify whether TDS was deducted on professional receipts, particularly the export revenue of Rs. 11,50,31,250/-. The assessee argued that TDS provisions are not applicable to export income and that the AO had reconciled the TDS as per Form 26AS with the income shown in the Profit & Loss Account. The Tribunal observed that the AO had indeed examined the professional receipts and TDS applicability during the assessment proceedings. Since the professional fees from export were not subject to TDS, the Tribunal found no error in the AO's approach and held that the Pr.CIT's direction to re-examine this issue was unnecessary.3. Non-examination of business promotion expenses and loan sanction documents:The Pr.CIT pointed out that the AO did not call for or examine details of business promotion expenses amounting to Rs. 19,04,585/- and the loan sanction and disbursement letter for a Rs. 12,00,00,000/- loan from HDFC Bank. The assessee submitted that these details were provided during the assessment proceedings, and the AO had considered them. The Tribunal found that the AO had indeed examined these expenses and loan details, and there was no basis for the Pr.CIT's claim of inadequate inquiry. The Tribunal concluded that the AO had conducted a proper inquiry and taken a reasonable view, thus the Pr.CIT's invocation of Section 263 was invalid.Conclusion:The Tribunal set aside the Pr.CIT's order passed u/s 263 of the Act, holding that the AO had conducted adequate inquiries and taken a plausible view on all the issues raised. The appeal filed by the assessee was allowed, and the original assessment order was restored.