2022 (8) TMI 1294 - HC - Income Tax

Court classifies Industrial Site sale as capital gains, rejects business income, disallows deduction, emphasizes factual findings

The court upheld the authorities' decision to classify the sale of an Industrial Site as 'capital gains' instead of 'business income' due to lack of ... Correct head of income - Gain on sale of industrial site - capital gain v/s business income - rejecting the claim of the appellant with respect to the cost of acquisition of the land and deduction of commission payment to one T.P.Anand as share of profit - HELD THAT:- We are of the view that the concurrent finding of all the three authorities namely, Assessing Officer, First Appellate Authority and the Tribunal is based on evidence and the finding that the appellant had not let in evidence in support of his claim as business income is again concurrent and made on the basis and on consideration of the material on record. Hence, the same being essentially a finding of fact that the sale of Industrial Site is one to be assessed under the head “capital gains” and not under 'business income', the concurrent finding of fact by all the authorities below in the absence of any evidence to the contrary being let in by the appellant, does not warrant any interference by this court. Cost of purchase/ acquisition of Industrial Site - Tribunal found that the said fact having been proved by the Appellant before the Statutory Authority and the same having been accepted in the absence of any material other than mere assertion alleging that the appellant had entered into a subsequent agreement with one A.Mubaraq Ali, would show that the cost of acquisition was Rs.1.80 Crores, was rightly rejected by the Tribunal and other Lower Authorities, since weight must be given to a statement/ document approved by a Statutory Authority vis-a-vis a self serving document which has no sanctity. The same is a finding of fact based on consideration of the material on record and thus, does not warrant any interference by this court. Claim of deduction of amounts paid to Anand - As found by the Tribunal that the order of the Assessing Officer fixing the payment for the alleged services by the said Anand in the absence of any evidence let in, at Rs. 2 lakhs was in order and enhanced it to 7% by the First Appellate Authority, in the absence of any evidence, was unacceptable. Secondly, the Tribunal was prompted by the fact that the said claim of deduction was contrary to Section 48 In case of transfer of Capital Asset, deduction is allowable only under two circumstances, when the expenditure is made wholly and exclusively in connection with such transfer and if it represents the cost of improvement for the transfer. The plea of the appellant that the payments were made towards the improvement of the assessee’s title and rights, was not supported by any evidence whatsoever and thus, cannot be allowed. In any view, the said claim of deduction does not fall within the two circumstances mentioned in Section 48 of the Income Tax Act, 1961. Thus, the Tribunal has rightly affirmed the order of the assessing officer in fixing the claim of deduction of payment to Anand restricted to Rs.2 lakhs, which does not warrant any interference. Powers of High Court - While exercising its power under Section 260 A of the Income Tax Act, 1961, this court would exercise restraint and normally, would not interfere with the finding of fact unless it is shown to be perverse, which is not the case here. - As the order of the Tribunal being one essentially finding of facts and based on evidence and on consideration of relevant materials on record, it does not warrant any interference. Issues involved:1. Classification of receipts as 'capital gains' or 'business income.'2. Determination of the cost of acquisition of the industrial site.3. Claim of deduction of amounts paid to a third party for services rendered.Issue 1: Classification of receipts:The appellant contested the treatment of the sale of an Industrial Site as 'capital gains' instead of 'business income.' The appellant's claim was rejected by all authorities due to lack of evidence supporting the business income assertion. The Tribunal found the appellant's business activities were limited to lorry operation, not real estate. The absence of evidence like infrastructure, stock, and trade led to the rejection of the claim. The court upheld the authorities' decision, stating that the sale should be assessed as 'capital gains' based on the evidence presented.Issue 2: Cost of acquisition determination:The appellant claimed the cost of acquisition of the land was Rs.1.80 crores, while authorities fixed it at Rs.1.40 crores based on the registered sale deed. The court upheld the lower authorities' decision, emphasizing the importance of documents approved by statutory authorities over self-serving documents. The lack of substantial evidence supporting the higher cost led to the rejection of the appellant's claim.Issue 3: Claim of deduction for services rendered:The appellant sought a deduction for amounts paid to a third party for services related to the industrial site. However, authorities found no evidence supporting the services claimed, such as clearing encroachments and debris removal. The Tribunal noted the absence of proof for the claimed services and ruled against the deduction. Additionally, the claim did not align with Section 48 of the Income Tax Act, 1961, which specifies allowable deductions for capital gains. The court upheld the Tribunal's decision, stating that the claimed deduction did not meet the criteria outlined in the Act.In conclusion, the court dismissed both tax case appeals, citing the absence of evidence to support the appellant's claims and emphasizing the importance of factual findings made by lower authorities. The court highlighted the need for substantial evidence to substantiate claims and upheld the decisions based on the evidence and relevant legal provisions. The judgments of the Hon'ble Supreme Court were referenced to support the court's decision not to interfere with the factual findings unless shown to be perverse.