2022 (8) TMI 1294 - HC - Income Tax

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

Smt. S. Kalpana Versus The Assistant Commissioner of Income Tax, Income Tax Circle XIII, Chennai

Smt. S. Kalpana Versus The Assistant Commissioner of Income Tax, Income Tax Circle XIII, Chennai - TMI 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.