TaxTMI 
TaxTMI 
2015 (4) TMI 98
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....avour of Revenue. On the issue of addition of Rs. 2,10,60,000 towards difference in profit on sale of shop in ground floor, the CIT (A) remanded the issue to the file of the AO with the following observations: "Keeping in view all the above legal pronouncements and facts of the case, I hold that there is no doubt that based on evidence and human probability the area in question was sold to the brother of the Director Mr. Ashok Kumar Malpani is at the rate at least Rs. 2000/- per sq.foot on the minimum sale rate of adjoining areas. It was not difficult for the appellant to obtain the unaccounted for consideration in cash as the purchaser Mr. Ashok Kumar Malpani was a brother of a Director and also a close business associate in the project. Therefore, the AO is correct in holding that the actual sale rate was much higher than what was shown by the appellant. However, instead of sale rate of Rs. 2,250/- sq.foot the AO is directed to apply a sale rate 2,000. As already discussed the AO is also directed to verify whether there is any duplicate addition with respect to ground Nos. 4, 5, 6 & 7 of the appeal". 4. Against the decision of the ld CIT (A), both the Department and the ass....
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....Expenditure incurred in relation to exempt income of Rs. 2.00 lakhs. iv) Business profit of shops sold of Rs. 1,22,54,000 v) Difference in profit on sale of shop in ground floor of MMP Mall of Rs. 2,10,60,000 vi) Difference in profit on sale of shops in 2nd, 3rd & 4th floors in MPM Mall of Rs. 1,26,00,000. 6. Aggrieved by the assessment order dated 30.12.2011 the assessee preferred appeal before the CIT (A). The assessee raised Ground No.3 before the CIT (A) which is as follows: "3. The ld AO grossly erred in disallowing interest paid on borrowed capital for an aggregate sum of Rs. 45,01,777 as expenses incurred exempted income in total disregard of the provisions of section 14A r.w. Rule 8D and also of the decision of the Hon'ble ITAT in the case of this appellant in its order dated 31 October, 2011 in ITA No.1705/Hyd/2008 for the A.Y 2005-06. He ought to have allowed the interest claimed in terms of section 36(I)(iii)". 7. With respect to ground No.3 on disallowance of interest of Rs. 45,01,777/- paid on borrowed capital u/s 14A r.w.s. Rule 8D, AO observed that the assessee, out of interest bearing funds, had invested Rs. 4.00 crores towards share applicatio....
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.... 14A, could not be accepted. Disallowance under section 14A required finding of incurring of expenditure and where it was found that for earning exempted income no expenditure had been incurred, disallowance under section 14A could not stand. Consequently, the disallowance was not permissible." The same view has been taken by the Tribunal in the case of ACIT V/s. Sun Investment (8 ITR (Trib) 33). Relying on the ratio laid down in the above cases, this issue is set aside to the file of the assessing officer, to verify whether any exempted income has been earned by the assessee during the previous year relevant to assessment year under consideration on the investment towards share application money and decide the issue in accordance with law, after giving an opportunity to the assessee to present its case. 76. As for the balance amount of interest free advance of Rs. 4.37 crores advanced by the assessee, we find that the assessee company, which is having experience and expertise in running a star hotel is interested in the new venture in as much as it was felt that the assessee would be benefitted maximum by being a part of a hotel chain. The running of a chain of hotels belong....
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....s. 1,00,07,133/- treated as business income at Rs. 1,22,54,400/-, it was observed that the assessee had sold its let out shops and offered it under long term capital gains. The AO treated the sale of assets as its business income and brought to tax an amount of Rs. 1,22,54,400/-. On this, during the course of scrutiny proceedings, it was submitted by the assessee, as under: "Company has initially capitalized the building as investment in the year 2001-02 with an intention to hold the same as an asset for long run and receive rentals in the nature of regular income on the same. The same property was leased out to M/s Pantaloon Retail India Ltd and M/s Bennet Coloman & Co. Ltd with the said intention of earning rentals. The intention the company is further witnesses in the balance sheet as the same was presented as an investment in building, as capital asset since that year. Hence the income generated on the sale of the same should be treated as capital gain and not as a business income. An amount of Rs. 1,34,83,600/- is shown under the head investments capitalized. 12. On this the AO observed "just because an entry is made in its books of accounts to show the property as inves....
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.... from the very beginning, we are of the opinion that the income generated on the sale of the same should be treated as capital gain and not as business income. We confirm the order of the CIT (A) in deleting the addition. Ground Nos. 3 & 4 of appeal of the Revenue are dismissed. 15. Ground No.5 relates to the additions made towards profit on sale of ground floor - Rs. 2,10,06,000/- and profit on sale of shops in 2nd, 3rd and 4th floors - Rs. 1,26,00,000/-. In this regard assessee submitted before the CIT (A) that the transactions made i.e. sale on ground floor and 2nd, 3rd and 4th floors of MPM Mall should be viewed from a family settlement angle. According to the assessee, members of Malpani family had come to an understanding of settling their properties and it is in pursuance of this settlement of assets between members of family and they had some transactions/exchange of properties and those arrangements should be viewed from this angle and not as a general transaction. Hence, during the appellate proceedings, the assessee along with an aide memoire, filed a copy of "deed of family arrangement" evidencing the arrangement entered into by the family members of Malpani. Accordi....
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....t among the assessees did not amount to any transfer and hence was not exigible to capital gains tax" 16. The ld CIT (A) held as under: " 10.1 I have gone through the assessment order and submissions of the appellant. Going by the facts involved, I see there is merit in the submissions of the appellant. When an arrangement is made between the family members of the Directors of the company, the rates so adopted for this purpose cannot be compared to prevailing market rates and unless it was proved that consideration in excess of what was mentioned in the sale deed has been parted by the purchaser, the difference in rates cannot be adopted for the purpose of capital gains. Therefore, the comparable rates of the adjacent shops sold by the appellant cannot be criteria to the sale transactions effected within the members of family of the Directors, as part of arrangement between themselves. Accordingly, I direct the AO to adopt the rates as admitted by the appellant in the computation and delete the additions so made". 17. We heard both the parties. We have perused the copy of the deed of family arrangement filed by the assessee evidencing the arrangement entered into by the fa....