AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (9) TMI 948
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.... which the assessee could not place these evidences before the A.O. 4. Learned CIT(Appeals) has erred in ignoring that the assessee was not the dealer of agricultural land and the object clauses of the company also does not authorize the assessee to deal in trading of agricultural land. 5. The order of the Learned CIT(Appeals) is contradictory having regard to the fact that on one hand it has been observed that agricultural land was there and on the other hand it has been held that necessary approvals vis-à-vis land was obtained by the assessee. 6. The order of the Learned CIT(Appeals) is contrary to the facts and evidences produced before him during the course of hearing. 7. Learned CIT(Appeals) has failed to appreciate that the additional evidences which were produced before him as per the provision of Rule 46A proves beyond doubt that the land in relation to which the compensation was received by the assessee was an agricultural land. 8. Learned CIT(Appeals) has further failed to appreciate that from day 1 the assessee has treated this amount as investment in his books of account and has neither claimed the amount as Revenue ex....
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.... & Engg. (P) Ltd. Rs.1,00,00,000 M/s. Aerens Goldsuck International Ltd. Rs.1,00,00,000 6. The assessee company credited the amount of compensation so received in its books of account more particularly in the audited profit and loss account. In the notes of accounts, the auditor has commented that the said income was earned by the assessee in pursuance to an agreement dated 05.03.2006, executed with JMA Buildcom (P) Ltd. towards non-fulfillment of terms and conditions of the earlier agreement, however, in the computation of income the assessee claimed this income as exempt and reduced this income while computing its taxable profit. The Assessing Officer, however, held that the compensation received was on account of breach of agreement in the normal course of business of the assessee and, therefore, the same is a Revenue receipts. The Learned CIT(Appeals) upheld this action of the Assessing Officer, which has been questioned by the assessee before the ITAT. 7. In support of the grounds, the Learned AR furnished following submissions: 1. "Agreement entered into normal course of business:- One of the observation of the authorities below, for treating....
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....eks to rely on the judgment of Hon'ble Pune Bench of the Tribunal in the case of Aquapharam in ITA No 372/Pune/2002 dated 29.02.2012. Copy of the decision is enclosed in Paper Book of decision and the relevant observation of the Hon'ble Bench are at Page No-15-,( Findings of the case starts from Page No13) wherein it has been held that expression "normal course of business" presupposes some business and compensation received on account of loss of new line of business is a capital receipt. g. Hon'ble ITAT in the case of Aquapharam further observed that the where profit making apparatus is damaged then receipt is capital receipt- See Page No 14- Objection A h. In this very case of Aquapharam the Hon'ble Bench of the ITAT while dealing objection C of the revenue, has held that compensation received by the assessee for an injury because of which an assessee failed to commence a new business would be capital receipt.( See Page No 19 of the PB) 2. Object clause of assessee does not exclude deals of agriculture land and the assessee was not an agriculturist:- The CIT(A) in its order in Para 8 at Page no 16 and in Para 12 at Page No 17, has observed that the obje....
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....that assessee was a non-agriculturist and the intention of the assessee was to commence project on that land and not to start agriculture over there. In this regard the AO and CIT (A) have relied on the decision of Sarifabibi reported in 204 ITR 631 (SC) for holding that cultivation of land is sine-qua-non for treating some land as agriculture land. Finding of CIT(A) in this regard as page no 17 of the CIT(A) order.- 3. In this regard it is submitted that status of an assessee whether he is agriculturist or not is not relevant and what is relevant is the character of land at the time of entering into the agreement to sell. This proposition is further supported by two High Court and three Tribunal judgments- which are referred in below Para(s). 4. The assessee first seeks to rely on the judgment of Hon'ble Delhi High Court in the case of DLF universal Limited reported in 158 ITR 342(Del). Which judgment was quoted before the authority below:- Quoted portion can be seen from Page No-13 of CIT(A) order. 5. It is submitted that both the authorities has overlooked the judgment of Hon'ble Delhi High Court in the case of Hindustan Industrial Resources Vs ACIT re....
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.... and rice and animal feed grass in Gat No. 426. On perusal of the details of 7/12 extracts, the following facts are found: (1)that the land was undoubtedly classified in the Revenue records as agricultural lands, (2) that the land was subjected to payment of land revenue, (3) that the land was used by the owner himself, (4) that the nature of the agricultural produce produced from the said land are rice, jawar and animal feed grass. It is also equally true that the assessee has not given any evidence of incurring any expenditure on agricultural operations carried out on the said land. No direct evidence has been produced by the assessee to show and establish that the agricultural produce in the nature of rice, jawar andanimal feed grass were produced from the said land. On the other hand, no evidence has also been produced by the Revenue to show and establish that the land was used for some other purposes other than agricultural purposes. It is nobody's case that the assessee had used the land for nonagricultural purposes before selling the same. No permission for non-agricultural use has also been obtained by the assessee. No evidence t....
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....tted that land for which compensation was received was never become the stock in trade of the assessee:- It is next submitted that the observation of the AO in the body of assessment order and in remand report number-1 also support the factum land was never become the stock in trade of assessee. This fact is also evident from the words "in the present case of the assessee, the land was proposed to be purchased as part of stock in trade by the assessee Company". 12.It is view of the facts mentioned in Asst order and remand report it is an admitted fact that "stock in trade" was never conceived by the assessee therefore, merely because an agreement has been entered into does not change the nature of receipt. In other words the fact that the land was never become the part of stock in trade is evident from two things (i) the deal was spoiled prior to its maturity (ii) the AO in assessment order and in remand report has categorically admitted this fact as correct (iii) the assessee has never debited the expenses in its P& L rather has shown the amount as mere investment via consortium. Therefore, the principle of law as laid down by the apex court in the case of Universal Radia....
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.... in the state of Punjab. However, before the business of the consortium would have commenced the deal got spoiled and the business was demolished completely even before the setting up of the business. Their contentions remained that the assessee had not entered into agreement to sell with JMA Buildcom in its individual capacity and thus the entire business of the consortium got demolished even prior to the setting up of the new projects. It was submitted that business of the assessee is not to form consortium day in and day out therefore normal course of business proposition by the Assessing Officer does not stand. It was contended that under taxing provisions, every step of a transaction would have to be seen carefully before reaching to any conclusion. Heavy reliance has been placed by the Learned AR on the decision of Pune Bench of the ITAT in the case of Aquapharm Chemical Co. Ltd. vs. JCIT (supra). Having gone through that decision, we find that in that case the assessee company was incorporated in 1974 with its primary object of manufacturing sea water desalting it for the Indian Air Force and Indian Navy. In early 1980, it diversify its operation by entering into the manufac....