TaxTMI 
TaxTMI 
2019 (4) TMI 1571
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....llant 1. The CIT (A) failed to appreciate that the Appellant had acquired and was possessed of the new off ice premise which was supported by possession letter, and hence, the same was liable to be added to the cost of the block of office premises u/s 50(1)(iii) of the Act for computing capital gains u/s 50 of the Act. 2. The CIT (A) erred in holding that the AO was justified ill relying on third party statements and failed to appreciate that the AO had failed to provide opportunity of cross examination of the parties relied upon by him before making the addition. Non-appreciation of alternate argument that provisions of Explanation to section 73 cannot be invoked if benefit of Rs. 2,16,00,000/- is denied u/s 50. 3. The CIT (A) failed to appreciate that if the benef it of Rs. 2,16,00,000/- is denied to the Appellant, provisions of Explanation to section 73 could not be invoked. Disallowance of Rs. 3.42,385/- tinder section 14A of the Act. 4. The CIT (A) failed to appreciate that the Appellant had not incurred any expenditure for the purpose of earning exempt income. Hence, the addition of Rs. 3,42,385/- u/s 14A read with Rule 8D....
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....ccordance with Sec. 14A of the I.T. Act. The A.O called upon the assessee to give working of disallowance under Sec. 14A in accordance with Rule 8D(2). In response, the assessee submitted working of such disallowance, as per which the same worked out to an amount of Rs. 7,10,977/-. Insofar the expenses which were directly attributable to earning of the said exempt income were concerned, it was the claim of the assessee that no direct expenses were incurred for earning of the same. On the basis of the working of disallowance under Sec. 14A r.w. Rule 8D(2) furnished by the assessee in compliance to the directions of the A.O, the latter restricted the same upto the amount of total expenses of Rs. 3,42,385/- that were debited by the assessee in its profit and loss account for the year under consideration. (iii) The A.O further noticed that the assessee had during the year under consideration sold two of its office premises viz (i) Flat No. 302 on the 3rd Floor of the building named as Khan House (Vidyanand Cooperative Housing Society) at CTS No. 407, Vidyanand CHS Ltd., Plot No. 107, 24th Road, Bandra (West), Mumbai for a consideration of Rs. 1,95,00,000/- th....
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..... Ltd., the A.O was of the view that the assessee was only assigned the rights in the aforesaid property which were conferred on M/s Govindram Brothers Pvt. Ltd through an allotment letter dated 25.06.2009. In order to confirm the factual position the A.O issued summons under Sec. 131 to the builders viz M/s Silver Land Developers Pvt. Ltd. On the basis of the information that was gathered by the A.O from M/s Govindram Brothers Pvt. Ltd and M/s Silver Land Developers Pvt. Ltd., it was observed by him that the acquisition of Unit No. 5 & 6 in the building Silver Turning Point by the assessee was not completed during the year under consideration. The A.O was of the view that the amount of Rs. 2,16,00,000/- paid by the assessee to M/s Govindram Brothers Pvt. Ltd. was merely an advance that was paid towards assignment of the allotment rights in respect of the aforesaid property under consideration. Apart from this, it was noticed by the A.O that the owner/builder had categorically denied of having sold the Unit No. 5 & 6 to the assessee. In compliance to the summons issued by the A.O under Sec. 131 of the I.T. Act to M/s Govindram Brothers Pvt. Ltd. the accountant of the said concern v....
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..... Further, the CIT(A) directed the A.O to allow the claim of exemption of Rs. 50,00,000/- raised by the assessee under 54EC vis-a-vis the investment made in the NHAI Bonds and allow the said exemption if the same satisfied the conditions contemplated in the aforesaid statutory provision. However, the CIT(A) did not find favour with the claim of the assessee that the new asset viz Unit No. 5 & 6 in the building Silver Turning Point, Mumbai qualified for being considered as 'acquired' within the meaning of Sec. 50(1)(iii) of the I.T. Act. As a result thereof, the exclusion of Rs. 2,16,00,000/- from the 'block of assets' by the A.O for the purpose of computation of STCG was upheld by the CIT(A). On the basis of his aforesaid observations the appeal of the assessee was partly allowed. 5. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The Learned Authorized Representative (for short 'A.R') for the assessee Dr. K. Shivaram, Senior Advocate submitted, that insofar the addition of Rs. 2,16,00,000/- in respect of the 'acquiring' of the assets by the assessee during the year under consideration was concerned, the lower authorities had....
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....Ld. A.R further took us through the 'affidavit', dated 12.03.2018 of Sh. Harshkumar N. Seksaria director of M/s Govindram Brothers Pvt. Ltd. which was filed before us by way of an 'additional evidence' by the assessee appellant. In the said affidavit the director of M/s Govindram Brothers Pvt. Ltd. had deposed that the assessee had purchased the commercial premises in the building viz. Silver Turning Point, Mumbai and had taken possession of the same on 'as is where is basis' after paying the entire consideration on/before 31.03.2011. It is further stated by the deponent that Sh. Manoj Parihar, accountant of M/s Govindram Brothers Pvt. Ltd. who had appeared before the A.O was not fully acquainted with the facts as regards the transaction under consideration. Further, the said affidavit also brings on record the subsequent events which as per the deponent established that the occupation certificate for the building was obtained after considerable delay. The Ld. A.R taking us through the contents of the affidavit submitted, that as the same had a strong bearing on the adjudication of the issue under consideration, therefore, the same may be admitted as per Rule 29 of the Appellate Tr....
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....g the year under consideration sold two of its office premises vide registered agreements dated 22.10.2010 for an aggregate sale consideration of Rs. 3,85,00,000/-. That a perusal of the computation of the STCG revealed that it was the claim of the assessee that it had during the year under consideration paid an amount of Rs. 2,16,00,000/- to M/s Govindram Brothers Pvt. Ltd. for acquisition of a commercial property viz. Unit No. 5 & 6, 5th Floor, Silver Turning Point, New Maniklal Street, Ghatkopar (West), Mumbai. The A.O being of the view that the assessee during the year was only assigned the rights in the aforesaid property which were conferred on M/s Govindram Brothers Pvt. Ltd. through an allotment letter dated 25.06.2009 and the acquisition of the property was not completed during the year under consideration, therefore, treated the amount advanced by the assessee to M/s Govindram Brothers Pvt. Ltd. as a capital work-in-progress and declined to include the same in the 'block of assets' for the year under consideration. In the backdrop of his aforesaid observations the A.O after reducing the addition of Rs. 2,16,00,000/- made by the assessee to the 'block of assets', recompute....
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....as to whether the assessee had acquired the property under consideration viz. Unit No. 5 & 6, 5th Floor, Silver Turning Point, New Maniklal Street, Ghatkopar (West), Mumbai during the year under consideration, or not. It is the claim of the assessee that it had acquired and was possessed of the said office premises by the end of the year, while for the revenue rejecting the said claim had proceeded with on the ground that the assessee by making a payment of Rs. 2,16,00,000/- to M/s Govindram Brothers Pvt. Ltd. was only assigned the rights in the aforesaid property which were conferred on the said party through an allotment letter dated 25.06.2009, and as such the aforesaid property was not acquired by the assessee during the year under consideration. 10. We find from a perusal of the order of the A.O that he had concluded that only the rights which were conferred by the builders M/s Silver Land Developers Pvt. Ltd. to M/s Govindram Brothers Pvt. Ltd., vide allotment letter dated 25.06.2009 were assigned to the assessee during the year and the acquisition of the property had not concluded by 31.03.2011, by observing as under :- "5.12 The reply of the assessee is not acce....
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....ition of the Units has not been completed as the owner/builders has not transferred the rights to the assessee, the assessee has not got physical possession, there is no contract between the owner and the assessee, the owner has categorically denied any transaction with the assessee. (viii) Mere allotment cannot be equated with ownership rights. In case of transfer of immovable properties as per governing law i.e. Transfer of Property Act and Indian Registration Act the transfer is to complete on payment of consideration, registration of documents and getting possession. In the case of assessee these factors are absence and hence it is held that acquisition of asset is incomplete. (ix) From the reply of M/s Silver Land Developers Pvt. Ltd. it is clear that they have not handed over the possession and all rights to use, exploit and access to the Units under reference lied with them only. The reply says that they allowed their customers to access their Units impliedly proves that the rights to access lied with them only. (x) Further, in response to the statutory notices, M/s Silver Land Developers Pvt. Ltd. vide their letter dated 13.03.2014 have s....
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....ore, it would form part of the 'block of asset'; (vii) that there was no contract between the owner and the assessee and as such the owner/builders had not transferred the rights to the assessee; (viii) that as the transfer would be complete only on payment of consideration, registration of documents and getting possession of the property, therefore in the absence of the aspects the acquisition of the property by the assessee was not complete; (ix) that as per the reply of the builders viz. M/s Silver Land Developers Pvt. Ltd. the possession of the property under consideration i.e. Unit No. 5 & 6 (supra) had not been handed over by them and all rights to use, exploit and access the said property remained with them; and (x) that the builders viz. M/s Silver Land Developers Pvt. Ltd. vide their letter dated 13.03.2014 had stated that they were yet to give formal possession of office units to their customers and the same would be given upon receipt of OC/BCC from Municipal Corporation of Greater Mumbai. It was thus for the aforesaid reasons and the information gathered by the A.O that it was concluded by him that the amount of Rs. 2,16,00,000/- paid by the assessee to M/s Govindram Br....
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....ated by him that on the date of handing over the possession to the assessee company, the construction of the said units was complete, however, the occupation certificate was still to be obtained by the builder due to some regulatory issues. It is stated by him that though his company viz. M/s Govindram Brothers Pvt. Ltd. had undertaken in its letter dated 30.03.2011 to get the no objection certificate of the builder, however, as the latter was evasive and non-cooperative, hence the same could not be obtained and resultantly the formal registration of the sale of the aforesaid units could not be carried out. It is further clarified by him that on the date of handing over the possession of the aforesaid units the building was complete except for certain electric/water supply that would have required the occupancy certificate. Further, it is stated by him that the builder i.e. M/s Silver Lands Developer Pvt. Ltd. were unwilling to complete its obligations and get the occupation certificate and complete the remaining formalities. It is further stated by him that the amount of Rs. 2,16,00,000/- that was received from the assessee company was not by way of an advance, but was towards the....
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....he assessee had purchased the property under consideration from M/s Govindram Brothers Pvt. Ltd. and not directly from the aforesaid builder i.e. M/s Silver Land Developers Pvt. Ltd., therefore, the said claim of the builder shall not have any material bearing on the issue under consideration. As regards the observations of the A.O that the aforesaid units were not supported with electric/water supply, we find that Sh. Harshkumar N. Seksaria had clarified the said aspect in his affidavit dated 12.03.2018 that though the construction of the said units was complete on the date of handing over the possession to the assessee company, however, as the occupation certificate was still to be obtained by the builder due to some regulatory issues, therefore, the said property was not supported by electric/water supply, as the same would have required the occupancy certificate. Insofar the observations of the A.O that M/s Govindram Brothers Pvt. Ltd. were not in possession of the Unit No. 5 & 6 (supra) during the year under consideration, we find that in contradiction of the said observations of the A.O it is deposed by Sh. Harshkumar N. Seksaria in his affidavit dated 12.03.2018 that the pos....
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....ineness and veracity of the facts as had been deposed therein. We thus in all fairness and in the interest of justice are of the considered view that the matter requires to be revisited by the A.O, who shall verify the veracity of the facts deposed by Sh. Harshkumar N. Seksaria in his affidavit dated 12.03.2018 and after making necessary verifications as he may deem fit, therein readjudicate the issue. Needless to say, the A.O shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee, who shall remain at a liberty to substantiate its claim that the property under consideration viz. Unit No. 5 & 6, 5th Floor, Silver Turning Point, New Maniklal Estate, Ghatkopar (West), Mumbai, was acquired by it during the year under consideration i.e. financial year 2010-11. In terms of our aforesaid observations the matter is set aside to the file of the A.O for fresh adjudication. The Grounds of Appeal No. 1 & 2 are allowed for statistical purposes. 13. We shall now advert to the disallowance made by the A.O under Sec. 14A as regards the exempt dividend income of Rs. 17,44,114/- received by the assessee during the year under consideration. ....
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....re proceeding with the merits of the issue under consideration, we may herein observe that the assessee loosing sight of the fact that the CIT(A) had scaled down the disallowance under Sec. 14A from an amount of Rs. 3,42,385/- as was disallowed by the A.O to an amount of Rs. 30,000/-, had however wrongly assailed before us the disallowance of Rs. 3,42,385/- (supra). We have deliberated at length on the observations of the CIT(A) and find ourselves as being in agreement with the view taken by him that the relating of entire expenses of Rs. 3,42,385/- debited in the profit and loss account to the earning of the exempt dividend income by the assessee, would inescapably result in an absurd situation, as per which the sole illogical view that would emerge would be that the assessee had earned its taxable income without incurring any expenditure. We are of a strong conviction that the said untenable and inconceivable view arrived at by the A.O could not be sustained and has rightly been dislodged by the CIT(A). We find that the CIT(A) duly appreciated that the A.O had failed to record the reasons which he was obliged to do for dislodging the claim raised by the assessee in its return ....
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...., therefore, the A.O appreciating that the case of the assessee was not covered by the exceptions provided in the Explanation to Sec. 73 of the I.T. Act, had thus rightly characterized the loss on sale of shares of Rs. 1,05,62,764/- as a speculative loss in the hands of the assessee company. The Ld. D.R relied on the order passed by the A.O. Insofar the disallowance under Sec. 14A of Rs. 3,42,385/- was concerned, it was submitted by the Ld. D.R that the said disallowance was rightly made by the A.O by taking recourse to Sec. 14A r.w. Rule 8D. Per Contra, the Ld. A.R in context of the aforesaid issues as were assailed by the revenue in its appeal before us, relied on the order of the CIT(A). It was submitted by the Ld. A.R that the CIT(A) after deliberating on the aforesaid issues had rightly deleted the said additions/disallowances made by the A.O. 18. We shall first advert to the deletion by the CIT(A) of the addition of Rs. 1,05,62,764/- made by the A.O by recharacterizing the loss on sale of shares as speculation loss in view of Explanation to section 73 of the I.T. Act. Succinctly stated, in the course of the assessment proceedings it was observed by the A.O that the assesse....
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....was noticed by him that there was nothing discernible from the records which would indicate that the interest bearing funds were deployed by the assessee for the acquisition of the aforementioned equity shares. On the basis of his aforesaid deliberations the CIT(A) concluded that the sale of shares of Hindustan Zinc Ltd. could not be taken as part of any share trading business of the assessee. In the backdrop of the aforesaid facts, it was observed by the CIT(A) that a clear cut requirement that the business of the company consisted of purchase and sale of shares of other companies was indispensably required to be satisfied for the purpose of invoking the Explanation to Sec. 73. The CIT(A) was of the view that as the sale of shares of Hindustan Zinc Ltd. could not be taken as part of any share trading business of the assessee, therefore, the assessee could not be brought within the sweep of the Explanation to Sec. 73 of the I.T. Act, and resultantly the loss of Rs. 1,05,62,764/- on the sale of shares of Hindustan Zinc Ltd. could not be treated as a speculation loss in the hands of the assessee. On the basis of his aforesaid observations the CIT(A) vacated the recharacterization of ....
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.... condition viz. that the assessee is doing the business of trading of shares, had as a matter of fact straight away given a finding that the gross total income of the assessee comprises income from share trading, without giving any basis for concluding that as to why as per him the assessee was found to be engaged in the business of trading in shares. Rather, the A.O had brought the case of the assessee within the sweep of the Explanation to Sec. 73 by primarily focusing on the fact that the assessee was not engaged in the business of advancing loans and that it was not an investment company. On a perusal of the assessment order, it can safely be gathered that the A.O had failed to record a reasoning as to why the purchase/sale of shares of Hindustan Zinc Ltd. by the assessee was to be held as its business of trading in shares. 21. We shall now deliberate on the aspect as to whether the transaction of purchase/sale of 75000 shares of Hindustan Zinc Ltd. by the assessee during the year could be brought within the ambit of a business activity or an adventure in the nature of trade, thereby, making the loss therefrom assessable under the head "business income". We find that the ass....
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....rt in the case of Patiala Biscuit Mfg. (P). Ltd. Vs. CIT (1971) 82 ITR 812 (SC). In our considered view as the transaction involved in purchase and sale of shares of Hindustan Zinc Ltd. by the assessee company during the year was a solitary transaction, therefore, the presumption would be that the said shares as claimed by the assessee were held as an investment, unless the same is rebutted by the department on the basis of irrefutable material. We thus in the backdrop of our aforesaid deliberations are of considered view that as the solitary transaction of purchase and sale of shares of Hindustan Zinc Ltd. by the assessee company during the year under consideration cannot be held to be a part of its business, therefore, the loss of Rs. 1,05,62,764/- suffered by the assessee on the sale of the same was rightly claimed as a capital loss, and the same could not have been held to be a speculative loss as had been so done by the A.O by invoking the Explanation to Sec. 73 of the I.T. Act. We thus being persuaded to subscribe to the well reasoned view of the CIT(A) that the loss on sale of shares of Hindustan Zinc Ltd. by the assessee was rightly claimed as a capital loss, thus uphold hi....