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2020 (1) TMI 459
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....s of Rs. 7,80,355/-. The A.O. observed that out of salary expenses claim of Rs. 18,97,443/- and amount of Rs. 7,80,355/- represent salary paid to relatives of the Director. The A.O. disallowed the same holding that the assessee did not prove the business exigencies to justify the payment of salary and that payment made remain unverifiable. 3.1. The assessee challenged the above addition before the Ld. CIT(A). Written submissions of the assessee are reproduced in the appellate order in which the assessee briefly explained that salary was paid to 05 persons and the actual amount was Rs. 8 lakhs. It was further submitted that out of the 05 payees, one of them namely Smt. Veena Rana is not an employee, but she is a Director of the company. Instead of salary, Director's remuneration in the shape of one-time payment of Rs. 2 Lakhs was made to her towards the end of the accounting period considering prospects of good income of the company and valuable contribution made by the said Director towards the business of the company. This payment is duly supported by Board's resolutions. However, owing to an inadvertent mistake on the part of the Accountant, this payment was shown and accou....
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....t the said relatives did nothing for the assessee company to earn salary or that payment of salary was excessive and not commensurate with the work done by them. The assessee filed all the details to show they were working for the assessee company and looking after various job. The assessee has also provided qualification of these employees which are verifiable. The salary paid to them has been disclosed. These employees show income in the income tax return. The salary expenditure of the company which was less than Rs. 19 lakhs could not be considered as excessive as per record maintained by assessee. The Ld. CIT(A), accordingly, deleted the addition. 4. The Ld. D.R. relied upon the Order of the A.O. and submitted that no details have been filed before A.O. and onus is not discharged. All the employees were relative of the Director. 5. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below. He has referred to PB-51 which is reply filed before A.O. supported by documentary evidences and payment of salary. PB-73 onwards is ledger account of the salary, on which, TDS has ben deducted. PB-77 is another reply. He h....
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....he Orders of the Ld. CIT(A) in deleting the addition. Ground No.1 of appeal of Revenue is dismissed. 7. In A.Y. 2011-2012, Revenue challenged the Order of the Ld. CIT(A) in deleting the addition of Rs. 7,80,000/- made by the A.O. on account of salary paid to the relatives of the Director. The Ld. CIT(A) found that this issue is same as have been considered by him in A.Y. 2010-2011. Following the Order for the A.Y. 2010-2011, the Ld. CIT(A) deleted the addition. 8. Since in A.Y. 2010-2011, we have dismissed the Departmental Appeal, therefore, following the reasons for decision, we dismiss Ground No.1 of appeal of the Revenue for the A.Y. 2011-2012 as well. 9. In the result, Ground No.1 of the Departmental Appeal for both the assessment years is dismissed. ISSUE NO.2 : 10. In A.Y. 2010-2011, the Revenue on Ground No.2 challenged the Order of Ld. CIT(A) in deleting the disallowance of excess remuneration paid to the Directors amounting to Rs. 33,10,000/- during the year. The A.O. disallowed Rs. 33,10,000/- out of Director's Remuneration paid to Shri Kushal Rana, Director of the Assessee-Company at Rs. 42 lakhs. The A.O. disallowed substantial portion of the payment on t....
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....e taxes. Considering the contribution of the Director for business purposes, small increase in the salary was found justified. The disallowance was deleted and this ground of the appeal of the assessee was allowed. 13. After considering the rival submissions, we do not find any merit in this ground of appeal of the Revenue. This issue is same as have been considered in A.Y. 2010-2011. In the assessment year under appeal there is a slight increase in the salary of the Director which is approved by the Company, on which, TDS have been deducted and income have been offered for tax by the Director. Therefore, considering the nature of business of assessee and contribution of Director and following order for A.Y. 2010-2011 in which we have dismissed the departmental appeal, we do not find any justification to interfere with the Order of the Ld. CIT(A) in deleting the addition. Ground No.2 of the appeal of the Revenue for both the assessment years i.e., 2010-2011 and 2011-2012 are dismissed. ISSUE No. 3 : 14. In A.Y. 2010-2011, the Revenue on ground no. 3 challenged the Order of the Ld. CIT(A) in deleting the disallowance of Rs. 36,66,75,500/- which was claimed as exempt unde....
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.... the assessee are reproduced in the appellate order. The assessee issue-wise explained the matter before the Ld. CIT(A). It is explained that the findings of the A.O. are based on information furnished by an Officer of the North Delhi Municipal Corporation, the origin of which Municipality dates back to merely 3-4 years back. Apparently, it talks of present position of the land whereas relevant portion of the land is one which existed on 06.01.1994 that is the date on which latest Notification about the jurisdiction of the Municipalities of India was got published by the CBDT. The name of North Delhi Municipal Corporation is not mentioned in the said Notification. Hence, the information provided by its functionary is not relevant for this purpose. As per the period for which the position of the impugned land is to be taken into reckoning, even the A.O. has not disputed in his remand report that the period/date for their purpose is 06.01.1994 and not the present position or that which was obtaining on the date of sale of the lands. It was further submitted that limits for this Section 2(14)(iii) from Notified Municipalities have to be seen as they existed on the date on which suc....
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....eld that since the beginning the mentality of the assessee company was that of purchasing the lands for selling them for profit, rather than retaining for own purposes. The assessee submitted that A.O. has failed to appreciate that period of holding as seen from the sale agreement is deceptive. The assessee does not deal in sale or purchase of lands, properties. It is an infrastructure developer. The agricultural lands in question were purchased with an intention to use them for own purposes. The A.O. failed to see that lot of effort and time was consumed before reaching stage of signing of the agreements. Before entering into agreements with different Farmers for purchase of their respective lands, assessee had undertaken huge spade work for preparing them to part with their lands, for negotiating the price of the land, for verifying genuineness of these vendors, for examining and verifying the ownership paper to ensure very clear title to the land, for ensuring that lands in question are free from any dispute legal etc., ownership, for negotiating payment terms and for determining the settlements of these transactions. After going through of these processes, assessee had en....
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....from tax. It was further submitted that the impugned land is governed by the provisions of Delhi Land Reforms Act, according to which, the concept of ownership of the land has been done away with those which were in possession of the land were recognized as tenure-holder with the nomenclature Bhumidhar. The land could not be converted into non-agricultural land because it was subjected to restriction since it was agricultural land and there is no provision under the Delhi Land Reforms Act to change its land use from 'agriculture to residential' or 'commercial' with the result that there is no scope of its development, urbanization, commercialization and colonization. Therefore, it could not be subjected to commercial exploitation. It is, therefore, not a capital asset to be taxed. It was further submitted that main Director of the assessee company is Shri Kushal Rana who is from agriculturist family. In purchase of these agricultural lands his initial intention is to retain it in the custody of the assessee company and to use it for agricultural purposes. However, he and other member of Management of the Company were deep in negotiation and everything was settling down regarding....
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....nities given to ARs are described below: - 13. After affording opportunity of being heard to the AO on the fresh evidence filed by the appellant at the appellate stage, the fresh evidence, which is in the form of a certificate issued by the Tehsildar, a Revenue authority of the Delhi Govt., is admitted and taken into consideration for deciding the case. 14. After duly considering the remand report and the rejoinder of the appellant, the cases cited and the oral arguments advanced by Ld. AR on the impugned issue, it is observed that the determination of the exact nature of land purchased and sold by the appellant lies at the core of the impugned issue. The appellant company vehemently pleaded that the said lands are agricultural lands falling in the exempt category under section 2(14)(iii)(b). On the contrary, the AO held that the lands, in question, were urban lands and fell under the category of 'capital asset'. He has based his finding on the report of the Assistant Commissioner, Narela Zone, North Delhi Municipal Corporation, as sent vide letter No. AC/NRZ/2013/525 dated 13.02.2014. It is further seen that the position and nature of impugned lands is t....
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....rade. The appellant has pleaded that the assessee company is not doing any business of sale purchase of lands, be it agricultural land or urban residential/commercial estate dealer. It further pleaded that the lands, in question, were being purchased for own use but in the meantime some buyer contacted the appellant and they offered handsome amount and that the appellant deemed it feasible to sell the agricultural lands. He relinquished his 'right to obtain conveyance' vested in it by virtue of the 'Agreement to sell' undertaken with the farmers. Relinquishment of 'right' would amount to 'tranfer' within the meaning assigned to the term under the provisions of sec. 2(47) of the Act. As per the decision of Hon'ble Delhi High Court in the case of J.K. Kashyap vs. ACIT (2008) 302 ITR 255 (Delhi), "interest was ultimately relinquished by him in favour of a new vendee by virtue of agreement dated 26.09.1995 and the consideration received by him for relinquishing his rights in the property, thus attracted the provisions of sec. 45(1) making him liable to capital gains tax" this decision was re-emphasized by the jurisdictional High Court in the case of Simka Hotels & Resorts vs. DCIT (201....
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....her, he has brought no material on record to show that the appellant carried on activities of buying and selling of land in a systematic manner so as to justify the action of the AO. 15. After duly considering the above facts, cited case laws on the issue and written submissions of the appellant, I hold the Pooth Khurd Village land to be an agricultural land and profit earned on sale of the said land to be a capital receipt of the appellant company. Consequently, addition made at Rs. 36,66,75,500/- is hereby deleted." 16. The Learned D.R. relied upon the order of the AO. He has submitted that the land was within the municipal area / limit. PB-370 is agreement to sale to purchase land in Pooth Khurd, Delhi, Dated 15.11.2009. It is in Narela Zone, MCD. Ph-377 is assignment agreement dated 16.11.2009 by assessee. PB-362 to 369 are details of properties. The Learned D.R. referred to PB-81 to 82 (Departmental paper book) which is Delhi Municipal Corporation Amendment Act to show that the same extend only to Delhi and that Delhi means entire area of Union Territory of Delhi except New Delhi and Delhi Cantonment. The Learned D.R. therefore submitted that entire Del....
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.... land with sole motive to sell the same for earning profit to be treated as business income and no capital gain. The learned D.R. also relied upon Judgment of the Hon'ble Kerala High Court in the case of N.A. Baby Vs. DCIT [2016] 383 ITR 585 in which it was held that where assessee having purchased agricultural land, converted the same into barren land and thereupon sold it within a short period of purchase, the said activity was to be regarded as an adventure in nature of trade and consequently profit earned on sale of land was to be taxed as business income. The learned D.R. submitted notification Dated January, 1994 is with regard to section 2(14)(iii)(b) of the I.T. Act and not with Section 2(14)(iii)(a) of the I.T. Act. He has submitted that area is in Municipal Corporation of Delhi, no Revenue Certificate is relevant. The CBDT Circular could not apply the certificate given by Assistant Commissioner, Municipal Corporation of Delhi ["MCD" ] that the land in question fall in MCD area, therefore, provisions of DMC Act would apply. 17. On the other hand Learned Counsel for the Assessee reiterated the submissions made before the authorities below. He has submitted that Sectio....
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....s) II. Agricultural land would fall outside term 'capital asset' if it fell beyond 8 kms of municipal limits on date of publication of relevant CBDT notification: 5. Satya Dev Sharma Vs. Income Tax Officer, Ward 5(2), Jaipur [2014] 46 taxmann.com 149 (Jaipur - Trib.) 6. Smt. (Dr.) Subha Tripathi Vs. Deputy Commissioner of Income-tax, Circle - 6, Jaipur [2013] 34 taxmann.com 286 (Jaipur - Trib.) 7. Dinesh Kumar Jain Vs. ITO, Ward 6(1), Jaipur [2017] 78 taxmann.com 53 (Jaipur - Trib.) 8. Deputy Commissioner of Income-tax, Circle 8, Kolkata Vs. Arijit Mitra [2011] 16 taxmann.com 66 (Kol.) 9. Capital Local Area Bank Ltd. Vs. ACIT-III, Jalandhar [2017] 82 taxmann.com 387 (Amtritsar - Trib.) III. Income from agricultural land was not business income 10. Marigold Merchandise (P) Ltd. Vs. DCIt [2015] 55 taxmann.com 358 (Delhi - Trib.) 11. Goutham Constructions Co. Vs. ITO, Ward 4(2), Hyderabad [2013] 39 taxmann.com 181 (Hyderabad - Trib.) 12. Hindustan Industrial Resources Ltd. Vs. ACIT [2011] 335 ITR 77 (Delhi) 13. Principal Commissioner of Income tax, Rajkot-1 Vs. Heenaben Bhadresh Mehta [2....
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....lands in question falls more than 8 KM from the Municipal limits. Since it is also not disputed that the lands in question at the time of purchase by assessee was agricultural land, therefore, it is governed by Delhi Land Reforms Act. The assessee did nothing in the agricultural land. The assessee did not make any request for conversion of the land use and did not made plotting in the said land. The assessee with great efforts purchased the lands in question from several Farmers and after making these efforts during the long period purchased the land and since some other party approached the assessee for purchase of the lands in question at a higher rate, the assessee has sold the lands to other party. Therefore, there is no question of assessee doing any business activity in the agricultural land. The Revenue Authorities have also certified that at the time of purchase by assessee, the land was cultivated as agricultural land by the Farmers. Therefore, land use was agricultural land only. No land use was changed at any point of time. The CBDT has issued notification dated 06.01.1994 under section 2(14)(iii)(b) of the I.T. Act regarding urbanisation of area. This notification has c....
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....tion of "capital asset". No other notification has been issued by the CBDT. Therefore, the case of the assessee is supported by Certificate of Patwari as well as Tehsildar and Sub-Divisional Magistrate of Delhi in which it is clarified that the land in question is situated more than 9 KM from the municipal limit and the population of the area is about 7000 only. Therefore, contention of the Learned D.R. is rejected. It may also be noted here that Amendment in the Act is made in the year 2014 which is not relevant to the matter in issue. The North Municipal Corporation Delhi is created in the year 2011 and they have issued certificate in the year 2013. Since it was not in existence in assessment year under appeal, therefore, such notification issued by North Municipal Corporation Delhi is not relevant. The assessee has admittedly sold the agricultural land as it is so there were no intention to do any business activity, therefore, period of holding would not be relevant. The intention of the assessee is therefore clear that assessee purchased the agricultural land and sold the agricultural land as it is. The assessee never treated the said agricultural land as stock in trade and nev....
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....nothing wrong in the findings of the Ld CIT(A) in holding that land in question is agricultural land and amount earned on sale of the land to be capital receipt. The decisions relied upon by the Learned D.R. would not support the case of the Revenue. Considering the totality of the facts and circumstances, we do not find any infirmity in the order of the Learned CIT(A) in allowing the claim of assessee. We, therefore, do not find any merit in the departmental appeal on this ground and the same is dismissed accordingly. In the result, Ground No.3 of the appeal of the Revenue for the A.Y. 2010- 2011 is dismissed. 24. In A.Y. 2011-2012, the Revenue on Ground No.3, challenged the Order of the Ld. CIT(A) in deleting the addition of Rs. 18,03,84,934/- on account of exemption claimed under section 2(14) of the I.T Act. The Ld. CIT(A) reproduced the facts and submissions of the parties in the appellate order and noted that he has decided the similar issue in A.Y. 2010-2011 and following the same, he has deleted the addition. Learned Representatives of both the parties submitted that the issue is same as have been considered in A.Y. 2010-2011 (supra). Following the same reasons for de....
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....n connection with the issue of shares with a view to increase its share capital was directly related to expenditure expansion of capital base of the company was capital expenditure even though it might incidentally help in company's business. The issue was decided against the assessee. Ld Counsel for the Assessee did not dispute the above legal proposition. 28. We have considered the rival submissions. In assessment year under appeal the assessee company has increased its authorised share capital. The assessee paid ROC fees. The issue is, therefore, covered by the Judgment of the Hon'ble Supreme Court in the case of Punjab State Industrial Development Corporation Limited and Brooke Bond India Limited (supra) against the assessee, in which it was held that fees paid to the Registrar of Companies for enhancement of capital is capital expenditure. In this view of the matter, we set aside the Order of the ld. CIT(A) and restore the Order of the AO as no deduction is permissible and Section 35D would not be applicable. 29. In the result, Ground No.4 of the appeal of the Revenue for the AY 2010-2011 is allowed and Ground No.4 of the appeal of Assessee for the AY 2010-2011 is dismis....
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.... the assessee and the authorities below without considering the issue in proper perspective have confirmed the addition. He has, therefore, prayed that the matter may be sent back to the AO for reconsideration. The Ld DR has also suggested that the matter could be remanded to the AO for fresh consideration. Considering the facts and circumstances of the case and nature of business of assessee that assessee is engaged in the business of infrastructure, purchase, manufacturing, trading, import and export of construction material, mining extracts etc., we are of the view that the matter have not been appreciated by the authorities below in accordance with the Law. Since both the parties have suggested that the matter may be remanded to the file of AO, therefore, in the interest of justice, we set aside the Orders of the authorities below and restore this issue to the file of AO with a direction to re-decide this issue in accordance with Law, by giving reasonable, sufficient opportunity of being heard to the assessee. 32. In the result, Ground Nos. 2 and 3 of the appeal of the Assessee for the AY 2010-2011 are allowed for statistical purposes. ISSUE NO.6 : 33. In AY 2011-20....