AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (5) TMI 461
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....n law, and impugned order therefore, deserves to be set aside, and the assessment in case of the appellant of being heard in the matter. ii. That within the facts and circumstances of the case and the law on the point, the learned CIT(A) has erred in sustaining disallowance of claim of Bad debt of Rs. 77,98,88,400/- caused by learned Assessing Officer under section 36(1)(vii) of the Act read with section 36(2) of the Act under the head 'Income from Business and profession', as claimed by the appellant, and instead upholding the amount of claim of the appellant as assessed by the Learned Assessing Officer under the head 'Income from Capital Gains'. iii. That within the facts and circumstances of the case and the law on the point, the learned CIT(A) has erred in sustaining addition of an amount of Rs. 3,31,49,744/- pertaining to sale of a property by the appellant as per the provisions of section 50C of the Act without considering the reasons submitted by the appellant, and therefore, the impugned addition confirmed by the Learned CIT(A) deserves to be set-aside and the income on account of sale of the property he reassessed after giving an adequate opportunity to the appellant t....
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.... plots of land as part of the real estate business. Factually the same was treated as business investment. 5. As regards the particular issue involved in the present appeal, the assessee company had acquired equity shares of its subsidiary company, Silver Town Inn and Resorts Pvt. Ltd. as part of business venture as the said company owned two contiguous plots of land at Village Kherki Daula, Tehsil Manesar, Gurgaon, Haryana having commercial prospects. Assessee has clarified that shares were not acquired for the purpose of investment to earn dividends, albeit for pure business purpose. The assessee purchased the entire equity share capital of the said company being 50,000 equity shares of Rs. 10/- each at Rs. 18,19,20,452/-, i.e., at a significant premium considering the development / business prospects of the plots of land held by the said company. The assessee agreed to sell the said contiguous plots of land owned by Silvertown by way of transferring the said total shares to M/s Kausar Leasing Ltd. (hereinafter referred to as 'Kausar'). As agreed with the said buyer, the assessee was to obtain CLU and other clearances for the said plots of land. This fact is clearly evident fro....
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.... came under road widening and 4906 sq. mtr area under wide green belt. The only area of 493.52 sq. mtr. remained with the assessee. In support, assessee has also filed the necessary documents and the sketch plan wherein the area has been demarcated under the road widening of land falling under the green belt. The assessee's grant for CLU was thus rejected by the Government Authorities. Thus, by the stroke of such governmental orders, the asset of Silver Town Resort Pvt. Ltd. had drastically reduced from 10243.52 sq. mtr to 493.52 sq. mtr. In the wake of such event, the buyer refused to pay the balance amount and even the assessee company failed to obtain requisite sanction and CLU permission on the acquisition of major portion of land. Assessee Company was also unable to persuade the buyer to comply with its obligation. Since assessee has shown the entire amount of Rs. 93 Crores in the books of account, hence assessee has written off the balance receivable amount of Rs. 77.98 crores in the books during the Financial Year 2012-13 relevant to Assessment Year 2013-14. The assessee's contention before the AO in view of the aforesaid facts and circumstances were as under: a) "That ....
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....nue amount of Rs. 77.98 crore in P&L account as business expenses which is not permissible. Thus, he disallowed the entire claim and added the amount at Rs. 77,98,88,400/-. 8. Ld. CIT (A) has confirmed the addition made by the AO inter alia on following reasoning: - I have considered the arguments of the appellant and the legal position available on the issue and it is held that: 1) The appellant had already declared long term capital gain in its return of income, disclosing the sale of shares having been made as sale of its investment. The appellant had computed long-term capital gain on the said sale of shares at Rs. 71,84,37,748/- and paid taxes thereon. 2) The amount that appellant did not receive from Kausar Leasing Ltd. was Rs. 77,98,88,400/- was capital receiptcapital loss. 3) In the subsequent year, the said amount was written off, however, the said bad debt is not out of any transaction on account of business or venture, therefore, the said loss was declared by the appellant itself as loss of an investment transaction. 4) xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxx From the reading of above section, it is clear that bad debt in the case of appellant was relat....
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....n with the CLU and other clearance being a business activity of the assessee which is engaged in the real estate business. Even if the assessee has incorrectly declared the entire amount as capital gain in the return of income filed for the Assessment Year 2010-11, instead of business income and even if the entire amount was declared as income though same did not accrue to the assessee during the year, even though at that time only the buyer had categorically refused to pay the entire amount vide letter dated 18.01.2010. However, it does not mean that in the year in which the actual loss has been incurred the assessee cannot claim under the correct head which here in this case was business income/business loss. The income can be said to accrue only when the right to receive has arisen and, in this case, right to receive the income was depended upon getting the CLU and other clearances for the agricultural plot of land owned by the Silver Town, the income cannot be brought to tax. Since, the assessee could not get the CLU and other clearances from the Government during the assessment year 2010-11, the right to receive the balance amount did not arise in the favour of the assessee. ....
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....-1]- ITAT Mumbai (j) DCIT vs. Lab India Instruments (P) Ltd., 93 ITD 120 / 2005-TIOL-49-ITAT-PUNE (k) Raghavan Nair [2018] 89 taxmann.com 212 (Kerala) 11. Thus, he submitted that even if the income has been incorrectly assessed in the wrong head under the Assessment Year 2010-11, the same cannot be impediment for assessing the income under the correct provisions of the law. In support, he strongly relied upon the judgement of Hon'ble Supreme Court in the case of Hon'ble Supreme Court in the case of CIT v. Manmohan Das (Deceased) [1966] 59 ITR 699, wherein it was held that it is for the ITO of the subsequent year to determine whether the loss of the previous year may be set off against the profits of that year. A decision recorded by the ITO who computes the loss in the previous year that the loss cannot be set off against the income of the subsequent year is not binding on the assessee in the subsequent year. The Hon'ble Apex Court held that:- "On a careful consideration of the covenants are of the view that the treasurer was not a servant of the Allahabad bank under the terms of the agreement dated 02/04/1931and the remuneration received by him was not "salaries" withi....
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....he assessee was treated as an investor would not in our opinion estop the assessing authorities from considering, for the purpose of computation of the profits of 1944, as to when the trading activity of the assessee in shares began. The assessing authorities found that it began in 1943. On that finding the profits were correctly computed and the answer given by the High Court to the question of the computation of the profits was correctly given." 2. The Hon'ble Supreme Court in the case of CIT Vs Western India Oil Distributing Co. Ltd. (2001) 249 ITR 0517 (SC)confirmed the order of the Bombay High Court in the case of Western India Oil Distributing Co. Ltd. Vs CIT (1980) 126 ITR 0497 (Bom.) wherein relying upon the judgment in the case of Manmohan Das, it was observed as under: "11. Our attention was then drawn by counsel of the assessee to CIT vs CIT v. Manmohan Das [1966] 59 ITR 699(SC) ...... If this decision be properly analysed, it would seem that the application of the principle of finality, which has been submitted for our acceptance by counsel for the Revenue and which found favour with the Tribunal has been rejected by the Supreme Court in a substantially similar set ....
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....of Sawai Man Singh." 4. The appellant relied on the decision in the case of Gajendra Kumar T. Agarwal Vs ITO [2011] 11 taxmann.com 231 (Mum) wherein relying upon the judgment of the Western India Oil (supra) it has been held as under: "19. Hon'ble Supreme Court's judgment did not specifically reflect whether revenue had taken any objection to redetermination of character of an income, which was earned in an earlier assessment year, and when characterization so assigned had received finality. One could have entertained a little doubt whether Manmohan Das judgment (supra) may or may not be viewed as an authority for the proposition that such an objection, when taken, can be rejected. However, Hon'ble jurisdictional High Court's judgment in the case of Western India Oil Distributing Co. Ltd. v. CIT[1980] 126 ITR 497 (Bom.)(as approved by Hon'ble Supreme Court in the judgment reported as CIT v. Western India Oil Distributing Co. Ltd. [2001] 249 ITR 517), while interpreting the scope of Hon'ble Supreme Court's judgment in the case of Manmohan Das (supra), set these doubts at rest, and thus nipped this possible controversy in the bud, by observing as follows :....
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....gnificant propositions. These propositions are summed up as follows: I. First, that the call, as to whether a particular business loss, speculative or non-speculative, incurred by the assessee in an earlier year is eligible for set off against business income in a subsequent year, is to be taken in the course of proceedings in the subsequent assessment year, i.e. the assessment year in which set off is claimed. Hon'ble Supreme Court has set out this proposition and this proposition was later clarified, in unambiguous words, by Hon'ble jurisdictional High Court in the case of Western India Oil Distributing Co. Ltd. (supra), which was approved by Hon'ble Supreme Court in the judgment reported as Western India Oil Distributing Co. Ltd. (supra). II. Second, that section 24(2) of the 1922 Act, which is the same as section 73(2) in all material respects, confers "a statutory right upon the assessee who sustains a loss of profits in any year in any business, profession or vocation to carry forward the loss as is not set off under sub-section (1) to the following year, and to set it off against his profits and gains, if any, from the same business, profession or vocation fo....
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....as accepted the Long-Term Capital Gain @ 20% in Assessment Year 2010-11, and therefore, with regard to same nature of transaction, the assessee cannot say that it was on revenue account assessable under the head 'business income'. The character of income cannot be changed by any subsequent conduct to fulfill the condition of any agreement. In fact, it cannot be the case of bad debt because assessee had not shown any business income in the Assessment Year 2010-11. Further, the assessee had never revised the computation of return of income in the Assessment Year 2010-11 and has offered the Long-Term Capital Gain @ 20% instead of 30% which is rate applicable for business income. Thus, there is no infirmity in the order of the AO and ld. CIT (A) and same should be confirmed. 13. We have heard the rival submissions, perused the relevant findings given in the impugned orders as well as material referred to before us. The fact and the backgrounds of the case have already been discussed in detail hereinabove. To put in a succinct manner, the assessee company which is engaged in real estate business had various subsidiaries through which it had acquired land/plots, and they hand over such ....
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....t for widening of the national highways and certain areas were declared as green belt. Due to this governmental order, the entire project had failed and CLU and other legal permission ostensibly could not be obtained. As brought on record by the Ld. Counsel, later on, the said piece of plot/land was sold at a meagre sum of Rs. 5,60,00,000/- as compared to the aggregate consideration of Rs. 93 crores, had all the conditions would have been fulfilled and the project could have been started by the buyer. In the relevant Financial Year 2012-13, i.e., relevant for the Assessment Year 2013-14, it became clear that the buyer will not pay the amount and since the assessee had already declared the said income in the Assessment Year 2010-11, the same has been claimed as business loss/written off as bad debt. 14. Now, the core issue before us is, whether in this year the said claim of loss should be allowed as 'business loss' or 'long term capital loss'. There is no dispute that assessee did incur loss of Rs. 77,98,88,400/-. First of all, if the assessee company is carrying out purely real estate business and getting of CLU/FSI on land and project and other governmental clearance, is part of....
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.... already been quoted above. Following the same ratio and the principle laid down by the Hon'ble Apex Court in the case of CIT vs. Western India Oil Distributing Company Ltd. (supra), wherein their Lordships have confirmed the order of the Hon'ble Bombay High Court observed that once the correct principle flowing from Manmohan Das's case is realised, it would appear that if in an earlier year it has been held that correct head income applicable to the assessee's case was under the head 'income from other sources' and by that reason the benefit of carrying forward of depreciation is denied to the assessee, then such a decision will not bind the assessee in the subsequent year in which he wants to claim the set off against the business income. 16. The principle enunciated by the Hon'ble Supreme Court clearly clinches the issue that, if the assessee in the earlier years has offered the income or loss under the different head of income either under an erroneous presumption of law or by mistake, then it does not act as an estoppel or bar the assessee to point out that same was assessable under the different head if it is found that income was actually assessable under the different head....
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....ourt brushed aside the argument of the Revenue that in the preceding year, the order has become final and reason of such finality, the assessee was not entitled to set off the loss incurred in the earlier years even though the correct legal position was that income was always from the pursuit of business or profession. The ITAT Mumbai Bench in the case of Gajendra Kumar T. Agarwal vs. ITO (supra) has sum up the proposition of Hon'ble Apex Court in the following manner: I. First, that the call, as to whether a particular business loss, speculative or non-speculative, incurred by the assessee in an earlier year is eligible for set off against business income in a subsequent year, is to be taken in the course of proceedings in the subsequent assessment year, i.e. the assessment year in which set off is claimed. Hon'ble Supreme Court has set out this proposition and this proposition was later clarified, in unambiguous words, by Hon'ble jurisdictional High Court in the case of Western India Oil Distributing Co. Ltd. (supra), which was approved by Hon'ble Supreme Court in the judgment reported as Western India Oil Distributing Co. Ltd. (supra). II. Second, that section 24....
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....wn by the Hon'ble Apex Court and other rulings are that, if either the assessee has offered income or the Assessing Officer in the earlier assessment year has assessed the income under the particular head which originally was assessable in a different head, i.e., capital gain, even though the same was liable to be assessed under the head 'business or profession', then there is no embargo either on the Assessing officer or on the assessee to show the income or loss under the head 'business or profession' in the subsequent year. The assessee can always point out in the subsequent year in which it is claiming any deduction or loss that the income offered in the earlier years was not shown under the correct head and in this year the same is assessable under the correct head which here in this case was income or loss from the business or profession. Acquiescence by the assessee by offering any income under different head cannot act as an estoppel against the assessee or there is any embargo on his claim that income is taxable or not taxable under the particular head. The Hon'ble Andhra Pradesh and Telangana High Court in the case of Prefab Gratings Ltd. (supra) observed that the findin....
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....r dated 11th February, 2020 in ITA No.1265 and 1469 of 2017, wherein the Hon'ble High Court after interpreting the Section 36(1)(vii) and Section 36(2) and relying upon the judgment of Hon'ble Supreme Court in the case of TRF Ltd. vs. CIT, 323 ITR 397 observed that, firstly, assessee need not required to establish/approve that debt has in fact become irrecoverable and it is sufficient that if the bad debt is written off irrecoverable in the account of the assessee; and secondly, the Court observed that there is no requirement under the Act that the bad debt has to accrue out of income under the same head 'income from business or profession' to be deducted as income. The relevant observation for the later proposition reads as under: "19. If that be the position, then there is compliance to the requirement of Section 36(1)(vii) of the act and the amount covered by the bad debts would be entitled to be deducted vide computing income under section 28 of the Act. Further, it is not necessary, rather there is no requirement under the Act that the bad debt has to accrue out of income under the same head i.e. 'income from business or profession' to be eligible for deduction. That is not ....
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.... property in terms of Section 50C. The facts in brief are that the assessee has sold the property situated at Budh Singh Pura, Jaipur for a sale consideration of Rs. 12,61,00,000/- during the year, whereas the stamp duty valuation of the said property was Rs. 15,92,49,744/-. The AO made the addition of Rs. 3,31,49,744/- u/s 50C of the Act alleging that the assessee did not contest the valuation of the said property before the stamp duty valuation authorities. 25. Ld. Counsel pointed out that, the appellant specifically objected to the proposition of application of the section 50C of the Act and explained that the circle rates in Jaipur were higher than the prevailing market rate. Besides, there was a crematorium ground in front of this property which also affected the market rate of the property significantly and therefore, this property fetched a lower market value. It was for the buyer to agitate the matter of the valuation before the valuation authorities as the buyer had to pay the stamp duty. The appellant also requested the CIT (A) to refer the said property for valuation. 26. Before the ld. CIT (A), the assessee submitted that the land was situated near the cremation groun....
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.... area was higher than prevailing market rate but the land in question which was sold was adjacent to cremation ground which adversely affected the market rate of the property, and therefore, the property could not be fetched the circle rate and was sold at the lower rate than the circle rate. Further, it was the buyer who has to contest the stamp value of the property before the Valuation Authority in which assessee has no control. In any case, when the assessee has disputed the stamp duty valuation because of clinching circumstances, then in our opinion matter should have been referred to DVO for the valuation of the said property. Accordingly, we remand this issue to the file of the Assessing Officer who shall refer the matter for the valuation of the property to the DVO and assessee will substantiate its case before the Assessing Officer or DVO to justify the sale price. Accordingly, this ground is partly allowed for statistical purpose. 29. In the result, the appeal of the assessee is partly allowed. 30. In the Revenue's appeal, the addition of disallowance of Rs. 1,60,30,344/- u/s.14A has been challenged. The facts in brief are that the assessee has received dividend of Rs.....