TaxTMI 
TaxTMI 
2021 (5) TMI 304
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....lying the principle laid down by the Hon'ble ITAT in the case of Sudhakar Shetty (130 ITD 197(Mum) and thereby treating the amount of Rs. 1,35,38,77,722/- as capital receipt not chargeable to tax u/s.45. 2. "On the facts and circumstances of the case and in law Ld. CIT(A) erred in deleting an amount of Rs. 1,34,68,82,688/- as alleged long term capital gains on retirement from erstwhile from PLA-1 treating the same as not transfer u/s.2(47) and not chargeable to tax. 3. "On the facts and circumstances of the case and in the law, the Ld. CIT(A) erred in allowing the deduction of Rs. 1,35,57,86,616/- while computation of book profit u/s.115JB. 4. "On the facts and circumstances of the case and in the law, the Ld. CIT(A) erred deleting the addition of Rs. 1,19,85,18,833/- as alleged undisclosed / unaccounted out of books income/investment." 5. "On the facts and circumstances of the case and in the law, the Ld. CIT(A) erred in treating the rent received as business income instead of income from house property." 6. "On the facts and circumstances of the case and in the law, the Ld. CIT(A) erred in deleting the addition of notional interest on ....
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....revaluation of investment of PLA was mentioned at Rs. 135,38,77,723/-, we find that the assessee was actually paid only Rs. 92,18,852/-. We find that the total income of the firm PLA including the capital gains was Rs. 153,33,50,024/- and the assessee's share in total income for claim u/s 10(2A) of the Act was Rs. 148,73,49,523/-. However, this amount of Rs. 148,73,49,523/- was not paid to the assessee. The firm PLA utilised the consideration of Rs. 220,00,00,000/- as follows:- a) Discharge of loan liability of Rs. 160 crores b) Other expenditure of Rs. 11 crores c) Tax on sale of property of Rs. 30 crores d) Brokerage paid of Rs. 1.25 crores 4.1. We find that on 1.4.2007, PLA firm had revalued its capital asset and increased the amount of investment by Rs. 262,12,92,699/-. On 6.11.2009, PLA firm had devalued the same asset by Rs. 119,85,18,833/-. The effect of accounting entries was reflected in firm PLA's audited accounts in the Asst Years 2008-09 and 2010-11 respectively. But we find that the assessee company gave net effect of the aforesaid revaluation and devaluation in its books in Asst Year 2010-11 when the profits were realised by t....
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....tax. b) Deletion of long term capital gains of Rs. 134,68,82,688/- assessed in the hands of the assessee. c) Allowing deduction of Rs. 135,57,86,616/- while computing book profits u/s 115JB of the Act. d) Deletion of the addition of Rs. 119,85,18,833/- as undisclosed / unaccounted out of books income/investment. 4.4.1. We find that the share of assessee being surplus on revaluation of investment of firm PLA amounted to Rs. 135,38,77,7238/- which was determined pursuant to revaluation of the investment on 1.4.2007 by Rs. 262,12,92,699/- and devaluation of the same on 6.11.2009 by Rs. 119,85,18,833/-. On 3.3.2010, the firm PLA sold the said investments to firm PLA-2 and duly offered income to capital gains tax. The assessee gave net effect of the aforesaid revaluation and devaluation in its books in the Asst Year 2010-11 (i.e the year under consideration) when the profits were realised by the firm PLA on sale of the immovable property. The assessee retired from the firm PLA on 3.3.2010. Upon retirement, Rs. 92,18,852/- was paid to the assessee by the firm. While computing total income, the assessee claimed Rs. 135,38,77,722/- as exempt u/s 10(2A) of the ....
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....lted in appreciation of Rs. 262,12,92,699/- and correspondingly credited partner's current account in their respective profit sharing ratio in the books of that firm. The assessee's share thereon worked out to Rs. 10,48,51,708/-. In response to this revaluation, no entry was passed in the books of the assessee firm as on 31/03/2008, by correspondingly increasing the investment made in Pranik Landmark Associates with corresponding credit to current account of the partners of the assessee firm. The assessee passed this entry belatedly only in the year of receipt of actual money from Pranik Landmark Associates i.e. during the F.Y.2009-10 relevant to A.Y.2010-11 in which year, it retired from Pranik Landmark Associates. Pursuant to assessee passing this entry during A.Y.2010-11 in its books for the revaluation, the amounts ultimately received by the assessee from the partnership firm exactly matched with the investments made in the partnership firm. In other words, the assessee did not receive any sum over and above the value of its investments from Pranik Landmark Associates. Hence, there cannot be any levy of capital gains or any levy in the nature of income within t....
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....in the partnership assets by the retired partner to the continuing partners. The amount received by the retiring partner is not liable to tax as 'Capital Gains' under Section 45 of the Act. 12. We find that this Tribunal had originally placed reliance on the decision in the case of Sudhakar Shetty reported in 130 ITD 197 which decision was reversed by this Tribunal in the case of his wife i.e. in the case of Hemalata S Shetty vs. ACIT in wherein it was held as under:- "9. In this connection, we find that decision of the jurisdictional High Court in the case of CIT vs. Shri Riyaz A. Sheikh (2014) 41 taxman.com 455 (Bom) which is on similar issue, was not available when the appeal of Shri Sudhakar Shetty was decided by ITAT..... ........We were made aware by Ld. Authorized Representative that after the decision of Hon'ble Bombay High Court in the case of Riyaz A. Sheikh (supra) ITAT "E" Bench, Mumbai by following the said decision has taken a view wherein the decision in the case of Shri Sudhakar Shetty has been reversed. In view of this the issue in the case of present assesses has to be decided in its favour by following the decision of jurisd....
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....Tribunal in the case of Shevantibhai C Mehta vs ITO reported in 83 TTJ 542. We find that in the case before the Pune Tribunal referred to supra, the retiring partner had assigned his interest in partnership firm specifically by a deed of retirement executed in writing to continuing partners and consideration for the same was agreed to be paid to him in lumpsum. In that circumstance, the amount received by the assessee on retirement from firm was held to be liable to be taxed as long term capital gain. Hence, the facts of the case before the Pune Tribunal are clearly distinguishable from the facts of the instant case before us. 12.5. We also find that in the case of Shri Sudhakar Shetty referred to by the ld. DR, the retiring partner thereof relinquished his share / rights in the partnership and its assets in favour of continuing partners and had received a lumpsum consideration in respect of the same. Whereas, in the facts of the instant case before us, there was no transfer of relinquishment of rights in favour of the continuing partners thereby making it squarely distinguishable. 12.6. We also find that the ld. DR placed the reliance on the Co-ordinate Bench dec....
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....hereon by the assessee from the partnership firm cannot contain any element of income. In such scenario, the same ought to be construed only as a capital receipt. 13.3. The inclusion of a capital receipt in the sum of Rs. 10,48,51,708/- while computing book profits u/s.115JB of the Act was the subject matter of adjudication by various Tribunals and High Courts and we find that the Hon'ble Calcutta High Court in the case of Ankit Metal and Power Ltd. in ITA No.155 of 2018 dated 09/07/2019 had held that when a capital receipt does not fall within the definition of "income" u/s.2(24) of the Act, then the same cannot form part of the book profits u/s.115JB of the Act. The copy of the said decision had been placed on record by the ld AR. From the said decision, it could be safely concluded that first the nature of receipt should fall within the definition of income u/s.2(24) of the Act so as to fall within the ambit of book profit u/s.115JB of the Act. If a particular receipt from the inception does not have any element of income u/s.2(24) of the Act, the same would be automatically outside the scope of inclusion as book profits u/s.115JB of the Act. 13.4. We find ....
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....ic provisions of the Act. In our considered opinion, this is a subtle distinction, which needs to be understood. In other words, the profits and gains that are otherwise deductible u/s.10A/10B/Section 80IA / 80IB of the Act under normal provisions of the Act would still be liable for book profits u/s.115JB of the Act, since the provisions of section 115JB of the Act have an overriding effect over other provisions of the Act. But where a particular receipt from its inception is not at all income such as capital receipt as is present in the instant case, then, the said capital receipt would be outside the scope of inclusion as book profits u/s.115JB of the Act. 13.6. The ld. DR also placed reliance on the following decisions in support of his proposition:- a. Decision of Special Bench of Hyderabad Tribunal in the case of Rain Commodities Ltd vs. DCIT reported in 40 SOT 265. b. Decision of Chennai Tribunal in the case of DCIT vs. Western India Cashew Co. Pvt. Ltd. reported in 155 ITD 356 13.7. In view of the elaborate observations, the aforesaid decisions relied upon by the ld. DR would not come to the rescue of the revenue. We also find that all these decis....
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..../- and the share of the assessee was 97% ie. Rs. 116,25,63,268/-. b) The revaluation is effected in the books of the erstwhile PLA firm and it has nothing to do with the assessee's chargeable income. There is no reason to treat the revaluation as giving rise to income chargeable to tax under the Act. c) The ld AO had not brought any iota of evidence on record that any unaccounted money has flown to the assessee as consideration for the alleged transfer. The transaction in question has been assessed to tax in the hands of firm PLA as capital gains on which tax has already been paid by the firm PLA u/s 45(1) of the Act. d) The revaluation / devaluation of asset is a capital receipt; since it is capital in nature, no tax can be levied on such amount - such view is affirmed by Hon'ble Supreme Court and various other courts such as in ITO vs Paru D Dave reported in 303 ITR (AT) 569 and hence, the ld AO could not consider this capital receipt as undisclosed income / investments. e) The amount cannot be said to be taxed u/s 69B of the Act as in the instant case, the assessee had property which was existing in the accounts, it was recorded in the books o....
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.... Rs. 500. Lupin Ltd also paid Rs. 18 crores as interest free refundable deposit to the assessee vide a separate deposit agreement. Though the business conducting agreement is entered for Rs. 500 per month, the assessee, in its return of income has offered Rs. 12,00,000/- as 'income from business and profession' being composite rent for leasing out the said premises for its own business purposes. We find that further, vide letter dated 25.2.2013, the assessee submitted before the ld AO that the said income has been accepted in the past assessments as business income. The ld AO considered the amount of Rs. 500 per month as income from house property as the business was being conducted by M/s Lupin Ltd on behalf of the assessee by utilising the plant and machinery and other amenities under the 'Business Conducting Agreement'. Further, the ld AO proceeded to hold that the balance amount of Rs. 99,500 per month (1,00,000 - 500) should be treated as rent in respect of factory premises used by Lupin Ltd for conducting their business and taxed the same under the head 'income from house property' instead of 'income from business', 6.2. We find that the ld AR vehemently argued that the....
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.... of commercial assets and this was also accepted in the past assessment years :- a) Decision of Hon'ble Punjab & Haryana High Court in the case of CIT vs Anand Rubber & Plastics (P) Ltd reported in 178 ITR 301 (P&H) b) Decision of Hon'ble Madras High Court in the case of CIT vs Kongarar Spinners Pvt Ltd reported in 208 ITR 645 (Mad) 6.5. We find that the ld CITA also applied the rule of consistency by stating that assessee offering business income in this regard has been accepted by the revenue since Asst Year 2006-07 and there was absolutely no change in facts and circumstances of the instant case for the year under consideration. Hence, we do not find any infirmity in the order of the ld CITA in this regard. Accordingly, the Ground No. 5 raised by the revenue is dismissed. 7. The Ground Nos. 6 to 7.2 raised by the revenue are challenging the action of the ld CITA in deleting the addition made on account of notional interest to interest free deposit received by the assessee on Ankleshwar factory premises and Santacruz property. 7.1. We have heard the rival submissions and perused the materials available on record. We find that the ld AO sought to add not....