TaxTMI 
TaxTMI 
2023 (10) TMI 297
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.... s Citi Beautiful Engg. Co. 3. That on law, facts and circumstances of the case, the Worthy CIT(A) has erred in confirming the action of the Ld. AO in making addition of Rs. 14,00,000/- on account of differential of the amount paid as biana for purchase of property and its receipt back from the seller as 'Income from Other Sources' even when the same was in the nature of LTCG and declared correctly as such by the appellant. 4. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal on or before the disposal of the same." 2. Ground no. 2 relates to disallowance of Rs. 9,09,340/- under section 36(1)(iii). In this regard, the ld AR submitted that the assessee is engaged in the business of money lending. He has booked interest income of Rs. 27,88,828/- by credit to his P&L A/c for the financial year relevant to impugned assessment year. It was submitted that the ld CIT(A) has recorded perverse facts in the order, at page 13 para 5.2, wherein he looked into the interest income declared by the assessee in computation of income under the head "income from other sources" and declared that the assessee is not into money lending business.....
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....-. Therefore, disallowance u/s 36(l)(iii) could not have been made. The reliance was placed on the following case laws namely, Bright Enterprises Put Ltd vs CIT 381 ITR 107 (P&H HC), Gurdas Garg vs CIT(A) & Anr 93 CCH 489 (P&H HC) and Torque Pharmaceuticals Pvt Ltd vs Addl. CIT in ITA No. 671/CHD/2011. It was accordingly submitted that the addition so made and confirmed by the ld CIT(A) be directed to be deleted. 7. Per contra, the Ld. DR has relied on the findings of the lower authorities and our reference was drawn to the findings of the Ld. CIT(A) which are contained at para 5.2, 5.2.1 and 5.2.2 of his order which read as under: "5.2 I have perused the order of the Assessing Officer and examined the reply of the assessee. The issue at hand is that appellant had advanced loan of Rs. 75,77,838/- to City Beautiful Engineering Company Pvt. Ltd. during the F.Y. 2010-11. The same amount of Rs. 75,77,838/- was outstanding as on 31.03.2014. No interest was charged by the appellant till the end of this financial year. When confronted appellant submitted that the borrower's company is non-cooperative and has defaulted in repayment of interest as well as principal. AO did not buy th....
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....est was being paid by the borrower. No TDS was deducted by the said borrower in FY 2011-12, FY 2012-13 and FY 2013-14, (ii) As per Accounting standard - 9 Revenue arising from the use by others of enterprise resources yielding interest, royalties and dividends should only be recognized when no significant uncertainty as to measurability or collectability exists. Whereas in this case there was significant uncertainty as to the collectability of not only the interest but the principal as well and in such a case the income should not be recognised and even if recognised the same will have to be written off as bad debt, (iii) Only real income can be put to tax and not notional income, (iv) In such a case the interest income if actually received in future can be taxed as per the provisions of section 41 of the Act. As the assessee was carrying on business of money lending he could have shown the interest income and simultaneously claimed the same as bad debt and then offer the interest if received in future to tax u/s 41. Incidentally this has been done in AY 2015-16. 5.2.1. A remand report was called for wherein the AO has submitted that the appellant is following mercantile system o....
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....ate Limited (ABPL) are Harsh Kohli, JogeshKohli, Sukhwant Singh, Ashveen Singh Oberoi and Mohinder Paul Singh Grewal. ln fact both these companies are group" companies. This is also an undisputed fact that the appellant is earning gross salary from M/s Acme Builders Private Limited at Rs. 42,00,000/-. There is one confirmation from the CBECPL dated "NIL" that it has received Rs. 75,77,838/- on 31.12.2010 which was interest bearing but happily they had not paid/credited any interest and appellant is not related to directors/shareholders. No evidence of TDS deducted by the CBECPL has been produced. No confirmation from the CBECPL has been produced by the appellant especially when both the companies are group companies. Heavy onus is casted on the appellant to prove his case. In the light of these facts and circumstances, AO has rightly concluded that Rs. 75,77,838/- has been provided to the CBECPL free of interest. Appellant is not at all in the business of money lending. Merely cooking up evidence of receipt of meager interest of Rs. 5,71,001/- in AY 2015-16 and Rs. 1 lakh in AY 2012-13 does not give colour to the advance as interest bearing when there is no evidence of non-cooperat....
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....relevant to assessment year 2015-16. In this regard, it is noted that the loan was advanced in financial 2010-11 and the year under consideration is financial year 2011-12, therefore, the case of the assessee is that in the second year itself, the loan has become bad. However, there is nothing on record to substantiate said claim and the explanation so offered by the assessee. The explanation in absence of any corroborative evidence/documentation which can provide beyond reasonable doubt that during the financial year 2011-12, the debt has become bad will remain mere an unsubstantiated claim or an assertion on part of the assessee. Infact, if we look at the confirmation so filed by M/s City Beautiful Engineering Company Pvt limited, it states that "It is hereby confirmed that an amount of Rs 75,77,838/- was due to Mr Sukhwant Singh Ahluwalia resident of 205, Sector 36-A, Chandigarh as on 31 March 2012. The said amount was received on 31 December 2010 vide cheque no. 401687. This was an interest bearing borrowing, however, no interest has been paid/credited on the said dues" The said confirmation infact shows not just the existence of the loan transaction entered into by the borrowe....
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....realised in 2012 at the time of cancellation of the agreement was considered by the assessee as the sale consideration of that capital asset. On this transaction, assessee applied the provisions of Section 45 for computing the capital gains and thereafter for computing the indexed cost of acquisition, the statutory and automatic benefit of indexation u/s 48 was claimed. With this exercise, the COA of Rs. 14 Lacs became indexed cost of Rs. 22,11,268/- and after reducing this from sale consideration of Rs. 28 Lacs, the resultant LTCG of Rs. 5,88,732/-was declared by the assessee in his ITR. 13. It was submitted that the AO accepted the sale consideration of Rs. 28 Lacs and also accepted the purchase value of Rs. 14 Lacs but assessed the differential of Rs. 14 Lacs straight-away as income from other sources. For this, he held that when the title of seller was in itself defective due to which the assessee could not purchase the property in 7 years, therefore, assessee did not acquire any right to capital asset and hence, the differential is to be assessed as income from other sources. 14. It was submitted that the ld CIT(A) upheld the action of the Ld. AO and also added that when the....
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....1 (P&H HC) wherein it was held that "a suit for specific performance, based upon an unregistered contract/agreement to sell that contains a clause recording part performance of the contract by delivery of possession or has been executed with a person, who is already in possession shall not be dismissed for want of registration of the contract/agreement; the proviso to Section 49 of the Registration Act, legitimises such a contract to the extent that, even though unregistered, it can form the basis of a suit for specific performance and be led into evidence as proof of the agreement or part performance of a contract." 17. Per contra, the Ld. DR has relied on the findings of the lower authorites and our reference was drawn to the findings of the Ld. CIT(A) which are contained at para 6.2 which read as under: "6.2 I have perused the order of the Assessing Officer and examined the reply of the assessee. The appellant has shown 'Long Term Capital Gain' of Rs. 5,88,732/- on account of relinquishment of right to acquire a property and receipt of Rs. 28/- Lacs against Rs. 14/-Lacs paid by him as Biana for a property at Kharar as per Agreement to Sell dated 11.07.2005. AO has tre....
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.... law. AO's non submission of any comment in the remand report does not change the colour of these agreements and can not be treated as acceptance. Appellant has never taken any legal recourse against the seller to enforce the said agreement to sell, also strengthens the AO's findings. When, the very agreement is treated as a Sham Agreement, all the case laws relied by the appellant do not help him. AO's action is confirmed. The Ground of Appeal is dismissed 18. I have heard the rival contentions and purused the material available on record and in particular, the agreement to sell dated 11/007/2005 for sale of 6 acres of land situated at Kharar and compromise agreement dated 12/02/2012 between the assessee and Rev Joseph William, power of attorney holder on behalf of United Church of North India. As per the contents of the compromise agreement, in view of the fact that the seller is unable to get the sale deed of said land executed in favour of the assessee, both the parties have decided to settle their dispute without recourse to litigation and for that purposes, have decided to abandon their respective claims under the agreement to sell and in particular, the assessee....