TaxTMI 
TaxTMI 
2025 (6) TMI 969
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....O noted that the assessee company had sold land bearing Khasra No. 32 situated at Fatehabad, Village Bundhera, Tehsil & district Agra held as capital asset for an amount of Rs. 35,58,00,000/- to M/s. Bloom Inn Pvt. Limited. The assessee had declared Long-term Capital Gains of Rs. 12,97,20,752/- on sale of the said land chargeable to tax u/s 45 of the Act in its return of income filed by it on 29.09.2016 for the AY 2016-17. The assessee had claimed two expenses being the claim in respect of cost of stamp duty paid (Rs. 2,49,26,200/-) by the assessee and the claim of cost improvement (Rs. 12,97,20,753/-), on the said land in its computation of capital gains which was disallowed by the AO. In appeal, the said two disallowances made by the AO were deleted by the Ld. CIT(A). Against the above deletion, the department has filed the following ground of appeal. "On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting addition of Rs. 2,49,26,200/- made on account of cost of stamp duty paid without appreciating the facts that the assessee has made an arrangement with its related party and the Ld.CIT(A) also erred in deleting the disallowance of Rs....
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....sset held by it to its 100% Indian subsidiary company chargeable to tax under section 45 in the return of income filed by the assessee on 29.09.2016 for the AY 2016-17 4. That the fact that the capital asset was sold to M/s Bloom Inn Pvt. Limited which is a related party of the assessee company was before the assessing officer as is evident from Pg. 3 of the assessment order. 5. That the above sale made by the assessee to its 100% Indian Subsidiary do not fall within the meaning of transfer as per the provisions of section 47(iv) of the Act and hence not chargeable to tax. 6. That the assessing officer while doing the assessment under section 143(3) has disallowed the indexed cost of acquisition/ improvement to the tune of Rs. 15,46,46,953/- and recomputed the long term capital gain at Rs. 28,43,67,705/- as against the long term capital gain of Rs. 12,97,20,752/- declared by the assessee. 7. That aggrieved by the order passed by the AO, the applicant filed an appeal before the CIT(A) and learned CIT(A) has deleted the addition made by the AO and allowed the indexed cost of acquisition/improvement claimed by the assessee. 8. That revenue ....
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.... of section 47(iv) of the Income Tax Act. 13. The above ground raised by the assessee is purely a legal issue and is connected to the issue before your honours and thus, it is prayed before your honours that these grounds may kindly be adjudicated by the Bench under Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963." 5. The Grounds of Cross Objection filed by the assessee are as under:- 1. On the facts and circumstances of the case, the sale of land bearing Khara No. 32 situated at Fatehabad, Village Bundhera, Tehsil & district Agra made by the assessee to its 100% Indian subsidiary company is not a 'transfer' in view of the provisions of clause (iv) to section 47 of the Income Tax Act and accordingly, AO was not justified in treating the same as transfer and taxing the same under section 45 of the Act 2. On the facts and circumstances of the case, the Income Tax Authorities are duty bound to assess the correct income of the assessee as per the provisions of the Income Tax Act and as such the learned AO and the CIT(A) have gone wrong in charging tax on the sale of capital asset by the assessee to its 100% Indian Subsidiary company. ....
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....iving this information, the Senior Counsel promptly advised the applicant to file the cross objections along with an application for condonation of delay before the Hon'ble Tribunal. Consequently, the applicant took immediate steps to file the cross objections. 8. That the cross objections were filed on 21.11.2024 resulting in a delay of 1726 days in their submission. This delay occurred due to the lack of communication and the failure of the previous counsel to keep the applicant properly informed. 9. That In view of the above-mentioned facts, it is humbly submitted that the delay in filing the cross objection was unintentional and beyond the control of the applicant. 10. Accordingly, it is respectfully prayed before Your Honour that the delay in filing the cross objections be condoned, and the cross objections be heard on its merits." 5.2. The above facts were also supported by an affidavit dated 21.11.2024 filed by Shri Sachin Agarwal, Managing Director of the assessee company. 5.3. The facts stated in the condonation petition has been carefully perused. On its perusal, we find that the explanation of the assessee for the delay in filing the ....
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.... Pvt. Limited at point 27. (PB Page 22). • Note no. 1 (Share Capital) to the audited financial statements of M/s Bloom In Pvt. Limited on PB pg. no. 363, wherein it was specifically mentioned that "100% shares are hold by Spring Infradev Limited • Note No. 21 to the audited financial statements of M/s Bloom Inn Pvt. Limited includes a list of related parties and relationships, showing Spring Infradev Limited as the sole holding company. (PB page 368). • List of shareholders of M/s Bloom Inn Pvt. Limited showing 2099999 shares are held by Spring Infradev Limited and 1 share held by Mrs. Shikha Agarwal as a nominee of Spring Infradev Limited, on PB pg. no. 370 • Extracts of MGT-7 of M/s Bloom Inn Pvt. Limited clearly showing Spring Infradev Limited as Holding Company, on PB pg. no. 372. Additionally, the AO, in the assessment order (Page 3), himself acknowledged that the capital asset was sold to M/s Bloom Inn Pvt. Limited, a related party of the assessee. The AO while doing the assessment under section 143(3) has disallowed the indexed cost of acquisition/ improvement to the tune of Rs. 15,46,46,953/- and recomputed the lo....
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.... of provisions of section 45 of the Act o This is subject to the condition that subsidiary company is an a) Indian company and b) the holding company along with its nominees, held the whole of the share capital of the subsidiary company- 13. Your Honors, due regard need to be given to the facts of the present case: - i. The assessee is an Indian company who sold its land which is a capital asset in accordance with Section 2(14) of the Act during the year under consideration. ii. The land was sold to M/s Bloom Inn Pvt. Ltd. which is also an Indian company. iii. The assessee, along with its nominees, as on the date of transfer held whole of the share capital of M/s Bloom Inn Pvt. Ltd. iv. Accordingly, M/s Bloom Inn Pvt. Ltd. is a wholly owned subsidiary of the assessee company. 14. Having said that, your honours would appreciate that when the conditions of section 47(iv) of the Act are satisfied, the capital gain or loss arising on transfer of a capital asset by the holding to its subsidiary company, would not be chargeable to tax under the head 'capital gains'". 7. The assessee also relied upon the following c....
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....w Delhi the revenue had appeal before the Hon'ble ITAT, G- Bench, New Delhi in the case of M/s Samast Vikas Limited formerly known as Spring Infradev Limited for the assessment year 2016-17. 5. During the appellate proceeding, the assessee has filed cross objection on the issue of sale of land bearing Khasra No. 32, Mauza Budhera Tehsil, Agra during the financial year 2015-16 to M/s Bloom Inn Private Limited at sale consideration of Rs. 35,58,00,000/- on 01.01.2016. 4. In the said cross objection filed by the assessee before the Hon'ble ITAT, G-Bench, New Delhi has contended that the buyer of the above-mentioned property i.e. M/s Bloom Inn Private Limited is a wholly owned Indian subsidiary company of the assessee or seller i.e. M/s Samast Vikas Limited. Further the assessee had also submitted that the sale of the property does not cover under the transfer within the meaning of section 47 (iv) of the Income Tax Act, 1961. 5. It is noteworthy to mention here that above said issue is an absolutely new facts presented before the Hon'ble ITAT which was neither raised during the assessment proceedings before the assessing officer nor the a....
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....43,67,705/- in its ITR. In the mentioned LTCG, the assessee had taken claim of deduction on the stamp duty payment of Rs. 2,49,26,200/- which was paid by assessee being the seller and not by the buyer. 9.1 On the issue of claim of deduction of Rs. 12,97,20,753/- on the expenses made as interest paid to M/s Century Tracon Private Limited. Since, the claim of interest paid by the assessee had not come within the category of expenditure incurred by the assessee company for making any additions to the capital asset therefore, the same had been disallowed and added to the total income of the assessee. On the issue of stamp duty of Rs. 2,49,26,200/-, there was no basis of claiming the cost of stamp duty paid on behalf of the buyer as its cost of improvement or the cost of transfer of the property. The stamp duty is payable by the buyer and not the seller. Therefore, the same was also disallowed and added back to the income of the assessee. 10. Furthermore, it is also stated that any assessment is done on the basis of ITR filed along with material facts provided by assessee and information gathered by the AO. In this case, assessee has himself declared LTCG on impugned t....
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....ovisions of section 47(iv) of the Act. The relevant findings of the AO in para no.6 to 8 of the said report are reproduced once again for ready reference:- 6. Notwithstanding to above, on perusal of the audit report of the buyer i.e. M/s Bloom Inn Private Limited for the assessment year 2016-17, the company had disclosed its Related Parties in notes to account at Sr. No. 21, wherein M/s Spring Infradev Ltd. presently known as M/s Samast Vikas Limited is its holding company. 6.1 Further, on perusal of the annual return form of M/s Bloom Inn Private Limited with the Ministry of Corporate Affairs(MCA), it is observed that the buyer of the above- mentioned property i.e. M/s Bloom Inn Private is 100% subsidiary company of M/s Spring Infradev Ltd. presently known as M/s Samast Vikas Limited. 7. The Capital Gains under section 45 of the Income Tax Act, 1961 does not apply on the transfer of capital assets to subsidiary or holding company. The transactions not regard as transfer duly covered under section 47 of the Act. The relevant portion of the section 47 of the Act is as reproduced below:- 47....... ......... (iv) any trans....
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....cified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced." 12.1 As noted above that the assessee in its written submission before us and reproduced above stated the fact that the capital asset sold to M/s Bloom Inn Pvt. Ltd. was a related party of the assessee company (100% Indian subsidiary company) was before the AO during the assessment proceedings which was evident from the following facts:- • Note No. 28 of the audited financial statements of the assessee, listing subsidiary companies, specifically mentions M/s Bloom Inn Pvt. Limited at point 27. (PB Page 22). • Note no. 1 (Share Capital) to the audited financial statements of M/s Bloom In Pvt. Limited on PB pg. no. 363, wherein it was specifically mentioned that "100% shares are hold by Spring Infradev Limited • Note No. 21 to the audited financial statements of M/s Bloom Inn Pvt. Limited includes a list of related parties and relationships, showing Spring Infradev Limited as the sole holding company. (PB page 368). •....
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.... Apex Court in the cited case is reproduced under:- "Under section 254 of the Income-tax Act, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross objections before the Tribunal. We fail to see why t....
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....:- "10. The learned ASG appearing for the department had faintly argued that since the appellant in its return had taken a conscious explicit plea with regard to the part of the claim being ascribable to capital expenditure and partly to revenue expenditure, it was not open for the appellant to plead for the first time before the ITAT that the entire claim must be treated as revenue expenditure. Further, it was not open to the ITAT to entertain such fresh claim for the first time. This submission needs to be stated to be rejected. In the first place, the ITAT was conscious about the fact that this claim was set up by the appellant for the first time before it, and was clearly inconsistent and contrary to the stand taken in the return filed by the appellant for the concerned assessment year including the notings made by the officials of the appellant. Yet, the ITAT entertained the claim as permissible, even though for the first time before the ITAT, in appeal under Section 254 of the 1961 Act, by relying on the dictum of this Court in National Thermal Power Co. Ltd. supra at footnote No. 4. Further, the ITAT has also expressly recorded the no objection given by the represen....
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....-Bundhera, Tehsil District-Agra sold to its 100% subsidiary M/s Bloom Inn Private Ltd. was not taxable in view of provisions of section 47(iv) of the Act and was wrongly offered to tax by the assessee in its return of income filed on 29.09.2016 for AY 2016-17. 14. The CBDT vide Circular no.14 XL-35 dated 11.04.1995states that the Department should draw the attention of the assessee to any relief to which they appeared to be clearly entitled but which they have omitted to claim for some reason or other. The said Circular of the CBDT is reproduced as under:- "3. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he....
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....) (Kolkata) and of the Hon'ble Delhi High Court in the case of CIT v. Bharat General Reinsurance Co. Ltd.[1971] 81 ITR 303 (Del.) 14.2. Aggrieved with the said order, the department filed an appeal before the Hon'ble Delhi High Court which dismissed the appeal of the department and upheld the findings of the co-ordinate bench of the Tribunal. The relevant extract of the findings of the Hon'ble Delhi Court are reproduced as under: "14. What emerges from a reading of the impugned order is the following: (i) It is not the case of the appellant-Revenue that the subject income, i. e., the income received by the respondent-assessee for the services rendered to an Indian company, i.e., HSIPL, was taxable. (ii) The benefit of article 12 of the India-USA Double Taxation Avoidance Agreement (in short, "Indo-USA DTAA") was available to the respondent-assessee. (iii) The rectification had been ordered by the Centralized Processing Centre with respect to two other group companies, i. e., Heidrick and Struggles Pvt. Ltd., Singapore, Heidrick and Struggles Pvt. Ltd., UK, in similar circumstance, via order dated February 27, 2020 and January 30, 2020, respect....