TaxTMI 
TaxTMI 
2026 (9) TMI 702
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....ssment Year 2018-19 by the Ld. Assistant Commissioner of Income-tax, Central Circle-2(3), Mumbai (AO) is bad in law, facts and procedure. 2. i) For that the Ld. CIT(A) erred in not correcting the actual amount of loss of Rs. 7,45,75,535/-on transfer of allotment right in respect of 18 units of EMAAR MFG Land Ltd. and arbitrarily confirming the action of the Ld. AO who erroneously took the said amount of loss at Rs. 7,45,75,635/- and consequently, enhancing the income of the assessee by an excess amount of Rs. 100/-solely due to the above mistake. ii) For that in view of the undisputed facts of the case that the assessee was engaged in the business of purchase and sale of properties and has suffered loss of Rs. 7,45,75,535/- during the year under consideration on transfer of its right to purchase and receive possession of the 18 units of properties which was acquired with the intention to re-sale during the course of its business and accordingly claimed as business loss in the return of income, the Ld. CIT(A) has erred in arbitrarily confirming the action of the Ld. AO in not allowing deduction for the said loss in computing business income of the assessee. ....
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..... AO to compute the correct amount of "Capital Gains" as per the provisions of law. 4. For that the impugned order having been passed by the Ld. CIT(A) in gross violation of the principles of natural justice and without allowing reasonable opportunity of hearing to the assessee, the impugned order is bad in law and untenable. 5. For that the Ld. CIT(A) ought to have held that the order of assessment was passed by the Ld. AO in gross violation of the principles of natural justice, the said order of assessment is bad in law and is liable to be quashed. 3. Ground no.1 is general and does not require any separate adjudication. 4. In respect of ground no.2 and 3 which are interlinked, briefly stated facts of the case are that the assessee company is engaged in the business of purchase, sale and letting of leased buildings and declared loss from business. During assessment proceedings, it was seen by the AO from the financials of the assessee that in the relevant year, it had claimed deduction of Rs. 7,45,75,635/-,being "Loss on transfer of allotment letter" under the head Other Expenses. It was further noticed from the details that the assessee had shown the sale....
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....tock in trade. The builder offered possession vide letter dated 06.07.2017 on receipt of occupancy certificate subject to payment of the balance dues. The company had on 17.04.2017 entered into an agreement with buyers to sell the said 18 units to them on as is where is basis. The buyers paid the agreed amount to the company and got the allotment letter nominated in their name and after payment of balance dues to builder took possession of the units and executed the documentation in their favour. As the 18 units were not fully constructed and possession not taken and documents registered, the amount paid was included as short term loans and advances and not inventory/stock in trade and the net loss on sale thereof has been charged to profit & loss account. The loss had been incurred in business transaction and hence should be allowed and not added back to the Income. 4.2 The above submission of the assessee was considered. However, it was pointed out by the AO that it was in the business of property dealing and despite this, the assessee had never reflected that 18 flats purchased in EMAR Mfg-Digital Green, as stock-in-trade during any previous years. During the year, it was cla....
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....ked out as Long term capital loss (-) 1,38,35,317/- which was allowed to be carried forward for adjustment towards long term capital gains in subsequent years. 5. Aggrieved, the assessee filed further appeal contesting the action of the AO by reiterating the same contentions as made before the AO. Before the ld.CIT(A),the assessee explained that the company was in the business of purchase and sale of properties. The properties purchased were reconstructed or renovated before sale depending on the condition of the properties. The purchase cost and other expenditure incurred on reconstruction or renovation were included in closing stock in the balance sheet. On sale of the property the resultant profit/loss was treated as business profit/loss by it since the start of business and was being assessed as business profit/loss. In no year, the profit/loss had been treated as capital gain by the company nor assessed as capital gain by the department. In the financial year 2010-11, the appellant company booked 18 Units with EMAAR MGF Land Ltd. As the units were under construction neither possession was handed over nor documents for purchase were registered. The payments were made in inst....
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....idence that the assessee company was to consider it as business income and not capital gain.As the assessee was dealing in property and its income was regularly returned and assessed as business income the loss on transfer of allotment letter should be allowed at business loss u/s 37 of the Act. 5.1 In respect of cost taken at Rs. 13,06,55,639/- instead of 25,34,82,377/- incurred the company for capital gain calculation,it was submitted that the AO treated the loss claimed by the assessee as business loss to be capital loss and allowed indexation of cost of acquisition. The total cost of acquisition was Rs. 25,34,82,377/- but indexation had been allowed on Rs. 13,06,55,639/-. All details and evidence of acquisition cost were provided to the AO. Necessary directions may be given for allowing indexation of all expenditure incurred to arrive at long term capital loss available to the assessee company in case the loss is not treated as a business loss. 6. The ld.CIT(A) after due consideration of the relevant facts of the case, concurred with the treatment given to the loss claimed as business loss and also agreed that the AO was justified in treating the said assets capital asset....
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....tion. It is a settled principle that entries in the books of account are not determinative of taxability as held by the various courts of law.The mere fact that the amounts were shown under "Short Term Loans and Advances" could not alter the real character of the transaction. Besides, the assessee never intended to hold the property. The units were sold immediately upon opportunity. The activity was consistent with business operations. The AO had not examined the business intent, commercial conduct and nature of transaction. The conclusion had been drawn solely on the basis of balance sheet classification, which is legally unsustainable. The loss incurred by the assessee was real and arises from genuine transactions. The AO accepted the transaction as genuine. However, simultaneously disallowed the business loss. This leads to a contradictory position where the same transaction was treated differently for different purposes, which is not permissible. 7.2 On careful consideration of the factual matrix of the case, we are of the considered opinion that the claim of the business loss on sale of certain flats is full of contradictions and inconsistencies in the stand of the assessee....