2013 (5) TMI 910 - AT - Income Tax

Summary

Issues involved:
1. Treatment of profit/gain on sale of land under Capital Gain or Business income.
2. Claim of loss due to embezzlement/cash shortage from an earlier year.

Issue 1: Treatment of profit/gain on sale of land
The appellant, a Co-operative Bank, challenged the assessment of profit/gain on the sale of a plot of land as business income instead of Capital Gain for the A.Y. 2008-09. The plot was initially purchased for construction but later sold due to poor economic conditions. The Assessing Officer and Ld. CIT(A) considered it as a business asset, while the appellant argued it should be treated as a Capital Asset. The ITAT Pune held that the gain/loss on the sale of the land should be assessed under the Head Capital Gain, not as part of the bank's trading activity. The Assessing Officer was directed to assess the gain/loss accordingly and reduce the profit from the business income.

Issue 2: Claim of loss due to embezzlement/cash shortage
The appellant claimed a loss of Rs. 22,00,000 due to embezzlement/cash shortage in an earlier year, which was not allowed by the Assessing Officer and Ld. CIT(A) as it pertained to a previous year. The ITAT Pune noted that the loss should be allowed in the year it is discovered, as per CBDT Circular and legal precedents. The appellant failed to provide reasons for claiming the loss in A.Y. 2008-09 when it was detected in 2004. Therefore, the decision of Ld. CIT(A) to disallow the loss claim was upheld.

In conclusion, the ITAT Pune partially allowed the appellant's appeal, directing the assessment of profit/gain on the sale of land as Capital Gain and confirming the disallowance of the loss claim due to embezzlement/cash shortage from an earlier year.