2013 (3) TMI 719 - AT - Income Tax

Summary

Issues Involved:
1. Transfer of development right - Incorrect taxation thereof.
2. Warranty expenses of Rs. 68,24,150/-.
3. Set-off of short-term capital loss without applying the provisions of Section 94(7) of the Act.

Summary:

1. Transfer of Development Right - Incorrect Taxation Thereof:
The Ld. CIT observed that the assessee received Rs. 41 Crores for the transfer of development rights to Gera Reality Pvt. Ltd. during F.Y. 06-07. The Ld. CIT concluded that the entire amount should have been taxed in A.Y. 07-08, but only Rs. 5.86 Crores was taxed, rendering the order erroneous and prejudicial to the interest of revenue. The Tribunal found that the Assessing Officer had made detailed discussions and inquiries during the assessment proceedings, and the view taken by the Assessing Officer was permissible in law. Therefore, the order on this issue was not erroneous.

2. Warranty Expenses of Rs. 68,24,150/-:
The Ld. CIT noted that the assessee debited Rs. 68,24,160/- as warranty expenses, which was a provision without evidence of actual expenditure. The Ld. CIT deemed this provision not allowable as an expenditure. The Tribunal found that the Assessing Officer had raised specific queries and received detailed replies from the assessee. Moreover, the issue was covered in favor of the assessee by the Supreme Court decision in Rotork Controls India Pvt. Ltd. Vs. CIT 314 ITR 62. Thus, the order on this issue was not erroneous.

3. Set-off of Short-Term Capital Loss Without Applying Provisions of Section 94(7):
The Ld. CIT observed that the assessee claimed set-off of short-term capital loss arising from dividend stripping, which is not permissible u/s 94(7) of the Act. The Tribunal found that there was no query or inquiry by the Assessing Officer on this issue, making the assessment order erroneous and prejudicial to the interest of revenue. The Tribunal upheld the Ld. CIT's order to the extent of this issue and directed the Assessing Officer to complete the assessment after examining this issue as per the provisions of law.

Conclusion:
The Tribunal partly allowed the assessee's appeal, holding that the order was erroneous and prejudicial to the interest of revenue only concerning the set-off of short-term capital loss and applicability of Section 94(7) of the Act. The Assessing Officer was directed to re-examine this issue.