2013 (12) TMI 1321 - HC - Income Tax

Carry forward of capital loss. - Whether sale of polymer division and sale of land in Gujarat are separate transactions Held that - The polymer unit which is at Vizag was acquired in the year 1978 - The industrial land in Gujarat was acquired in the year 1997 to set up a polymer unit - The assessee has spent some money towards salaries, wages, conveyance, telephone, interest, etc., in connection with the land at Gujarat - That by itself would not make the said land the property of the polymer unit - These properties are separate and distinct - The first appellant authority as well as the Tribunal was justified in holding that it is not one and the same transaction - As they are two independent transactions, the loss sustained in one transaction cannot be set off against the profit made in the other transaction - Decided against Revenue. Genuineness of commission - Held that - Following assessee's own case 2006 (9) TMI 147 - KARNATAKA High Court - The allowance of the commission payment requires interference - Decided in favour of Revenue.

Summary

Issues:
1. Taxability of profit on sale of Polymer division and loss on surrender of land.
2. Genuineness of commission payments made.
3. Allowability of expenses on maintaining aircrafts and depreciation.
4. Allowability of depreciation on a grounded aircraft.

Analysis:

Issue 1:
The appellant questioned the correctness of the Appellate Authorities' decision regarding the tax liability of profit from the sale of the Polymer division and the allowance of loss on surrender of land as a deduction. The Assessing Authority disallowed carrying forward the capital loss, linking it to the profit earned from the sale. The Commissioner of Income Tax (Appeals) and the Tribunal, however, deemed the transactions independent, allowing the capital loss to be carried forward separately. The High Court upheld this decision, emphasizing the distinct nature of the transactions and the lack of industrial activity on the surrendered land, thus dismissing the appeal in favor of the assessee.

Issue 2:
The second substantial question pertained to the genuineness of commission payments made to certain entities. The Tribunal and the first appellate authority had allowed these payments, but the High Court referred to a previous judgment in the assessee's case, disallowing the commission payments. Consequently, the High Court set aside the allowance of these payments, favoring the revenue over the assessee.

Issue 3 and 4:
Regarding the expenses incurred on maintaining aircrafts and the depreciation on a grounded aircraft, the High Court remanded the matter back to the Assessing Authority for fresh disposal. The previous findings on these issues were set aside to avoid conflicting decisions, ensuring a comprehensive review by the Assessing Authority along with other connected matters.

In conclusion, the High Court ruled in favor of the assessee on the first issue, disallowing commission payments on the second issue, and remanding the third and fourth issues back to the Assessing Authority for further examination to prevent conflicting decisions.