2017 (11) TMI 1710 - HC - Income Tax

Revision u/s 263 - no business activity - Held that - Appellate Tribunal while noting the facts has noted that in the scrutiny assessment under subsection (3) of Section 143 for the year 2006-2007 it was accepted that the respondent assessee has not carried out any business activity and the business expenditure claimed in that year was disallowed. We may note here that in the order dated 21st December 2010 passed by the Assessing Officer which was reviewed it is specifically recorded that no business activity has been undertaken by the assessee during the relevant year. Assessing Officer while passing an order under subsection (3) of Section 143 in respect of Assessment Year 2006-2007 has examined the issue regarding allotment of plot by MIDC. Considering the fact that the order under subsection (3) of Section 143 for the Assessment Year 2006-2007 has become final in paragraph 9.1 of the impugned order the Appellate Tribunal has observed that the AO adopted one of the two courses permissible in law. Therefore it was held that the order was not erroneous - no substantial question of law

Summary

Issues:
Interpretation of tax liability on transfer of a capital right under a joint venture agreement.

Analysis:
The respondent- assessee entered into a joint venture agreement for acquiring a plot from the Maharashtra Industrial Development Corporation (MIDC). The respondent relinquished its rights in favor of the joint venture partner, receiving a consideration of ?43,52,50,000. The respondent claimed that this amount was not taxable as income tax liability. The Assessing Officer accepted this claim under Section 143 of the Income Tax Act, 1961. However, the Commissioner of Income Tax passed an order under Section 263, stating that the amount received was taxable as capital gains. The Commissioner cited case laws to support the taxability of the amount. This order was appealed before the Income Tax Tribunal, which set aside the Commissioner's order under Section 263.

The appellant-revenue contended that the Assessing Officer's order was erroneous and prejudicial to the revenue's interest. The Appellate Tribunal, in its order, highlighted that the Assessing Officer had previously examined the issue of the plot allotment by MIDC during the assessment year 2006-2007, where it was established that the respondent had not engaged in any business activity. The Tribunal concluded that the Assessing Officer had taken a permissible course of action under the law, and thus, the order was not erroneous. The High Court noted that the findings of fact recorded by the Tribunal were based on the Assessing Officer's order for the assessment year 2006-2007, and therefore, no substantial question of law arose. Consequently, the High Court dismissed the appeal, stating that no substantial question of law was present in the case.