2021 (10) TMI 1428 - AT - Income Tax

Correct head of income - LTCG - Treating the capital asset as stock in trade - assessee is a real estate company and no addition in WIP was made during the yea - DR submitted that the Assessing Officer has rightly worked out the business profit on this transaction treating the same as stock in trade - CIT(A) deleted the addition - HELD THAT - As continuous stand of the revenue was these are work in progress treated to be as capital asset and not as stock-in- trade. The transfer of the hotel on sale cannot be termed as short term capital gain or even business income and thus, the assessee has rightly computed the same as long term capital gain on sale which was reflected in profit and loss account and was subsequently also done. Thus, the deletion of the addition by the CIT(A) was right and there is no need to interfere with the findings of the CIT(A). Hence, Ground No. 1 of Revenue s appeal is dismissed. Accrual of income - addition of interest amount in the income of the assessee as share of the disputed parties in the interest will arise only - CIT(A) deleted the addition - HELD THAT - The interest income on fixed deposit in respect of arbitration proceeding and the same cannot be taxable during the year under consideration as the year of taxability of the same was contingent upon the final decision of the arbitrary Tribunal. During the course of hearing, the Ld. AR submitted that in subsequent year the interest was offered to tax by the assessee. Therefore, the CIT(A) has rightly deleted the said addition and there is no need to interfere with the findings of the CIT(A). Hence, Ground No. 2 of the Revenue s appeal is dismissed.

Summary

Issues:
Appeal for Assessment Year 2012-13: Treatment of capital asset as stock in trade and interest income discrepancy.
Appeal for Assessment Year 2013-14: Interest income discrepancy.

Analysis:
*Appeal for Assessment Year 2012-13:*
1. The appeal for A.Y. 2012-13 involved the deletion of additions made by the Assessing Officer regarding the treatment of a capital asset as stock in trade and an interest income discrepancy. The CIT(A) allowed the appeal of the assessee, leading to the Revenue filing an appeal.
2. Regarding the first ground of appeal, the Revenue argued that the CIT(A) erred in deleting the addition of Rs. 154,29,06,058 made by the Assessing Officer, treating the capital asset as stock in trade. However, the CIT(A) found that the construction of the hotel was accepted as a capital work in progress in previous assessments. The Revenue's continuous stand was that these were work in progress treated as a capital asset, not stock-in-trade. The CIT(A) upheld the assessee's computation of long-term capital gain on the sale, leading to the dismissal of this ground of appeal.
3. Concerning the second ground of appeal, the Revenue contended that the CIT(A) wrongly deleted the addition of Rs. 8,57,25,871 due to an interest discrepancy. The CIT(A) found that the interest income on fixed deposit was contingent upon the final decision of the arbitration tribunal and was not taxable in the year under consideration. The interest was offered for tax in subsequent years, justifying the deletion of the addition by the CIT(A) and the dismissal of this ground of appeal.

*Appeal for Assessment Year 2013-14:*
1. The appeal for A.Y. 2013-14 focused on an interest income discrepancy similar to the one in the previous year. The CIT(A)'s decision on this issue was in line with the findings for A.Y. 2012-13, leading to the dismissal of the Revenue's appeal for this assessment year.
2. The judgment pronounced on October 1, 2021, resulted in the dismissal of both appeals filed by the Revenue for Assessment Years 2012-13 and 2013-14, based on the detailed analysis and findings presented in the judgment.