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2021 (7) TMI 1447 - AT - Income TaxIncome from house property - notional ALV u/s 22 - AO bringing to tax the notional ALV of the unsold properties being vacant commercial, residential/self-occupied assets in terms of Section 22 - Difference between the original Grounds of Appeal and the revised one - HELD THAT - As fresh plea of the assessee based on the judgment of Neha Builders P. Ltd. 2006 (8) TMI 105 - GUJARAT HIGH COURT and also Chennai Properties Investments Limited 2015 (5) TMI 46 - SUPREME COURT for the proposition that the income from the properties in the instant case be held to be assessable under the head income from business or profession and that, if it is so held, the same would oust the charge made by the Assessing Officer by invoking Section 22 of the Act under the head income from house property . Even if it is taken that the aforesaid plea is the new plea raised by the assessee, it is quite clear that all the facts necessary to adjudicate the same are available on record and, therefore, we had made known to the parties that the said plea is admissible, and accordingly, both sides had addressed us on the merits of the same also. Addition u/s 22 - We are in concurrence with the assertion made by the learned CIT-DR that the matter stands fully covered in favour of the Revenue even with regard to the plea of the assessee based on the judgment of Neha Builders P. Ltd. (supra). In fact, in the case of Ansal Housing Finance Leasing Company Ltd. ( 2016 (11) TMI 208 - DELHI HIGH COURT considered the ratio of the judgment Chennai Properties Investments Limited (supra) and held that the same was not applicable to the facts of the case and, accordingly, had reiterated its earlier judgment on the instant issue in the case of Ansal Housing Finance Leasing Company Ltd. (supra). Notably, assessee s own case was also clubbed with the case of Ansal Housing Finance Leasing Company Ltd. (supra) before the Hon ble High Court. Therefore, in this view of the matter, we find no merit in the plea raised by the assessee. Accordingly, the order of learned CIT(A) is liable to be affirmed. Disallowance of deduction u/s 80IA(4)(iii) - HELD THAT - Action of the lower authorities in denying the claim of the assessee for deduction u/s 80IA(4)(iii) cannot be faulted for the reasons ascribed in their respective orders. The requisite notification entitling the assessee for the deduction has been rejected by the CBDT, as is emerging from the record and therefore, we find no reason to interfere with the action of the lower authorities. The plea of the assessee that in case the notification is received in future in pursuance to assessee s review petition pending before the CBDT, it is sufficient to direct the AO that in case, he is approached by the assessee with the requisite notification on a later date, he shall deal with the same in accordance with law. Nature of expenses - Expenses incurred in connection with issue of equity shares to Qualified Institutional Buyers (QIBs) - Assessee raising alternative plea for deduction of the impugned expenditure based on Section 35D - HELD THAT - So far as the plea of the assessee for deduction of the impugned expenditure incurred on issue of shares to QIBs in terms of Section 37(1) of the Act is concerned, the same is liable to be decided against the assessee following the precedents in the assessee s own case. Assessee raising alternative plea - We find no reasons to restrict the assessee from raising a plea for deduction of the impugned expenditure based on Section 35D of the Act. The impugned expenditure incurred in connection with issue of shares be considered in terms of Section 35D of the Act even if before the lower authorities, the claim revolved around Section 37(1) of the Act only. In fact, in the case before the Hon'ble Supreme Court, the matter by the lower authorities was considered in the light of the earlier judgment in the case of Brooke Bond India Limited 1997 (2) TMI 11 - SUPREME COURT an approach which was not approved by Hon'ble Supreme Court having regard to the fact that Section 35D of the Act came on the Statute after the rendering of the decision in the case of Brooke Bond India Limited (supra). Therefore instant claim of the assessee would fall for consideration in terms of Section 35D of the Act provided of course, the expenditure is in connection with issue of Public subscription of shares as per Section 35D(2)(c)(iv) of the Act. QIBs qualify to be treated as public shareholders in terms of the SEBI listing requirements. Therefore, the most pertinent condition prescribed in Section 35D(2)(c)(iv) of the Act, i.e., the expenditure is in connection with public subscription of shares stands fulfilled. Whether matter may be remanded back to the Assessing Officer to ascertain whether QIBs are public shareholders or not? - In our considered opinion, remanding the matter on this aspect to the Assessing Officer would only prolong the litigation and not achieve any substantive purpose. It is not a case where the fresh alternate plea of the assessee, based on Section 35D of the Act, is required to be examined on the basis of any fresh facts or material, which was hitherto not before the Assessing Officer. The short point is as to whether the ratio of the judgment of Hon'ble Supreme Court in the case of Brooke Bond India Limited (supra) would apply in the context of claim under Section 35D or not? This aspect is clearly answered in the case of Shasun Chemicals Drugs Limited ( 2016 (9) TMI 1199 - SUPREME COURT ). Furthermore, on the issue of classification of QIBs as a part of public shareholders is concerned, the said issue is covered by the decision of our Coordinate Benches. Thus, the alternative plea of the assessee with regard to the allowability of expenditure incurred on issue of shares to QIBs is allowable in terms of Section 35D. We reiterate that so far as the claim of deduction under Section 37(1) of the Act is concerned, the same is decided against the assessee but the claim under Section 35D of the Act is allowed in terms of our above discussion. Thus, assessee partly succeeds in this Ground of appeal. LTCG - Surplus arising on transfer of its capital asset, viz., infrastructure assets to its wholly owned subsidiary - primary dispute on this aspect is with regard to Section 47(iv) of the Act whereby the claim of the assessee is that the transfer in question is not exigible to the charge of capital gains under Section 45 - HELD THAT - The terms of the agreement bring out that the development and maintenance of the Trunk Infrastructure was the responsibility of the assessee in terms of the project awarded by the Government of Uttar Pradesh. The assessee was to earn user charges etc. from this asset in terms of the Award by the Government of Uttar Pradesh. This Trunk Infrastructure was transferred to AAIL for the reason that the assessee desired that the infrastructure related work and its maintenance and servicing to end users by a Special Purpose Vehicle. The supporting infrastructure for linking the Trunk Infrastructure to end users was being developed by the assessee itself but through AAIL. Another important feature was that AAIL was not permitted to transfer the Trunk Infrastructure to any third party. Notably, Section 45 of the Act provides that any profits and gains arising from a transfer of a capital asset effected in the previous year will be chargeable to income tax under the head capital gains . Such capital gains are deemed to be the income of the previous year in which such transfer took place. Section 47 enumerates a list of transactions which would not be considered as a transfer under Section 45(1) of the Act, which, interalia includes Sub-section (iv) prescribing for transfer of a capital asset by a company to its wholly-owned Indian subsidiary. From the aforesaid legal position and the terms of arrangement available before us, it is evident that the transfer in question is of a capital asset under development i.e., capital work-in-progress and such transfer being to a 100% subsidiary, cannot be treated as a transfer for the purpose of Section 45 of the Act in view of Section 47(iv) of the Act. The reliance placed by assessee on the decision of our Coordinate Bench in the case of Mother Diary Fruits Veg.(P) Ltd. ( 2011 (1) TMI 66 - ITAT DELHI ) is quite apt under the present circumstances. The case of the Income-tax Authorities, that it was a transfer of an asset employed in the business and therefore Section 47(iv) is not attracted, is quite unjustified and untenable. It is a well-settled legal proposition that the claims made by the assessee have to be examined in the light of the applicable factual and legal position and not merely on the basis of the position taken in the financial statements or otherwise. In this view of the matter, we do not find the stand of the CIT(A) or the Assessing Officer to be tenable in this regard. Insofar as the plea of the learned DR to remand the matter back to the lower authorities is concerned, the same, in our view, is not, at all, merited. It has been demonstrated by the assessee before us, and which has not been controverted by the learned DR, that the entire material was before the lower authorities and there is nothing to show that the same has not been examined by the lower authorities. Therefore, considering the entirety of the circumstances, and in view of the aforesaid discussion, we hereby allow the claim of the assessee.
Issues Involved:
1. Addition of Notional Annual Letting Value (ALV) of unsold properties. 2. Deduction under Section 80IA(4)(iii) of the Income Tax Act. 3. Disallowance of expenses incurred in connection with the issue of equity shares to Qualified Institutional Buyers (QIBs). 4. Taxability of surplus arising on transfer of infrastructure assets to a wholly-owned subsidiary under Section 47(iv) of the Income Tax Act. Detailed Analysis: 1. Addition of Notional Annual Letting Value (ALV) of Unsold Properties: - The assessee contested the addition of notional ALV on unsold properties, arguing that such properties were stock-in-trade and should not be taxed under 'income from house property.' - The Revenue's position, supported by the Delhi High Court in the assessee’s own case, was that the notional ALV of unsold properties should be taxed under 'income from house property.' - The Tribunal ruled in favor of the Revenue, affirming the CIT(A)'s decision and dismissing the assessee's grounds. The Tribunal noted that the Delhi High Court had already considered and rejected similar arguments made by the assessee in earlier cases. 2. Deduction under Section 80IA(4)(iii) of the Income Tax Act: - The assessee claimed a deduction under Section 80IA(4)(iii) for profits from an industrial park, which was denied by the Assessing Officer and CIT(A) due to the lack of requisite notification by the CBDT. - The Tribunal upheld the denial of the deduction but directed that if the notification is received in the future, the Assessing Officer should modify the assessment accordingly. 3. Disallowance of Expenses Incurred in Connection with the Issue of Equity Shares to QIBs: - The assessee claimed deduction of expenses incurred on the issue of equity shares to QIBs under Section 37(1) and alternatively under Section 35D of the Act. - The Tribunal dismissed the claim under Section 37(1) but admitted the alternative claim under Section 35D, noting that the expenses related to public subscription of shares and thus qualified for amortization over ten years. - The Tribunal remanded the matter to the Assessing Officer for quantifying the allowable expenditure under Section 35D. 4. Taxability of Surplus Arising on Transfer of Infrastructure Assets to a Wholly-Owned Subsidiary under Section 47(iv): - The assessee argued that the surplus arising from the transfer of infrastructure assets to its wholly-owned subsidiary was not taxable under Section 47(iv), which exempts transfers of capital assets to a 100% subsidiary. - The Tribunal found that the transfer met the conditions of Section 47(iv) and ruled that the surplus should not be treated as taxable capital gains. - The Tribunal rejected the Revenue’s argument that the matter should be remanded for further examination, noting that all necessary materials were already on record. Conclusion: - The Tribunal upheld the addition of notional ALV on unsold properties and denied the deduction under Section 80IA(4)(iii) but allowed the alternative claim for deduction of share issue expenses under Section 35D and exempted the surplus from the transfer of infrastructure assets under Section 47(iv).
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