2016 (11) TMI 662 - AT - Income Tax

Adoption of price for sale consideration - adoption of sale rate for land - Held that - In view of the provisions of section 50C of the Act, we are of the considered view that in the given facts and circumstances of the case wherein assessee has shown sale consideration @ ₹ 7,301/- per sq.m., registered valuer valued it at ₹ 5,800/- per sq.m., ld. Assessing Officer estimated rate at ₹ 10,000/- per sq.m. no report from the DVO and jantri price of ₹ 8,000/- per sq.m., we are of the view that in order to meet the ends of justice, it will be justified to adopt the jantri price of ₹ 8,000/- per sq.m. for the sale consideration towards the sale of 33817 sq.m. of land. Not allowing set off of the unabsorbed business loss of earlier year against the income from other sources of current year confirmed - in view of the clear provisions of section 72(1) of the I.T. Act, it is held that the claim of the assessee in setting off business loss of earlier years against current year s income from other sources is illegal and not allowable as per law. Allowability of deduction u/s 80P - Held that - there is loss during the year from the business activities of the society which includes all types of income relating to marketing of agricultural produce grown by its members as well as income from letting out godown/warehouse, assessee is not eligible for any deduction u/s 80P(2)(iii) and 80P(2)(e) of the Act for the lack of positive income Deduction of claim of assessee as unabsorbed depreciation and also claim of the current depreciation by applying the provisions of section 14A for the purpose of computing total income - Held that - We observe that depreciation is claimed as per the provisions of section 32 of the Act and sub-section (2) of section 32 allows the assessee to claim unabsorbed depreciation of earlier years. Further in order to compute the business income of the assessee society the computation of income has to pass through the provisions of section 32 of the Act so as to arrive at the correct business income. Sec. 14A of the Act refers to income which are not included in total income i.e. exempt income dividend, for example tax free interest etc. Whereas in the case of assessee deduction has to be claimed u/s 80P of the Act. Further as per section 80P(2)(a)(iii) of the Act, the deduction is allowable for the amount of profits and gain of business attributable to marketing of agricultural produce grown by the members of the society and in order to calculate profits and gains of business assessee needs to calculate business income after claiming depreciation as per provisions of sec. 32 of the Act. Therefore, ld. CIT(A) has rightly allowed the claim u/s 32 of the Act towards deduction of unabsorbed depreciation of earlier years and deduction of current year depreciation and therefore, we find no reason to interfere with the order of ld. CIT(A)

Issues Involved:

1. Adoption of sale rate for calculating capital gains.
2. Set-off of unabsorbed business loss against income from other sources.
3. Disallowance of deduction under Section 80P of the Income Tax Act.
4. Disallowance of depreciation loss of earlier years and current year.

Issue-wise Detailed Analysis:

1. Adoption of Sale Rate for Calculating Capital Gains:

The primary issue in the assessee's appeal was the adoption of a sale rate of ?10,000 per sq. meter by the Assessing Officer (AO) for calculating capital gains, as opposed to ?7,301 per sq. meter shown by the assessee. The AO based his valuation on comparative sale instances and the jantri rate, which was ?8,000 per sq. meter, while the market value was estimated at ?10,000 per sq. meter. The CIT(A) upheld the AO's valuation, noting inconsistencies in the registered valuer's report provided by the assessee. The Tribunal, upon reviewing the facts and the provisions of Section 50C of the Income Tax Act, concluded that adopting the jantri rate of ?8,000 per sq. meter would be fair and reasonable. Consequently, the Tribunal partly allowed the assessee's appeal by adopting the jantri rate for calculating the capital gains.

2. Set-off of Unabsorbed Business Loss Against Income from Other Sources:

The assessee challenged the CIT(A)'s decision to disallow the set-off of unabsorbed business loss of ?8,60,125 against the income from other sources. The CIT(A) held that as per Section 72 of the Income Tax Act, carried forward business losses can only be set off against business income and not against income from other sources. The Tribunal upheld the CIT(A)'s decision, citing a similar ruling in the case of Surat Dist. Co-op. Spinning Mills Ltd., and dismissed the assessee's appeal on this ground.

3. Disallowance of Deduction Under Section 80P of the Income Tax Act:

The assessee claimed deductions under Section 80P(2)(a)(iii) and Section 80P(2)(e) of the Income Tax Act, which were disallowed by the AO due to the absence of positive business income. The CIT(A) allowed a deduction of ?1 lakh under Section 80P(2)(c)(i) but upheld the disallowance of ?19,16,663 under Section 80P(2)(a)(iii) and ?10,800 under Section 80P(2)(e). The Tribunal agreed with the CIT(A), noting that deductions under Section 80P are allowable only on net income, and since the assessee had a business loss, no further deductions under these sections were permissible. The Tribunal dismissed the assessee's appeal on this ground.

4. Disallowance of Depreciation Loss of Earlier Years and Current Year:

The Revenue appealed against the CIT(A)'s decision to allow the assessee's claim of ?53,90,948 as unabsorbed depreciation and ?4,58,320 as current depreciation. The AO had disallowed these claims by applying the provisions of Section 14A of the Income Tax Act. The CIT(A) allowed the claims, stating that depreciation is calculated as per Section 32, and unabsorbed depreciation can be carried forward and set off against other heads of income. The Tribunal upheld the CIT(A)'s decision, emphasizing that the computation of business income must include depreciation as per Section 32, and Section 14A does not apply to deductions under Section 80P. The Tribunal dismissed the Revenue's appeal on this ground.

Conclusion:

The Tribunal partly allowed the assessee's appeal by adopting the jantri rate for calculating capital gains and dismissed the remaining grounds. The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to allow the depreciation claims.

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