2019 (10) TMI 435 - AT - Income Tax

Sale of land - whether exigible to Long Term Capital Gain (LTCG) - whether there is a transfer of property on execution of sale agreement ? - HELD THAT - We have carefully perused the judgment of the Hon ble High Court in the case of Harbour View 2018 (12) TMI 213 - KERALA HIGH COURT was of the view that when vendee is put in possession of property and is in receipt of part payment of sale consideration on execution of sale agreement, there was transfer as per provisions of section 2(47)(v) of the I.T.Act r.w.s. 53A of the T.P.Act, 1882. We hold that the assessee is liable to be taxed for long term capital gain in the current assessment year. It is ordered accordingly. We hold that the assessee is liable to be taxed for long term capital gain in the current assessment year. Addition u/s 41(1) - liability in relation to the sundry creditors is considered as ceased to exist - HELD THAT - In the impugned order has clearly stated that the liability has seized to exist during the FY 2010-11 itself and the same has been accepted by the appellant during the assessment proceedings. In the above circumstances Assessing Officer was legally correct in assessing a sum u/s 41(1) in the assessment year 2011- 12 Disallowance of depreciation - block of assets whose WDV is NIL- HELD THAT - AO has worked out the short term capital loss and the same has been allowed u/s 50 of the I.T.Act. As a result, the Written Down Value (WDV) for the block of assets consisting of plant and machinery and building became NIL. Therefore, the disallowance of claim of depreciation of this block of assets, whose WDV is NIL is correct and hence the addition is confirmed. Disallowance of Commission expenses - HELD THAT - The assessee has not produced any evidence to show that it has incurred any commission expenditure during the relevant assessment year. Hence, we hold that the Assessing Officer has correctly disallowed the claim of commission payment. Appeal filled by assessee dismissed.

Issues Involved:
1. Sale of land and its exigibility to Long Term Capital Gain (LTCG) in assessment year 2011-2012.
2. Addition of ?1,42,266 under Section 41(1) of the Income Tax Act.
3. Disallowance of depreciation of ?2,28,470.
4. Disallowance of commission expenses of ?18,55,605.

Detailed Analysis:

1. Sale of Land and Long Term Capital Gain (LTCG):
The primary issue was whether the sale of land to M/s. Maruti Suzuki India Limited (MSIL) was exigible to LTCG in the assessment year 2011-2012. The assessee had entered into a sale agreement on 10.11.2010 and received ?8.50 crore as part payment. The Assessing Officer (AO) concluded that the conditions of Section 53A of the Transfer of Property Act, 1882, and Section 2(47)(v) of the Income Tax Act were fulfilled, thus making the assessee liable for LTCG in the assessment year 2011-2012.

The CIT(A) upheld the AO's view, noting that the assessee had handed over physical possession of the property to MSIL, thereby transferring absolute control. The Tribunal also supported this view, emphasizing that the sale agreement's clauses indicated the transfer of possession and control to MSIL. The Tribunal cited the Hon'ble Supreme Court's conditions for transfer under Section 53A and the Kerala High Court's ruling in the case of Harbour View, which supported the AO's decision. Consequently, the Tribunal dismissed the assessee's appeal on this issue, confirming the liability for LTCG in the assessment year 2011-2012.

2. Addition of ?1,42,266 under Section 41(1):
The AO added ?1,42,266 to the income under Section 41(1) of the Income Tax Act, noting that the liability ceased to exist during the financial year 2010-11, as accepted by the assessee. The CIT(A) confirmed this addition, agreeing with the AO's observation. The Tribunal upheld this decision, noting that the issue was conceded before the AO and no serious contention was raised by the assessee. Therefore, the addition of ?1,42,266 was confirmed.

3. Disallowance of Depreciation of ?2,28,470:
The AO disallowed the depreciation claim of ?2,28,470 for plant and machinery, stating that the Written Down Value (WDV) of the block of assets became NIL after computing the short-term capital loss under Section 50 of the Income Tax Act. The CIT(A) upheld this disallowance, agreeing that the WDV of the block of assets was NIL. The Tribunal confirmed this view, stating that the disallowance of depreciation was correct since the WDV was NIL.

4. Disallowance of Commission Expenses of ?18,55,605:
The AO disallowed the commission expenses of ?18,55,605, noting that the commission was not paid during the relevant assessment year and no evidence was provided for the payment. The CIT(A) confirmed this disallowance, agreeing that the assessee did not furnish any evidence for the commission payment. The Tribunal upheld this decision, stating that the assessee failed to produce any evidence of incurring commission expenditure during the relevant assessment year. Therefore, the disallowance of commission expenses was confirmed.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee, confirming the AO's decisions on all issues. The order was pronounced on 04th September 2019.

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