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2021 (11) TMI 407 - AT - Income TaxAddition of interest expenditure - Addition being 11% (SBI lending rate) holding it to be the interest attributable to the advance made by the assessee company to its director Sri B.S.Chadha - interest as disallowed out of the interest claimed alleging that the interest was not attributable to the business requirement and the borrowed funds had been diverted for non-business purposes - HELD THAT - As rightly pointed out by the ld. DR, the interest expenditure to the tune of ₹ 17,26,100 is not subject matter for consideration before the AO through the directions of the Tribunal. The assessee has not agitated this ground before the Tribunal in the earlier occasion. As such, there was no direction on this issue by the Tribunal so as to be taken up by the AO in the second round in the proceedings u/s. 143(3) r.w.s. 254 of the Act. Hence there is no merit in the argument of the ld. AR for the assessee that there was disallowance of the said amount by the AO in his second round of order. Accordingly, this ground of the assessee is disallowed. Undisclosed scrap sale - HELD THAT - Tribunal remanded this issue to the AO on the reason that the assessee did not furnish any evidence to substantiate its claim that income had already been offered to tax in earlier years and it was not clear as to whether earlier record available with the AO had been considered while arriving at the conclusion that no evidence was produced by the assessee - in the remand proceedings also, the assessee failed to produce relevant evidence in respect of its claim. Even after going through the documents available with the AO in the form of part ledger account and Profit Loss account submitted by the assessee during the assessment proceedings, it was found by the AO that only scrap sale to the extent of ₹ 31,45,974 out of total scrap sale of ₹ 57,22,227 was credited in the ledger account as scrap sale and the balance was not offered for taxation. Hence the lower authorities rightly brought to tax the balance amount of ₹ 25,76,253 which is based on material found during the course of survey and the assessee was not able to reconcile the same, even after providing opportunity of hearing before the lower authorities. Therefore, the addition is justified and this ground is dismissed. Addition of capital gain on transfer of property - HELD THAT - Actually the CIT(Appeals) decided the issue in favour of assessee and observed that the assessee claimed the incurring expenditure as expenses towards levelling, boundary work and fencing, but failed to furnish any evidence supporting these expenses and hence upheld the disallowance. Even before us, there is no iota of evidence in support of the claim of the assessee. Hence, on this count, there is no error in the order of CIT(Appeals). Other contention of the ld. AR is that the sum of ₹ 3,30,29,479 should have been excluded from the computation of long term capital gain as it was offered as income from other sources. Admittedly, the CIT(Appeals) has given relief on this count by observing that the said amount cannot be taxed twice; once as capital gain and another as income from other sources and prima facie accepted the argument of the assessee. However, he directed the AO to take appropriate rectification action after due verification of the facts and after affording necessary opportunity to the assessee in this regard. Being so, the assessee cannot have any grievance on this count. However, we make it clear that the AO has to carry out the directions of the CIT(Appeals) in para 9.4 of his order. With these observations, this ground of the assessee is dismissed. Capital gain in respect of transfer of property to IDEB - HELD THAT - As held in the case of Alapati Venkataramiah 1965 (3) TMI 21 - SUPREME COURT to attract liability to tax u/s. 45, it is sufficient if in the accounting year profits have arisen out of transfer of capital asset. In other words, if the assessee had a right to receive the profit in the assessment year under consideration, the assessee is liable to pay capital gains tax on transfer of capital asset. Actual receipt of profit is not a relevant consideration. Once the profits have arisen in the accounting year out of the transfer of capital asset, it would be sufficient to attract liability u/s. 45 of the Act. The contention of the assessee is that there was no transfer in the assessment year under consideration as the possession of the property has not been given to the developer. In the present case, the assessee executed registered JDA along with registered GPA which authorizes the developer a provisional permission to enter into the land and authorizing them to develop, execute sale deed or other conveyance in respect of the impugned property and authorize to sell the constructed area of both the assessee as well as the developer. As such, there is a transfer in terms of section 45 r.w.s. 2(47) of the Act. Accordingly, we decide this ground against the assessee.
Issues Involved:
1. Disallowance of travel expenditure. 2. Disallowance of interest expenditure. 3. Challenge to disallowance due to lack of specific findings. 4. Advances in the course of business. 5. Addition towards undisclosed scrap sale. 6. Computation of capital gains on transfer of property to Gopalan Enterprises. 7. Cost of purchase of steel in computing capital gains. 8. Surplus from sale of improvements under "Income from other sources". 9. Computation of capital gains on transfer of property to IDEB. 10. Application of Sec. 2(47)(v) rws Sec. 53A of the Transfer of Property Act. 11. Agreement to sell not acted upon. 12. Non-consideration of submissions and case law. 13. Distinguishability of Karnataka High Court judgment. 14. Subsequent sale to another party. 15. Surmising possession handed over to IDEB. 16. Acceptance of explanation and submissions. 17. Levy of interest under sections 234A, 234B, and 234C. 18. Non-leviability of interest under sections 234A, 234B, and 234C. 19. Excessive interest levied. 20. Excessive, arbitrary, and unreasonable additions. Issue-wise Detailed Analysis: 1. Disallowance of Travel Expenditure: The judgment does not address this specific ground in detail, indicating that the focus was on other grounds of appeal. 2. Disallowance of Interest Expenditure: The AO added back ?17,26,100 as interest attributable to an advance made to a director, holding it was not for business purposes. The assessee argued that combining the accounts of amounts owed and receivable would show adequate non-interest-bearing funds. The Tribunal found no merit in the argument, noting that the issue was not directed for reconsideration by the Tribunal in earlier proceedings. The ground was disallowed. 3. Challenge to Disallowance Due to Lack of Specific Findings: The Tribunal noted that the issue of interest expenditure was not directed for reconsideration in earlier proceedings, and thus, there was no merit in the argument. This ground was disallowed. 4. Advances in the Course of Business: The Tribunal did not specifically address this ground separately, as it was intertwined with the issue of interest expenditure, which was disallowed. 5. Addition Towards Undisclosed Scrap Sale: The AO added ?25,76,253 for unaccounted scrap sales found during a survey. The assessee argued that these sales were recorded in the books and the variation in dates was due to dispatch and receipt dates. The Tribunal upheld the addition, noting the assessee failed to provide evidence to substantiate the claim that the income was already offered for tax, even after remand proceedings. 6. Computation of Capital Gains on Transfer of Property to Gopalan Enterprises: The AO computed capital gains on the entire sale consideration of ?14 crores, disallowing the cost of improvement for fencing. The Tribunal upheld the disallowance, noting the assessee failed to provide evidence for the claimed expenses. The Tribunal also upheld the AO's computation of capital gains, noting that the entire consideration pertained to a single unit of property. 7. Cost of Purchase of Steel in Computing Capital Gains: The Tribunal upheld the disallowance of ?1,63,70,521 claimed as expenses for fencing, as the assessee failed to provide evidence for these expenses. 8. Surplus from Sale of Improvements Under "Income from Other Sources": The Tribunal upheld the CIT(A)'s direction to the AO to rectify any double taxation of ?3,30,29,479, which was offered as income from other sources but included in the computation of capital gains. 9. Computation of Capital Gains on Transfer of Property to IDEB: The AO computed capital gains on the transfer of property to IDEB based on a Joint Development Agreement (JDA) and other agreements executed on 30.03.2007. The Tribunal upheld the AO's computation, noting that the agreements satisfied the conditions for transfer under Section 2(47) of the IT Act r.w.s. 53A of the Transfer of Property Act. 10. Application of Sec. 2(47)(v) rws Sec. 53A of the Transfer of Property Act: The Tribunal upheld the AO's application of Section 2(47)(v) r.w.s. 53A, noting that the agreements executed on 30.03.2007 constituted a valid transfer of property. 11. Agreement to Sell Not Acted Upon: The Tribunal found that the agreements remained effective and were not cancelled, and thus, the transaction constituted a transfer for capital gains purposes. 12. Non-Consideration of Submissions and Case Law: The Tribunal considered the submissions and case law cited by the assessee but found them unconvincing in light of the facts and circumstances of the case. 13. Distinguishability of Karnataka High Court Judgment: The Tribunal found the judgment of the Karnataka High Court in the case of CIT vs. Dr. T.K. Dayalu applicable, supporting the AO's computation of capital gains. 14. Subsequent Sale to Another Party: The Tribunal did not find merit in the argument that the property was subsequently sold to another party, as the agreements with IDEB were effective and constituted a transfer. 15. Surmising Possession Handed Over to IDEB: The Tribunal upheld the AO's finding that possession was effectively handed over to IDEB, satisfying the conditions for transfer under Section 2(47) of the IT Act. 16. Acceptance of Explanation and Submissions: The Tribunal did not accept the explanations and submissions made by the assessee, finding them unsupported by evidence. 17. Levy of Interest Under Sections 234A, 234B, and 234C: The Tribunal noted that the levy of interest under these sections is mandatory and consequential, and thus, no separate adjudication was warranted. 18. Non-Leviability of Interest Under Sections 234A, 234B, and 234C: The Tribunal did not find merit in the argument that interest under these sections was not leviable. 19. Excessive Interest Levied: The Tribunal did not specifically address this ground, as the levy of interest was found to be mandatory and consequential. 20. Excessive, Arbitrary, and Unreasonable Additions: The Tribunal upheld the additions made by the AO, finding them justified based on the evidence and circumstances of the case. Conclusion: The appeal by the assessee was dismissed, and the Tribunal upheld the findings and computations made by the AO and CIT(A) on various grounds, including interest expenditure, undisclosed scrap sales, and capital gains on the transfer of properties. The levy of interest under sections 234A, 234B, and 234C was found to be mandatory and consequential.
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