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2023 (6) TMI 83 - AT - Income TaxCharacterization of income - Treating the agriculture income declared by the assessee as Business income - CIT (A) deleted the addition observing that the income derived from similar activities in the past previous years had been accepted by the Revenue without any adverse finding and the same has been treated as agricultural income - HELD THAT - No valid reason to reverse the findings of the CIT (A) for the reason that in the past assessment years while making scrutiny assessments u/s 143(3) AO has accepted the stand of the assessee that activities of cultivating of sugar cane seeds as agricultural activity and the income derived therefrom is agricultural income. No valid reasons to deviate from the stand taken by the revenue from earlier years as there was no change in facts. Ratio of the decision of Radhasoami Satsang 1991 (11) TMI 2 - SUPREME COURT was rightly applied by the CIT (Appeals). Thus, we sustain the order of the ld. CIT (Appeals) and reject the ground raised by the Revenue. Addition u/s 41(1) - outstanding balances in sundry creditors accounts - CIT (A) following the decision of Sugauli Sugar Works (P.) Ltd 1999 (2) TMI 5 - SUPREME COURT deleted the addition - HELD THAT - In the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt was barred and had become unenforceable. There may be circumstances which may enable the creditor to come with a proceeding for enforcement of the debt even after expiry of the normal period of limitation as provided in the Limitation Act. The principle that expiry of period of limitation prescribed under the Limitation Act cannot extinguish the debt but it will only prevent the creditor from enforcing the debt is well- settled. Mere entry in the books of account of the debtor made unilaterally without any act on the part of the creditor would not enable the debtor to say that the liability had come to an end. Apart from that that would not by itself confer any benefit on the debtor as contemplated by the section. Therefore, as right in holding that the assessee's unilateral entry in the accounts transferring the amount to the capital reserve account would not bring the matter within the scope of section 41. - Decided against revenue. Addition u/s 14A r.w.r. 8D(2)(iii) - CIT (Appeals) considering the submissions of the assessee that only 0.5% of average value of investments which yielded the exempt income should be considered for the purpose of disallowance under Rule 8D(2)(iii), held that the AO wrongly computed the disallowance and deleted the excess disallowance - HELD THAT - As in view of the decision of Vireet Investment (P) Ltd. 2017 (6) TMI 1124 - ITAT DELHI and also the decision of ACB India Ltd. Vs. CIT 2015 (4) TMI 224 - DELHI HIGH COURT only those investments which yielded Tax free dividend income should be considered for disallowance under Rule 8D(2)(iii). Therefore, we see no infirmity in the order passed by the ld. CIT (Appeals). The ground raised by the Revenue is rejected.
Issues Involved:
1. Deletion of addition treating agricultural income as business income. 2. Deletion of addition under section 41(1) regarding outstanding liabilities of sundry creditors. 3. Deletion of disallowance under Rule 8D(2)(iii) concerning the calculation of average value of investments. Summary: Issue 1: Deletion of Addition Treating Agricultural Income as Business Income The Revenue challenged the deletion of Rs. 9,45,04,432/- by the CIT (Appeals), which was added by the Assessing Officer (AO) treating the agricultural income as business income. The assessee, engaged in the manufacture and sale of sugar, declared this amount as agricultural income derived from cultivating sugar cane seeds. The CIT (Appeals) observed that similar income had been accepted as agricultural income in past years without adverse findings. Relying on the Supreme Court's decisions in Radhasoami Satsang Vs. CIT and CIT v. Excel Industries Ltd., the CIT (Appeals) held that the income should be treated as agricultural income. The Tribunal upheld this view, emphasizing consistency and the absence of any change in facts. Issue 2: Deletion of Addition under Section 41(1) Regarding Outstanding Liabilities of Sundry Creditors The Revenue contested the deletion of Rs. 6,72,537/- added under section 41(1) by the AO, who argued that the outstanding sundry credits were no longer payable. The CIT (Appeals) referred to the Supreme Court's ruling in CIT vs Sugauli Sugar Works (P.) Ltd., which held that a unilateral entry by the debtor does not constitute remission or cessation of liability. The Tribunal agreed with the CIT (Appeals), noting that the AO had not established that the liability had ceased or been remitted, and upheld the deletion. Issue 3: Deletion of Disallowance under Rule 8D(2)(iii) Concerning Calculation of Average Value of Investments The Revenue objected to the deletion of Rs. 95,84,849/- disallowed under Rule 8D(2)(iii). The CIT (Appeals) accepted the assessee's argument that only investments yielding exempt income should be considered for disallowance. This view was supported by the Special Bench decision in ACIT Vs. Vireet Investment (P) Ltd. and the Delhi High Court's ruling in ACB India Ltd. Vs. CIT. The Tribunal found no fault in the CIT (Appeals)'s decision and upheld the deletion. Conclusion: The Tribunal dismissed the Revenue's appeal, sustaining the CIT (Appeals)'s orders on all grounds. The judgment was pronounced on 29/05/2023.
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