2015 (2) TMI 248 - AT - Income Tax

Addition u/s 50C - CIT(A) deleted the addition - Held that - While holding that the transaction was sale of a capital asset, the Assessing Officer did not apply the relevant provisions to calculate the assessable capital gains income. Instead, he picked up the solitary provision of section 50C of the Act and tinkered with total consideration on the ground that the stamp duty valuation was higher than the stated consideration by a sum of ₹ 1,23,600/-. The discussion made by the CIT(A) demonstrates that if the provisions of the Chapter IV-E relating to the taxability of income from capital gains are applied to the present case, the resultant tax payable would be lower than what has been returned by the assessee. The aforesaid factual matrix has not been controverted by the Revenue before us and therefore, we affirm the order of the CIT(A) in deleting the addition of ₹ 1,23,600/- made by the Assessing Officer. - Decided against revenue. Interest on advances for non-business purposes - CIT(A) deleted the addition - Held that -no reason to interfere with the conclusion drawn by the CIT(A). The finding of the CIT(A) is that assessee was possessing sufficient interest-free funds of its own, which were generated in the course of relevant financial year apart from the substantial share-holder funds which covered the impugned interest-free advances and therefore a presumption has to be drawn that such interest-free advances have been made out of interestfree funds available with the assessee. Factually speaking, the aforesaid finding of the CIT(A) has not been assailed before us on the basis of any cogent material or evidence. Since the aforesaid finding is not in dispute, then the ratio of the judgement of the Hon ble Bombay High Court in the case of Reliance Utilities & Power Ltd. (2009 (1) TMI 4 - HIGH COURT BOMBAY) is clearly attracted and the disallowance of ₹ 15,21,946/- made by the Assessing Officer has been rightly deleted by the CIT(A). The investment in non-interest bearing advances/shares has been made out of own funds and hence the disallowance u/s 14A is not justified. - Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition under section 50C of the Income-tax Act, 1961.
2. Deletion of addition on account of interest on advances for non-business purposes.

Issue 1: Deletion of addition under section 50C:
The appeal by the Revenue challenged the deletion of an addition of Rs. 1,23,600 made under section 50C of the Income-tax Act, 1961. The case involved the sale of a shop in a building complex by the assessee. The Assessing Officer treated the transaction as a sale of a capital asset, applying section 50C due to a variance in stamp duty valuation. However, the CIT(A) held that treating the income as capital gain would result in lower tax liability for the assessee. The Tribunal affirmed the CIT(A)'s decision, noting that the Assessing Officer did not apply relevant provisions for calculating capital gains. The Revenue's appeal was dismissed as the factual matrix supported the deletion of the addition.

Issue 2: Deletion of addition on account of interest on advances:
The second issue involved an addition of Rs. 15,21,946 made by the Assessing Officer on interest expenditure. The Assessing Officer disallowed the interest amount on advances made by the assessee for non-business purposes. However, the CIT(A) deleted this addition, citing the sufficiency of interest-free funds possessed by the assessee to cover the advances. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee had generated enough interest-free funds to justify the advances made. The Revenue's appeal was dismissed as the CIT(A)'s findings were not disputed with substantial evidence.

In conclusion, the Tribunal upheld the CIT(A)'s decisions in both issues, resulting in the dismissal of the Revenue's appeal. The judgment highlighted the importance of applying relevant provisions accurately and considering the availability of interest-free funds in determining tax liabilities.