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2020 (3) TMI 1166 - AT - Income TaxDisallowance of bad debts and advances written off - HELD THAT - We find that this Tribunal in assessee s own case for A.Y. 2006-07 set aside the issue of disallowance on account of write off of advances - In CIT vs. Calcutta Agency Ltd. 1950 (12) TMI 4 - SUPREME COURT it was held that the burden of proving the necessary fact in order to entitle the assessee the claim exemption was on the assessee. Bad debts written off - we find that the issue is settled by Hon'ble Apex Course in the case of TRF Ltd. Vs. CIT 2010 (2) TMI 211 - SUPREME COURT . It was held in the said case that writing off of advances in the aforesaid account is sufficient compliance for provisions of the Act. However, in the present case, it was noted that the assessee has not furnished names of the debtors to the Assessing Officer, hence we remit this issue also to the file of the Assessing Officer if details of bad debts actually written off in the books are available the same is to be allowed as per ratios emanating out of the order of Hon'ble Supreme Court as above. Disallowance of expenditure incurred on fixing barricades while computing capital gains - HELD THAT - Both the authorities are making contradictory remarks only based upon their surmises. Learned CIT(A) has further erred in observing as to how barricades can improve the quality of land and cause to improvement of any kind. Here we find that as submitted by the assessee the barricades were necessary to earmark land to be sold. That lands are demarcated by barricades is well known phenomena. In the present situation everybody wants his land to be demarcated by identified barricades. People do not generally sit idle and go by demarcation of land in revenue records. It is naive to assume that people rest upon demarcation of land in land records without making barricades of their own for the various purposes of protection of land, ease in selling it and saving from encroachment etc. Authorities below have totally erred in this regard and impugned expenditure is allowable. Hence, we set aside the orders of the authorities below and decide the issue in favour of the assessee. Addition on sale of Transferable Development Rights (TDR) - AO noted that despite receiving income the assessee has not offered the same to tax - assessee had to surrender 27% of the vacant plot and in lieu thereof subsequently it got TDR - CIT(A) deleted the additions - HELD THAT - AO observed that it is the contention of the assessee that receipt on sale of TDR is on surrender of land in earlier years and the capital gain on such transfer of land has already been offered by the assessee in the year in which transfer took place. He rejected the assessee s contention that since the cost of such TDR is nil, there is no capital gain. He noted that the assessee is having the ownership of the plot and on sale of such plot the assessee received the sale consideration as well as other benefit in the form of TDR on such plot of land, which is just like a receipt of bonus shares in respect of shares held. With promulgation of development control rules (DCR) it acquired right of putting up additional construction through transferable development rights (TDR). Instead of utilizing this right itself, the assessee decided to transfer the same to a developer for construction of new building. This right created by the DCR was held to be not giving rise to any capital gains. We note that on the other hand the facts of the present case are that it was in lieu of surrender of 27% of vacant plot to MHADA that the assessee received TDR. Hence, facts of the present case are totally different and the cost is very much evident therein as the assessee had to surrender part of the plot owned by it. Furthermore other decisions referred by learned Counsel of the assessee are also in the same background. Distinguishing feature of the present case is that the assessee had to surrender 27% of the vacant plot and in lieu thereof subsequently it got TDR. Hence CIT(A) s order is nonspeaking and laconic cannot be sustained. We deem it appropriate to remit this issue to the file of the learned CIT(A). Learned CIT(A) is directed to consider the issue afresh after taking into account actual facts arising in this case and thereafter decide as per law. The assessee is at liberty to make further submission before learned CIT(A) in support of its case - Appeals are partly allowed for statistical purposes.
Issues Involved:
1. Deletion of disallowance on account of bad debts. 2. Deletion of addition on sale of Transfer Development Rights (TDR) as long-term capital gains. 3. Non-allowance of advances/deposits written off. 4. Non-allowance of deduction related to expenditure on fixing iron barricades while computing capital gains. Issue-wise Detailed Analysis: 1. Deletion of Disallowance on Account of Bad Debts: The Revenue challenged the deletion of disallowance of ?23,00,125/- on account of bad debts, arguing that the assessee did not provide necessary details or documentary evidence regarding the debtors. The Tribunal noted that the assessee failed to furnish evidence showing that the advances were made in the due course of business, the nature of the advances, and whether they were written off in the books of accounts. The Tribunal referred to the Supreme Court's decision in TRF Ltd. vs. CIT (323 ITR 397), which held that writing off debts in the books is sufficient compliance. However, since the assessee did not provide the names of the debtors, the issue was remitted to the Assessing Officer for verification. 2. Deletion of Addition on Sale of Transfer Development Rights (TDR) as Long-Term Capital Gains: The Revenue contested the deletion of ?3,09,68,028/- on the sale of TDRs. The Assessing Officer argued that the sale proceeds of TDRs should be taxed as long-term capital gains with a cost of acquisition as Nil. The CIT(A) relied on the Bombay High Court's decision in CIT vs. Sambhaji Nagar Co-op. Hsg. Society Ltd., which held that if no cost is incurred to acquire TDRs, the transfer does not result in capital gains. The Tribunal noted that the CIT(A) did not provide detailed reasoning and that the facts of the present case differed, as the TDRs were received in lieu of surrendering 27% of the vacant plot to MHADA. The Tribunal remitted the issue to the CIT(A) for fresh consideration, directing a detailed examination of the facts and applicable law. 3. Non-Allowance of Advances/Deposits Written Off: The assessee appealed against the non-allowance of ?34,38,099/- as advances/deposits written off. The Assessing Officer disallowed the amount due to a lack of evidence showing that the advances were made in the due course of business and whether they were written off in the books. The CIT(A) upheld the disallowance. The Tribunal, referencing its own decision in the assessee's case for A.Y. 2006-07, remitted the issue to the Assessing Officer for fresh assessment, directing the assessee to provide relevant details. 4. Non-Allowance of Deduction Related to Expenditure on Fixing Iron Barricades While Computing Capital Gains: The assessee contested the non-allowance of ?1,77,69,915/- incurred on fixing iron barricades as a deduction while computing capital gains. The Assessing Officer and CIT(A) held that the expenditure was not necessary for the sale of the plot and was not intrinsically linked to the sale. The Tribunal found that the authorities' observations were contradictory and based on surmises. It concluded that the expenditure was necessary for earmarking the land to be sold and allowed the deduction, setting aside the orders of the authorities below. Conclusion: The Tribunal partly allowed the appeals for statistical purposes, remitting the issues of bad debts and TDRs to the Assessing Officer and CIT(A) respectively for fresh consideration. The Tribunal allowed the deduction for expenditure on iron barricades, finding the authorities' reasoning flawed. The order was pronounced on 02.03.2020.
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