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TMI Blog2015 (3) TMI 644X X X X Extracts X X X X X X X X Extracts X X X X ..... r to examine the veracity of these two letters, one issued by Tehsildar, Sonepat and the another by Council Engineer, Municipal Council, Sonepat, as well as the mode i.e. aerial or motorable road for calculation of the distance adopted by the District Town Planner, Sonepat, followed by the A.O. as well as learned CIT(A) and decide the issue afresh about the distance in view of notification dated 06.01.1994 as land in question has been sold during the period falling in the A.Y. 2010-11, and our observations, after affording opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Disallowance of business expenses - AO disallowed the claim of the assessee on the basis that there were no business receipts - Held that:- Genuine expenditure incurred in the business cannot be denied only on the basis that there was no business receipts. The further contention of the learned AR remained that similar expenditure was allowed to the assessee in the assessment years 2006-07 to 2008-09 while in the assessment year 2009-10, there was no interest expenditure claimed by the assessee company. In the present year under consideration, interest income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri I. C. Sudhir And Shri T. S. Kapoor,JJ. For the Appellant : Sh. Rajiv Saxena Sumangla Saxena, Advocates For the Respondent : Smt. A. Mishra, CIT, DR ORDER Per I. C. Sudhir, JM: The assessee has questioned the first appellate order on the following grounds: 1. That the order of the LD CIT (A) is bad in law and required to be quashed as legally not tenable on various grounds amongst the following because: a) She did not follow the directions of her predecessor vide letter dated 22-04-2014 to the AO for making specific enquiry for calculating the motorable road distance of village Kishora from the then municipal limits of 1994 (when the central government notified in the official gazette issued under section 2 (14)(iii)(b) of the Income Tax Act, 1961 which was applicable on the facts of the case). b) She has failed to understand that the Central Government can enter into the state subject i.e. agriculture only by way of bringing either notification or any law passed by the parliament as was done by it from time to time on 06-02-1973, 06-01-1994 and by Finance Act, 2013 mentioned in clause iii (b) of subsection 14 of section 2. c) The appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions relied upon. 3. In ground no. 1, the issue raised is as to whether the assessee is liable to pay tax only on the capital gain earned on the sale of its agricultural land situated at village Kishora, Sonepat, Haryana, as the same being out of the purview of definition of capital asset as per Section 2(14)(iii) of the Income-tax Act, 1961 (for short the Act ). 3. 1 The Assessing Officer did not agree with the assessee on the calculation of measurement of the distance of the land situated at village Kishora, Sonepat, Haryana, from municipal limit, which, as per the assessee, was more than 8 kilometers hence, it was out of the purview of Section 2(14)(iii) of the Act. The Assessing Officer expressed his view keeping in mind the amendment by Finance Act, 2013 to the effect that distance from municipal limit shall be aerial distance. He relied upon the letter dated 14.03.2013 of the District Town Planner, Sonepat, showing village Kishore, Distt. Sonepat, within 8 kms. limit of Municipal Council, Sonepat attaching with a map of Sonepat- Kundli Multifunctional Urban Complex. The A.O. also noted that the village Kishora falls within notified area vide notification dated 09.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerned authority to examine the facts as applicable in the year 1994 vide letter dated 22.04.2014. 3.5 The learned CIT(A) again fixed the hearing and asked to respond her letter dated 09.07.2014. The assessee replied it vide its letter dated 10.07.2014 explaining the facts and also sought the necessary documents supplied by the Assessing Officer. The learned CIT(A) vide letter dated 11.07.2014, enclosed the remand report dated 28.05.2014 showing the letter dated 16.05.2014 received from Dept. of Town and Planning, Sonepat. In response to which, reply dated 16.07.2014 received on 17.07.2014 was filed highlighting certain documents not enclosed and also explained that the inquiry sought by the predecessors CIT(A) was not made as per the notification dated 06.04.1994 and a suitable direction be given to the Assessing Officer to supply the documents, if inquiry is completed as per her predecessors CIT(A) on the same date. A letter to Assessing Officer was also filed for inspection of records who asked to appear on 21.07.2014 and subsequently on 30.07.2014, which was informed to the learned CIT(A). Two applications under RTI were also filed before Executive Officer, Municipal Counci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter. The District Town Planner, Sonepat, has also reported different distance in their different letter and reply without mentioning the mode of measurement either aerial or motorable road adopted by them for the purpose. The ultimate inference, however, is that the assessee was trying hard to gather the required information from the authorities concern about the correct distance. Even otherwise, authorities like, Tehsildar of the area, Municipal Council, Sonepat and District Town Planner, Sonepat are the concern authorities to ascertain the distance. The learned AR also referred page nos. 61 to 129 of the paper book which are correspondences with different authorities regarding ascertainment of the distance of Kishora village from the Municipal limit of Sonepat. We, thus, allow the application and admit the additional evidence in question for our consideration to adjudicate upon the issue. 3.8 Now, the issue before our further consideration would be as to which provision will be applicable in the case of the assessee falling in the A.Y. 2010-11. Undisputedly, the amendment brought by Finance Act, 2013 to the effect that the distance from municipal limit shall be aerial distanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions, we hold that in the present case before us, when land in question has been sold during the period falling in the A.Y. 2010-11, the Notification no. 9447, dated 06.01.1994 in operation will be applicable to compute the distance from the municipal limit. 3.11 Before us, the assessee has filed correspondences with the Municipal Engineer and information gathered from them as well as Tehsildar, Sonepat, as additional evidence which we have admitted to verify the actual motorable distance of agricultural land in question from the outer municipal limit. Copies of these correspondences and informations gathered from different authorities concerned have been made available at page nos. 1 to 11 to the application filed under Rule 29 of the ITAT Rules for additional evidence. Among these correspondences, are the letter dated 26.08.2014 issued by Tehsildar, Sonepat, stating that the land in question as on 06.01.1994 was more than 8 kilometers from the municipal limit i.e. Truck Union, Sonepat. The another letter is dated 19.02.2013 issued by Council Engineer, Municipal Council, Sonepat, addressed to the Income Tax Officer, New Delhi, stating therein that there is no any village ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The ground nos. 1 and 2 are thus allowed for statistical purposes. 4. The ground no. 3 is regarding disallowance of ₹ 36,62,426/- claimed as business expenses. 4.1 In support of this ground, the learned AR submitted that the Assessing Officer has disallowed the claim of the assessee on the basis that there were no business receipts and the learned CIT(A) has simply stated that the assessee did not make any specific submission, nor has pressed this issue before her. He submitted that the authorities below have failed to take note of these material facts that the assessee company is engaged in the business of agriculture. The claim of administrative expenses in Schedule VII VIII of the balance-sheet filed in the paper book for the assessment years 2006-07 to 2009- 10 clearly shows that only small expenditure towards audit fee, salary etc. were claimed and the bank charges and interest paid was claimed as a major expenditure apart from insurance charges, rent and vehicle repair and maintenance. All such expenses are very nominal. Salary and accountancy charges claimed are only small amount, if divided in twelve months. Likewise, rent and vehicle expenses are also very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, without examining the nexus between those expenses and the purpose on which those were spent for. We thus set aside the matter to the file of the A.O. to examine the claim and dispose of the issue by passing a speaking order after hearing the assesse. The ground no. 3 is thus allowed for statistical purposes. 5. Ground no. 4 is regarding the disallowance of agricultural income of ₹ 3,28,534/-. 5.1 In support of this ground, the learned AR submitted that the assessee company was formed to acquire land and engage in the agricultural activities. It derives its income from agricultural activities, investment income in the form of dividend, interest and profit/loss on sale of securities. He submitted that copy of profile of company was submitted to the A.O. vide letter dated 08.12.2012. The A.O. started the framing of assessment at the fag end when it was becoming barred by limitation and has totally ignored his own assessment record where agricultural income was regularly being declared and accepted by him in the earlier years. The Assessing Officer did not make any inquiry about the cultivation and only on presumption disallowed the claim. The learned CIT(A) has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the learned CIT(A) has remained to be examined. The Assessing Officer is thus directed to decide the issue afresh after verifying the above submission of the assessee as well as the affidavit filed before the learned CIT(A) and after affording opportunity of being heard to the assessee. The ground no. 4 is accordingly allowed for statistical purposes. 6. Ground no. 5 is regarding the treatment of interest income of ₹ 44,35,304/- under the head income from other sources as against business income. 6.1 In support of this ground, the learned AR submitted that the assessee was regularly declaring business income received from agricultural activities and interest earned. The assessee was also claiming business expenditure by way of interest expense and bank charges, which had duly been assessed for the last so many years without any dispute. During the year, the A.O., however, ignoring the past assessment records has assessed the income by bifurcating receipts from interest under the head income from other sources . He has totally ignored that for the last so many years under the receipts interest income was declared while under the expenditure, major expenditure rela ..... X X X X Extracts X X X X X X X X Extracts X X X X
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