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TMI Blog2016 (5) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the profit under the head business income.On verification of computation of total income furnished by the assessee for assessment year 2010-11, we did not find any income offered by the assessee under the head business income on sale of the plots. As these vital facts are not brought on record, either by the assessee or by the revenue, in the interest of the Justice, we set-aside these grounds of appeal to the file of the assessing officer to verify the facts and then to decide issue accordingly. That assessing officer shall afford proper opportunity to the assessee to substantiate its claim before deciding the issue on the merit. - Decided in favour of assessee by way of remand. Disallowance of the development charges - Held that:- CIT (A), while allowing ₹ 4 lakhs and disallowing ₹ 553 400/-did not give any reason for such bifurcation. It is also not apparent that even despite the assessee has not furnished the bills and vouchers related to these expenses under this head how he has come to the conclusion that ₹ 5 53 400 is disallowable. Therefore, as these expenses are related to the development of the above said property which has been dealt with by us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar chart either was not controverted by the assessing officer, CIT (A) or learned DR before us. In view of this, we are of the view that the addition of rupees, 976805/- confirmed by the CIT appeal is not proper and we reverse his findings on this count.- Decided in favour of assessee Allowance of expenditure under the head development charges - Held that:- Assessee has claimed to have incurred an expenditure of ₹ 45 lakhs on development of the properties, and out of that the claim of ₹ 953,400/- has been made. Learned CIT (A) out of the disallowance of ₹ 9,53,400/- allowed expenditure of Rs. Four lakhs and confirmed disallowance of ₹ 5 53 400/- Both the parties contested the respective aggrieved action of CIT appeal. We have already set aside Ground No. 1, 2 and 3 of the appeal of the assessee to the file of assessing officer for determining head of taxability of income and verification of details of expenditure and then grant deduction. Therefore, we also set aside this ground of the appeal of the revenue to the file of assessing officer subject to the direction contained while deciding the appeal of the assessee Addition on account of purchase of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in trading of property as a property dealer. The finding is arbitrary, unjust, uncalled-for and in any case against the history and material placed on record. 2. That under the facts circumstances of the case, the learned lower authority has erred to compute tax on long term capital gain at regular rate and not at specific rate of 20%, computed and disclosed by the appellant and assessed by the A.O, The finding of capital gain treating the same as business income is, therefore, arbitrary, unjust, uncalled-for and in any case illegal. 3. That under the facts circumstances of the case, the learned CIT (Appeals) was not justified to disallow the development charges at ₹ 5,53,400/-. The confirmation of disallowance at ₹ 5,53,400/- is arbitrary, unjust, uncalled-for and in any case highly excessive and without any basis. 4. That under the facts circumstances of the case, the learned ITO has erred, not to allow the exemption u/s 54F at ₹ 10,41,901/- for purchase of the residential flat, ignoring the provision of section 45(2). Nor allowance of deduction is, therefore, arbitrary, unjust, uncalled-for and in any case illegal. 5. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h others and in A. Y. 2009 10 and subsequent year sold this property in parts after sub plotting. According to assesseee Plot of land were capital assets and later on converted in to stock in trade. Therefore, applying the provisions of section 45 (2) of the act fair market value of the property as on the date of conversion shall be treated as full value of consideration received and capital gain tax shall be charged on the converted assets in the year in which stock in trade is sold. Assessing officer rejected the explanation of the assessee as he has not maintained any books of accounts and the business of the assessee is trading inproperty because of the reason that assessee has purchased severalproperties in earlier years and during the year and has sold many plots and therefore profit shown by the assessee is business income from trading of property. During the year assessee has claimed the development charges of ₹ 9 53400/- against the sale of plots.It was explained that these expenses are incurred for preparing the plan of the plot, approval from the development authority, leveling, filling of the roads, construction of the roads and other expenses without which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant is engaged in the business. It was not at all shown by the assessee during the course of assessment proceedings that it has some other business other than the real estate therefore, it was noted by CIT (A) that the above expenses are incurred for the sale of property and in such situation, the assessee s activities are according to him indeed of business. It was also noted by the CIT appeal that the assessee has sold the plot of land and beforesale of those plots; assessee has developed property in a very professional manner by providing electricity line, transformer,roads andboundary wall etc. This activity clearly showed, according to him, that appellant is developing the property not for his own personal use but by selling it for the commercial consideration. According to him, intention of the assessee was to earn profit out of the sale of land, which was developed by him in a professional manner. Therefore, according to him, the income on sale of plot is not chargeable to tax under the head capital gain, but is chargeable to tax as business income of the assessee. Further regarding the expenditure of development charges of ₹ 953400/- it was noted by CIT (A) that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the history and material placed on record as per assessee. The second ground of appeal was that the income of the assessee is charged to tax under the head business income, whereas the assessee has offered same as long-term capital gain under the head capital gain. In nutshell ground No. 1 and 2 are against the order of the CIT (A) confirming the action of the assessing officer that assessee is a Trader in real estate and therefore his income is chargeable to tax as business income and not under the head capital gains. 9. Ld. AR submitted before us the detailed paper book containing 94 pages and a chart covering ground wise facts. Regarding this ground, he took us to the page No. 85 of the paper book wherein he submitted that assessee purchased plot of land along with Shri Pawan Kumar Arora admeasuring 1672.24 m on 7th of August 2004 for ₹ 880,000. He further purchased another plot of land admeasuring 4379.10 m in 2005 for ₹ 2304500/-. At page No. 62 of the paper book, he submitted details of investment in purchase of property. He has made an investment of ₹ 51,95,804/- and properties were converted into 64 small size plots out of which 18 plots have been sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that in each year he has shown sale of plots. Therefore, it was his contention that he is not a dealer in real estate, but as an investor and therefore the profit on sale of the property should be chargeable to tax under the head capital gains only. 10. Against this learned DR relied on the orders of lower authorities and submitted that assessee is a dealer in property and according to the remand report assessee is dealing in various properties which are listed at page No. 84 and 85 of the paper book and therefore it is clear that assessee was engaged in business in trading of purchase and sale of properties from A Y. 2008 09 to 2010 11. He vehemently argued that that the property was further developed to exploit commercially by the assessee and therefore the reasons given by the CIT (A) for holding that assessee is a Trader in plot and real estate is correct finding of the fact. Therefore, he submitted that income of assessee is not chargeable to tax on sale of these plots under the head capital gains, but is chargeable to tax as business income. 11. We have carefully considered the rival contentions. It is not in dispute that assessee has purchased the properties wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the sale of stock in trade, which was stated to have been converted from the capital asset. If the assessee has converted capital asset into stock in trade in prior years, then part of the profit arising on sale of land, shall be chargeable to tax under the head capital gains and part of the profit under the head business income.On verification of computation of total income furnished by the assessee at page No. 16 of the paper book for assessment year 2010-11, we did not find any income offered by the assessee under the head business income on sale of the plots. As these vital facts are not brought on record, either by the assessee or by the revenue, in the interest of the Justice, we set-aside these grounds of appeal to the file of the assessing officer to verify the facts and then to decide issue accordingly. That assessing officer shall afford proper opportunity to the assessee to substantiate its claim before deciding the issue on the merit. In the result,we allow ground No. 1 and 2 of the appeal of the assessee with above direction. 12. The third ground of appeal was against conformation of the disallowance of the development charges at ₹ 553400/-. It was noted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Then this expenditure should be allowed as cost of improvement of the asset. With above direction the ground No. 3 of the appeal is allowed. 16. The ground No. 4 of the appeal of the assessee is against not granting exemption under section 54F of the act at ₹ 1 041 914/- for purchase of the residential flat ignoring the provisions of section 45 (2) of the Act. 17. We have considered the rival contentions. However, the deduction under section 54F of the income tax act is allowable onlyif the assessee has earned any capital gain on sale of the property. No such deduction is allowable if the income is chargeable to tax under the head business income. As we have already set aside Ground No. 1 and 2 of the appeal of the assessee to the file of assessing officer, we also set aside this ground of appeal to the file of assessing officer and to grant deduction under section 54F if income of the assessee is chargeable to tax under the head capital gains. We also direct assessing officer to verify the claim of the assessee in accordance with the provisions of the law while granting deduction under section 54F of the income tax act after affording reasonable opportunity of heari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ₹ 29,25,000/- was reportedly deposited in the IDBI bank account of the assessee in cash. During the course of assessment proceedings, the assessee was asked to explain the source of the deposit whereassessee submitted that he has deposited cash in IDBI from time to time, which was withdrawn from either the syndicate bank or IDBI bank before depositing that amount. It was further submitted by the assessee that the assessee has sold land along with other parties in which cash was received against sale for which details are available with the assessing officer. It was further submitted that though there is a deposit of more than 28 Lacs in cash the peak deposited never exceeded the ₹ 8 Lacs. Before the assessing officer assessee has further submitted a chart of deposited source of deposited wide letter dated 26th may 2012. However, AO has rejected all the contentions of the assessee and made an addition of ₹ 2925000/-. 22. Before us, appellant submitted a chart, which it is placed at paper book paper book page No. 47 to 48. According to the chart ₹ 28,35,000/- has been deposited in cash in the IDBI bank account of the assessee. The assessee is stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned departmental representative submitted that during the year, assessee has purchased the property of ₹ 19,62,400/- in cash and the assessee before the assessing officer did not substantiate the source of which. It was further submitted that the CIT (A) has deleted this addition holding that that appellant has received part of the cash from sale of plot and deleted the addition. 29. Learned AR relied on the orders of CIT appeal and submitted a chart at page No. 64 to 66 of the paper book. It page No. 64, he has prepared a chart showing availability of case before purchase of House. According to that chart, where in receipt of funds from the partnership frim, receipt on account of sale of plots shows total availability of the cash of ₹ 3 8,63,905/-. Out of that investment in residential flat on 08/02/2010 has been made of ₹ 19,62,400/-. Therefore, it was submitted that assessee had enough cash on hand available for the purpose of purchase of the property. Hence, he submitted that the addition made by the assessing officer because of purchase of property in cash may be deleted. 30. We have carefully considered the rival contentions. It is an admitted fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the appellant s own fun, or from some interest-bearing funds borrowed by the assessee. 34. Ld. DR has submitted that that the CIT (A) has deleted this disallowance without any basis. Learned AR relied on the order of CIT (A) deleting the disallowance. 35. We have carefully considered the rival contentions. It is an admitted fact that assessee has advanced a sum of ₹ 13,24, 500/- to others without charging any interest and assessee is paying interest on other loans. Assessee has submittedstatement of affairs as on 31/03/2010where assessee has own fund of ₹ 49,51,036/-. Therefore, a presumption can be drawn that the amount that has been invested by the assessee in the interest-free advances given to some parties is out of the capital of the assessee, which is free of interest. Therefore, in view of the above, we confirm the action of the CIT (A) in deleting the disallowance on account of interest expenditure of ₹ 47135/-. In the result ground No. 4 of the revenues appeal is dismissed. 36. Ground No. 5 of the appeal of the assessee is regarding deletion of the disallowance made by the assessing officer under section 37 (1) being 20% of various miscell ..... X X X X Extracts X X X X X X X X Extracts X X X X
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