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TMI Blog2019 (9) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... emanded the matter for a fresh consideration to examine the genuineness of the transaction. Thus, unless and until the assessee is able to succeed before the AO in the de novo proceedings to be conducted on remand, the question of considering as to whether the interest on borrowed funds should be treated as cost of acquisition and as to whether the assessee is entitled to indexation of interest would not arise. Thus, in our considered view, in the light of our decision to approve the order of remand for examining the genuineness of the loan transactions, the two issues pointed out above have become academic and are not required to be answered at this juncture. Penalty under Section 271(1)(c) - wilfulness on the part of the assessee to declare the land as an agricultural land for the purpose of claiming the benefits - HELD THAT:- When the penalty proceedings were initiated, the AO was fully justified in holding that the assessee was consciously aware of the real position and knowingly furnished inaccurate particulars of income in the revised return. The assessee is not an individual, but a company, which is an association of persons consisting of other corporate giants. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the case, the Tribunal was right in law in holding that the land sold by the appellant would not fall within the meaning of Section 2(14)(iii) of the Income Tax Act, 1961, to substantiate the claim that no capital gains would arise therefrom? (ii) Whether, on the facts and circumstances of the case, the Tribunal was right in law in holding that the appellant is not entitled to indexation of interest payment on borrowed funds used for purchase of land, which being 'cost of acquisition'? And (iii) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in remitting back the issue of allowing compound interest on borrowed funds as cost of acquisition to the file of the assessing officer with a direction to examine the genuineness of the payment of interest, when the CIT(A) had give categorical finding on this issue?? 4. TCA.Nos.182 and 184 of 2009 were admitted on 30.3.2009 on the following substantial question of law : Whether on the facts and in the circumstances of the case, the Tribunal was right in law in remitting back the issue of allowing interest on bor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention here that by order dated 12.7.2019, we answered two issues, which arose in these appeals. The relevant portions in the order dated 12.7.2019 read thus : 4. We have heard Mr.M.P.Senthil Kumar, learned counsel for the appellant/assessee and Mr.M.Swaminathan, learned Senior Standing counsel for the respondent/revenue. 5. The first substantial question in TC(A) 181 183 of 2009 is whether the land sold by the appellant would fall within the definition of agricultural land as defined under Section 2(14) of Clause (iii) of the Act. To be noted that, the Assessing Officer, Commissioner of Income Tax (Appeals)-IX (hereinafter referred to as CIT(A)) and the Tribunal concurrently held that the land sold by the assessee was not an agricultural land. Thus, the question would be whether this Court while considering the appeals under Section 260-A of the Act can undertake an exercise of reappreciation of the factual position. The answer to this question should be in the negative, as an appeal under Section 260-A of the Act can be decided only on substantial questions of law. 6. The two authorities and the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. Admittedly, the land has been notified to fall within the jurisdiction of the CMDA. The provisions of Development Control Rules, which is applied by CMDA, would stand attracted to all lands, which are within the urban agglomeration. Thus by virtue of the notification, the Government of Tamil Nadu has included the area in which the subject lands are situated to be part of an urban agglomeration. Therefore, the assessee, if he seeks to plead that it is not an urban land, the onus is on the assessee that the land was mainly used for the purpose of agriculture. 9. In our considered view by operation of law, the land can never be an agricultural land though it is stated that in the revenue record it is recorded as an agricultural land, the assessee sold the land as an agricultural land, the total extent was in acres and not in square feet. 10. In our considered view, the definition of agricultural land as defined in Section 2(14) clause iii of the Act hits at the assessee because the lands would fall within the jurisdiction of an urban agglomeration/Corporation. In any event, the two authorities and the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd TCA. Nos.521, 522, 545 546 of 2009. We have decided substantial questions of law No.(i) (iii) i.e., with regard to Section 2(14)(iii) and the order of remand passed by the Tribunal to examine the genuineness of payment of interest against the assessee. The other issues will be heard on the next hearing date. 15. List this matter on 25.7.2019. 8. However, the matters were listed only today. 9. There are two other questions, which remain to be answered by us. The first aspect is with regard to the interest on borrowed funds for acquiring capital asset and whether it had to be treated as cost of acquisition in computing capital gains. The next aspect is with regard to indexation of interest. 10. With regard to the first aspect, the Tribunal, in the impugned order, affirmed by the order passed by the CIT(A), who held that interest paid on funds borrowed for buying the land had to be treated as cost of acquisition. While rendering such a finding, the CIT(A) relied upon the decision of a Division Bench of this Court in the case of CIT Vs. Rajagopala Rao [reported in (2001) 252 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. Reliance is also placed by the learned Senior Standing Counsel for the Revenue on the latest decision of a Division Bench of this Court in the case of Tmt.D.Zeenath Vs. ITO, Ward-I(1), Nagapattinam [reported in (2019) 105 Taxmann.com 298] wherein it was held that where the property was mortgaged by the assessee after he had acquired the property, the amount paid by the assessee to discharge the mortgage debt by sale of the said property could not be treated as cost of acquisition so as to allow the same as deduction under Section 48 of the Act. 14. The learned counsel for the assessee contends that the decision in the case of Tmt.D.Zeenath could not be applied to the facts of the present case, as it was a case where the assessee mortgaged the property after acquiring. 15. In our considered view, there may not be any necessity for this Court to decide these two questions namely (i) with regard to interest on borrowed funds for acquiring capital asset and whether it should be treated as cost of acquisition for computing the capital gain and (ii) with regard to indexation of interest, since we affirmed the order passed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision in the case of Tata Iron Steel Company Limited lays down the correct position. 21. In any event, we have already held that the two issues, which we have pointed out above, are not required to be decided at this juncture, as they have become academic. However, we are conscious of the fact that the Revenue is on appeal as against the finding rendered by the Tribunal by filing TCA.Nos.521 and 522 of 2009. Since we have held that there is no necessity to decide the aforementioned two questions, we have to necessarily interfere with the order passed by the Tribunal, which granted relief to the assessee based on the decision in the case of K.Rajagopala Rao. 22. For the above reasons, TCA.Nos.521 and 522 of 2009 are allowed and the substantial questions of law are answered in favour of the Revenue. Further, we make it clear that subject to the decision that may be taken by the Assessing Officer pursuant to the remand order passed by the Tribunal, which we have affirmed, we leave it open to the assessee to claim deduction under Section 48 of the Act and make a further claim that interest on borrowed funds should be treated as cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt the land into house sites for sale. Though the assessee claims that the land as agricultural and situated in a village, it is within the area marked in CMDA map and urban land tax has been paid. The agricultural operations have been abandoned because the water is salty and no agricultural operations even ploughing and tilling has been done and it remains as a barren land. There is only one bore well for a vast land of this area, that too, has only salt water. Neither there is any big well for irrigation purpose nor there is any farm house. Further, it is not a stop gap arrangement to continue the agricultural operations in future. The CMDA and local bodies permission has been sought through developers to convert the land into house plots. Not even single rupee has been earned for years together by way of agricultural production. The land has been plotted and roads laid before the sale, the land very well situate in a developed area where industries and colleges have come up and land is sold on cent basis, which is normally the case in the sale of house sites only. The purchaser is a housing cooperative society purchasing land for promotion o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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