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TMI Blog2020 (8) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... lots as investments and there are no developmental expenses as such debited/claimed in the year." "The appellant craves its rights to add, amend or alter any of the grounds on or before the hearing." 2. Due to the prevailing situation of COVID 19 pandemic, the hearing of the appeal was concluded through Video Conference. The assessee is a HUF engaged in the business of real estate and developers. The assessee filed its return of income on 27.08.2015 declaring loss of Rs. 51,44,443/-. During the course of assessment proceedings, the AO noted that the assessee has purchased some immovable properties during the year under consideration and the consideration shown by the assessee is less than the value for stamp duty purpose. Therefore, the AO proposed to make the addition under section 56(2)(vii) of the IT Act on account of difference between the purchase price shown by the assessee and the DLC rate of the land in the area. The AO finally made an addition of Rs. 3,15,70,809/- under section 56(2)(vii) of the Act, apart from disallowance of interest expenses which is the issue involved in the Cross Objection filed by the assessee. The assessee challenged the action of the AO before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hought stand taken by the assessee that the lands in question are stock-in-trade and not capital asset. He has further submitted that even otherwise in the subsequent year the assessee has returned these lands to the seller and claimed that the transaction is cancelled. Therefore, these are not a genuine transaction but only a paper transaction to divert the fund to the sellers who are related party. Thus the LD. CIT D/R has submitted that once the assessee has not disputed the applicability of provisions of section 56(2)(vii) during the assessment proceedings, then the said objection raised before the LD. CIT (A) cannot be accepted. Hence the LD. CIT (A) has committed an error while deleting the addition by accepting the objection raised by the assessee. He has relied upon the order of the A.O. 4. On the other hand, the ld. A/R of the assessee has submitted that the assessee has filed all the documents before the AO including the books of account, copy of purchase account which tallies with the figures shown in the trading account. In Schedule-G of the Balance Sheet, these plots of lands are shown as part of the closing stock. Therefore, the plots of land purchased by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is issue is even accepted by the department as clarified by the CBDT in the said circular and, therefore, the LD. CIT (A) has rightly deleted the addition made by the AO under section 56(2)(vii) of the Act. In support of the contention, he has relied upon the following decisions :- 1. Shri Satendra Koushik C/o M/s. S.S. Properties vs. ITO in ITA No. 392/JP/2019 order dated 23.04.2019. 2. Mubarak Gafur Korabu Malewadi-Akluj Tal Malshiras vs. ITO In ITA No. 752/PUN/2018 order dated 05/04/2019. 3. Shri Prem Chand Jain vs. ACIT in ITA No. 98/JP/2019 order dated 08.06.2020. 5. We have considered the rival submissions as well as the relevant material on record. The dispute in the revenue's appeal is regarding the addition made by the AO under section 56(2)(vii) on account of difference of purchase price shown by the assessee and the DLC rate of the land in the respective area. In the assessment order, the AO has simply applied the DLC rate without even examining the issue whether the provisions of section 56(2)(vii) of the Act are applicable or not in respect of the property which is in the nature of stock-in-trade of the assessee. Therefore, the assessment order is silent about t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed during appellate proceedings, it is seen that: 1. The addition u/s 56(2) of the IT Act, 1961 was made in the assessment order after verification of DLC rate of the area of the land in question which is situated at GH-6, GH-7, GH-9 & GH-10 Shri Ram Vatika, Rampura Bass, Sanganer, Jaipur having total area of 20,239.65 Sq. Yards from the Sub-registrar, Sanganer vide its report dated 28.11.2017(copy enclosed). Thus the assessee's contention that no such verification of DLC rate was made is not a matter of fact and even not supported with evidence. Thus as per the provisions of section 56(2)(vii)(b)(ii) of the IT Act, 1961, the property in question was purchased in less than the stamp duty value of the property, thus the difference amount of Rs. 3,03,50,970/- was considered as deemed gift/ income from other sources in the hand of the assessee. 2. The assessee vide his letter dated 08.04.2019 has claimed the property in question is a part of stock in trade, thus as per the circular issued by the CBDT dated 01/2011 para 13.4, the provisions of section 56(2) of the IT Act, 1961 are not applicable on the business transactions made by him. In view of the above claim of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day of October, 2009 66[but before the 1st day of April, 2017],- (a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum; 67[(b) any immovable property,- (i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; (ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration: Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub-clause: Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property;] (c) any property, other than immovable property,- (i) without consideration, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vii) sculptures; 71[***] (viii) any work of art; 72[or] 72[(ix) bullion;] 73[(e) "relative" means,- (i) in case of an individual- (A) spouse of the individual; (B) brother or sister of the individual; (C) brother or sister of the spouse of the individual; (D) brother or sister of either of the parents of the individual; (E) any lineal ascendant or descendant of the individual; (F) any lineal ascendant or descendant of the spouse of the individual; (G) spouse of the person referred to in items (B) to (F); and (ii) in case of a Hindu undivided family, any member thereof;] (f) "stamp duty value" means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property;]" Therefore, the term 'Property' used in sub-clause (b) of clause (vii) of sub-section (2) of section 56 is the capital asset and that too specified property as per clause (d) of explanation. The term 'capital asset' has been defined in section 2(14) of the IT Act and as per clause (a) of section 2(14) any stock-in-trade, consumable stores or raw material held for the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: "(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009 but before the 1st day of April, 2017,- (a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum; (b) any immovable property,- (i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property; (ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration: Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub-clause: Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by any mode other than cash on or before the date of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecurities; (iii) jewellery; (iv) archaeological collections; (v) drawings; (vi) paintings; (vii) sculptures; (viii) any work of art; or (ix) bullion; (e) "relative" means,- (i) in case of an individual- (A) spouse of the individual; (B) brother or sister of the individual; (C) brother or sister of the spouse of the individual; (D) brother or sister of either of the parents of the individual; (E) any lineal ascendant or descendant of the individual; (F) any lineal ascendant or descendant of the spouse of the individual; (G) spouse of the person referred to in items (B) to (F); and (ii) in case of a Hindu undivided family, any member thereof;] (f) "stamp duty value" means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property;" 17. The above provisions thus provide that where an individual receives in any previous year, from any person or persons on or after the 1st day of October, 2009 but before the 1st day of April, 2017, any immoveable property for a consideration which is less than the stamp duty value of the prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 56(2)(vii)(b) of the Act. In the instant case, therefore, where the agricultural land doesn't qualify as falling in the definition of capital asset, provisions of section 56(2)(vii)(b) cannot be invoked. 20. In the instant case, whether agriculture land so acquired falls in the definition of capital asset or not, one has to refer to the provision of section 2(14) which exclude agriculture land in India subject to certain exceptions. However, there are no findings of the lower authorities in this regard. Therefore, we deem it appropriate to set-aside the matter to the file of the AO for the limited purposes of examining whether the two plots of agricultural land so acquired falls in the definition of capital asset or not. Where it is so determined by the Assessing officer that the agricultural land so acquired doesn't falls in the definition of capital asset, difference in the DLC value and sales consideration cannot be brought to tax under the provisions of section 56(2)(vii)(b) of the Act and relief should be granted to the assessee. 21. In a scenario, where it is so determined by the Assessing officer that the agricultural land so acquired falls in the definition of capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act and consequently the provisions of section 56(2)(vii) will not be applicable in the case of the assessee. Hence we do not find any error or illegality in the impugned order of the ld. LD. CIT (A). 5.1. As regards the contention of the LD. CIT D/R this is only a paper transaction, we note that the AO has not doubted the transaction either during the course of assessment proceedings or during the course of remand proceedings. Therefore, such a plea cannot be considered or accepted which is contrary to the stand of the AO. Even otherwise, the LD. CIT D/R can only support the order of the AO and cannot improve the same. Further, if the transaction itself is not a genuine transaction, then the question of applying the provisions of section 56(2)(vii) does not arise. 6. In the Cross Objection, the assessee has raised the following grounds :- " 1. On the facts and in the circumstances and in law the LD. CIT (A) erred in confirming the finding of the ld. AO that M/s. Tajraj Cold Storage Pvt. Ltd. is party covered under section 40(a)(2)(b) of the Act while this company is no way related with the assessee. 2. On the facts and in the circumstances and in law the LD. CIT (A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k and submitted that this amount of Rs. 10,00,000/- received on account of cancellation of agreement was duly offered to tax in the next year. Since the advance was given for purchase of the property which is stock-in-trade, therefore, no disallowance of interest is called for on the ground that the assessee has given the interest free advance. Further, the ld. A/R has pointed out that the assessee's own interest free funds as well as interest free loans from the family members are more than the amount given in advance for purchase of the land and, therefore, the interest bearing funds are not utilized for such purposes. He has further pointed out that the interest bearing loans are all term loans and the same cannot be used other than the purposes for which the loans were taken. Similarly, M/s. Taj Raj Cold Storage Pvt. Ltd. is not a related party and the advance of Rs. 33,00,000/- was given under the Agreement for purpose of land at Harchandpura. He has referred to the copy of the agreement at pages 75 to 77 in paper book and submitted that the advance was given for purchase of property which is part of the stock-in-trade and, therefore, this was given in the ordinary course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the HUF, the details of which are as under :- Name of creditor Amount Ashok Agarwal 7,64,88,029.50 Renu Agarwal 1,26,702.50 Total : 7,66,14,732.00 Once the unsecured interest free loan amount is more than the alleged amount of advance given to these parties, then the disallowance of interest is not justified. The Hon'ble Jurisdictional High Court in the case of `CIT vs. Vijay Solvex Ltd. (supra) has considered this issue in para 15 to 17 as under :- " 15. The Allahabad High Court in the case of CIT vs. Motor Sales Ltd. (2008) 304 ITR 123 (Allahabad) has held that it was finding of fact as found in the case that respondent-assessee had capital/reserve/surplus of Rs. 6.10 crores on which no interest was being paid and therefore interest free advances made by it are covered and ultimately held that there is no question of any disallowance of notional interest on loan taken by it. It was further held that the Tribunal had also recorded a finding that the assessee had not diverted any borrowed fund on which interest was paid for non-commercial purposes and therefore, there is no question of disallowance of interest out of the interest paid by the assessee. 16. In view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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