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TMI Blog2023 (4) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... , we hold that the Ld. CIT(A) was perfectly justified in deleting the impugned disallowance. Ground No. 1 of the Revenue being devoid of any legal substance is rejected. Addition u/s 68 - no authentic evidence/detail is produced - Whether impugned transaction is covered as short term capital gain in the hands of the assessee firm? - CIT(A) allowing the long term capital loss instead of short term capital gain as computed by AO in remand report - Whether assessee failed to substantiate the claim? - HELD THAT:- Perusal of assessment order reveals that it was explained by the assessee during assessment proceedings that the said amount represents profit on sale of land/building. Sale proceeds have been accepted through banking channels. TDS under section 194A has been deducted which is duly reflected in Form 26AS. The transaction is genuine yet the Ld. AO made the impugned addition for the only reason that no authentic evidence/detail is produced. CIT(A) under Rule 46A admitted purchase as also sale deed and confronted the Ld. AO who in his remand report admitted that addition under section 68 needs to be deleted and contended that the impugned transaction is covered as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law and on facts in deleting the addition of Rs. 3,46,50,000/- made by the AO to the income of the assessee on account of disallowance of Rs. 3,46,50,000/- u/s 68 of the Income Tax Act, 1961 ignoring the fact that the- assessee failed to substantiate the claim ? III. Whether on facts and in circumstances of the case, the Ld. CIT(A) has erred in law and on facts in allowing the long term capital loss of Rs. 9,770/- instead of short term capital gain of Rs. 206,25,643/- as computed by AO in remand report ignoring the fact that assessee failed to substantiate the claim? 3. The cross objection filed by the assessee is in support of the order of the Ld. CIT(A). 4. Facts in brief are that the assessee is a firm of six partners engaged in the business of trading of apparels. It e-filed its return for AY 2014-15 on 30.11.2014 declaring income of Rs. 25,08,170/-.After initial processing of the return under section 143(1) of the Income Tax, 1961 (the Act ) the case was selected for complete scrutiny through CASS. Statutory notice was served, in response to which details / information called for were submitted. The Ld. Assessing Officer ( AO ) examined them. 5. During the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- made by the Ld. AO under section 68 of the Act; restricted the disallowance to Rs. 74,785/- out of Misc. Expenses claimed at Rs. 2,46,358/-; sustained 10% disallowance out of tour and travel expenses claimed at Rs. 18,60,985/- allowing the rest of the claim under other heads of expenses. 11. The Revenue is aggrieved by the deletion of disallowance of interest of Rs. 29,80,679/- paid to the partners; deletion of addition of Rs. 3,46,50,000/- under section 68 of the Act and allowing by the Ld. CIT(A) long term capital loss of Rs. 9,770/- instead of short term capital gain computed by the Ld. AO in remand report. All the three grounds of appeal relate thereto. 12. The Ld. DR supported the order of the Ld. AO whereas Ld. AR relied and supported the finding of the Ld. CIT(A) and drew our attention to the submissions contained in the Cross Objection filed by the assessee before the Tribunal. 13. Ground No. 1 relates to disallowance of Rs. 29,80,679/- on account of interest payment on secured loans by the assessee firm to its partners which the Ld. CIT(A) has deleted. On this issue the Ld. CIT(A) observed and recorded the following findings:- 8.0...........This disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 194A(3)(iv) of the Act which read as under:- (3): The provisions of sub-section (1) shall not apply 0) (i) ......... (ii) ......... (iii) .......... (iv) To such income credited or paid by a firm to a partner of the firm 8.5 In these circumstances also the basis of disallowance of the AO does not stand to reason and is therefore, not justified. 8.6 From the aforesaid discussion evidently the deduction of TDS under the provisions of section 194A on interest paid to partners was not required to be made and in the deed of partnership filed as an additional evidence it is evident that partners have been authorized to interest on their loan accounts with the firm at such rates as are prescribed under Income Tax Act, 1961. Thus, in accordance with the facts of the case I hereby allow the payment of interest to partners as having been made in accordance with law and duly authorized for payment in the partnership deed and also direct the AO to delete the addition made of Rs.29,80,649/-. 14. We have carefully considered the rival contentions and perused the records. We observe that the Ld. AO disallowed the assessee s claim of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain of Rs.2,06,25,643/- is assessable in the hands of the assessee since a conveyance deed in favour of the assessee firm was executed only on 19.3.2013 for a consideration of Rs.1,35,93,600/- and sale deed of the same was executed on 23.01.2014 for a sale value of Rs.3,50,00,000/- . Since the capital asset was held by the assessee for a period of less than 36 months the said transaction is covered as short term capital gain in the hands of the assessee. 10.3 In the rejoinder submission the assessee contended that the land as allotted to it by HSIIDC on 22.12.2008 which is duly stated by the HSIIDC in the Conveyance Deed executed on 19.3.2013 at page 115 of the paper book where it is stated as under:- Whereas, industrial plot No. 152, Phase/Block/Sector-4, in Industrial Estate IMT-Manesar measuring 1800 sq. mtrs was allotted to M/s Modesty Garments for setting up of project of manufacturing readymade garments in pursuance to his/its application for allotment/transfer of the plot, as per the terms conditions, contained in the agreement dated 3.2.2009 and regular allotment letter dated 22.12.2008 which shall continue to remain part parcel of this deed. 10.4 It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of indexation and after reducing the indexed cost of land, cost of depreciated, cost of building and building under construction, there is a loss of Rs.9,770/- under the head capital gains which should be allowed to the assessee. 10.7 I have considered the submission made by the assessee and the objection of the AO in his report under Rule 46A. It is also seen that in clause 15 of the conveyance deed dated 19.3.2013 at page 119 of the paper book, it is provided that for further transfer of the aforesaid plot/shed the transferee shall apply to the transferor i.e. HSIIDC along with following documents besides others:- a) Original letter of allotment b) Proposed agreement to sell 10.8 Thus, it was contended that since these papers were filed before HSIIDC such papers are not available with it but it is evident from the sale deed itself that the land was allotted to the assessee firm in the year 2008 i.e., beyond a period of thirty six months. 10.9 I have also found that the High Court of Madras in the case of South India Mineral Corporation Ltd. Vs ACIT Chennai in 417 ITR 306 (Madras) it is specifically held in para 18 19 as under:- 18. We agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in 417 ITR 306 it is also relevant to note that Circular No.471 dated 15.10.1986 is not relevant only to a residential accommodation but an industrial plot allotted by HSIIDC is also fully squarely covered under the terms of the said Circular issued by CBDT which is binding. 10.11 The AO is thus directed to delete the addition made of Rs.3,46,50,000/- made u/s 68 of the Act and allow the assessee long term capital loss of Rs.9,770/- as claimed by it. 16. Perusal of assessment order reveals that it was explained by the assessee during assessment proceedings that the said amount of Rs. 3,46,50,000/- represents profit on sale of land/building. Sale proceeds have been accepted through banking channels. TDS under section 194A has been deducted which is duly reflected in Form 26AS. The transaction is genuine yet the Ld. AO made the impugned addition for the only reason that no authentic evidence/detail is produced. The Ld. CIT(A) under Rule 46A admitted purchase as also sale deed and confronted the Ld. AO who in his remand report admitted that addition under section 68 needs to be deleted and contended that the impugned transaction is covered as short term capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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