HIND CERAMICS PVT. LTD., ,KOLKATA V. DCIT, CIRCLE - 10(1), KOLKATQ

ITA 609/KOL/2024

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Hind Ceramics Pvt. Ltd. appealed against the order of the National Faceless Appeal Centre, which upheld the Assessing Officer's decision to classify income from lease rentals as business income rather than house property income, leading to the disallowance of a standard deduction. The Tribunal found that the income should be classified under house property, referencing consistent treatment in previous and subsequent assessment years. Furthermore, the Tribunal addressed the issue of speculative income from the assignment of rights in property, determining that such income should be treated as capital gains rather than speculative income under Section 43(5) of the Income Tax Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 787413 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 26-03-2024
• Other Referred Cases: Radhasoami Satsang vs. CIT (193 ITR 321), CIT Vs Tata Services Ltd.(1980)122ITR 594 (Bom)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MADHUMITA DAS
• Assessee Lawyers: S SOUMITRA CHOUDHURY; P. SARKAR; ARS
• Keywords: Set aside; Business income; Capital asset; Speculative transactions
• Section: 43(5)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No.609/KOL/2024 (Assessment Year: 2013-14) Hind Ceramics Pvt. Ltd. 147, Nilganj Road, Belghoria, Kolkata-700056, West Bengal Vs. DCIT, Circle 10(1) Aaykar Bhawan Poorva, P-7, Chowringhee Square, Kolkata-700069, West Bengal (Appellant) (Respondent) PAN No. AAACH7998D Assessee by : S/shri Soumitra Choudhury & P. Sarkar, Ars Revenue by : Shri Madhumita Das, DR Date of hearing: 15.10.2025 Date of pronouncement: 19.11.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 30.01.2024 for the AY 2013-14. 2. The issue raised in ground nos.1 to 4 is against the order of ld. CIT (A) upholding the order of ld. AO, wherein the house property income amounting to ₹2,88,06,379/- has been treated as business income thereby, confirming the disallowance of 30% of the standard deduction claimed by the assessee amounting to ₹83,38,635/-. 2.1. The facts in brief are that the ld. AO observed during the course of assessment proceedings, that the assessee has received lease rental charges from various parties for occupying the area within the Printed from counselvise.com Page | 2 ITA No.609/KOL/2024 Hind Ceramics Pvt. Ltd.; A.Y. 2013-14 warehousing complex situated at 147 Nilgung Road, Belghoria, Kolkata-700057, to the extent of ₹2,58,44,582/- and further lease rent fees, Road Development and Security charges to the extent of ₹58,11,050/- aggregating to ₹3,16,55,642/-. The ld. AR also noted that assessee paid lease rental of ₹28,49,260/- to Dalmia Jain Trust, Dalmia Manav Seva Trust, Vishwa kalyanSansthan and thus, net amount received by the assessee was ₹2,88,06,379/-, which is been offered to tax as income from the house property after claiming statutory deduction on account of Repairs @30% of Net lease rental for ₹83,38,635/-. According to the ld. AO the said income is chargeable to tax under the head of income from business and profession and accordingly, the ld. AO changed the head from house property to “income from business”. The said treatment has not impacted the rate of tax on the income, however, resulted in disallowance of standard deduction which was allowed from the income from s house property amounting to ₹83,38,635/-. 2.2. In the appellate proceedings, the ld. CIT (A) dismissed the appealof the assessee by observing and holding as under:- “7.3 I do not concur with the contentions so raised by the appellant in view of the valid observation made by the assessing officer in the assessment order which are reproduced as below: The deed of conveyance between the Vendor (Forum Riviera Constructions Pvt. Ltd) all the intermediary transferee companies before the final sale of the flat was not materialised at any point of time. No actual sale/transfer took and/or registration of so called agreement between the assessee and the vendor (Forum Riviera Constructions Pvt Ltd, as per the Deed) took place, so the claim of capital gain of the assessee is not substantiated. The assessing officer noted from the Deed that Forum Riviera Constructions Pvt Ltd was actually entitled to undertake development of the housing project and in the last also when the actual sale of the flat materialised, Forum Riviera Constructions Pvt Ltd received the consideration from the payment of the purchaser in the Deed as Vendor. So, the overall control over the sale of the Printed from counselvise.com Page | 3 ITA No.609/KOL/2024 Hind Ceramics Pvt. Ltd.; A.Y. 2013-14 property remained with the vendor only from start of project till the sale thereofthe individual purchaser. Hence, in between the period of initiation of building of the housing project and ultimate sale to the actual buyer, the involvement of the intermediaries companies by virtue of sale/homination agreement is nothing, but tax planning of the assessee in the form of claim of long term capital loss by showing its right in the alleged property (flat). The assessing officer also analyzed the agreement through which the purported right is being which revealed that though reportedly the so called transfer has taken place on many occasion with reported, yet the final consideration paid by the buyers who had acquired right through a registered Deed goes to the first reported transferor, le Forum Riviera Constructions Pvt. Ltd. The movement of deeds reveals that the so called right has emanated from Forum Riviera Constructions Pvt. Ltd and the final consideration also is going to the same, i.e. Forum Riviera Constructions Pvt. Ltd. In the entire scheme of things the basic essence of transfer, l.e. flow of consideration and existence of right in substance is in complete absentia. The role of the assessee is an exit provider of profit where the total profits are shared to even out the concentration of overall surplus without an iota of right in the property having been shared much less transferred. 7.4 During appellate proceedings, appellant has furnished similar submission which was submitted before the assessing officer. The appellant has not bring out anything new on record to contravene the findings/observation of the assessing officer. Thus I agree with the view of assessing officer that claim of long term capital loss is nothing but a colorable device staged within the group through a colorable transaction devoid of any business or economic merit. 7.5 Therefore, in view of the above, I did not find any infirmity in the action of the assessing officer of disallowing the amount of long term capital loss of Rs.3,23,25,547/- claimed as carried forwarded and the amount of Rs.96,05,579/-which is the normal profit shown in the Profit & Loss A/c as 'Profit on Sale of Right Acquisition/Booked Belur Flats' as income of the assessee is therefore upheld. Thus Ground No 2 to 6 are dismissed.\" 9.5 Thus in view of above, I do not concur with approach of the assessing officer to tax the advances against sale of flats as speculative transaction by invoking section 43(5) but it is to be taxed as profit on sale of right as income of the assessee. Thus Ground No. 6 to 8 are dismissed.” 2.3. After hearing the rival contentions and perusing the materials available on record, we find that the assessee has shown the rental income under the head house property and claimed standard deduction at the rate of 30% towards repairs. The ld. AO challenged the head of income and brought to tax the lease rental charges under Printed from counselvise.com Page | 4 ITA No.609/KOL/2024 Hind Ceramics Pvt. Ltd.; A.Y. 2013-14 the head income from business which has resulted into disallowance of 30% of standard deduction towards repairs. We note that the only reason cited by the appellate authority for dismissing this ground is that the assessee was incorporated with main object in the memorandum of association to acquire the properties and develop these properties and therefore, it is to be treated as business income. However, we observed from the record before us i.e. assessment orders available for preceding and succeeding assessment years that revenue has accepted the income shown by the assessee under the head income from house property. In our opinion, the stand of the Revenue in the current assessment year cannot be at variance with the stand accepted in the preceding and succeeding assessments. Since, there is no change in the facts and circumstances of the case, the Department cannot be allowed to take a different view under the same facts. The case of the assessee find support from the decision of Hon'ble supreme Court Radhasoami Satsang vs. CIT (193 ITR 321). Therefore, we set aside the order of ld. CIT (A) and direct the ld. AO to treat the lease rental charges as income from house property and accordingly, allow the deduction u/s 24(1) of the Act. The ground no. 1 to 4 are allowed. 3. The second issue raised in ground no.5 is not pressed and hereby dismissed. 4. The issue raised in Ground nos. 6 to 8 are against the confirmation of addition of ₹86,24,540/- by the ld. CIT (A) as made by the ld. AO on account of speculation business. 4.1. The facts in brief are that the assessee paid an advance for purchase of flats from Forum Rivera Constructions P. Ltd (developer). The project was in progress during the year and the advance paid to Printed from counselvise.com Page | 5 ITA No.609/KOL/2024 Hind Ceramics Pvt. Ltd.; A.Y. 2013-14 the developer was shown in the asset side of the balance sheet as ‘advance against space booking’. The balance as on 31.03.2012, was ₹5,01,80,540/- and as on 31.03.2013, ₹7,57,86,000/. The ld. AO noted that the assessee has made further advance of ₹2,56,05,460/- during the previous year to the developer. The assessee assigned its right as agreement holder with the developer to third parties and received an advance of ₹3,42,30,000/- during the previous year which is shown on the liability side of the balance sheet under the head ‘advance received against the sale of flats’. The assessee sold the rights of the flats during the year and money collected on account of transferring the authority for selling the flat to Forum Rivera Constructions P. Ltd and give a sale right in favour of different parties on 31.03.2012 and 31.03.2013 is as under:- SL no. Particulars 31st March, 2012 31st march, 2013 1. Forum Rivera Constructions Pvt. ltd. 20,00,000 3,66,00,000 Sub-Total (A) 20,00,000 3,66,00,000 1. Beautiful Enclave Pvt. Ltd. 20,00,000 2. Nimidhi commercial pvt. ltd. 53,00,000 Sub Total (B) 73,00,000 1. Animesh Paul 1,60,000 1,60,000 2. Ram Chandra Trading 2,30,000 3. Baijnath Jaiswal 4,70,000 4,70,000 4. Dalmia Manav Seva Trust 16,22,554 5. Dalmia Shiksha pratishtan 1,10,45,724 6. Prashanth Paul 45,000 45,000 7. Ram Chandra Paul 4,59,000 4,59,000 8. Shakuntala Bojgaria 9,66,900 9,96,900 9. Susmistha Roy 2,60,000 Sub total (C) 1,50,29,178 23,30,900 Total (A+B+C) 2,43,29,178 3,89,30,900 4.2. Accordingly, the assessee was asked to explain why ₹3,46,00,000/- received from Forum Rivera Constructions P. Ltd. during the year and why should not be treated as concealed income vide order sheet dated 10.02.2016. The assessee also received ₹2,30,000/- from Ram Chandra Trading on account of sale of flat by Printed from counselvise.com Page | 6 ITA No.609/KOL/2024 Hind Ceramics Pvt. Ltd.; A.Y. 2013-14 way of not surrendering ownership, giving up only the sale right. Thus, it is not disputed that assessee received advance of ₹3,42,30,000/- during the previous year (₹3,40,00,000) by way of adjustment by the developer and ₹2,30,000/- from one Shri Ram Chandra trading towards purchase of rights from the assessee as agreement holder with the developer. According to the ld. AO, the assessee completed the transfer of rights as an agreement holder and received a sum of ₹3,42,30,000/- and paid a sum of ₹2,56,05,460/-. Thus, the amount of profit of ₹86,24,540/-. According to the ld. AO that these transactions of assignment taken place without delivering the flats and therefore, gain arises out of the speculative transactions within the meaning of Section 43(5)of the Act and accordingly, it was added to the income of the assessee as speculative profit. 4.3. In the appellate proceedings, the ld CIT(A) confirmed the order of AO on this issue after taking into account the submissions of the assessee. 4.4. After hearing the rival parties and perusing the materials on records , we find that the AO treated the difference between amount received and paid for assigning the rights in the flats as speculative income u/s 43(5) of the Act on the ground that there was no physical sale of the flats. In our considered opinion the provisions of section 43(5) are not applicable to assignment of rights in property but applicable to commodities including stocks and shares and not to rights in immovable properties. The case of the assessee find support from the decision of CIT Vs Tata Services Ltd.(1980)122ITR 594 (Bom) in case of assignment of right in property the surplus/profit would be liable to capital gain tax. Therefore agreement to purchase Printed from counselvise.com Page | 7 ITA No.609/KOL/2024 Hind Ceramics Pvt. Ltd.; A.Y. 2013-14 an immovable property or to obtain a specific performance is a capital asset and when the right is assigned it gives rise to transfer of capital asset and income or loss would be charged to tax under the head of capital gain. Therefore, we set aside the order of ld. CIT(A) on this issue and direct the AO to delete the addition. The grounds no 6 to 8 are allowed. 5. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 19.11.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated:19.11.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "