M/s Penna Cement Industries Limited, Hyderabad V. DCIT, Hyderabad

ITA 1354/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61888 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-02-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 27-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Assessee Lawyers: C S SUBRAHMANYAM
• Keywords: Capital asset; Cost of acquisition; Bad and doubtful debts
• Section: 143(3); 2(14); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI SKTIJIT DEY, JUDICIAL MEMBER ITA NO.1353 & 1354/HYD/2010 ASSESSMENT YEAR 2006-07 & 2007-08 M/S PENNA CEMENT INDUSTRIES LTD., HYDERABAD (PAN AABCP 2290 D ) (APPELLANT) VS THE DCIT, CIRCLE 16(3), HYDERABAD (RESPONDENT) ITA NO.1433/HYD/2010 ASSESSMENT YEAR 2007-08 THE DCIT, CIRCLE 16(3) VS. M/S PENNA CEMENT HYDERABAD INDUSTRIES LTD., HYD. (PAN AABCP 2290 D) ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI C.S. SUBRAHMANYAM RESPONDENT BY : SHRI B.V. PRASAD REDDY DATE OF HEARING : 14-03-2012. DATE OF PRONOUNCEMENT : 04-05-2012 ORDER PER SAKTIJIT DEY, JM : THESE ARE THREE APPEALS, TWO FILED BY THE ASSESSEE AGAINST SEPARATE ORDERS DATED 20-8-2010 OF THE CIT (A)- V, HYDERABAD PERTAINING TO THE ASSESSMENT YEAR 2006 -07 AND 2007-08 AND ONE BY THE REVENUE AGAINST THE ORDE R OF THE CIT (A) DATED 20-8-2010 PERTAINING TO THE ASSESSMENT YEAR 2007-08. SINCE THE ISSUES INVOLVED IN ALL THESE APPEALS ARE COMMON AND IDENTICAL IN NATURE, T HESE ITA 1353 AND OTHERS PENNA CEMENT INDUSTRIES LIMITED, HYD. 2 ARE HEARD, CLUBBED AND DISPOSED OF BY THIS CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.1353/HYD/2010 (ASSESSEES APPEAL A.YR. 2006- 07) 2. THIS APPEAL IS FILED AGAINST THE ORDER DATED 20- 8- 2010 PASSED BY THE CIT (A)-V, HYDERABAD PASSED IN I TA NO.287/DC-16(3)/CIT(A)-V/2009-10 RELATING TO ASSESSMENT YEAR 2006-07. THE ASSESSEE HAS CHALLEN GED THE ADDITION OF RS.3,25,98,440/- BEING BAD DEBTS WR ITTEN OFF AND ADDITION OF RS.4,50,000/- OUT OF FOREIGN TR AVEL EXPENDITURE. 3. BRIEFLY, THE FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURE AND SALE OF CEMENT AND TRADI NG. THE ASSESSEE-COMPANY HAD A TEXTILE DIVISION WHICH W AS CARRYING ON BUSINESS OF GINNING, CARDING, SPINNING, WEAVING ETC. THE ASSESSEE COMPANY HAD ACQUIRED SPINNING DIVISION WITH A VIEW TO DIVERSIFY ITS BUSI NESS BUT THE ASSESSEE LATER REALISED THAT THERE WAS NO SYNER GY BETWEEN THE BUSINESS AND INTENDED TO CONCENTRATE ON LY ON THE CEMENT BUSINESS AND TRANSFERRED TEXTILE DIVI SION TO ONE SPS TEXTILE & INDUSTRIES LIMITED. TO EFFECT TH E TRANSFER, A PETITION UNDER SECTION 394 OF THE COMPA NIES ACT WAS FILED BEFORE THE HONBLE ANDHRA PRADESH HIG H COURT. THE HONBLE A.P HIGH COURT HAVING APPROVED THE SCHEME OF ARRANGEMENT BY ITS JUDGMENT DATED 10-2- 2000, PENNA TEXTILE DIVISION WAS TRANSFERRED WITH A LL ITS ASSETS AND LIABILITIES TO M/S SPS TEXTILE & INDUS TRIES ITA 1353 AND OTHERS PENNA CEMENT INDUSTRIES LIMITED, HYD. 3 LIMITED FOR A TOTAL CONSIDERATION OF RS.16,47,73,05 3/-. OUT OF THE AFORESAID SALE CONSIDERATION, THE ASSESS EE RECEIVED AN AMOUNT OF RS.8,01,00,966/- TILL THE FIN ANCIAL YEAR 2005-06. THE ASSESSEE CREDITED THE PROFITS EAR NED FROM THE TRANSFER OF THE TEXTILE DIVISION TO THE PR OFIT & LOSS A/C AND DECLARED SHORT TERM CAPITAL GAINS OF RS.3,40,90,755/- FOR THE ASSESSMENT YEAR 2000-01. SO FAR AS THE AMOUNT OF RS.8,46,72,087/- REMAINING OU T OF THE SALE CONSIDERATION, THE SAME COULD NOT BE REALI SED IN SPITE OF THE ASSESSEE FOLLOWING IT UP. 4. DURING THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT FOR THE ASSESSMENT YEAR UNDER DIS PUTE WHILE EXAMINING THE ASSESSEES PROFIT & LOSS A/C, T HE AO FOUND THAT UNDER THE HEAD ADMINISTRATIVE EXPENSES , THE ASSESSEE HAD CLAIMED RS.3,25,98,440/- AS BAD DEBTS WRITTEN OFF. WHEN THE AO ASKED TO EXPLAIN ABOUT SUC H CLAIM WITH DETAILS, THE ASSESSEE EXPLAINED THAT OUT OF SALE CONSIDERATION OF TEXTILE DIVISION, THE ASSESEEE HAD RECEIVED AN AMOUNT OF RS.8,01,00,966/- UP TO FINANC IAL YEAR 2005-06 AND IN SPITE OF FOLLOWING IT UP, THE BALANCE AMOUNT OF RS.8,46,72,087/- COULD NOT BE REALISED. THE PARTY REQUESTED THE ASSESSEE TO WAIVE AN AMOUNT OF RS.3,25,98,440/-. THE MATTER WAS PLACED BEFORE THE BOARD AND THE BOARD AFTER CONSIDERING THE REQUEST FO R WAIVER TOOK A DECISION TO WRITE OFF AN AMOUNT OF RS.3,25,98,440/-. ACCORDINGLY, IT WAS WRITTEN OFF AS BAD DEBTS DURING THE ASSESSMENT YEAR UNDER DISPUTE. TH E AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE BAD DEB TS ITA 1353 AND OTHERS PENNA CEMENT INDUSTRIES LIMITED, HYD. 4 WRITTEN OFF SHOULD NOT BE DISALLOWED AS IT IS CAPIT AL LOSS RESULTING ON ACCOUNT OF TRANSFER OF CAPITAL ASSET. THE ASSESSEE DID NOT OFFER ANY EXPLANATION AND THE AO ACCORDINGLY DISALLOWED THE ASSESSEES CLAIM AND ADD ED AN AMOUNT OF RS.3,25,98,440/- TO THE TOTAL INCOME OF T HE ASSESSEE. THE AO FURTHER FOUND THAT OUT OF TOTAL FOREIGN TRAVEL EXPENDITURE OF RS.25,21,091/-, THE ASSESSEE HAD INCURRED AN EXPENDITURE OF RS.9,00,020/- TOWARDS V ISIT OF CHAIRMAN/MANAGING DIRECTOR ALONG WITH HIS DAUGHTER DEEPTI REDDY TO SINGAPORE. AS OBSERVED IN THE ASSESSMENT ORDER, IN THE ABSENCE OF PROPER EVIDENC E REGARDING THE VISIT OF DEEPTI REDDY, WAS IN CONNECT ION WITH THE BUSINESS OF THE ASSESSEE COMPANY, THE AO DISALLOWED AN AMOUNT OF RS.4,50,010/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSE SSEE CHALLENGED THE ADDITIONS MADE BY THE AO AND FILED A N APPEAL BEFORE THE CIT (A). ON APPEAL, THE CIT (A) CONCURRED WITH THE FINDINGS OF THE AO AND SUSTAINED BOTH THE ADDITIONS. 5. THE LEARNED AR OF THE ASSESSEE SUBMITTED BEFORE US THAT THE ENTIRE PURPOSE OF TRANSFERRING THE TEXTILE DIVISION WAS FOR AUGMENTING THE EXPANSION OF CEMENT DIVISION . REFERRING TO THE ORDERS PASSED BY THE HONBLE HIGH COURT OF ANDHRA PRADESH, THE LEARNED AR SUBMITTED THAT TH E HONBLE HIGH COURT HAS APPROVED THE SCHEME OF ARRANGEMENT ON THE CONDITION THAT THE ENTIRE AMOUNT RECEIVED FROM TRANSFER OF TEXTILE DIVISION IS TO BE UTILISED FOR THE CEMENT DIVISION. THE LEARNED AR SUBMITS TH AT THE ITA 1353 AND OTHERS PENNA CEMENT INDUSTRIES LIMITED, HYD. 5 TRANSFER HAVING BEEN EFFECTED FOR UTILISING THE FUN D FOR BUSINESS PURPOSE I.E., FOR EXPANSION OF CEMENT BUSI NESS, THE EXPENDITURE CLAIMED ON ACCOUNT OF BAD DEBTS W RITTEN OFF SHOULD BE ALLOWED. IN SUPPORT OF HIS CONTENTIO N, THE LEARNED AR RELIED ON THE FOLLOWING DECISIONS:- I) DCIT VS. SHREYAS S. MORAKHIA (40 SOT 432) II) DCIT VS. IIT INVESTMENTS LTD.(45 SOT 1) III) CIT VS. T. VEERABHADRA RAO (155 ITR 152) REGARDING THE DISALLOWANCE OF RS.4,50,010/- IN RESP ECT OF THE FOREIGN TRAVEL EXPENDITURE, THE LEARNED AR SUB MITS THAT DEEPTI REDDY, DAUGHTER OF THE MANAGING DIRECTO R HAS ACCOMPANIED TO HIM TO A VISIT TO SINGAPORE FOR NEGO TIATING CERTAIN COMPONENTS AND PARTS FOR ITS PLANT. SINCE THE MANAGING DIRECTORS WIFE COULD NOT GO ALONG WITH HI M, DAUGHTER OF THE M. D WENT ALONG WITH HER FATHER TO FULFIL CERTAIN SOCIAL RESPONSIBILITY. REFERRING TO A DEC ISION OF CALCUTTA HIGH COURT IN THE CASE OF J.K. INDUSTRIES LTD. VS. CIT 335 ITR 170, THE LEARNED AR OF THE ASSESSEE SU BMITS THAT THE AO CANNOT DETERMINE WHAT EXPENDITURE IS REQUIRED TO BE INCURRED FOR THE PURPOSE OF BUSINESS , IT HAS TO BE LOOKED INTO FROM THE POINT OF VIEW OF THE BUSINESSMAN KEEPING IN VIEW THE BUSINESS EXPEDIENCY . 6. THE LEARNED DR SUBMITS THAT THE ASSESSEE HAVING TRANSFERRED A CAPITAL ASSET, THE LOSS SUSTAINED IN THAT ACCOUNT, CANNOT BE ALLOWED AS EXPENDITURE EITHER UN DER SECTION 36(1)(VII) OR U/S 37 AS BAD DEBT WRITTEN OF F. IN ITA 1353 AND OTHERS PENNA CEMENT INDUSTRIES LIMITED, HYD. 6 SUPPORT OF HIS CONTENTION, THE LD. DR RELIED ON THE FOLLOWING DECISIONS:- 1) CIT VS. ABDULLABHAI ABDULKADAR 41 ITR 545(S.C) 2) A.V. THOMAS & CO. VS. CIT (48 ITR 67)(S. C) 3) AMARCHAND SOBHACHAND VS.CIT (82 ITR 591) (S.C) 4) MADAN GOPAL BAGLA VS. CIT(30 ITR 174) (S.C) 5) N. ANNAJI RAO & BROTHER VS. CIT (97 ITR 265) (AP) WITH REGARD TO THE DISALLOWANCE OF FOREIGN TRAVEL EXPENDITURE, THE LD. DR SUBMITS THAT THE ASSESSEE H AVING NOT PROVED THAT THE EXPENDITURE WAS INCURRED FOR TH E PURPOSE OF BUSINESS, THE DISALLOWANCE WAS JUSTIFIED . 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PARTI ES AND GONE THROUGH THE MATERIALS AVAILABLE BEFORE US. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAS SOLD PLANT AN D MACHINERY OF THE TEXTILE DIVISION WHICH ARE PURELY CAPITAL ASSETS. IN FACT, THE ASSESSEE ITSELF HAS DECLARED THE PROFIT FROM THE SALE OF THOSE ASSETS AS SHORT TERM CAPITAL GAIN FOR THE ASSESSMENT YEAR 2000-01. THE CONTENTION OF THE LEARNED AR OF THE ASSESSEE THAT THE TRANSFER OF THE TEXTILE DIVISION WAS APPROVED ON THE CONDITION OF UTILISING THE SALE CONSIDERATION FOR EXPANSION OF THE CEMENT DIVI SION, WILL NOT CHANGE THE NATURE AND CHARACTER OF THE ASS ETS TRANSFERRED. 8. THE DECISIONS RELIED UPON BY THE LEARNED AR ARE DISTINGUISHABLE ON FACTS. IN THE CASE OF DCIT V S. SHREYAS S. MORAKHIA (40 SOT 432), THE ASSESSEE WAS A ITA 1353 AND OTHERS PENNA CEMENT INDUSTRIES LIMITED, HYD. 7 SHARE BROKER AND HE HAS TO RECEIVE CERTAIN AMOUNT F ROM ITS CLIENTS AGAINST THE TRANSACTIONS OF PURCHASE OF SHARES ON THEIR BEHALF. THE ITAT, MUMBAI BENCH HELD THAT S INCE THE SHARES ARE STOCK IN TRADE OF THE ASSESSEE THE A MOUNT RECEIVABLE CONSTITUTES OF TRADING DEBT AND THEREFOR E CAN BE WRITTEN OFF AS BAD DEBT UNDER SEC. 36(1)(VII) OF THE ACT. IN THE CASE OF DCIT VS. IIT INVESTRUST LTD. (45 SOT 1), THE ITAT, MUMBAI BENCH ALSO CONSIDERING A CASE OF BAD DEBTS WRITTEN OFF ON ACCOUNT OF NON RECEIPT OF SHARE BROKERAGE. IN THE CASE OF CIT VS. T. VEERABHADRA RAO (155 ITR 152), THE HONBLE SUPREME COURT WAS CONSIDERING A CASE WHERE A BUSINESS ALONG WITH ITS ASSETS AND LIABILITIES WAS TRANSFERRED TO ANOTHER PERSON W HETHER IN THAT CASE, A DEBT TRANSFER IT SHOULD BE ALLOWED IN THE HANDS OF THE SUCCESSOR OR NOT. 9. ON THE OTHER HAND, FROM THE DECISIONS RELIED UP ON BY THE LEARNED DR, THE PRINCIPLE LAID DOWN BY THE H ONBLE SUPREME COURT AS EMERGES IS THAT IF THE TRANSACTIO N IN COURSE OF WHICH THE LOSS RESULTED WAS NOT CONNECTED WITH THE TRADING ACTIVITY, IT CANNOT BE TREATED AS TRADI NG LOSS. THE DEBT IS IN THE NATURE OF AN OUTSTANDING WHICH I F RECOVERED WOULD HAVE SWELLED THE PROFIT. CONSIDER ING THE AFORESAID FACTUAL POSITION AND KEEPING IN MIND THE PRINCIPLE OF LAW DECIDED IN THE DECISIONS CITED ABO VE, IT IS QUITE CLEAR THAT THE SALE OF PLANT AND MACHINERY AR E IN THE NATURE OF SALE OF A CAPITAL ASSET AND ANY LOSS SUST AINED ON THAT ACCOUNT WILL BE A CAPITAL LOSS AND CANNOT BE A LLOWED AS AN EXPENDITURE AS BAD DEBT WRITTEN OFF. HENCE, THIS ITA 1353 AND OTHERS PENNA CEMENT INDUSTRIES LIMITED, HYD. 8 GROUND RAISED BY THE ASSESSEE IS DISMISSED AND ADDI TION OF RS. 3,25,98,440/- IS SUSTAINED. 10. NOW COMING TO THE ADDITION OF RS.4,50,010/- ON ACCOUNT OF FOREIGN TRAVEL EXPENDITURE, WE AGREE WIT H THE CONTENTION OF THE LEARNED AR OF THE ASSESSEE THAT WHAT EXPENDITURE IS TO BE INCURRED HAS TO BE LOOKED INTO FROM THE POINT OF VIEW OF THE BUSINESSMAN AND KEEPING IN MIND THE BUSINESS EXPEDIENCY. THE AO CANNOT DETERMINE W HAT EXPENDITURE A BUSINESSMAN SHOULD INCUR OR NOT. HOWEVER, AT THE SAME TIME, THE AO CANNOT BE EXPECTE D TO REMAIN BLIND TO THE SURROUNDING FACTS AND CIRCUMST ANCES AND ACCEPT WHATEVER THE ASSESSEE MAY CLAIM, BE IT REASONABLE OR NOT. IN THE PRESENT CASE, THE ASSESS EE HAS FAILED TO PRODUCE OR SUBMIT ANY REASONABLE EXPLANAT ION THAT THE DAUGHTER OF THE MANAGING DIRECTOR HAD ACCOMPANIED HIM IN THE FOREIGN TRIP FOR FULFILLING CERTAIN SOCIAL RESPONSIBILITIES. IN OUR VIEW, SUCH EXPLANA TION CANNOT BE ACCEPTED ON THE FACE OF IT WITHOUT BRINGI NG ANY EVIDENCE TO ESTABLISH NEXUS BETWEEN THE FOREIGN VIS IT OF A PERSON WITH THE PURPOSE OF BUSINESS. WE THEREFORE DO NOT SEE ANY GOOD GROUND TO INTERFERE WITH THE FINDING OF THE LOWER AUTHORITIES. HENCE, THE AMOUNT OF RS.4,50,01 0/- IS SUSTAINED. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA NO. 1354/HYD/2010 (ASSESSEES APPEAL A.Y. 2007- 08) : ITA 1353 AND OTHERS PENNA CEMENT INDUSTRIES LIMITED, HYD. 9 12. GROUND NO.1 RAISED IN THIS APPEAL IS GENERAL IN NATURE AND IT DOES NOT REQUIRE ANY ADJUDICATION FRO M US. 13. GROUND NOS. 3 AND 6 RELATE TO THE DISALLOWANCE OF BAD DEBTS WRITTEN OFF AMOUNTING TO RS.5,20,73,647/- . IN VIEW OF OUR FINDING GIVEN ABOVE IN THIS ORDER IN TH E ASSESSEES APPEAL FOR ASSESSMENT YEAR 2006-07, THE GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 14. GROUND NOS. 2 AND 5 RELATE TO THE DISALLOWANCE OF FOREIGN TRAVEL EXPENDITURE AMOUNTING TO RS.19,15,41 4/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS CLAIMED TOTAL FOREIGN TRAVEL EXPENDITU RE AMOUNTING TO RS.75,33,331/-, THE AO WHILE COMPLETIN G THE ASSESSMENT DISALLOWED A SUM OF RS.36,02,766/- O UT OF THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE. IN THE APPEAL PROCEEDINGS, THE CIT (A) AFTER EXAMINING ALL THE DETAILS AND CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AND ALSO EXAMINING THE MATERIALS PRODUCED BEFORE HIM HAS GIVEN HIS FINDING AT PARA 6.2 OF HIS ORDER. THE CIT (A) HAS CATEGORICALLY GIVEN A FINDING OF FA CT THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE REGARDING THE AMOUNTS OF RS.9,23,749/- AND RS.9,91,665/- INCURRED IN CONNECTION WITH VISIT TO USA. SINCE NO EVIDENCE WAS PRODUCED TO PROVE THAT THE AFORESAID EXPENDITURE ON FOREIGN TRAVEL WAS MADE FO R THE PURPOSE OF BUSINESS, THE DISALLOWANCE MADE BY THE C IT (A) IS JUSTIFIED AND NEEDS NO INTERFERENCE. ACCORD INGLY, ITA 1353 AND OTHERS PENNA CEMENT INDUSTRIES LIMITED, HYD. 10 WE UPHOLD THE FINDINGS OF THE CIT (A) ON THIS ISSUE AND DISMISS THESE GROUNDS ACCORDINGLY. 15. GROUND NOS. 4 AND 7 RELATE TO THE ADDITION OF RS.62,95,883/- AS THE INCOME FROM LONG TERM CAPITAL GAINS ARISING ON ACCOUNT OF COMPENSATION ON ACQUIS ITION OF AGRICULTURAL LANDS. THE ASSESSEE DURING THE FIN ANCIAL YEAR 2002-03 HAD PURCHASED AGRICULTURAL LAND AT A C OST OF RS.28,69,858/-. THESE LANDS WERE COMPULSORILY ACQUI RED BY THE GOVERNMENT OF ANDHRA PRADESH FOR THE PURPOSE OF SOME PROJECT AND COMPENSATION OF RS.96,28,000/- WAS PAID TO THE ASSESSEE. IN THE COMPUTATION OF TOTAL INCOME MADE FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE AFTER DEDUCTING THE COST OF ACQUISITION REDUCED AN AMOUNT OF RS.67,58,142/- BY TREATING IT AS PROFIT FROM SAL E OF AGRICULTURAL LAND. IN THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE ACT, THE AO ASKED THE ASSESSEE TO PRODUCE EVIDENCE IN SUPPORT O F THIS CLAIM. THE ASSESSEE EXPLAINED THAT THE FARMERS FRO M WHOM THE LANDS WERE PURCHASED CONTINUED TO CARRY ON AGRICULTURAL ACTIVITY TILL THE LANDS WERE ACQUIRED BY THE GOVERNMENT. THE AO REJECTED THE ASSESSEES EXPLANA TION AND ADDED AN AMOUNT OF RS.62,95,883/- AS LONG TERM CAPITAL GAINS WHILE COMPLETING THE ASSESSMENT ON TH E GROUND THAT THE ASSESSEE COULD NOT PRODUCE ANY EVID ENCE THAT AGRICULTURAL OPERATIONS WERE CARRIED OUT ON T HESE LANDS. THE ASSESSEE CHALLENGED THE ADDITION IN APP EAL BEFORE THE CIT (A). IN COURSE OF HEARING BEFORE THE CIT (A), THE ASSESSEE SUBMITTED FURTHER EXPLANATION WHI CH IS ITA 1353 AND OTHERS PENNA CEMENT INDUSTRIES LIMITED, HYD. 11 QUOTED IN PARA 7.1 OF THE CIT (A)S ORDER. THE CIT (A) REJECTED THE ASSESSEES CONTENTION BY OBSERVING THA T THE INTENTION OF THE ASSESSEE WAS NEVER TO CARRY ON AGRICULTURAL ACTIVITIES IN THE SAID LAND BUT EXPLOI T IT FOR ITS BUSINESS PURPOSE. THE ASSESSEE HAS NOT DONE ANY AGRICULTURAL OPERATIONS IN THESE LANDS. FOR THESE REASONS, THE CIT (A) REJECTED THE ASSESSEES CLAIM. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AFTE R ANALYSING THE FACTS, WE FEEL THAT THE DISPUTE REMAI NS WITHIN THE NARROW COMPASS AS TO WHAT IS THE NATURE AND CHARACTER OF THE LAND IN QUESTION. THE DEFINITION OF CAPITAL ASSET U/S 2(14) EXCLUDES AGRICULTURAL LAND FROM WITHIN ITS PURVIEW, SAVE AND EXCEPT THE EXCEPTIONS PROVIDED IN SECTION 2(14)(III)(A) AND(B). TO DETERM INE WHETHER A LAND IS AGRICULTURAL OR NOT, VARIOUS FA CTORS LIKE WHETHER THE LAND HAS BEEN ASSESSED TO LAND REVENUE OR NOT WHETHER AGRICULTURAL OPERATIONS ARE CARRIED OUT IN THE SAID LAND AND WHETHER THE LAND IS CAPABLE OF AGRICU LTURAL OPERATIONS AND THE INTENTION OF THE OWNER FOR RETAI NING THE LAND, DESCRIPTION OF THE LAND IN THE OFFICIAL RECORDS ETC., HAVE TO BE CUMULATIVELY TAKEN INTO ACCOUNT. WE FIND THAT THESE FACTS WERE NEITHER BROUGHT ON RECOR D NOR DEALT WITH EITHER BY THE AO OR BY THE CIT (A) WHILE TREATING THE SALE PROCEEDS AS LONG TERM CAPITAL GAI NS. WHILE THE ASSESSEE HAS TAKEN THE STAND THAT THE NAT URE AND CHARACTER OF THE LAND IS AGRICULTURAL AND AGRIC ULTURAL ACTIVITY WAS CARRIED OUT IN THESE LANDS TILL THEIR ACQUISITION ITA 1353 AND OTHERS PENNA CEMENT INDUSTRIES LIMITED, HYD. 12 BY THE GOVERNMENT, THE AO AND THE CIT (A) BY APPLYI NG THE USER TEST HAVE HELD IT AS NON AGRICULTURAL LAND . FOR TREATING A PARTICULAR LAND TO BE NON AGRICULTURAL F OR THE PURPOSE OF BRINGING IT TO CAPITAL GAINS TAX, IT IS ABSOLUTELY NECESSARY TO BRING MATERIAL ON RECORD TO PROVE TH AT THE LAND IS IN FACT NON AGRICULTURAL. SINCE RELEVANT F ACTS REGARDING THE NATURE AND CHARACTER OF THE LAND, HOW THEY HAVE BEEN TREATED IN REVENUE RECORDS, WHETHER ANY AGRICULTURAL ACTIVITIES WERE CARRIED OUT IN THEM, H AVE NOT BEEN PROPERLY CONSIDERED BY THE AUTHORITIES, WE THI NK IT APPROPRIATE TO RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR FRESH CONSIDERATION IN ACCORDANCE WITH LAW. FOR COMING TO A PROPER CONCLUSION, THE AO IS FREE TO MA KE ANY ENQUIRY AS MAY BE FOUND NECESSARY. THE AO SHALL AFFORD A REASONABLE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN ITS CASE WITH NECESSARY EVIDENCE. IN VIEW OF THE ABO VE, WE SET ASIDE THE MATTER TO THE FILE OF THE AO FOR FRES H CONSIDERATION AFTER AFFORDING A REASONABLE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. 17. IN THE RESULT, THE APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 2007-08 IS TREATED AS PARTLY ALLOWE D FOR STATISTICAL PURPOSE. ITA NO.1433/HYD/10 (REVENUES APPEAL) :- 18. THIS APPEAL HAS BEEN FILED BY THE REVENUE CHALLENGING THE ORDER OF THE CIT (A) FOR PARTLY ALL OWING THE FOREIGN TRAVEL EXPENDITURE. AFTER GOING THROUGH TH E CIT ITA 1353 AND OTHERS PENNA CEMENT INDUSTRIES LIMITED, HYD. 13 (A)S ORDER, WE FIND THAT THE DECISION OF THE CIT (A) IN PARTLY ALLOWING THE FOREIGN TRAVEL EXPENDITURE IS B ASED ON GOOD GROUND AND HENCE NO INTERFERENCE IS CALLED FOR IN THIS REGARD. ACCORDINGLY, WE REJECT THE GROUND RAISED BY THE REVENUE. 19. IN THE RESULT, ASSESSEES APPEALS IN ITA NO.1353/HYD/10 IS DISMISSED, ITA NO.1354/HYD/10 IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE A ND REVENUES APPEAL IN ITA 1433/HYD/10 IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 04-05-2012. SD/- SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER DATED THE 4 TH MAY, 2012. COPY FORWARDED TO: 1. M/S PENNA CEMENT INDUSTRIES LIMITED, PLOT NO.703, SRINIKETAN COLONY, ROAD NO.3, BANJARA HILLS, HYDERABAD. 2. DCIT, CIR-16(3), AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 3. CIT (A)-V, HYDERABAD. 4. THE CIT CONCERNED, HYDERABAD 5. THE DR, ITAT, HYDERABAD JMR* ITA 1353 AND OTHERS PENNA CEMENT INDUSTRIES LIMITED, HYD. 14 ITA 1353 AND OTHERS PENNA CEMENT INDUSTRIES LIMITED, HYD. 15