Appeal Details
Counselvise Citation
[2018] 126 COUNSELVISE.COM (IT) 2958 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 10 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
13-03-2018
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
D
Next Hearing Date
23-05-2017
Assessment Year
2009-2010
Appeal Filed On
05-05-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL , DELHI D BENCH , NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER, AND SHRI B.P. JAIN, ACCOUNTANT MEMBER, ITA NO. 2738 /D EL /20 1 4 [ ASSESSMENT YEAR : 20 09 - 10 ] TREND EAST WEST LPG BOTTLING LTD VS. THE DY. C.I.T. D 289, WADHWA COMPLEX CENTRAL CIRCLE - 17 VIKAS MARG, LAXMI NAGAR NEW DELHI DELHI P AN : A AAC T 4726 B [APPELLANT] [RESPONDENT] DATE OF HEARING : 07 . 03 . 201 8 DATE OF PRONOUNCEMENT : 13 . 03 .201 8 ASSESSEE BY : S HRI G.C. SRIVASTAVA SHRI SURINAY K. DASH, ADV REVENUE BY : SHRI AMIT JAIN , SR. DR ORDER PER B.P. JAIN, ACCOUNTANT MEMBER, THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER DATED 1 2 .0 2 .201 4 OF THE LD. CIT(A) - II , DELHI FOR AY 20 09 - 10 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING T THE ACTION OF THE LD ASSESSING OFFICER IN TREATING THE INCOME ARISING FROM LONG TERM CAPITAL GAINS AS INCOME ARISING ON ACCOUNT OF ADVENTURE IN NATURE OF TRADE. 2 ITA NO. 2738 /DEL/2014 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED IN CONFIRMING THE ACTION OF THE LD ASSESSING OFFICER IN DENYING THE BENEFIT OF INDEXATION TO THE ASSESSEE. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED IN CONFIRMING T HE ACTION OF THE ASSESSING OFFICER, IN NOT ALLOWING COMPENSATION PAID TO VLS CAPITAL LTD AMOUNTING TO RS. 3.40 CRORES AS COST OF IMPROVEMENT TO BE DEDUCTED FROM SALE CONSIDERATION FOR THE PURPOSES OF CAPITAL GAINS. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED IN IGNORING THE FACT THAT THE PAYMENT OF RS.3.40 CRORES MADE BY THE ASSESSEE TO M/S VLS CAPITAL LTD AROSE OUT OF CONTRACTUAL OBLIGATION ON PART OF THE ASSESSEE AND THUS WAS FULLY ALLOWABLE TO THE ASSESSEE OUT OF SALES CONSIDERA TION RECEIVED BY IT. 5. THE ADDITIONS CONFIRMED AND THE OBSERVATIONS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ARE UNJUST AND CANNOT BE JUSTIFIED BY ANY MATERIAL ON RECORD. 6. THAT WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN NOT REDUCING/ALLOWING DEDUCTION OF RS. 3.40 CRORES PAID TO VLS CAPITAL LTD OUT OF THE BUSINESS INCOME ASSESSED. THE PLEA IS WITHOUT PREJUDICE TO THE CLAIM OF THE APPELLANT THAT THE GAIN FROM THE SAL E OF LAND IS ASSESSED AS LONG TERM CAPITAL . 7 . THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUND OF APPEAL AND /OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. 3 ITA NO. 2738 /DEL/2014 3 . BRIEFLY STATED, THE FACTS OF THE CASE AS EMANATING FROM THE ORDER OF THE ASSESSI NG OFFICER ARE REPRODUCED HEREIN BELOW: THE ASSESSEE HAS DURING THE YEAR SOLD LANDED PROPERTY OF AROUND 18 ACRES IN WEST BENGAL AREA WITH IN THE VICINITY OF BARASAT TOWN IN THE DISTRICT OF 24 N PARAGNA WEST BENGAL TO BENGAL HOUSING BOARD VIDE 2 SEPARATE SALE DEEDS FOR A TOTAL CONSIDERATION OF RS.8,51,00,000/ - . THIS LAND IS STATED TO BE ACQUIRED IN THE YEAR 1995 - 1996 FOR RS.1,84,29,294/ - AND THEREAFTER SITE DEVELOPMENT V/ITH COST OF RS. 1,71,31,949/ - I S STATED TO BE MADE DURING THE F.Y. 1995 - 1996 TO F.Y. 1998 - 1999. THUS MEETING THE TOTAL COST OF LAND TO THE ASSESSEE OF RS. 3,55,61,243/ - . THE ASSESSEE FROM THE SALE CONSIDERATION HAS REDUCED AN AMOUNT OF RS. 3,40,00,000/ - STATED TO BE PAID TO ONE M/S. VLS CAPITAL LTD.. ACCORD INGLY CA PITAL GAIN AFTER INDEXATION HAS BEEN WORKED OUT IN LOSS.I NCOME. THE CIRCUMSTANCES OF THE COMP ANY TO PURCHASE THE LAND, THEN D EVELOP IT AND T H EN GV., ADVENTURE IN THE NATURE OF TRADE. THE ASSESSEE HAD PURCHASED THIS LAND FRO M AROUN D 50 DIFFERENT VILLAGERS IN WEST BENGAL THEN DEVELOPED IT AND SOLD THE DEVELOPED LAND TO HOUSING BOARD AT A CONSIDERABLE PROFIT. EVEN THE SALE CONSIDERATION RECEIPT HAS BEEN FURTHER INVESTED BY THE ASSESSEE IN LANDS AS ADVANCES TO VARIOUS PERSONS IN SOME OTHER TOWNS. THE DETAILS OF THE PERSONS WITHOUT ADDRESS TO WHOM THESE ADVANCES HAVE BEEN GIVEN ARE AVAILABLE ON RECORDS BUT DESPITE ASKING THE AR OF THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENTS EXECUTED WITH SUCH PERSONS TO WHOM THESE ADVANCES HAVE BE EN GIVEN. HE HAS DELIBERATELY WITH HELD THIS INFORMATION. EVEN THE REGULAR BOOKS OF ACCOUNTS WERE ALSO NOT PRODUCED THOUGH THE ASSESSEE PRODUCED A BOUNDED COMPUTER PRINTOUT OF SOME EFFECTIVE ACCOUNTS. THIS CANNOT BE TREATED AS 4 ITA NO. 2738 /DEL/2014 REGULAR BOOKS OF ACCOUNTS. AF TER EXAMINING THE FOLLOWING FACTS REGARDING THE SALE OF LAND IT IS HELD THAT THE TRANSACTION WAS ADVENTURE IN THE NATURE OF TRADE. > THE LAND WAS SITUATED IN AN AREA WHICH COULD BE DEVELOPED FOR RESIDENTIAL USE AS THE WEST BENGAL HOUSING BOARD HAS PURCHASE D THE LAND. > THAT THE LAND WAS PURCHASED IN AN AROUND 50 PARTS, THEN CONSOLIDATED, DEVELOPED AND SOLD. > THAT NO AGRICULTURAL OPERATION WERE CARRIED OUT ON THIS LAND IN THE PAST AS THE ASSESSEE HAS NOT DECLARED ANY SUCH AGRICULTURAL INCOME. > THAT THE SALE CONSIDERATION RECEIVED HAVE BEEN FURTHER INVESTED IN THE LANDS IN DIFFERENT TOWNS, WHICH INFORMATION THOUGH NOT COMPLETE IS CLEARLY INDICATIVE OF THE FACT THAT THIS LAND WILL BE DEVELOPED AND SOLD. IN VIEW OF THE ABOVE, IT IS HELD THAT INTENTION OF THE ASSESSEE IS TO EARN PROFIT AND NOT TO MAKE INVESTMENT IN LAND FOR AGRICULTURAL PURPOSES. THUS, IT IS HELD TO BE AN ADVENTURE IN THE NATURE OF TRADE. AS SUCH THE INCOME IS ASSESSED UNDER THE HEADS BUSINESS INCOME. 3 . NOW I COME TO THE ISSUE OF PAYMENT OF RS. 3 ,40,00,000/ - TO M/S. VLS CAPITAL LTD. IT IS INTIMATED THAT THE ORIGINAL TITLE DEEDS OF THE LAND WERE IN THE POSSESSION OF M/S. VLS CAPITAL LTD. THEY WERE NOT RELEASING THESE ORIGINAL TITLE DEEDS. IT IS ALSO STATED THAT AN MOU IS ENTERED BETWEEN THE ASSESSE E AND M/S. VLS CAPITAL LTD., WHEREBY THE ASSESSEE WAS OBLIGED TO PAY THIS AMOUNT OF RS. 3,40,00,000/ - TO M/S. VLS CAPITAL LTD. IT IS FOUND 5 ITA NO. 2738 /DEL/2014 THAT THIS TRANSACTION OF THE ASSESSEE COMPANY WITH M/S. VLS CAPITAL LTD. IS NOT A REAL ONE. THE ORIGINAL TITLE DEEDS AS SUCH DO NOT CONTAIN ANY FINANCIAL VALUE SO LONG AS THE TITLE AND POSSESSION OF THE LAND IS WITH THE ASSESSEE COMPANY. SECONDLY, VLS CAPITAL LTD. HAD BEEN A SHARE HOLDER OF 14% OF SHARES IN THE ASSESSEE COMPANY TILL LAST YEAR AND EVEN DURING THE PERIOD T HIS SHARE PRIOR TO SALE OF THIS LAND. THE MOU BEING RELIED UPON IS A COLLUSIVE AGREEMENT BETWEEN THE ASSESSEE AND VLS CAPITAL LTD. THE ASSESSEE HAS ALSO PRODUCED CERTAIN NEWS PAPER CUTTING TO SHOW ABOUT THE DISPUTE IN THE ASSESSEE COMPANY AND M/S. VLS CAPI TAL LTD. THESE ARE ALL CREATED DOCUMENTS TO MAKE BELIEVE THE STORY COOKED BY THE ASSESSEE IN COLLUSION WITH M/S. VLS CAPITAL LTD. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THIS EXPENDITURE CLAIMED OF RS. 3,40,00,000/ - IS NOT GENUINE HENCE NOT ALLOWED. IT IS ALSO BEEN MENTIONED HERE THAT M/S. VLS CAPITAL LTD. HAD NOT SHOWN THIS 4 WITH THE ABOVE REMARKS AND AFTER TAKING INTO CONSIDERATION ALL THE FACTS OF THE CASE THE TOTAL INCOME OF THE ASSESSEE IS WORKED OUT AS UNDER : INCOME FROM BUSINESS SALE CONSIDERATION OF LAND RS. 8,51,00,000/ - LESS EXPENDITURE AS CLAIMED RS. 7,14,51,805/ - [INCLUDING PAYMENT TO M/S VLS CAPITAL LTD] 6 ITA NO. 2738 /DEL/2014 ADD THE AMOUNT PAID TO M/S VLS CAPITAL LTD DISALLOWED FOR THE REASONS DISCUSSED ABOVE. RS. 3,40,00,000/ - RS . 4,76,48,195/ - RS. 4,76,48,195/ - 4 . THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 5 . WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE A.O AND THE LD. CIT(A) AND THE PAPER BOOK FILED ON BEH ALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS RELIED UPON BY BOTH THE SIDES. THE ISSUE IN HAND IS TWO FOLDS. FIRSTLY, THE ASSESSEE HAS CLAIMED INVESTMENT OF LAND AND ON SELLING THE SAME IN THE IMPUGNED YEAR HAS CLAIMED CAPITAL GAINS WHEREAS THE ASSESSING OFFICER HAS CONSIDERED THE SAME AS ADVENTURE IN THE NATURE OF TRADE. SECONDLY, DEDUCTION OF RS. 3.40 CRORES BEING PAYMENT MADE TO VLS LTD WHERE THE ASSESSEE CLAIMS TO HAVE PLEDGED ORIGINAL TITLE DEEDS TO THE SAID COMPANY AND THEY WE RE NOT RELEASING THE SAID TITLE DEEDS AND HENCE THE ASSESSEE WAS OBLIGED TO PAY RS. 3.40 CRORES WHICH HAD BEEN CLAIMED AS COST FOR COMPUTING THE CAPITAL GAINS AND INCLUDED IN THE INDEXED COST OF ACQUISITION. OUR ATTENTION WAS DRAWN BY THE LD. COUNSEL FOR THE ASSESSEE TO PAGE 23 OF THE PAPER BOOK BEING BALANCE SHEET OF THE ASSESSEE COMPANY AS ON 31.03.2009 RELEVANT TO ASSESSMENT 7 ITA NO. 2738 /DEL/2014 YEAR 2009 - 10 WHERE THE INVESTMENT HAS BEEN DECLARED IN THE FIXED ASSET IN SCHEDULE C AT PAGE 25. THE ASSESSEE HAS ALSO DECLARED T HE SITE DEVELOPMENT EXPENSES. THE SAID PURCHASE OF LAND AND SITE DEVELOPMENT IS NOT A FEATURE WHICH IS INCURRED DURING THE YEAR BUT THE LAND WAS PURCHASED IN THE YEAR 1995 PERTAINING TO F.Y. 1995 - 96 RELEVANT TO ASSESSMENT YEAR 1996 - 97 WHEREAS THE MAJOR DE VELOPMENT WAS MADE DURING THE ASSESSMENT YEAR 1996 - 97 AN D SMALL INVESTMENT OF RS. 83 , 250/ - WAS MADE DURING THE ASSESSMENT YEAR 1999 - 2000 AND THE SAME WAS DISCLOSED AS INVESTMENT SINCE INCEPTION . TOTAL INDEXED COST OF LAND WAS COMPUTED AT RS. 7,34,46,377/ - OUT OF WHICH THE ASSESSEE HAS CLAIMED RS. 3.40 CRORES AS AMOUNT PAID TO VLS CAPITAL LTD WHICH INCLUDED RS. 1.40 CRORE AS INTEREST PAID. IT WAS ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE COMPANY WAS INITIALLY FORMED FOR THE PURPOSE OF RUNNING A L PG BOTTLING PLANT. SINCE FORMAL APPROVAL S W ERE NOT GRANTED BY THE AUTHORITIES, THE ASSESSEE COMPANY COULD NOT COMMENCE THE BUSINESS. HOWEVER, NO BUSINESS ACTIVITIES WERE CARRIED OUT BY THE ASSESSEE DURING THE YEAR . ULTIMATELY, THE LAND WAS SOLD TO WEST BENGAL GOVERNMENT FOR A TOTAL SUM OF RS. 8.51 CRORES WHICH WAS SOLD IN TWO PARTS AND TWO DEEDS WERE EXECUTED IN THIS REGARD. THE ASSESSEE HAS CALCULATED THE INCOME/LOSS FROM CAPITAL GAIN U/S 50C OF THE ACT. ALL THE INVESTMENTS INCLUDING IMPROVEMENT MADE IN THE 8 ITA NO. 2738 /DEL/2014 EARLIER YEARS HAVE BEEN DULY RECORDED IN THE BALANCE SHEET AND HAVE BEEN ACCEPTED UNDER ASSESSMEN T PROCEEDINGS FROM TIME TO TIME, AS INVESTMENTS IS NOT UNDER DISPUTE. 6. REGARDING THE EXPENDITURE MADE NECESSARY EVIDENCES WERE PLACED ON RECO RD AND NO DISPUTE IN THAT REGARD HAS EVER BEEN MADE. THESE SUBMISSIONS WERE SUBMITTED BEFORE THE DCIT, CENTRAL CIRCLE 17, NEW DELHI PLACED AT PAGES 41 AND 42 OF THE PAPER BOOK. THE ASSESSEE AL SO SUBMITTED A LETTER TO THE DC IT, CENTRAL CIRCLE 17, NEW DE L HI DATED 7.12.2011, AVAILABLE AT PAGES 43 & 44 OF THE PAPER BOOK IN THIS REGARD. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DEFECT IN THE SAME. FOR THE YEARS SINCE 1995 THERE IS NO DISPUTE IN THIS REGARD AS TO THE COST OF LAND I.E. PURCHASE OF LAND A ND THE IMPROVEMENT OF THE SAME. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE COMPANY WAS FORMED FOR THE PURPOSE OF MAIN BUSINESS OF OPERATING AS LPG BOTTLING PLANT IN WEST BENGAL. NO ADVERSE FINDING HAS BEEN GIVEN EVER IN THE EARLIER ASSESSMENTS AND IN THE IMPUGNED ASSESSMENT YEAR. IT IS SURPRISING THAT WHETH ER CONTENTION OF THE ASSESSEE HAS THROUGHOUT BEEN ACCEPTED BY THE DEPARTMENT, ALL OF A SUDDEN THE DEPARTMENT CANNOT TAKE A U TURN TO HOLD THAT THE INTENTION OF THE ASSESSEE IS TO EARN A PROFIT AND TH E LAND WAS ACQUIRED FROM DIFFERENT VILLAGERS TO JUST EARN PROFIT. THE REVENUE HAS NOT 9 ITA NO. 2738 /DEL/2014 PLACED AN IOTA OF EVIDENCE OR COGENT EXPLANATION ON RECORD TO PROVE ITS STAND REGARDING ADVENTURE IN THE NATURE OF TRADE. THEREFORE , UNDER THE FACTS AND CIRCUMSTANCES O F THE CASE, THE ASSESSEES INVESTMENT IS TREATED AS INVESTMENT FOR THE PURPOSE OF CAPITAL GAIN ALONGWITH PURCHASE COST AND SITE DEVELOPMENT AND THE SAME HAS TO BE ALLOWED UNDER THE HEAD CAPITAL GAIN AND IN NO STRETCH OF IMAGINATION IT CAN BE AN ADVENTURE I N THE NATURE OF TRADE. 7. AS REGARDS THE SECOND ISSUE, TIME AND AGAIN THE ASSESSEE HAS SUBMITTED THAT THE AMOUNT WAS BORROWED FROM VLS CAPITAL LTD FOR SETTING UP LPG BOTTLING PLANT WHERE FORMAL APPROVAL S W ERE NOT ACCORDED BY THE VARIOUS AUTHORITIES. THER EFORE, THE P ROJECT WAS DISCARDED AND THE LAND WAS SOLD TO WEST BENGAL GOVERNMENT. THE WEST BENGAL GOVERNMENT, IF HAS ACQUIRED THE SAID LAND FOR THE PURPOSE OF RESIDENTIAL COLONY OR WHATEVER, IS NOT A CONCERN OF THE ASSESSEE AND THEREFORE, CANNOT BE HELD T O BE AN ADVENTURE IN THE NATURE OF TRADE AND AT LEAST, THE INTER E ST PART TO THE EXTENT OF RS. 1.40 CRORES H A S TO BE ALLOWED IN VIEW OF THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. MITHLESH KUMARI [1973] 92 ITR 9 [DEL] WHEREIN IT HAS BEEN HELD AS UNDER: 10 ITA NO. 2738 /DEL/2014 WE ARE IN RESPECTFUL AGREEMENT WITH THE OBSERVATIONS OF THE CALCUTTA AND THE BOMBAY HIGH COURT IN THE DECISIONS REFERRED TO ABOVE. IN THE PRESENT CASE, WE FIND THAT THE ASSESSED IN ORDER TO PURCHASE THE LAND HAD NOT ONLY TO BORROW THE AMOUNT OF RS. 95,000.00 WHICH WAS THE CONSIDERATION FOR THE PURCHASE OF THE LAND BUT ALSO HAD TO PAY INTEREST OF RS. 16, 878.00 ON THE AMOUNT BORROWED BY HER. THE AMOUNT OF RS. 95,000.00 PLUS THE INTEREST PAID BY THE ASSESSED CONSTITUTES THE ACTUAL COS T TO THE ASSESSED OF THE LAND. THE FACT THAT THE AMOU N T OF RS. 95,000.00 WAS PAID BY THE ASSESSED TO THE VENDOR AND THE AMOUNT OF INTEREST OF RS. 16,878.00 WAS PAID TO A DIFFERENT PERSON, NAMELY, HER MOTHER - IN - LAW, DOES NOT MAKE ANY DIFFERENCE SO FAR AS TH E ASSESSED IS CONCERNED IN RESPECT OF THE ACTUAL COST OF THE LAND TO HER. 8. IN THAT VIEW OF THE MATTER, THE DEDUCTION OF RS. 1.40 CRORE IS DIRECTED TO BE ALLOWED AND DEDUCTION OF RS. 2 CRORES IS REJECTED. THUS, ON THE SECOND ASPECT OF THE ISSUE, THE SA ME IS PARTLY ALLOWED. 9 . IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE PURCHASE OF LAND AND ITS IMPROVEMENT COST AND INTEREST TO THE EXTENT OF RS. 1.40 CRORES IS ALLOWED AS DEDUCTION FROM SALE CONSIDERATION DECLARED BY THE ASSESSEE AND DEDUCTION OF INDEXED COST OF ACQUISITION IS ALLOWED ON PURCHASE OF LAND AND ITS IMPROVEMENT FROM THE SAID CONSIDERATION. ACCORDINGLY, THE APPEAL IS DISPOSED OFF. 11 ITA NO. 2738 /DEL/2014 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO. 2738 /DEL/2014 IS PARTLY ALLOWED . THE ORDER IS PR ON OUNCED IN THE OPEN COURT ON 1 3 . 03 .201 8 . S D S D [H.S. SIDHU] [B.P. JAIN] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 3 T H MARCH , 201 8 VL/ COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI
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