The Dy. CIT, Circle-4(1)(1), Ahmedabad V. Swagat Infrastructure Ltd., Ahmedabad

ITA 295/AHD/2021

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 6515 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 19-07-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 02-11-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIASHOKKUMARSUTHAR; FORTHEREVENUEACTIVITIESINTHE
• Keywords: Sale consideration of property below Jantri Value

Judgement Text

आयकरअपीलीयअधिकरण , अहमदाबादनयायपीी INTHEINCOMETAXAPPELLATETRIBUNAL, ‘’D’BENCH,AHMEDABAD BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And SHRISIDDHARTHANAUTIYAL,JUDICIALMEMBER आयकरअपीलसं./ITANo.295/AHD/2021 धििाधरणवरध / Asstt.Year:2012-13 D.C.I.T, Circle-4(1)(1), Ahmedabad. Vs. SwagatInfrastructureLimited, 307-308,SarthikSquare, Nr.Us.Plaza, S.G.Highway, Ahmedabad. PAN:AACCS1351H (Applicant)(Respondent) Revenueby:ShriAshokKumarSuthar,Sr.D.R Assesseeby:ShriTusharHemani,Sr.Advocatewith ShriParimalsinhB.Parmar,A.R सुिवाईकीतारीख/DateofHearing:20/07/2023 घोरणाकीतारीख/DateofPronouncement:16/10/2023 आदेश /ORDER PERWASEEMAHMEDACCOUNTANTMEMBER: ThecaptionedappealhasbeenfiledattheinstanceoftheRevenue againsttheorderoftheLearnedCommissionerofIncomeTax(Appeals), Ahmedabad,(inshort“Ld.CIT(A)”)arisinginthematterofassessmentorder passedunders.143(3)oftheIncomeTaxAct1961(here-in-afterreferredtoas "theAct")relevanttotheAssessmentYear2012-13. ITAno.295/AHD/2021 Asstt.Year2012-13 2 2.ThefirstissueraisedbytheRevenueisthattheld.CIT-Aerredindeleting theadditionmadebytheAOundersection50CoftheActbeingthedifference betweenthestampvalueandtheactualsaleprice. 3.Theassesseeinthepresentcaseisalimitedcompanyandengagedinthe businessofBuildingconstructionandlandDevelopment.TheAOreceived informationfromsub-registrarofficethattheassesseeexecutedsaledeedsfor2 immovablepropertiesvideseparatedeedNos.(8393and5888)fora considerationlessthanthestampvalue,leadingtothedifferenceofRs. 1,38,20,533/-asevidentfromtheorderoftheAO.Thesamewasaddedtothe totalincomeoftheassessee. 4.Aggrievedassesseepreferredanappealbeforetheld.CIT-Aandsale proceedsoftheimpugnedpropertiesweretreatedasbusinessturnoverwhich werepartofstockintrade.Duringtheyear,therewereexecutedsaledeedsand proceedstherefromwasshownasbusinessturnover. 4.1Aspertheassessee,theprovisionsofsection50Careapplicableonlyin caseofcapitalassets.Section2(14)definescapitalassetswhichdoesnotinclude anystockintrade.Hence,theAOwronglyinvokedtheprovisionsofsection50C oftheAct. 5.Theld.CIT-AprovidedtheopportunitytotheAOtoverifywhetherthe propertyinquestionwaspartofinvestmentorstockintradetowhichAOreplied thatthepropertymightbepartofstock,butdetailedbifurcationoftheproperties andstockisnotavailableintheassessmentrecords.However,theld.CIT-Abased onthereportoftheAOanddetailsavailableonrecordinferredthattherewasno propertyheldasinvestmentatbeginningoftheyear.Therefore,thepresumption isthatthepropertysoldduringtheyearwaspartofstockintrade.Aspertheld. CIT-A,oncepropertyisfoundtobeheldasstockintrade,theprovisionsof ITAno.295/AHD/2021 Asstt.Year2012-13 3 section50Careinapplicableinthegivenfactsandcircumstances.Thustheld. CIT-AdeletedtheadditionmadebytheAO. 6.Beingaggrievedbytheorderoftheld.CIT-A,theRevenueisinappeal beforeus. 7.Boththeld.DRandtheARbeforeusvehementlysupportedtheorderof theauthoritiesbelowasfavorabletothem 8.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Theissueinthepresentcaserelateswhetherthe propertiesshownbytheassesseeintheyearunderconsiderationwereheldas investmentorstockintradesoastofindoutwhethertheprovisionsofsection 50Careapplicableonthesaleofpropertiesinthegivenfactsandcircumstances. Fromtheprecedingdiscussion,wenotethatthelearnedCIT-Ahasgiven categoricalfindingthattherewasnoinvestmentshownbytheassesseeinthe booksofaccountsatthebeginningoftheyearindisputeandthereforea presumptioncanbedrawnthatthepropertysoldbytheassesseewerepartofthe stockintrade.SuchfindinghasnowherebeenprovedwrongbythelearnedDR appearingonbehalfoftherevenue.Thereisnodisputethatthepropertieswhich wassoldbytheassesseeintheyearunderconsiderationwereacquiredbyitin theearlieryears.Thus,itbecomesnecessarytofindoutwhattreatmentthe assesseehasshowninitsbooksofaccountsintheearlierareas.Asperthe findingofthelearnedCIT-A,allthesepropertieswereshownasstockintrade. ThefindingofthelearnedCIT-Ahasnowherebeencontrovertedbythelearned DRappearingonbehalfoftherevenue.Thus,wedonotfindanyinfirmityinthe orderofthelearnedCIT-A.Hence,thegroundofappealoftherevenueishereby dismissed. 9.ThenextissueraisedbytheRevenueisthattheld.CIT-Aerredindeleting theadditionmadebytheAOonaccountofdiversionofinterest-bearingfundfor Rs.1,99,39,237/-only. ITAno.295/AHD/2021 Asstt.Year2012-13 4 10.Theassesseehasprovidedtotalloans&advancesofRs.163,00,96,182/- outofwhichthesumofRs.77,96,36,007/-wasgiveninrelationtotheland purchase/developmentaspartofinvestmentforfutureproject.AspertheAO,the assesseeononehandhasprovidedinterestfreeadvancesforthefutureprojects andonotherhandclaiminghugeinterestexpenseamountingtoRs.1,9939,237/- only.Likewise,theAOalsofoundthattheInterestfreefundavailabletothe assesseeisonlyforRs.62,28,22,774/-only.TheAOfurtherworkedtheamountof interestattributabletoaboveloanandadvancesforfutureprojectat 2,49,59,403/-(interestexpXloans&advances/availablefund)whichwas attributabletothediversionofinterest-bearingfund.ButtheAOrestrictedthe interestexpensetoRs.1,99,39,237/-beingactualexpenseandaddedthesame tothetotalincomeoftheassessee. 11.Aggrievedassesseepreferredanappealbeforetheld.CIT-Awhodeleted theadditionmadebytheAObyobservingasunder: 6.3Ihaveconsideredthematter.Assessee’sfirstargumentisthattheadvanceswere giventoDirectorsforprocuringlandfordevelopmentbyassessee.Hence,thesamewas strictlyforbusinesspurposeofassessee.Further,itwasarguedthatassesseehad sufficientinterest-freefundtomaketheadvances.Availableinterest-freefundwas calculatedatRs.102,98,03,646/-whereasinterest-freeadvanceforpurchaseoflandwas Rs.77,96,36,007/-.Itisseenthatinassessee'sowncaseforassessmentyear2009-10in ITANo.2084/Ahd/2012dated28.6.2013,Hon'bleAhmedabadTribunalhaddecidedthe matterinassessee'sfavour.Similarfactsareinvolvedinthisyearalso.Sincetheissueis squarelycoveredbybindingdecisionofHon'bleJurisdictionalTribunal,theadditionof Rs.1,99,39,237/-isdeleted. 12.Beingaggrievedbytheorderoftheld.CIT-A,theRevenueisinappeal beforeus. 13.Boththeld.DRandtheARbeforeusvehementlysupportedtheorderof theauthoritiesbelowasfavorabletothem. 14.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Thecontroversyinthepresentcaserelateswhether ITAno.295/AHD/2021 Asstt.Year2012-13 5 theinterestcostincurredbytheassesseeonthemoneyutilizedforgivingadvance forthepurchasesofthelandistobedisallowedinthegivenfactsand circumstances.Fromtheprecedingdiscussion,wenotethatthebasisofmaking thedisallowanceofinterestexpensesbytheAOwasthisthattheadvanceshave beengivenforthepurchaseoflandforthefutureprojectandthereforethe interestofattributabletosuchadvancescannotbeallowedasdeduction.Thereis nodisputethattheassesseeinthepresentcaseisengagedinthedevelopmentof therealestateprojectsandthereforeanyadvancegivenbytheassesseein connectionwithitsbusinessactivities/projectstheincomeofwhichwillariseinthe lateryearshallbetreatedasrevenueexpenses.Itisforthereasonthatthereis nodisputeassesseehasalreadycommenceditsbusinessactivitiesandtherefore theinterestincurredonthemoneyadvancedfortherevenueactivitiesinthe givenfactsandcircumstancescannotbedisallowedbeingincurredinthecourse ofthebusiness. 14.1Inadditiontotheabove,wealsonotethattheassesseehassufficient interestfreeownfundofRs.102,98,03,646asevidentfromtheorderoftheld. CIT-Aexceedingtheamountofimpugnedadvances.Therefore,inourconsidered view,apresumptioncanbedrawnthatthemoneyhasbeenadvancedbythe assesseeforthepurchaseofthepropertiesoutofitsinterestfreefund.Hence,no disallowanceofinterestexpensecanbemadeonaccountofdiversionoffund.In holdingso,wedrawsupportandguidancefromthejudgementofHon’bleBombay HighCourtinthecaseofRelianceUtilitiesandPowerLtd.reportedin313ITR340 whereinitwasheldasunder: “Theprinciplethereforewouldbethatiftherearefundsavailablebothinterest- freeandoverdraftand/orloanstaken,thenapresumptionwouldarisethat investmentswouldbeoutoftheinterest-freefundgeneratedoravailablewiththe company,iftheinterest-freefundsweresufficienttomeettheinvestments.Inthis casethispresumptionisestablishedconsideringthefindingoffactbothbythe CIT(A)andTribunal”. 14.2Similarly,wealsorelyonthejudgmentoftheHon’bleGujaratHighCourtin thecaseofCITvs.IndiaGelatine&ChemicalsPvt.Ltd.reportedin376ITR553. Therelevantextractoftheorderisreproducedbelow: ITAno.295/AHD/2021 Asstt.Year2012-13 6 Theassesseehadmadeinvestmentinsharesandmutualfunds.Itsuomotu offered/disallowedtheamountofRs.2lakhsonaccountofsection14A.The AssessingOfficer,however,madefurtherdisallowanceundersection14A.The TribunaldeletedtheentiredisallowancemadebytheAssessingOfficeronthe groundthattheassesseehadsufficientinterest-freefundsoutofwhich investmentwasmade.Heldthattherewasnoinfirmityintheimpugnedorderof theTribunal. 14.3Likewise,wealsodrawsupportfromthejudgmentofHon’bleGujaratHigh CourtinthecaseofUTIBankLtd.reportedin32Taxmann.com370wherethe head-notereadsasunder: “Iftherearesufficientinterestfreefundstomeettaxfreeinvestments,theyare presumedtobemadefrominterestfreefundsandnotloanedfundsandno disallowancecanbemadeundersection14A”. 14.4Inviewoftheaboveproposition,weholdthatnodisallowanceofinterest expenseclaimedbytheassesseecanbemadeonaccountofadvancegivenfor thepropertiesasdiscussedabove.Hence,weupholdthefindingoftheld.CIT-A anddirecttheAOtodeletetheadditionmadebyhimtotheextentofinterest expenses.Thus,thegroundofappealoftheRevenueisherebydismissed. 15.Intheresult,theappealoftheRevenueisherebydismissed. OrderpronouncedintheCourton16/10/2023atAhmedabad. Sd/-Sd/- (SIDDHARTHANAUTIYAL)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated16/10/2023 Manish