Appeal Details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 4942 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 year(s) 7 month(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-08-2017
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
E
Next Hearing Date
05-10-2016
Assessment Year
2008-2009
Appeal Filed On
21-01-2013
Judgement Text
INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E : NEW DELHI BEFORE SHRI I.C.SUDHIR , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 356/DEL/2013 (ASSESSMENT YEAR: 2008 - 09) ITA NO. 789/DEL/2013 (ASSESSMENT YEAR: 2009 - 10) ITA NO. 2039/DEL/2014 (ASSESSMENT YEAR: 2010 - 11 ) MODI INDUSTRIES LIMITED, MODINAGAR, UTTAR PRADESH, PAN: AAACM2063Q VS. ACIT, CENTRAL CIRCLE - 19, NEW DELHI (APPELLANT) (RESPONDENT) ITA NO. 734/DEL/2013 (ASSESSMENT YEAR: 2008 - 09) ITA NO. 1658/DEL/2013 (ASSESSMENT YEAR: 2009 - 10) DCIT, CENTRAL CIRCLE - 19, ROOM NO. 319, E - 2, ARA CENTRE, JHANDEWALAN EXTENSION, NEW DELHI VS. MODI INDUSTRIES LIMITED, MODINAGAR, UTTAR PRADESH, PAN: AAACM2063Q (APPELLANT) (RESPONDENT) ITA NO. 2389/DEL/2014 (ASSESSMENT YEAR: 2010 - 11) ACIT, CENTRAL CIRCLE - 19, ROOM NO. 319, E - 2, ARA CENTRE, JHANDEWALAN EXTENSION, NEW DELHI VS. MODI INDUSTRIES LIMITED, MODINAGAR, UTTAR PRADESH, PAN: AAACM2063Q (APPELLANT) (RESPONDENT) ASSESSEE BY : ROHIT JAIN, ADV MS. DEEPANSHREE RAO, CA REVENUE BY: SH. RAJESH KUMAR, SR. DR DATE OF HEARING 31/05 / 2017 DATE OF PRONOUNCEMENT 24 / 0 8 / 2017 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THESE ARE THE CROSS APPEALS FILED BY THE PARTIES AGAINST THE ORDER OF THE LD. CIT A FOR THREE DIFFERENT ASSESSMENT YEARS . WE TAKE UP EACH ASSESSMENT YEAR AND ITS APPEAL S AS UNDER. ASSESSMENT YEAR : 2008 - 09 PAGE 2 OF 44 ITA NO 356/ DEL/2013 (BY ASSESSEE) ITA NO 734/DEL/2013 (BY REVENUE) 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 356/DEL/2013: - 1. THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN AFFIRMING THE ACTION OF THE ASSESSING OFFICER IN ASSESSING RENTAL INCOME OF RS.21,49,943, DERIVED FROM LETTING OUT OF CORPORATE OFFICE AND QUARTERS UNDER THE HEAD 'BUSINESS INCOME' AS AGAINST THE SAME BEING DECLARED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. 1.1 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN HOLDING THAT THE CORPORATE OFFICE AND QUARTERS WERE LET OUT TO THE SISTER CONCERNS OF THE APPE LLANT ON A TEMPORARY BASIS AND, THEREFORE THE RENTAL INCOME SO DERIVED WAS ASSESSABLE TO TAX UNDER THE HEAD 'BUSINESS INCOME'. 1.2 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN DISALLOWING STATUTORY DEDUCTION @ 30% OF THE ANNU AL VALUE UNDER SECTION 24 OF THE ACT, AGAINST THE RENTAL INCOME RECEIVED BY THE APPELLANT, AFTER TREATING THE RENTAL INCOME FROM OFFICE AND QUARTERS AS 'BUSINESS INCOME'. 2. THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN CON FIRMING THE ACTION OF THE ASSESSING OFFICER IN TREATING THE RENTAL INCOME OF RS.4,20,000 RECEIVED FROM LETTING OUT OF M.D. OFFICE (SOAP UNIT MERGED WITH M.D. OFFICE) AS 'INCOME FROM OTHER SOURCES' INSTEAD OF 'INCOME FROM HOUSE PROPERTY' DECLARED BY THE APP ELLANT. 2.1 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) FAILED TO APPRECIATE THAT THE RENTAL INCOME FROM M.D. OFFICE (SOAP UNIT MERGED WITH M.D. OFFICE) WAS NOT RECEIVED ONLY FOR LETTING OUT OF LAND ALONE BUT FOR LAND AND BUILDING APPURTENANT THERETO. 2.2 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN DISALLOWING STATUTORY DEDUCTION @30% OF THE ANNUAL VALUE UNDER SECTION 24 OF THE ACT, AGAINST THE RENTAL INCOME RECEIVED BY THE APPELLANT, AFTER TREATING THE RENTAL INCOME FR OM (SOAP UNIT MERGED WITH M.D. OFFICE) AS 'INCOME FROM OTHER SOURCES'. 3. WITHOUT PREJUDICE, THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN ASSESSING RENTAL INCOME OF RS.4,20,000 AS 'INCOME FROM OTHER S OURCES' AND NOT AS 'BUSINESS INCOME 1 OF THE APPELLANT. 4. THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF EXPENDITURE AMOUNTING TO RS.98.14 LACS INCURRED BY THE APPELLANT IN RESPECT OF STEEL UNI T, ON THE GROUND THAT NO BUSINESS ACTIVITY WAS BEING CARRIED OUT BY THE APPELLANT IN THE SAID UNIT DURING THE RELEVANT PREVIOUS YEAR. 4.1 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) FURTHER ERRED IN HOLDING THAT THE STEEL UNIT WAS AN ENTIRELY 'INDEPEN DENT UNIT' ON THE SOLE PREMISE THAT SEPARATE BOOKS OF ACCOUNTS WERE BEING MAINTAINED BY THE APPELLANT FOR THE SAID UNIT. PAGE 3 OF 44 4.2 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN NOT FOLLOWING THE BINDING DECISION OF THE JURISDICTIO NAL DELHI HIGH COURT IN APPELLANT'S OWN CASE REPORTED IN 200 ITR 341 AND ALSO THE DECISION OF THE CIT(A) FOR THE ASSESSMENT YEAR 2003 - 04 (DECIDED FOLLOWING THE FORMER DECISION AND NO FURTHER APPEAL BEING PREFERRED BY THE REVENUE AGAINST THE SAME), IN UTTER / GROSS VIOLATION OF PRINCIPLES OF JUDICIAL DISCIPLINE/ HIERARCHY. 4.3 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) GROSSLY ERRED IN NOT FOLLOWING VARIOUS BINDING DECISIONS OF THE COURTS, PARTICULARLY THE DECISION OF THE SUPREME COURT IN THE CASE OF K. RAVINDRANATH NAIR: 247 ITR 178 AND VARIOUS OTHER JURISDICTIONAL HIGH COURT DECISIONS, RELIED UPON BY THE APPELLANT BY SIMPLY HOLDING THAT THE FACTS OF THE SAID DECISIONS ARE DISTINGUISHABLE, WITHOUT APPRECIATING THE RATIO DECIDED OF THE SAID DECISIONS. 5. THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN HOLDING THAT CREDIT OF RS.20 LACS FROM M/S. SHRESTH COMMERCIAL (P) LIMITED WAS ASSESSABLE AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. 5.1 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN ALLEGING THAT THE APPELLANT WAS NOT ABLE TO ESTABLISH IDENTITY OF THE CREDITOR MEW SIMPLY BECAUSE THE SUMMON PURPORTEDLY ISSUED BY THE ASSESSING OFFICER RETURNED BACK UN - SERVED AND IN CONSEQUENTLY, CONCLUDI NG THAT THE CREDITWORTHINESS OF THE CREDITOR AND THE GENUINENESS OF THE TRANSACTION IS NOT ESTABLISHED, IN TOTAL DISREGARD OF THE CONTEMPORANEOUS EVIDENCES FILED BY THE APPELLANT. 5.2 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) FURTHER ERRED IN NOT DIR ECTING THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 1,92,787/ - , BEING THE AMOUNT OF INTEREST PAID TO THE AFORESAID CREDITOR, ON WHICH TAX WAS DULY DEDUCTED AT SOURCE. 6. THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS.320.94 LACS AS 'SHORT TERM CAPITAL GAINS' UNDER SECTION 50 OF THE ACT ON ACCOUNT OF ALLEGED 'TRANSFER' OF 150 RESIDENTIAL QUARTERS. 6.1 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN HOLDING THAT ENTERING INTO AGREEMENT TO SELL IN RESPECT OF 150 RESIDENTIAL QUARTERS AMOUNTED TO 'TRANSFER' IN TERMS OF SECTION 2(47) OF THE ACT READ WITH SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882. 6.2 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) FAILED TO AP PRECIATE THAT THE APPELLANT, BEING A SICK COMPANY, WAS BARRED FROM SELLING/ DISPOSING OFF ANY ASSET OF THE COMPANY, INCLUDING THE ABOVE RESIDENTIAL QUARTERS, WITHOUT THE PRIOR PERMISSION OF THE BIFR AND THE FINANCIAL INSTITUTIONS. 7. WITHOUT PREJUDICE, THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN NOT HOLDING THAT THE ASSESSING OFFICER ERRED IN CONSIDERING RS.325.97 LACS FOR THE PURPOSES OF COMPUTING 'SHORT TERM CAPITAL GAINS' AND NOT RS.42,92 LACS, BEING AMOUNT RECEIVED DURING THE RELEVANT PRE VIOUS YEAR. PAGE 4 OF 44 8. THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING THE CHARGING OF INTEREST UNDER SECTION 234A OF THE ACT. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 734/DEL/2013: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DIRECTING THE A.O. TO BIFURCATE THE INCOME AND ASSESS THE SAME UNDER DIFFERENT HEADS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN NOT APPRECIATING THE OBSERVATION OF THE A.O. AND ISSUED DIRECTIONS TO THE A.O. TO BIFURCATE THE INCOME AND ASSESS THE SAME UNDER DIFFERENT HEADS. 4. ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING SUGAR, ALCOHOLIC LIQUOR, WELDING ELECTRODES, PAINT AND VARNISH. THEREFORE, IT IS A MULTIUNIT MANUFACTURING CO. FOR THE YEAR, IT FILED ITS RETURN OF INCOME ON 09/10/2008 DECLARING NIL INCOME. THE ASSESSMENT UNDER SECTION 143 (3) OF THE ACT DATED 27/12/2010 WAS PASSED WHEREIN TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT RS. 409348820/ - . DURING THE ASSESSMENT PROCEEDINGS, THE LD. ASSESSING OFFICER MADE AN ADDITION OF RS. 98.14 LACS ON ACCOUNT OF EXPENDITURE INCURRED BY THE ASSESSEE ON CLOSED STEEL MANUFACTURING UNIT AS NON - BUSINESS EXPENDITURE. A SUM OF RS. 3 20.94 LAC S WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF AGREEMENT TO SELL ENTERED INTO BY THE ASSESSEE FOR 150 RESIDENTIAL QUARTERS HOLDING IT THAT THERE IS A TRANSFER OF THE CAPITAL ASSETS UNDER SECTION 2 (47) OF THE ACT READ WITH SECTION 5 3A OF T HE TRANSFER OF PROPERTY ACT, 1882 , EVEN IF THERE IS NO INSTRUMENT OF SALE DEED REGISTERED IN THE NAME OF STAFF. OVER AND ABOVE THE LD. ASSESSING OFFICER HAS ALSO HELD THAT RENTAL INCOME EARNED BY THE ASSESSEE OF RS. 1 5643952 IS CHARGEABLE TO TAX UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY AND NOT AS BUSINESS INCOME . FURTHER, SOME RENTAL INCOME LD. ASSESSING OFFICER HELD IT TO BE BUSINESS INCOME DENYING THE DEDUCTION OF 30% UNDER SECTION 24 OF THE ACT. FURTHER WITH RESPECT TO TWO PARTIES A SUM O F RS. 31 LACS WAS CONSIDERED AS INCOME UNDER SECTION 68 OF THE ACT. 5. ASSESSEE CHALLENGED THE ORDER OF AO BEFORE CIT A, WHO UPHELD TAXABILITY OF RENTAL INCOME UNDER THE BUSINESS INCOME OF RS. 2149943/ , CHARGEABILITY OF RENTAL INCOME OF RS. 420000 UNDER THE HEAD INCOME FROM OTHER SOURCES AND DISALLOWANCES OF THE EXPENDITURE OF CLOSED STEEL UNIT O F RS. 98.14 LACS . WITH RESPECT TO THE ADDITION OF RS. 31 LACS UNDER SECTION 68 OF THE ACT , HE PAGE 5 OF 44 CONFIRMED THE ADDITION OF RS. 20 LACS WITH RESPECT TO SHRESTHA COMM ERCIAL LTD. FURTHER WITH RESPECT TO THE ADDITION OF RS. 320.94 LACS AS SHORT - TERM CAPITAL GAIN UNDER SECTION 50 OF THE INCOME TAX ACT ON ACCOUNT OF TRANSFER OF 150 RESIDENTIAL QUARTERS , H E UPHELD THE ADDITION AS ACCORDING TO HIM REQUIREMENT OF SECTION 2 ( 47) FOR TRANSFER READ WITH SECTION 53A OF THE TRANSFER OF PROPERTY ACT ARE MET. THEREFORE AGGRIEVED WITH THE ORDER OF THE LD. CIT A, ASSESSEE IS IN APPEAL BEFORE US. 6. THE 1 ST GROUND OF APPEAL IS WITH RESPECT TO ASSES SMENT OF RENTAL INCOME OF RS. 2 149943/ DERIVED FROM CORPORATE OFFICE AND QUARTERS UNDER THE HEAD BUSINESS INCOME BY THE LD. ASSESSING OFFICER OFFERED BY THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY . 7. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE AFORESAID RENTAL INCOME IS, IT IS SUBMITTED, DERIVED BY THE APPELLANT FROM LETTING OUT OF SHOPS/QUARTERS OF CORPORATE OFFICE AND RESIDENTIAL QUARTERS TO SISTER CONCERNS AND 3RD PARTIES. THE SAID PROPERTIES HAD BEEN LET OUT BY THE APPELLANT LONG BACK, APPROXIMATELY 30 YEARS EARLIER, AND THE APPELLANT HAD BEEN CONSISTENTLY DECLARING RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY. IN TERMS OF SECTION 22 OF THE ACT, RENTAL INCOME DERIVED FROM LETTING OF ANY BUILDING OR LAND APPURTENANT THERETO OWNED BY AN ASSESSEE, OTHER THAN THE PROPERTY OCCUPIED BY THE ASSESSEE FOR THE PURPOSES OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM, IS CHARGEABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. RELIANCE PLACED ON THE FOLLOWING DECISIONS, WHERE IT HAS BEEN HELD THAT RENTAL INCOME FROM A PROPERTY OF WHICH THE ASSESSEE IS AN OWNER OR DEEMED OWNER IS ASSESSABLE UNDER THE HEAD `INCOME FROM HOUSE PROPERTY: - EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD. VS. CIT: 42 ITR 49 (SC) - SULTAN BROTHERS (P) LTD. VS. CIT: 51 ITR 353 (SC) - KARNANI PROPERTIES LTD. VS. CIT: 82 ITR 547 (SC) - S.G. MERCANTILE CORPORATION P. LTD. VS. CIT: 83 ITR 700 (SC) - SHAMBHU INVESTMENT P. LTD. VS. CIT: 263 ITR 143 (SC) - CIT V. T. V. SUNDARAM IYENGAR & SONS LTD: 271 ITR 79 (MAD) - CIT V. NEW INDIA INDUSTRIES LTD.: 201 ITR 208 (GUJ) - HOTEL ARTI DELUX (P.) LTD. VS. ACIT : 227 TAXMAN 119 (ALLAHABAD) - ATMA RAM PROPERTIES (P.) LTD. VS. JCIT: 8 SOT 741 (DEL. SB) THUS, WHERE A HOUSE PROPERTY IS OWNED BY AN ASSESSEE AND THE SAME IS EXPLOITED WITH THE DOMINANT INTENTION OF EARNING RENT PAGE 6 OF 44 THEREFROM, EVEN IF CERTAIN INCIDENTAL SERVICES ARE ALSO PROVIDED ALONG WITH LETTING OF PROPERTY, SUCH RENTAL INCOME WOULD BE TAXABLE UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 22 OF THE ACT. IN THE CASE OF APPELLANT, THE AFORESAID PROPERTIES HAD BEEN RENTED OUT LONG BACK, AND HAD ALWAYS INTENDED TO RETAIN THE OWNERSHIP IN SAID PROPERTIES . THE APPELLANT MERELY CONTINUED TO DERIVE PASSIVE RENTAL INCOME FROM THE PROPERTY. T HE SAID ASSET EVEN TILL TODAY, CONTINUE TO BE ON RENT AND IS THUS NOT A CASE OF TEMPORARY LET OUT. ACCORDINGLY, THE RENT RECEIVED BY THE APPELLANT WAS TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY, BY VIRTUE OF SPECIFIC MANDATE OF SECTION 22 OF THE A CT. NOTE: CLEAR DISTINCTION DRAWN BETWEEN RENTAL INCOME DERIVED FROM EMPLOYEES AND NON - EMPLOYEES AND RENTAL INCOME FROM EMPLOYEES HAS BEEN OFFERED TO TAX UNDER THE HEAD PGBP (REFER PAGE 141 OF THE PAPERBOOK). PRINCIPLES OF CONSISTENCY IT IS OF UTMOST IMPOR TANCE TO NOTE THAT THE ASSESSING OFFICER HAS BEEN INCONSISTENT IN HIS STAND REGARDING APPROPRIATE HEAD UNDER WHICH THE ABOVE RENTAL INCOME HAS TO BE ASSESSED. AS STATED SUPRA, THE APPELLANT HAS BEEN CONSISTENTLY DECLARING ABOVE RENTAL INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY SINCE THE ASSESSMENT YEAR 1994 - 95. IN ALL THE PAST ASSESSMENT YEARS (EXCEPT FOR AY 2007 - 08), TREATMENT OF THE AFORESAID RENTAL INCOME AS `INCOME FROM HOUSE PROPERTY, HAD NEVER BEEN DISPUTED BY THE ASSESSING OFFICER/ REVENUE ( REFER CHART PLACED AT PAGE 142 OF THE PAPER BOOK). RELIANCE PLACED ON THE FOLLOWING DECISIONS: - RADHASOAMI SATSANG VS. CIT: 193 ITR 321 (SC) - CIT VS. EXCEL INDUSTRIES LTD.: 358 ITR 295 (SC) 8 ITR 295 (SC) - DIT (E) VS. APPAREL EXPORT PROMOTION COUNCIL: 244 ITR 734 (DEL) - CIT VS. NEO POLYPACK (P) LTD: 245 ITR 492 (DEL.) - CIT VS. DALMIA PROMOTERS DEVELOPERS (P) LTD: 281 ITR 346 (DEL.) - DIT VS. ESCORTS CARDIAC DISEASES HOSPITAL: 300 ITR 75 (DEL.) - ACIT VS. HARBILAS COLD STORAGE & FOOD PRODUCTS: 131 ITD 171 (LUCK) THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS HARYANA TOURISM CORPN. LTD.: 327 ITR 26 (P&H) HELD THAT RENTAL INCOME EARLIER ASSESSED UNDER SECTION 22 AS INCOME FROM HOUSE PROPERTY, COULD NOT BE ASSESSED UNDER SECTION 28 OF THE ACT AS BUSINESS INCOME IN A LATER YEAR IN ABSENCE OF ANY CHANGE IN FUNDAMENTAL FACTS. PAGE 7 OF 44 REBUTTAL TO FINDINGS OF CIT(A) IN AFFIRMING THE ACTION OF THE AO, THE CIT(A) HAS PROCEEDED ON A FACTUALLY INCORRECT PREMISE AND HAS ERRED IN HOLDING THAT THE APPELLANT HAD LET OUT THE PROPERTY ONLY TO SISTER CONCERNS. IT IS FURTHER RESPECTFULLY SUBMITTED THAT THE MERE REASON THAT THE PROPERTY WAS LET OUT TO SISTER CONCERNS, COULD NOT, IT IS SUBMITTED, BE A JUSTIFIED GROUND FOR ASSESSING THE SAID INCOME UNDER THE HEAD BUSINESS INCOME. FURTHER, THE FINDING OF THE CIT(A), THAT THE PREMISES OF THE APPELLANT WAS LET OUT ON TEMPORARY BASIS IS ALSO FACTUALLY INCORRECT AS THE SAID PROPERTIES HAVE BEEN LET OUT FOR MORE THAN 30 YEARS AS ELABORATED INFRA. IT MAY ALSO BE PERTINENT TO NOTE THAT T HE WRITTEN DOWN VALUE OF THE BLOCK OF BUILDING, WHICH HAVE BEEN LET OUT FOR THE PAST 30 YEARS, WOULD HAVE REDUCED TO ALMOST NIL ON EFFLUX OF SUBSTANTIAL PERIOD OF TIME AND VIRTUALLY NO DEPRECIATION COULD HAVE POSSIBLY BEEN CLAIMED BY THE APPELLANT ON SUC H PROPERTIES IN THE SUBJECT ASSESSMENT YEAR. ISSUE COVERED BY ORDER OF ITAT THE AFORESAID ISSUE STANDS COVERED IN FAVOUR OF THE APPELLANT BY THE ORDER OF THE ITAT FOR THE ASSESSMENT YEAR 2007 - 08, WHEREIN ON SIMILAR FACTS, THE TRIBUNAL WAS PLEASED TO HOLD T HAT THE INCOME DERIVED BY THE APPELLANT FROM LETTING OUT OF CORPORATE OFFICE AND QUARTERS IS ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE RELEVANT FINDINGS OF THE TRIBUNAL IS RE - PRODUCED AS UNDER: 10. A BARE PERUSAL OF THE PROVIS IONS CONTAINED U/S 22 OF THE ACT APPARENTLY GOES TO PROVE THAT RENTAL INCOME FROM UNUSED PORTION OF ANY BUSINESS PREMISES OWNED BY THE ASSESSEE IS TO BE TREATED AS INCOME FROM HOUSE PROPERTY. IN THE CASE AT HAND, UNDISPUTEDLY, WHEN THE PROPERTY IN QUESTION CONSISTING OF BUILDINGS AND LAND APPURTENANT THERETO I.E. IN THE SHAPE OF CORPORATE OFFICE AND QUARTERS IS OWNED BY THE ASSESSEE COMPANY AND IS ON RENT PURSUANT TO THE LEASE AGREEMENT DATED 07.06.2007, THE SAME HAS TO BE TREATED AS INCOME FROM HOUSE PROPE RTY . IT DOES NOT MATTER IF THE PROPERTY IN QUESTION IS RENTED OUT TO THE THIRD PARTY OR ITS SISTER CONCERN BECAUSE SISTER CONCERN IS OTHERWISE TREATED AS A SEPARATE ENTITY FOR ALL INTENTS AND PURPOSES. 11. EVEN OTHERWISE, THE ASSESSEE COMPANY HAS COME UP W ITH THE LEASE AGREEMENT DATED 07.06.2007 WHICH DESCRIBES THE ENTIRE LAND AND STRUCTURE THEREON HAVING BEEN RENTED OUT BY THE ASSESSEE PAGE 8 OF 44 COMPANY TO THE THIRD PARTY OR ITS SISTER CONCERN AND THE ISSUE OF RENTING OUT THE LAND AND STRUCTURE THEREON OWNED BY THE ASSESSEE COMPANY IS DULY COVERED U/S 22 OF THE ACT. . (EMPHASIS SUPPLIED) IN VIEW OF THE ABOVE, IT IS RESPECTFULLY SUBMITTED THAT THE RENTAL INCOME OF RS.21,49,943 DERIVED BY THE APPELLANT FROM LETTING OUT OF SHOPS/QUARTERS OF CORPORATE OFFICE AND RESIDENTIAL QUARTERS IS ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN TERMS OF SECTION 22 OF THE ACT. 8. LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE LOWER AUTHORITY. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND PERUSED THE ORDERS OF THE LOWER AUTHORITY. LD AR STATED THAT THIS ISSUES IS DECIDED IN FAVOUR OF THE ASSESSEE FOR IMMEDIATELY PRECEDING YEAR WHEREIN IT HAS BEEN HELD THAT PROPERTY IN QUESTION CONSISTING OF BUILDING AND LAND APPURTENANT THERETO IN THE SHAPE OF CORPORATE OFFICE AND QUARTERS IS OWNED BY THE ASSESSEE COMPANY AND IS ON RENT PURSUANT TO LEAD AGREEMENT DATED 07/06/2007 , THEREFORE , IT HAS TO BE TREATED AS INCOME FROM HOUSE PROPERTY. R ESPECTFULLY FOLLOWING THE ORDER OF THE COORDINATE BENCH IN ASSE SSEES OWN CASE FOR THE IMMEDIATELY PRECEDING PREVIOUS YEAR AND IS NO CHANGE IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE HA S BEEN POINTED OUT BEFORE US BY THE RIVAL PARTIES, WE REVERSE THE FINDING OF THE LOWER AUTHORIT IES AND DIRECT THEM TO TREAT THE INCOME OF RS. 2149943/ FROM LETTING OUT OF SHOPS AND QUARTERS OF CORPORATE OFFICE AND RESIDENTIAL QUARTER TO 3 RD PARTIES AND VARIOUS SISTER CONCERNS TO BE TAXED AS INCOME FROM HOUSE PROPERTY . IN THE RESULT GROUND NO. 1 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 10. THE 2 ND GROUND OF THE APPEAL WAS WITH RESPECT TO THE ENHANCEMENT MADE BY THE LD. CIT APPEAL IN TREATING THE RENTAL INCOME OF RS. 4.20 LACS FROM LETTING OUT OF M. D OFFICE AS INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM HOUSE PROPERTY SHOWN BY THE APPELLANT. THE ASSESSING OFFICER ASSESSED THIS INCOME AS INCOME FROM OTHER SOURCES AGAINST INCOME FROM HOUSE PROPERTY AS IT IS DERIVED FROM LEASE OF VACANT LAND AND THEREFORE IT CANNOT BE HELD TO BE INCOME FROM HOUSE PROPERTY. THE LD. CIT A, HAS AL SO HELD IT TO BE INCOME CHARGEABLE TO TAX UNDER THE HEAD OF INCOME FROM OTHER SOURCES. 11. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED BEFORE US AS UNDER: - PAGE 9 OF 44 THE APPELLANT HAS ENTERED INTO A LEASE AGREEMENT DATED 07 TH JUNE, 2007 WITH M/S WELD EXCEL INDIA LIMITED (REFER PAGE 143 TO 187 OF THE PAPERBOOK) FOR LEASE OF CERTAIN PORTION OF THE SOAP FACTORY, LAND & BUILDING MEASURING 1584 SQ. METER AT THE RATE OF RS.35,000/ - PER MONTH (REFER PAGES 4 & 5 OF THE AGREEMENT). T HE SAID PREMISES MEASURING 1584 SQ. MTR HAS A BUILT UP AREA OF 733 SQ. MTR WHEREIN A TIN SHADE BUILDING HAS BEEN CONSTRUCTED AND THE BALANCE 851 SQ. MTR IS THE OPEN AREA APPURTENANT TO THE SAID BUILDING . FURTHER, THE TENANT HAS ALSO UNDERTAKEN CERTAIN RENO VATION WORK TO THE EXISTING CONSTRUCTED BUILDING AT ITS OWN COST . IT IS ALSO RESPECTFULLY SUBMITTED THAT THE SAID PREMISES HAS BEEN LET OUT TO THE TENANT FOR THE PURPOSE OF MANUFACTURE, WAREHOUSE AND STORAGE OF GOODS , WHICH CAN, BY NO STRETCH OF ARGUMENT , BE CARRIED OUT IN A VACANT PLOT OF LAND. FURTHER, AS PER NOTE 40(B) TO SCHEDULE 14 OF THE AUDITED FINANCIAL STATEMENTS (REFER PAGE 16 OF THE PAPER BOOK), THE AUDITORS HAVE CLEARLY DISCLOSED THE FACT THAT THE APPELLANT HAS ENTERED INTO A PERPETUAL LEASE AGREEMENT FOR CERTAIN PORTION OF SOAP FACTORY, LAND & BUILDING (1584 SQ. MTRS) . THE AFORESAID FACTS, IN OUR RESPECTFUL SUBMISSION, CLEARLY GO TO ESTABLISH THAT THE LEASE AGREEMENT HAS BEEN ENTERED INTO FOR LEASE OF BUILDING AND LAND APPURTENANT THERETO AND NOT FOR LEASE OF VACANT LAND ALONE, AS HAS BEEN ALLEGED BY THE ASSESSING OFFICER. FURTHER, THE ASSESSING OFFICER HAS HIMSELF ACKNOWLEDGED IN THE IMPUGNED ASSESSMENT ORDER (PARA 2.2) THAT INCOME SHOULD BE ASSESSED UNDER THE HEAD INCOME FROM HOUSE PR OPERTY IF THE RENTAL INCOME IS DERIVED FROM LEASING OF ANY BUILDING & LAND APPURTENANT THERETO. REBUTTAL TO FINDINGS OF CIT(A) ON PERUSAL OF THE FINDINGS OF THE CIT(A) @ PAGES 8, IT MAY BE NOTED, THAT THE INTENTION OF THE LESSEE IN TAKING THE AFORESAID PR OPERTY ON LEASE WAS TO USE THE SAME FOR MANUFACTURE, WAREHOUSE, STORAGE OF GOODS AND OFFICE PURPOSE, WHICH UNDOUBTEDLY COULD NOT HAVE, IT IS SUBMITTED, BEEN UNDERTAKEN ON A VACANT PIECE OF LAND. THUS, IT WAS MAINLY THE STRUCTURE WHICH WAS INTENDED TO BE T AKEN ON LEASE, FOR THE PURPOSE OF MANUFACTURE, STORAGE ETC. THE MERE FACT THAT PERMISSION WAS TAKEN BY THE LESSEE TO UNDERTAKE RENOVATION OF THE PREMISES WOULD NOT, IT IS SUBMITTED, CHANGE THE CHARACTER/ NATURE OF THE PREMISES VIS - - VIS THE APPELLANT IS CO NCERNED, FURTHER, ONCE THE FACT THAT THERE EXISTED A BUILT UP STRUCTURE ON THE LAND IS ESTABLISHED, PAGE 10 OF 44 IT CANNOT, IT IS SUBMITTED, BE HELD THAT THE INCOME DERIVED THEREFROM WAS ASSESSABLE TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. IN VIEW OF THE ABOV E, IT IS RESPECTFULLY SUBMITTED, THAT THE CIT(A), ERRED IN HOLDING THAT THE SAID PROPERTY WAS LET OUT BY THE APPELLANT ONLY WITH THE INTENTION OF DERIVING BENEFIT FROM THE LAND AND NOT THE INCIDENTAL STRUCTURE THEREON. ISSUE COVERED BY ORDER OF ITAT THE AF ORESAID ISSUE, IT IS SUBMITTED, IS COVERED BY THE ORDER OF THE ITAT FOR THE ASSESSMENT YEAR 2007 - 08, WHEREIN THE TRIBUNAL HAS ACCEPTED THE CONTENTION OF THE ASSESSEE THAT INCOME WAS DERIVED FROM LETTING OUT OF LAND AND STRUCTURE THEREON AS OPPOSED TO THE A LLEGATION OF THE ASSESSING OFFICER THAT SUCH INCOME WAS DERIVED FROM LETTING OUT OF VACANT LAND. STILL, THE TRIBUNAL HAS HELD THE SAID INCOME TO BE ASSESSABLE UNDER THE HEAD BUSINESS INCOME ON THE GROUND THAT SUCH INCOME WAS BEING RECEIVED ON A PERMANENT BASIS AND THEREBY CONSTITUTES REGULAR BUSINESS INCOME OF THE ASSESSEE. THE RELEVANT FINDINGS OF THE TRIBUNAL IS RE - PRODUCED AS UNDER: 17. PERUSAL OF THE LEASE AGREEMENT DATED 07.06.2007, MINUTELY PERUSED BY THE LD. CIT(A), IS ENOUGH TO DESCRIBE TH E PROPERTY IN QUESTION AS TOTAL LAND AREA OF 1584 SQ. MTR. HAVING INDUSTRIAL SHED OF COVERED AREA OF 733 SQ. MTR. IT IS ALSO SUBJECT MATTER OF THE LEASE AGREEMENT THAT THE LESSEE HAS REQUESTED THE LESSOR TO RENOVATE AND RECONSTRUCT THE EXISTING CONSTRUCTED BUILDING AS THE SAID STRUCTURE IS QUITE OLD AND IS NOT SUITABLE FOR LEASE FOR USE OF MANUFACTURE WAREHOUSE, STORAGE OF GOODS AND OFFICES ETC. WHEN THE LEASE AGREEMENT IS CATEGORIC ENOUGH TO LEASE OUT THE LAND AND STRUCTURE THEREON, THE SAME CANNOT BE DISB ELIEVED WITHOUT GETTING THE SAME VERIFIED BY THE LD. CIT(A) AND NO SUCH VERIFICATION/REMAND REPORT IS THERE ON THE FILE. SO, WE ARE OF THE CONSIDERED VIEW THAT THE RENTAL INCOME OF RS.4,20,000 WAS DERIVED BY THE ASSESSEE COMPANY BY LETTING OUT THE LAND AND STRUCTURE THEREON. . 19. WHEN IT IS NOT IN DISPUTE THAT THE REGULAR RENTAL INCOME OF RS.4,20,000 IS BEING DERIVED BY THE ASSESSEE COMPANY FROM THE LAND AND STRUCTURE THEREON FROM M/S WELS EXCEL INDIA LIMITED IN THE BASIS OF LEASE AGREEMENT DATED 07.0 6.2007 @ RS.35,000/ - PER MONTH ON PERMANENT BASIS, IT HAS BECOME REGULAR BUSINESS INCOME OF THE ASSESSEE COMPANY. SO, WE ARE OF THE CONSIDERED VIEW THAT AO AS WELL AS LD. CIT(A) HAVE ERRED IN TREATING THE RENTAL INCOME OF RS.4,20,000/ - PAGE 11 OF 44 AS INCOME FROM OTHER SOURCES. SO, THE SAME IS ORDERED TO BE TREATED AS BUSINESS INCOME OF THE ASSESSEE COMPANY. (EMPHASIS SUPPLIED) THE AFORESAID FINDING, IN OUR VIEW, IS CONTRARY TO THE CATEGORICAL FINDING OF ITAT IN ISSUE (1) SUPRA, WHEREIN THE ITAT HAS, IN PRINCIPLE , ACCEPTED THE CONTENTION OF THE APPELLANT THAT RENTAL INCOME DERIVED FROM LETTING OUT OF BUILDING AND LAND APPURTENANT THERETO IS ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THEREFORE, THE CONCLUSION OF THE TRIBUNAL ON THE ISSUE OF TAXATION OF THE SAID INCOME AS BUSINESS INCOME IS CONTRADICTORY TO THE PRINCIPLE LAID DOWN WHILE DISCUSSING ISSUE (1). IN VIEW OF THE ABOVE, IT IS RESPECTFULLY SUBMITTED THAT THE RENTAL INCOME OF RS.4,20,000 RECEIVED BY THE APPELLANT FROM LETTING OUT OF M.D. OFFICE (SOAP UNIT MERGED WITH M.D. OFFICE) IS ASSESSABLE TO TAX UNDER THE HEAD I NCOME FROM HOUSE PROPERTY . 12. LD. AUTHORISED REPRESENTATIVE RELIED UPON THE ORDER OF THE LOWER AUTHORITIES. 13. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND PERUSED THE ORDERS OF THE LOWER AUTHORITY. LD AR STATED THAT IN CASE OF THE ASSESSEE FOR IMMEDIATELY PRECEDING YEAR ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF ITAT FOR A Y 2007 08 WHEREIN IT HAS BEEN HELD WHEN THE LEASE AGREEMENT IS CATEGORIC ENOUGH TO LEA SE OUT THE LAND AND STRUCTURE THEREON, THE SAME CANNOT BE DISBELIEVED WITHOUT GETTING THE SAME VERIFIED BY THE LD. CIT A, AND NO SUCH VERIFICATION, REMAND REPORT IS THERE ON THE FILE. SO THE COORDINATE BENCH HELD THAT THEY ARE OF THE CONSIDERED VIEW THAT R ENTAL INCOME OF RS. 4.20 LACS WAS DERIVED BY THE ASSESSEE COMPANY BY LETTING OUT THE LAND AND STRUCTURE THEREON. FURTHERMORE, THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COURT OF INDIA IN CASE OF 81 TAXMANN.C OM 193 RAJ DADARKAR & ASSOC VS ACIT. THEREFORE, HENCE, AS ISSUES IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON. SUPREME COURT AND RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING PREVIOUS YEAR AND IS NO CHANGE IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IS BEEN POINTED OUT BEFORE US BY THE RIVAL PARTIES, WE REVERSE THE FINDING OF THE LOWER AUTHORITY AND DIRECT THEM TO TREAT THE INCOME O F RS. 4.20 LAKHS TO BE TAXED AS INCOME FROM HOUSE PROPERTY. IN THE RESULT GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. PAGE 12 OF 44 14. GROUND NO. 3 OF THE APPEAL IS REDUNDANT AS WE HAVE ALREADY ALLOWED GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE AND HENCE, DIS MISSED. 15. GROUND NO. 4 OF THE APPEAL WAS WITH RESPECT TO THE DISALLOWANCE OF EXPENDITURE OF RS. 98.14 LACS INCURRED BY THE ASSESSEE IN RESPECT OF STEEL UNIT ON THE GROUND THAT NO BUSINESS ACTIVITY WAS BEING CARRIED OUT BY THE APPELLANT IN THE SAID UNIT DURI NG THE RELEVANT PREVIOUS YEAR. THE LD. ASSESSING OFFICER HAS DISALLOWED THE SAME ON THE GROUND THAT DURING THE PREVIOUS YEAR BUSINESS ACTIVITY WAS NOT CARRIED OUT IN THE SAID UNIT AND THEREFORE THE EXPENDITURE BEING INCURRED FOR THE PURPOSE OF BUSINESS OR NOT DOES NOT ARISE. THE LD. CIT - A CONFIRMED THE ABO VE DISALLOWANCE BY STATING THAT SINCE THE APPELLANT MAINTAIN SEPARATE BOOKS OF ACCOUNT IN RESPECT OF EACH OF ITS UNIT THERE IS NO INTER DEPENDENCE AND THE UNITS ARE INDEPENDENT O F EACH OTHER. HE CONCL UDED THAT SINCE THE BUSINESS OF THE ST EEL UNIT HAD BEEN CLOSED , EXPENDITURE RELATABLE TO THE SAID UNIT ARE NOT ALLOWABLE AS DEDUCTION IN ABSENCES OF ANY STEEL BUSINESS CARRIED OUT BY THE ASSESSEE DURING THE YEAR . 16. LD. AUTHORISED REPRESENTATIVE SUBMITTED A S UNDER: - THE APPELLANT, MODI INDUSTRIES LTD, IT IS SUBMITTED, IS A MULTI - UNIT COMPANY, HAVING DIFFERENT BUSINESS UNITS, VIZ., SUGAR, DISTILLERY, STEEL, PAINT, ELECTRODE AND GAS, ETC. ALL THE ABOVE MENTIONED DIFFERENT UNITS CONSTITUTES THE SAME BUSINESS OF THE APPELLANT SINCE THERE IS COMPLETE UNITY OF CONTROL/ COMMAND, COMMON MANAGEMENT AND COMMON POOL/ INTERMIXING/ INTERLACING OF FUNDS. THIS IS CLEARLY EVIDENT FROM THE FACT THAT: - THERE IS COMMON BOARD OF DIRECTORS AND MANAGEMENT; - COMMON DIRECTORS REPORT IS PREPARED; - COMMON AUDITED ACCOUNTS ARE FINALIZED; AND - THERE IS COMMON POOL OF FUNDS, WHICH IS USED TO MEET THE EXPENSES OF VARIOUS OPERATING/ NON - OPERATING UNITS. UNIT OF CON TROL AND COMMON POOL OF FUNDS IS ALSO EVIDENT FROM THE FACT THAT THE EXPENSES/ LOSS OF THE STEEL UNIT, WHICH HAS CLOSED DOWN, IS ALSO MET OUT OF THE COMMON POOL OF THE APPELLANT. THE STEEL UNIT OF THE COMPANY, IT IS SUBMITTED, SUSPENDED ITS OPERATIONS ON A CCOUNT OF STRIKE/LOCK - OUT AND THEREAFTER, CLOSURE WAS DECLARED W.E.F. 24 TH NOVEMBER 1993 AS THE UNIT WAS FOUND TO BE UNVIABLE. UNDER THE PROVISIONS OF INDUSTRIAL DISPUTES ACT, 1947, IT IS SUBMITTED, WHERE AN UNDERTAKING IS CLOSED DOWN FOR ANY REASON, EVERY WORKMEN, WHO HAS BEEN IN CONTINUOUS SERVICE FOR NOT LESS THAN ONE YEAR, ARE ENTITLED TO `NOTICE PAY AND COMPENSATION IN PAGE 13 OF 44 ACCORDANCE WITH THE PROVISIONS OF SUB SECTION 25F OF THE SAID ACT AS IF THE WORKMEN HAD BEEN RETRENCHED. THE APPELLANT HAS, DURING THE YEAR UNDER CONSIDERATION, INCURRED THE FOLLOWING MAJOR EXPENSES (ROUNDED OFF) IN RELATION TO THE STEEL UNIT: REMUNERATION PAID TO EMPLOYEES: RS.29 LACS. LEGAL CHARGES AMOUNTING TO RS.11 LACS PAID TO ADVOCATES IN CONNECTION WITH LABOUR AND BIFR CASES. INT EREST AMOUNTING TO RS.29 LACS PAID TO LEASING COMPANIES ON BORROWED FUNDS. OTHER MISCELLANEOUS ADMINISTRATIVE EXPENSES INCLUDING RENT, INSURANCE, REPAIRS, ETC., OF RS.22.5 LACS SINCE THE AFORESAID EXPENSES WERE INCURRED IN THE COURSE OF AND FOR THE PURP OSES OF ITS BUSINESS, THE SAME ARE, IT IS SUBMITTED, ALLOWABLE AS DEDUCTION, DESPITE THE FACT THAT THE STEEL UNIT, TO WHICH IT PERTAINS WAS NOT IN OPERATION DURING THE RELEVANT YEAR, HAVING REGARD TO THE FACT STEEL UNIT WAS ONLY A PART/ ACTIVITY OF THE ONE COMMON/ CONSOLIDATED BUSINESS OF THE APPELLANT. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF K. RAVINDRANATHAN NAIR VS. CIT: 247 ITR 178. IN THAT CASE, APEX COURT HELD THAT THE TEN UNITS RUN BY THE ASSESSEE CONST ITUTED A SINGLE BUSINESS AND THAT THE FOUR UNITS IN KERALA DID NOT CONSTITUTE A SEPARATE BUSINESS AND, THEREFORE, PAYMENT THAT WAS MADE WAS NOT ON ACCOUNT OF CLOSURE OF BUSINESS, AND AS SUCH WOULD BE ALLOWABLE UNDER SECTION 37. IT HAD RECORDED THAT THE TRI BUNAL HAD FOUND THAT THERE WAS UNITY OF CONTROL AND MANAGEMENT. FOR THE PURPOSE OF CONTINUING THE BUSINESS THE ASSESSEE HAD TO REDUCE THE NUMBER OF UNITS FROM TEN TO SIX. ANY INCIDENTAL EXPENSE IN REDUCING THOSE UNITS WAS AN EXPENDITURE INCURRED IN THE COU RSE OF CONDUCTING THE BUSINESS BONA FIDE AND ALLOWABLE UNDER SECTION 37. IT IS ALSO PERTINENT TO NOTE THAT THOUGH SOME OF THE EXPENSES REFERRED ABOVE PERTAIN TO THE STEEL UNIT, THE SAID EXPENSES ARE NECESSARILY GENERAL ADMINISTRATIVE AND LEGAL EXPENSES, I NCURRED BY THE APPELLANT TO PRESERVE AND PROTECT THE EXISTING ASSETS OF THE APPELLANT. IT IS RESPECTFULLY SUBMITTED THAT, CLOSURE OF A UNIT OF THE BUSINESS, I.E. THE STEEL UNIT, DOES NOT MEAN THAT THE ENTIRE BUSINESS OF THE APPELLANT IS CLOSED BUT ONLY A PART OF THE BUSINESS ACTIVITY I.E. A UNIT WAS CLOSED. PAGE 14 OF 44 THE DELHI HIGH COURT IN APPELLANTS OWN CASE REPORTED AS CIT VS. MODI INDUSTRIES LTD. (NO.3): 200 ITR 341 WAS CONSIDERING ASSESSMENT FOR ASSESSMENT YEARS 1965 - 66 WHEN THE APPELLANT WAS ENGAGED IN MANUFACTURING VARIOUS COMMODITIES VIZ. SUGAR, VANASPATI, SOAPS, PAINTS AND VARNISH, TORCH AND LANTERN, STARTED MANUFACTURING A NE W COMMODITY, VIZ., SPECIAL ALLOY WIRE AND BILLETS. DEBENTURES WERE ISSUED FOR RAISING FUNDS FOR THIS NEW STEEL UNIT AND THE ASSESSEE INCURRED EXPENDITURE FOR THE ISSUE OF DEBENTURES. THE QUESTION WAS WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE YEAR IN WHICH THE UNIT HAD NOT STARTED WORKING WAS ALLOWABLE AS BUSINESS EXPENDITURE. THE APPELLATE TRIBUNAL FOUND THAT THE MANAGEMENT OF THE NEW UNIT AND THE EARLIER BUSINESS WERE THE SAME AND THERE WAS UNITY OF CONTROL AND A COMMON FUND, AND HELD THAT TH E MANUFACTURE OF SPECIAL ALLOY AND BILLETS WAS AN EXTENSION OF THE ASSESSEES BUSINESS AND NOT A NEW BUSINESS AND ALLOWED DEDUCTION OF THE EXPENDITURE. THE ORDER OF THE TRIBUNAL WAS AFFIRMED BY THE HONBLE HIGH COURT. FURTHER, THE CIT(A) VIII, NEW DELHI, IN THE APPELLANTS OWN CASE WAS CONSIDERING ASSESSMENT FOR ASSESSMENT YEAR 2003 - 04, WHEN THE APPELLANT HAD INCURRED EXPENDITURE AMOUNTING TO RS.65,11,000/ - FOR ITS VANASPATI UNIT, WHICH HAD SUSPENDED ITS MANUFACTURING ACTIVITIES ON ACCOUNT OF INTER - ALIA HIGHER COST AND SHORTAGE OF WORKING CAPITAL. THE ASSESSING OFFICER HAD TREATED THE SAID EXPENSES AS CAPITAL IN NATURE AS THE BUSINESS OF THE UNIT HAD ALTOGETHER STOPPED. T HE CIT(A) ON CONSIDERING THE VARIOUS JUDICIAL PRECEDENTS IN THIS REGARD, HELD THAT SI NCE ONLY ONE OF THE UNITS OF THE APPELLANT COMPANY HAD BEEN CLOSED AND THE REST OF THE BUSINESS CONTINUES, THE ASSESSING OFFICERS ACTION OF DISALLOWING THE SAID EXPENSE WAS INCORRECT . THE APPELLANT UNDERSTAND THAT NO APPEAL HAS BEEN FILED BY THE REVENUE A GAINST THE SAID ORDER OF THE CIT(A). RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING DECISIONS: - CIT VS. PRITHVI INSURANCE CO. LTD.: 63 ITR 632 (SC): - PRODUCE EXCHANGE CORPN. LTD. V. CIT: 77 ITR 739 (SC) - STANDARD REFINERY & DISTILLERY LTD. VS. CIT: 79 ITR 589 (SC): - HOOGHLY TRUST (P.) LTD. V. CIT: 73 ITR 685 (SC): - B.R. LTD. VS. VP. GUPTA, CIT: 113 ITR 647 (SC) - VEECUMSEES VS. CIT: 220 ITR 185 (SC) - C.T. DESAI VS. CIT: 120 ITR 240 (KAR.) - CIT VS. EXPANDED METAL MFRS.: 169 ITR 499 (ALL.) - CIT VS. MALWA VA NASPATI & CHEMICALS CO. LTD.: 226 ITR 253 (MP) - TATA CHEMICALS LIMITED VS. DCIT: 72 ITD 1 (MUM.), AFFIRMED IN 256 ITR 395 - KESORAM INDUSTRIES AND COTTON MILLS LTD VS. CIT: 196 ITR 845 (CAL.) - CIT VS. OSWAL SPINNING & WEAVING MILLS LTD: 160 ITR 426 (P&H) PAGE 15 OF 44 TH E OPERATIONS OF THE STEEL UNIT, WHICH WAS ONLY ONE AMONG THE VARIOUS UNITS OPERATED BY THE APPELLANT, HAD CEASED AND THE APPELLANTS BUSINESS HAD NOT CLOSED DOWN . WHILE RELYING OF VARIOUS JUDICIAL PRECEDENTS IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER F AILED TO APPRECIATE THAT SUSPENSION OF ONE OF THE ACTIVITIES DOES NOT TANTAMOUNT TO CLOSURE OF BUSINESS OF THE APPELLANT AS HELD IN VARIOUS JUDGMENTS DISCUSSED SUPRA. ANY INCIDENTAL EXPENSE INCURRED IN REDUCING THE UNITS IS AN EXPENDITURE INCURRED IN THE C OURSE OF CONDUCTING THE BUSINESS BONA FIDE AND ALLOWABLE UNDER SECTION 37 OF THE ACT. IN VIEW OF THE AFORESAID, IT IS RESPECTFULLY SUBMITTED, THAT THE THRESHOLD REQUIREMENT FOR DEDUCTION OF BUSINESS EXPENDITURE IS THAT, THERE SHOULD BE A LIVE BUSINESS DUR ING THE YEAR, IN VIEW OF THE REQUIREMENT THAT DEDUCTIONS ARE ALLOWED FOR BUSINESS CARRIED ON DURING THE YEAR. BUT WHERE THERE IS MORE THAN ONE ACTIVITY IN A SINGLE BUSINESS, RETRENCHMENT COMPENSATION AND OTHER INCIDENTAL EXPENSES INCURRED FOR CLOSING DOWN ONE SUCH ACTIVITY DOES NOT LOOSE THE RIGHT TO DEDUCTION. BEING SO, THE ASSESSING OFFICER, IT IS SUBMITTED, GROSSLY ERRED IN DISALLOWING DEDUCTION OF EXPENSES AGGREGATING TO RS.98.14 LACS RELATING TO THE STEEL UNIT OF THE APPELLANT. REBUTTAL TO FINDINGS OF CIT(A) IN AFFIRMING THE ACTION OF THE ASSESSING OFFICER, THE CIT(A) HAS MERELY PROCEEDED TO HOLD THAT THE STEEL UNIT OF THE APPELLANT WAS INDEPENDENT IN AS MUCH AS SEPARATE BOOKS OF ACCOUNTS WERE MAINTAINED. FIRSTLY, THE CIT( A) FAILED TO APPLY THE TRUE TEST LAID DOWN IN THE AFORESAID JUDICIAL PRECEDENTS OF WHETHER THERE WAS UNITY OF CONTROL AND INTER - LACING OF FUNDS. IN THE CASE OF THE APPELLANT, AS ELABORATED SUPRA, ALL THE UNITS OF THE APPELLANT ARE CONTROLLED BY COMMON MANA GEMENT AND THERE IS COMMON POOL OF FUNDS. FURTHER, THE FACT THAT UNIT WISE ACCOUNTS ARE INITIALLY PREPARED [AS RELIED UPON BY THE CIT(A)] IS, IT IS SUBMITTED, NOT MATERIAL. IN ANY MULTI - UNIT ORGANIZATION, SEPARATE UNIT WISE ACCOUNTS WOULD HAVE TO BE NECE SSARILY PREPARED SO AS TO DRAW CONSOLIDATED ACCOUNTS. THE FACT THAT THE BOOKS OF ACCOUNTS OF ALL THE UNITS ARE CONSOLIDATED UNDER THE SIGNATURE/ CONTROL/ SUPERVISION OF THE COMMON MANAGEMENT, IT IS SUBMITTED, PROVES THE FACT THAT THERE EXISTS COMMON CONTRO L AND MANAGEMENT. FURTHER, COMING TO THE RELIANCE PLACED BY THE CIT(A) ON THE DECISION OF THE APEX COURT IN THE CASE OF L.M. CHHABDA & SONS VS. CIT: 65 PAGE 16 OF 44 ITR 638 , IT IS RESPECTFULLY SUBMITTED THAT THE SAID DECISION IS DISTINGUISHABLE ON FACTS AS UNDER: IN TH E ABOVE CASE THE ASSESSEE HAD TAKEN A CINEMA THEATRE CALLED PRAKASH TALKIES AT AHMEDABAD ON LEASE AND CARRIED ON BUSINESS OF EXHIBITING CINEMATOGRAPHIC FILMS IN THAT THEATRE. THE LESSOR, ON EXPIRY OF THE LEASE PERIOD, FILED AN ACTION IN CIVIL COURT WHERE BY THE ASSESSEE PAID CERTAIN AMOUNT AS MESNE PROFITS TO THE LANDLORD/LESSOR AND POSSESSION OF THE THEATRE WAS ALSO RETURNED TO THE LESSOR. OUT OF THE AFORESAID AMOUNTS PAID AS MESNE PROFITS, THE APPELLANT CLAIMED A PART OF THE AMOUNT AS ALLOWABLE DEDUCTION IN THE COMPUTATION OF BUSINESS INCOME. THE CLAIM WAS, HOWEVER DISALLOWED, ON THE GROUND THAT BUSINESS OF PRAKASH TALKIES WAS NOT CARRIED ON BY THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR. THE ISSUE FOR ADJUDICATION BEFORE THE HONBLE SUPREME COURT WAS WHETHER THE VENTURE OF PRAKASH TALKIES WAS A PART OF THE BUSINESS OF EXHIBITING FILMS IN CINEMA THEATRES CARRIED ON BY THE ASSESSEE HAVING REGARD TO UNITY OF CONTROL AND INTERLACING/INTERDEPENDENCE BETWEEN THE DIFFERENT VENTURES. IN THE AFORESAID CONT EXT, THE SUPREME COURT HELD THAT THE ASSESSEE FAILED TO PROVE THAT THERE WAS ANY INTERDEPENDENCE OR ANY UNITY EMBRACING THE VENTURES . IT WAS OBSERVED THAT EXPENDITURE INCURRED IN RESPECT OF THEATRE, WHICH WAS CLOSED, WAS NOT ALLOWABLE AGAINST THE INCOME OF DIFFERENT VENTURES IN THE ABSENCE OF COMMON CONTROL AND INTER - DEPENDENCE. IT MAY BE PERTINENT TO NOTE THAT IN THE AFORESAID CASE, THE APEX COURT HAS CATEGORICALLY HELD THAT FOR THE PURPOSE OF DETERMINING THE INTERDEPENDENCE OF THE UNITS, THE FOLLOWING FIN DINGS OF FACT WOULD HAVE TO BE INVESTIGATED SUCH AS UNITY OF CONTROL AND MANAGEMENT, CONDUCT OF BUSINESS THROUGH THE SAME AGENCY, THE INTER - RELATION OF THE BUSINESS, THE EMPLOYMENT OF THE SAME STAFF TO RUN THE BUSINESS, THE NATURE OF THE DIFFERENT TRANSACT IONS, THE POSSIBILITY OF ONE BEING CLOSED WITHOUT AFFECTING THE TEXTURE OF THE OTHER AND SO FORTH. IN THE CASE OF THE APPELLANT, IT MAY BE NOTED, AS ALREADY DEMONSTRATED SUPRA, THAT THERE IS COMPLETE UNITY OF CONTROL/ COMMAND, COMMON MANAGEMENT AND COMMON POOL/ INTERMIXING/ INTERLACING OF FUNDS AND CONSOLIDATED BOOKS OF ACCOUNTS ARE DRAWN AND COMMON POOL OF FUNDS ARE UTILIZED FOR UNDERTAKING BUSINESS ACTIVITIES. THUS, IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT THE RELIANCE PLACED BY THE CIT(A) ON THE AFORE SAID DECISION FOR THE PROPOSITION THAT MERE MAINTENANCE OF SEPARATE BOOKS OF ACCOUNTS OF A UNIT WOULD DEMONSTRATE ABSENCE OF CONTROL AND INTER - DEPENDENCE IS HIGHLY MISPLACED. PAGE 17 OF 44 17. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUBMITTED THAT WHEN THE STEEL U NIT HAS ALREADY BEEN CLOSED THERE IS NO REASON THAT THE EXPENDITURE INCURRED BY THE ASSESSEE SHOULD BE ALLOWED . . NECESSARILY THOSE EXPENDITURE , A CCORDING TO HIM ARE NOT INCURRED FOR THE PURPOSES OF THE BUSINESS OF THE ASSESSEE AND THEY CANNOT BE ALLOWED EITHER UNDER SECTION 37 (1) OF THE INCOME TAX ACT OR UNDER SECTION 28 OF THE INCOME TAX ACT. 18. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE ASSESSEE HAS INCURRED THE EXPENDITURE OF REMUNERATION TO EMPLOYEES OF RS. 29 LACS AND LEGAL CHARGES OF RS. 11 LAKHS WITH RESPECT TO THE LABOUR. FURTHER, INTEREST AMOUNT OF RS. 29 LACS WAS INCURRED TO LEASING COMPAN IES ON BORROWAL MADE BY THE ASSESSEE AND OTHER MISCELLANEOUS ADMINISTRATIVE EXPENSES, SUCH AS RENT ETC OF RS. 22.5 LACS. AS IT IS ALREADY STATED BY US THAT THE ASSESSEE IS A MULTIUNIT MANUFACTURING CO WHICH IS ENGAGED IN BUSINESS OF MANUFACTURING OF VARIO US ITEMS AND ONE OF THEM IS STEEL. ADMITTEDLY DURING THE YEAR STEEL UNIT OF THE COMPANY WAS CLOSED BY SUSPENDING ITS OPERATION ON ACCOUNT OF STRIKE AND LOCKOUT AND THEREFORE THE CLOSURE WAS DECLARED W.E.F. 24/11/1993, AS THE UNIT WAS FOUND UNVIABLE. ADMITT EDLY, ALSO WHEN THE UNIT IS CLOSED THE ASSESSEE IS BOUND TO PAY THE DUES OF THE EMPLOYEES SUCH AS NOTICE PAY AND LEGAL EXPENDITURE ETC WITH RESPECT TO THE LABOUR AND OTHER CASES. IT IS ALSO THE FACT THAT INTEREST AMOUNT OF RS. 29 LACS IS PAID TO THE LEASI NG COMPANY ON BORROWED FUNDS FOR THE PURPOSE OF THE BUSINESS OF THE STEEL UNIT AND OTHER MISCELLANEOUS EXPENDITURE ARE ALSO INCURRED. MERELY BECAUSE ONE OF THE ACTIVITY OF THE MANUFACTURING OF THE ASSESSEE COMPANY HA S STOPPED IT DOES NOT RESULT IN TO DISA LLOWANCE OF THE EXPENDITURE OF THAT MANUFACTURING ACTIVITY AS ASSESSEE IS CARRYING ON COMPOSITES BUSINESS AS HELD BY THE HONBLE DELHI HIGH COURT IN THE APPELLANTS OWN CASE IN 200 ITR 341. FURTHER IN THE APPELLANTS OWN CASE FOR ASSESSMENT YEAR 2003 04 WHEN THE APPELLANT HAD INCURRED EXPENDITURE ON VANASPATI UNIT WHERE THE ACTIVITIES WERE SUSPENDED THE DEDUCTION WAS ALLOWED BY THE LD. CIT A, AND SAME DECISION REMAINS UNCHALLENGED. SIMILARLY, IN THE PRESENT CASE THE BUSINESS OF THE ASSESSEE CONTINUES BU T OUT OF THE SEVERAL MANUFACTURING ACTIVITIES CARRIED ON BY THE ASSESSEE ONE OF THE MANUFACTURING ACTIVITIES HAVE BEEN STOPPED. THEREFORE IT CANNOT BE SAID THAT ASSESSEE HAS CLOSED THE BUSINESS OF MANUFACTURING PAGE 18 OF 44 WHEN THERE IS A JUDICIAL PRECEDENT AVAILABLE IN THE CASE OF TH E ASSESSEE ITSELF (200 ITR 341) WHEREIN I T WAS FOUND THAT THE MANAGEMENT OF THE NEW UNIT IN THE EARLIER BUSINESS WAS THE SAME AND THERE WAS UNITY OF CONTROL AND THE COMMON FUND. FURTHER, WH EN SIMILAR ISSUE HAS BEEN CONSIDERED BY THE HON BLE DELHI HIGH COURT IN 320 ITR 307 WHERE ONE OF THE TEXTILE UNITS OF THE COMPANY WAS CLOSED AND EXPENSES WERE INCURRED BY THE ASSESSEE ON THE CLOSED UNIT, HONBLE DELHI HIGH COURT HELD THAT EXPENDI TURE INCURRED BY SUCH UNIT ARE ALLOWABLE EXPENDITURE. THE REFORE, WE REVERSE THE FINDING OF THE LOWER AUTHORITY IN DISALLOWING THE CLAIM OF THE ASSESSEE WITH RESPECT TO RS. 98.14 LACS INCURRED BY THE ASSESSEE WITH RESPECT TO STEEL UNIT. IN THE RESULT GROUND NO. 4 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 19. GROUND NO. 5 OF THE APPEAL OF THE ASSESSEE IS WITH RESPECT TO THE SUM OF RS. 20 LACS ASSESSED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE INCOME TAX ACT. DURING THE RELEVANT PREVIOUS YEAR APPELLANT IN ITS BOOKS OF ACCOUNT HAD REPAID SECURITY DEPOSIT AGGREGATING TO RS. 11 LAKHS TO ITS C & F AGENT. FURTHER, ASSESSEE RECEIVED LOAN OF RS. 20 LACS TO MRS SHRE S THA COMMERCIAL LTD., THE LD. ASSESSING OFFICER MADE THE ABOVE ADDITION UNDER SECTION 68 OF THE ACT OF RS. 31 LACS. THE LD. CIT APPEAL CONFIRMED THE ACTION OF THE LD. ASSESSING OFFICER, BY HOLDING THAT SINCE THE SUMMONS ISSUED BY THE ASSESSING OFFICER TO THE CREDITOR WAS RETURNED AND NO NEW ADDRESS WAS FURNISHED THE ASSESSEE FAILED TO DISCHARGE ITS ONUS AND ESTABLISH THE IDENTITY AND GENUINENESS OF THE CREDITOR OF RS 20 LAKHS. 20. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED BEFORE US AS UNDER: - THE APPELLANT HAD RECEIVED AN UNSECURED LOAN FROM M/S. SHRESTH COMMERCIAL (P) LTD, WHICH WAS DULY REPAID IN THE SAME YEAR. THE ASSESSING OFFICER, ON PERUSAL OF THE AUDITED ANNUAL ACCOUNTS FOR THE YEAR ENDED 31.03.2008, OBSERVED THAT THE APPELLANT HAD TAKEN UNSECURED LOANS FROM M/S. SHRESTH COMMERCIAL (P) LTD AND VIDE QUESTIONNAIRE DATED 10/12/2010 AND 01/11/2011 DIRECTED THE A PPELLANT TO ESTABLISH IDENTITY OF THE CREDITOR, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE CREDITORS IN RESPECT OF THE ALLEGED OUTSTANDING AMOUNTS. PAGE 19 OF 44 THE APPELLANT ACCORDINGLY WROTE A LETTER DATED 13.12.2010 TO THE AFORESAID COMPANY SEEKING THE RELEVANT DETAILS [REFER PAGES 268 AND 269 OF THE PAPER BOOK]. THEREAFTER IN RESPONSE TO THE QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER, THE APPELLANT SUBMITTED THE FOLLOWING DETAILS/ DOCUMENTS TO ESTABLISH THE CREDIBILITY OF THE TRANSACTION: SL. NO. NAME OF CREDITOR DETAILS/DOC UMENTS FURNISHED PAPERBO OK REFERENC E 1. M/S SHRESTH COMMERCIAL (P) LTD. PAN; COMPANY MASTER DETAILS WITH THE REGISTRAR OF COMPANIES; COPY OF INCOME TAX RETURN (ACKNOWLED GMENT); BANK STATEMENTS REFLECTING RECEIPT AND PAYMENT OF THE SAID LOAN AMOUNT; FORM 16A ISSUED ON TAX WITHHELD ON INTEREST PAID. P A G E S 2 7 0 T O 2 7 6 ON PERUSAL OF THE AFORESAID DETAILS, IT WILL KINDLY BE NOTICED THAT THE AMOUNT OF RS.20,00,000 WAS RECEIVED VIDE CHEQUE NO. 598328 DATED 19 - JUNE - 2007 AND REPAID THR OUGH ACCOUNT PAYEE CHEQUE NO. 027516 DATED 15 - DEC - 2007, WHICH IS REFLECTED IN THE BANK STATEMENT OF THE APPELLANT. THE APPELLANT HAS ALSO DEDUCTED TAX AT PAGE 20 OF 44 SOURCE ON THE INTEREST ON LOAN AMOUNTING TO RS.1,92,787 PAID TO M/S SHRESTH COMMERCIAL (P) LTD (COPY O F FORM 16A EVIDENCING DEDUCTION OF TAX AT SOURCE AMOUNTING TO RS.39,714 ON INTEREST PAID IS PLACED ON RECORD). THUS, ON PERUSAL OF THE AFOREMENTIONED FACTS, IT IS EVIDENT THAT THE TRANSACTION WITH M/S SHRESTH COMMERCIAL (P) LTD IS GENUINE AND THE APPELLAN T HAS BEEN SUCCESSFUL IN ESTABLISHING THE IDENTITY AND CREDITWORTHINESS OF THE CREDITOR. THE SETTLED LEGAL POSITION IS THAT THE INITIAL BURDEN TO SATISFY THE INGREDIENTS OF SECTION 68 OF THE ACT IS ON THE ASSESSEE AND ONCE THE INITIAL IS DISCHARGED AND THERE IS NOTHING TO CONTROVERT THE EVIDENCES PLACED ON RECORD BY THE ASSESSEE, ADDITION CANN OT BE MADE BY THE ASSESSING OFFICER UNDER THAT SECTION. RELIANCE PLACED ON THE FOLLOWING DECISIONS: - ORISSA CORPORATION (P) LIMITED: 159 ITR 78 (SC) - ORIENT TRADING CO. LIMITED: 49 ITR 723 (BOM.) - CIT VS. BAHRI BROTHERS: 154 ITR 247 (PAT.) - CIT VS. METACHEM INDUSTRIES: 245 ITR 160 (MP) - DCIT VS. ROHINI BUILDERS: 256 ITR 360 (GUJ) - NEMI CHAND KOTHARI VS. CIT: 264 ITR 254 (GAUHATI) - CIT VS. DWARKADHISH INVESTMENT (P.) LTD.: 330 ITR 298 (DEL) - CIT VS. KHOOBSURAT RESORTS (P.) LTD.: 256 CTR 371(DEL) - CIT VS. MORANI AUT OMOTIVES (P.) LTD.: 264 CTR 86 (RAJ) - CIT VS. APEX THERM PACKAGING (P.) LTD.: 222 TAXMAN 125 (GUJ) IT IS FURTHER SUBMITTED THAT THE ONUS OF THE APPELLANT IS TO MERELY ESTABLISH THE SOURCE OF THE CREDIT AND NOT SOURCE OF SOURCE. THE APPELLANT HAS CLEARLY ES TABLISHED THE SOURCE BY PLACING ON RECORD UNCONTROVERTED DOCUMENTARY EVIDENCES THAT THE LOAN HAD, IN FACT, BEEN ADVANCED BY THE CREDITORS AND IS DULY REFLECTED IN THEIR REGULAR BOOKS OF ACCOUNTS. IT IS NOT FOR THE APPELLANT TO ESTABLISH THE SOURCE OF THE S OURCE. RELIANCE PLACED ON THE FOLLOWING DECISIONS: - S. K. BOTHRA & SONS, HUF VS. ITO: ITA NO. 175/2003 (CAL) - CIT VS. KISHORI LAL CONSTRUCTION LTD.: 191 TAXMAN 194 (DEL) - CIT VS. DIAMOND PRODUCTS LTD.: 177 TAXMAN 331 (DEL) - CIT VS. JAI KUMAR BAKLIWAL : 366 ITR 217 (RAJ) - CIT VS. H.S. BUILDERS (P.) LTD.: 211 TAXMAN 116(RAJ) - ARAVALI TRADING CO. VS. ITO: 220 CTR 622 (RAJ) - CIT VS. JAUHARIMAL GOEL : 201 CTR 54 (ALLAHABAD) PAGE 21 OF 44 THE MERE FACT THAT THE NOTICE SENT BY THE ASSESSING OFFICER, THAT TOO EX - PARTE, AT THE ADDRESS APPEARING IN THE PAN OF THE LENDER COMPANY WAS RECEIVED BACK UNSERVED, CANNOT, IT IS SUBMITTED, BE THE BASIS FOR HOLDING THE APPELLANT HAS FAILED TO DISCHARGE ITS ONUS [REFER DIVINE LEASING: 299 ITR 268 (DEL) SLP DISMISSED IN 216 CTR 195; KAMDHENU: 206 T AXMANN 254 (DEL) SLP DISMISSED IN CC NO.15640/ 2012; ORIENT TRADING CO, LTD. VS. CIT: 49 ITR 723 (BOM);]. IN VIEW OF THE AFORESAID, IT IS RESPECTFULLY SUBMITTED THAT SINCE THE APPELLANT DISCHARGED THE ONUS UNDER SECTION 68 OF THE ACT, THE ADDITION OF RS .20,00,000 MADE BY THE ASSESSING OFFICER CALLS FOR BEING DELETED IN TOTO. AS A NECESSARY CONSEQUENCE, THE DISALLOWANCE OF INTEREST OF RS.1,92,787 ON THE SAID LOAN ALSO CALLS FOR BEING DELETED. REBUTTAL TO FINDINGS OF CIT(A) IN AFFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER, THE CIT(A) HAS FAILED TO APPRECIATE THAT THE LOAN WAS ADVANCED TO THE ASSESSEE IN THE YEAR 2008, WHICH WAS ALSO REPAID IN THE SAME YEAR AND THE SUMMONS WAS ISSUED BY THE ASSESSING OFFICER ONLY ON 21. 12.2010, I.E. AFTER A LONG GAP OF ABOUT 2 YEARS. FURTHER, THE ASSESSEE WAS NOT UNDER ANY OBLIGATION TO MAINTAIN A TRACK RECORD OF THE ADDRESS OF THE ASSESSEE SUBSEQUENT TO THE YEAR OF TRANSACTION. THE CIT(A) ALSO FAILED TO CONSIDER/ DEAL WITH THE VARIOUS DOCUMENTS WHICH WERE SUBMITTED BY THE APPELLANT IN ORDER TO DISCHARGE ITS ONUS AND ESTABLISH THE IDENTITY OF THE CREDITOR AND GENUINENESS OF THE TRANSACTION. 21. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES . 22. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND PERUSED THE ORDERS OF THE LOWER AUTHORIT IES. IT IS APPARENT THAT THE COMPANY HAS TAKEN A LOAN FROM THE CREDITOR AND THE ASSESSING OFFICER HAS RIGHTLY ASKED ASSESSEE TO PAGE 22 OF 44 IDENTIFY THE CREDITOR AS WELL AS THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CREDITOR WAS REQUIRE D TO BE ESTABLISHED. THE ASSESSEE SUBMITTED CONFIRMATION ALONG WITH THE BANK STATEMENTS OF ASSESSEE , AS WELL AS FORM NO. 16 A ISSUED TO THE PARTY FOR THE PURPOSE OF PAYMENT O F INTEREST AND TAX DEDUCTION AT SOURCE THEREON. THE AMOUNT OF THE LOAN WAS ALSO RECEIVED BY THE CHEQUE ON 19 TH OF JUNE 2007 AND I T WAS ALSO REPAID BY THE CHEQUE O N 15/12/2007. THE ASSESSEE HAS ALSO PAID INTEREST ON THE LOAN OF RS. 192787/ AND TAX HAS ALRE ADY BEEN DEDUCTED THEREON ON OF RS. 39714/ . IT IS ALSO AN ADMITTED FACT THAT AT THE ADDRESS GIVEN BY THE ASSESSEE L D. ASSESSING OFFICER SENT THE NOTICE WHICH WAS RECEIVED BACK, AS UNSERVED. ON VERIFICATION OF PAGE NO. 270 OF THE PAPER BOOK , IT IS APPARE NT THAT ASSESSEE HAS SUBMITTED THE CONFIRMATION OF THE ABOVE PARTY WHERE THE HEAD OFFICE ADDRESS IS SHOWN AT MODI NAGAR, WHEREAS THE ROC DETAILS SUBMITTED AT PAGE NO. 271 OF THE PAPER BOOK SHOWS THE ADDRESS OF NEW DELHI. THEREFORE, THERE MAY BE SOME ERROR IN PROVIDING THE CORRECT ADDRESS OF THE CREDITOR TO THE AO. THEREFORE, IN THE INTEREST OF J USTICE WE SET ASIDE THIS ISSUE TO THE FILE OF THE LD. ASSESSING OFFICER WITH A DIRECTION TO THE ASSESSEE TO PRODUCE NECESSARY DETAILS TO PROVE THE CREDITWORTHINESS A ND GENUINENESS OF THE ABOVE TRANSACTION. LD. AO IS FURTHER DIRECTED TO GRANT PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE TAKING ANY ADVERSE VIEW ON THE ISSUE. IN THE RESULT GROUND NO. 5 OF THE APPEAL OF THE ASSESSEE IS ALLOWED WITH ABO VE DIRECTIO N. 23. GROUND NO. 6 OF THE APPEAL OF THE ASSESSEE IS WITH R ESPECT TO THE ADDITION OF RS. 3 20.94 LACS AS SHORT TERM CAPITAL GAINS UNDER SECTION 50 OF THE ACT ON ACCOUNT OF TRANSFER OF 150 RESIDENTIAL QUARTERS. THE APPELLANT HAD UPTO 31.03.2008, ENTERED INTO 150 AGREEMENTS, INCLUDING 12 AGREEMENTS DURING THE RELEVANT YEAR, IN RELATION TO CERTAIN RESIDENTIAL QUARTERS OF THE COMPANY, WHICH WERE IN UNAUTHORIZED OCCUPATION OF EX - EMPLOYEES AND CERTAIN OUTSIDERS. THE SAID AGREEMENT CONTEMPLATED FUTURE SALE OF THE QUART ERS, SUBJECT TO AND ON RECEIPT OF PERMISSION FROM LENDERS AND REGULATORY AUTHORITIES SUCH AS FINANCIAL INSTITUTIONS AND BIFR. AS PER TERMS OF THE AGREEMENTS, THE APPELLANT HAD RECEIVED RS.325.97 LACS AS INTEREST FREE ADVANCE. THE ASSESSING OFFICER HELD THAT THE SAID AGREEMENT TO SELL IN RESPECT OF 150 RESIDENTIAL QUARTERS AMOUNTED TO TRANSFER IN TERMS OF SECTION 2(47) OF THE ACT READ WITH SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882. PAGE 23 OF 44 ACCORDINGLY, HE MADE AN ADDITION OF RS.320.94 LACS UNDER SECTION 50 OF THE ACT AS SHORT TERM CAPITAL GAINS' BY REDUCING THE WDV OF THE BLOCK OF QUARTERS BY THE TOTAL AMOUNT RECEIVED ON ACCOUNT OF ALLEGED TRAN SFER OF PROPERTY. THE CIT(A) AFFIRMED THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT SINCE THE ENTIRE AMOUNT OF CONSIDERATION WAS RECEIVED BY THE APPELLANT, BY WAY OF ENTERING INTO A WRITTEN AGREEMENT AND SINCE THE POSSESSION OF THE PROPERTY WAS ALREADY WITH THE PROSPECTIVE BUYERS, ALL THE INGREDIENTS OF SECTION 2(47)(V) OF THE ACT WERE FULFILLED. FURTHER, THE CIT(A) HAS ALSO OBSERVED THAT ON ACCOUNT OF ENTERING INTO SUCH , IT CAN BE INFERRED THAT THE LEGAL POSSESSION HAS BEEN GIVEN ON THE DATE OF THE CONTRACT TO THE PROSPECTIVE BUYERS. 24. THE LD. AUTHORISED REPRESENTATIVE ON THIS ISSUE SUBMITTED AS UNDER: - THE APPELLANT, AS STATED ABOVE, HAS ENTERED INTO 150 AGREEMENTS TO SELL, INCLUDING 12 AGREEMENTS DURING THE RELEVANT YEAR , IN RELATION TO CERTAIN QUARTERS OF THE COMPANY [REFER SAMPLE AGREEMENT AT PAGES 279 TO 289 OF THE PAPER BOOK]. THE AFORESAID QUARTER S, IT IS OF UTMOST IMPORTANCE TO NOTE, WERE IN UNAUTHORIZED OCCUPATION/ POSSESSION OF EX - EMPLOYEES AND CERTAIN OUTSIDERS. THE TERMS OF THE AGREEMENT, IT IS SUBMITTED, CLEARLY STIPULATES THAT SALE OF SUCH QUARTERS ARE SUBJECT TO APPROVAL OF FINANCIAL INSTI TUTIONS, WITH WHOM THESE QUARTERS HAVE BEEN MORTGAGED, AND THE APPELLANT COMPANY PROPOSES TO SEEK THE SAME BEFORE AFFECTING FINAL SALE OF SUCH QUARTERS. KIND ATTENTION, IN THIS REGARD, IS INVITED TO THE FOLLOWING SPECIFIC CLAUSES CONTAINED IN THE AGREEMENT : - PREAMBLE ON PAGE 281 REFERS TO AGREEMENT BEING SUBJECT TO PRIOR PERMISSION REQUIRED FROM FINANCIAL INSTITUTIONS; - CLAUSES ON PAGE 283 CLEARLY STATE THAT AGREEMENT IS SUBJECT TO PERMISSIONS FINANCIAL INSTITUTIONS AND REGULATORY AUTHORITIES AND IN CASE PERMISSION IS NOT RECEIVED, AMOUNT WOULD BE REFUNDED; FURTHERMORE, IT IS OF UTMOST IMPORTANCE TO NOTE THAT THE APPELLANT HAS BEEN DECLARED A SICK COMPANY AND THE REVIVAL OF THE APPELLANT IS PENDING BEFORE BIFR. THE APPELLANT, THEREFORE, IS NOT EMPOWERED T O TRANSFER THE PROPERTY OF THE SICK COMPANY, WITHOUT THE PRIOR PERMISSION OF THE BIFR. KIND ATTENTION, IN THIS REGARD, IS INVITED TO THE FOLLOWING PROVISIONS OF SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (SICA): PAGE 24 OF 44 - IN TERMS OF SECTION 22 OF SI CA, ALL THE LEGAL PROCEEDINGS AND CONTRACTS ARE, NOTWITHSTANDING ANY OTHER LAW, SUSPENDED DURING THE PENDENCY OF PROCEEDINGS BEFORE BIFR, INCLUDING FOR EXECUTION, DISTRESS OF THE LIKE AGAINST ANY OF THE PROPERTIES OF THE INDUSTRIAL COMPANY [REFER PAGE 3 08]. - IN TERMS OF SECTION 22A OF SICA, BIFR HAS POWER TO GIVE DIRECTIONS TO THE INDUSTRIAL COMPANY FOR NOT DISPOSING THE ASSETS OF THE COMPANY WITHOUT PRIOR PERMISSION [REFER PAGE 310]. - IN TERMS OF SECTION 32 OF SICA, THE PROVISIONS OF SICA OVERRIDES THE PR OVISIONS OF ANY OTHER ACT OR LAW [REFER PAGE 311]. IN THE AFORESAID CIRCUMSTANCES, THE APPELLANT CLAIMED THAT CAPITAL GAINS IS PAYABLE ON THE BASIS OF THE AFORESAID AGREEMENT AND GAINS WOULD BE TAXABLE ONLY WHEN THE SALE IS EFFECTED, ON RECEIPT OF NECESS ARY APPROVALS FROM THE FINANCIAL INSTITUTIONS AND THE SALE DEED IS REGISTERED AND/ OR POSSESSION IS GIVEN IN FURTHERANCE OF THE AGREEMENT AFTER RECEIPT OF NECESSARY APPROVALS FROM FINANCIAL INSTITUTIONS AND/OR BIFR. THE ASSESSING OFFICER, HOWEVER, SIMPLY P ROCEEDED ON THE GROUND THAT SINCE POSSESSION WAS ALREADY WITH THE PERSONS WITH WHOM AGREEMENT HAD BEEN ENTERED INTO, `TRANSFER UNDER SECTION 2(47) OF THE ACT WAS COMPLETE. THE ASSESSING OFFICER, HOWEVER, FAILED TO APPRECIATE THAT CONDITIONS SPECIFIED IN SECTION 2(47)(V) OF THE ACT READ WITH SECTION 53A OF THE TRANSFER OF PROPERTY ACT (IN SHORT TPA) WERE NOT FULFILLED INASMUCH AS: (A) THE AGREEMENT ENTERED INTO BY THE APPELLANT IS NOT AN AGREEMENT TO SELL AS ENVISAGED IN THE AFORESAID PROVISIONS, PARTICULA RLY HAVING REGARD TO THE FACT THAT THE APPELLANT, BEING A SICK COMPANY, WAS BARRED FROM SELLING/ DISPOSING OFF ANY ASSET, INCLUDING THE AFORESAID RESIDENTIAL QUARTERS, WITHOUT PRIOR PERMISSION OF THE BIFR AND THE FINANCIAL INSTITUTIONS; (B) THE PARTIES WERE I N UNAUTHORIZED OCCUPATION OF THE PREMISES AND THE APPELLANT HAD NOT GIVEN POSSESSION OF THE PREMISES IN PART PERFORMANCE OF THE AGREEMENT, AS REQUIRED UNDER SECTION 53A OF THE TRANSFER OF PROPERTY ACT; (C) MOST OF THE AGREEMENTS ENTERED INTO BY THE APPELLANT W ERE TO NOT REGISTERED AND CONSEQUENTLY, WERE NOT IN THE NATURE OF AGREEMENT REFERRED IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT. BEING SO, THE PROVISIONS OF SECTION 2(47)(V) OF THE ACT WERE NOT ATTRACTED, AS ELABORATED HEREUNDER: LEGAL POSITION PAGE 25 OF 44 IT W ILL KINDLY BE APPRECIATED THAT IN TERMS OF SECTION 45 OF THE ACT, CHARGE OF TAX UNDER THE HEAD CAPITAL GAINS ARISES W.R.T. ANY PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR... TRANSFER, AS DEFINED IN S ECTION 2(47) OF THE ACT, HAVING FOLLOWING FEATURES: - TRANSFER INCLUDES SALES, EXCHANGE OR RELINQUISHMENT OF THE ASSET OR EXTINGUISHMENT OF ANY RIGHTS THEREIN; - CLAUSES (V) AND (VI) WERE INSERTED BY THE FINANCE ACT, 1987, W.E.F. 01.04.1988, TO GIVE EXTENDED MEANING OF TRANSFER; - PRIOR TO INSERTION OF THE ABOVE CLAUSES, THE SETTLED LEGAL POSITION WAS THAT SINCE IMMOVABLE PROPERTY ABOVE RS.100 IN VALUE COULD BE TRANSFERRED ONLY BY EXECUTION OF A REGISTERED INSTRUMENT, IN TERMS OF SECTION 17 OF THE RE GISTRATION ACT, 1908, FOR THE PURPOSES OF SECTION 2(47) OF THE ACT, IMMOVABLE PROPERTY WAS TREATED AS TRANSFERRED ONLY ON EXECUTION OF A REGISTERED SALE DEED IN FAVOUR OF THE BUYER [REFER ALAPATI VENKATRAMIAH VS. CIT: 57 ITR 185 (SC)]; - SIMILARLY FOR RELI NQUISHMENT/ EXTINGUISHMENT OF RIGHTS IN IMMOVABLE PROPERTY, REGISTERED CONVEYANCE WAS NECESSARY AND CAPITAL GAINS WERE BROUGHT TO TAX ONLY IN THE YEAR OF EXECUTION OF REGISTERED CONVEYANCE [REFER ACIT V. MERCURY GENERAL CORPORATION LTD: 133 ITR 525 (DEL.)] . SECTION 53A OF THE TPA, WHICH IS INCORPORATED IN SECTION 2(47)(V) OF THE ACT BY WAY OF LEGISLATION BY REFERENCE/ INCORPORATION, REQUIRES THE FOLLOWING NECESSARY CONDITIONS TO BE SATISFIED: 1. THERE MUST BE A CONTRACT TO TRANSFER FOR CONSIDERATION ANY IM MOVABLE PROPERTY; 2. THE CONTRACT MUST BE IN WRITING, SIGNED BY THE TRANSFEROR, OR BY SOMEONE ON HIS BEHALF; 3. THE CONTRACT MUST BE REGISTERED; 4. THE TERMS NECESSARY TO CONSTITUTE THE TRANSFER SHOULD BE ASCERTAINABLE WITH REASONABLE CERTAINTY ; 5. THE TRANSFEREE MUS T IN PART PERFORMANCE OF THE CONTRACT TAKE POSSESSION OF THE PROPERTY, OR ANY PART THEREOF OR THE TRANSFEREE, BEING ALREADY IN POSSESSION, CONTINUES IN POSSESSION IN PART PERFORMANCE OF THE CONTRACT ; PAGE 26 OF 44 6. THE TRANSFEREE MUST HAVE DONE SOME ACT IN FURTHERANCE OF THE CONTRACT; 7. THE TRANSFEREE MUST HAVE PERFORMED OR BE WILLING TO PERFORM HIS PART OF THE CONTRACT. IT IS RESPECTFULLY SUBMITTED THAT FULFILMENT OF CONDITIONS SPECIFIED IN SECTION 53A OF THE TPA CONDITION PRECEDENT FOR APPLICATION OF SECTION 2(47)(V) OF THE ACT AS HAS BEEN HELD IN THE FOLLOWING DECISIONS: - CIT V. G. SAROJA: 301 ITR 124 (MAD) - C.S. ATWAL VS. CIT: 279 CTR 330 (P&H). IN THE PRESENT CASE, IT IS RESPECTFULLY SUBMITTED THAT OUT OF THE AFORESAID, THE FUNDAMENTAL CONDITIONS ARE, INTER ALIA, NOT FULFILLED, AS DISCUSSED HEREUNDER: (A) AGREEMENT NOT A CONTRACT TO TRANSFER FOR CONSIDERATION ANY IMMOVABLE PROPERTY REFERRED IN SECTION 53A ; IT IS, AT THE OUTSET, SUBMITTED THAT THE AGREEMENT ENTERED INTO BY THE APPELLANT IS NOT A CONTRACT FOR TRANSFER OF IMMOVABLE PROPERTY AS ENVISAGED IN SECTION 53A OF THE TPA, PARTICULARLY HAVING REGARD TO THE FACT THAT THE APPELLANT, BEING A SICK COMPANY, WAS BARRED FROM SELLING/ DISPOSING OFF ANY ASSET, INCLUDING THE AFORESAID RESIDENTIAL QUARTERS, WITHOUT PRIOR PE RMISSION OF THE BIFR AND THE FINANCIAL INSTITUTIONS. APPELLANTS COMPETENCY TO ENTER INTO AGREEMENT TO SELL SUBJECT TO PERMISSION OF BIFR AND FI IT IS RESPECTFULLY SUBMITTED THAT THE APPELLANT HAS BEEN DECLARED A SICK INDUSTRIAL COMPANY ON 14 TH MARCH, 1991 IN TERMS OF SECTION 3(1)(O) OF THE SICA AND IS NOT COMPETENT TO TRANSFER THE ASSETS OF THE COMPANY AS WOULD BE EVIDENT FROM THE FOLLOWING: - BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR) APPOINTED OPERATING AGENCY FOR DRAFTING A REHABILITATION S CHEME FOR REVIVAL OF THE COMPANY. - IN THIS CONTEXT, IT IS RESPECTFULLY SUBMITTED THAT SECTION 22 OF SICA PROVIDES FOR SUSPENSION OF ALL LEGAL PROCEEDINGS, CONTRACTS, ETC., IN RESPECT OF SICK INDUSTRIAL COMPANIES REGISTERED AND UNDER PROCESS WITH BIFR. NO PROCEEDINGS FOR WINDING UP OF THE SICK INDUSTRIAL COMPANY OR FOR THE SALE OF ANY ASSETS OF THE COMPANY OR FOR THE PAGE 27 OF 44 APPOINTMENT OF A RECEIVER, THEREFOR, SHALL LIE WITH ANY AUTHORITY EXCEPT WITH THE CONSENT OF THE BOARD. - SUB - SECTION (3) OF SECTION 22 LAYS D OWN THAT DURING THE PERIOD OF CONSIDERATION/IMPLEMENTATION OF ANY REVIVAL SCHEME, ALL OR ANY OF THE CONTRACTS, ASSURANCES OF PROPERTY, AGREEMENTS, ETC., WHICH THE SICK INDUSTRIAL COMPANY IS A PARTY OR WHICH MAY BE APPLICABLE TO SUCH SICK INDUSTRIAL COMPANY IMMEDIATELY BEFORE THE DATE OF SUCH ORDER, SHALL REMAIN SUSPENDED OR THAT ALL OR ANY OF THE RIGHTS, PRIVILEGES, OBLIGATIONS AND LIABILITIES ACCRUING OR ARISING THEREUNDER BEFORE THE SAID DATE, SHALL REMAIN SUSPENDED OR SHALL BE ENFORCEABLE WITH SUCH ADAPT ATIONS AND IN SUCH MANNER AS MAY BE SPECIFIED BY THE BOARD . - IT IS ALSO NOTE - WORTHY TO POINT HERE THAT SECTION 22(4) OF THE SICA STIPULATES THAT A DECLARATION MADE BY THE BOARD UNDER SECTION 22(3) OF THE SICA SHALL HAVE EFFECT NOTWITHSTANDING ANYTHING CON TAINED IN ANY OTHER LAW . - ADDITIONALLY, SECTION 32 OF SICA LAYS DOWN THAT THE PROVISIONS OF THE ACT AND OF ANY RULES OR SCHEMES MADE THEREUNDER SHALL HAVE EFFECT NOTWITHSTANDING ANYTHING INCONSISTENT THEREWITH, CONTAINED IN ANY OTHER LAW EXCEPT THE PROVIS IONS OF THE FOREIGN EXCHANGE REGULATION ACT, 1973, AND THE URBAN LAND (CEILING AND REGULATION) ACT, 1976. THUS, SECTION 32 OF THE SICA HAS AN OVERRIDING EFFECT AND CONSEQUENTLY THE SCHEME APPROVED BY BIFR SHALL HAVE EFFECT NOTWITHSTANDING ANYTHING INCONSIS TENT CONTAINED IN ANY OTHER LAW, INCLUDING THE PROVISIONS OF THE INCOME TAX ACT. SPECIFIC RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF M/S LORD CHLORO ALKALIES LTD. VS. DGIT (ADMIN): W.P.(C) 1915/ 2013, WHEREIN IT HAS CATEGORICALLY BEEN HELD THAT THE PROVISIONS OF SICA WOULD OVERRIDE/ PREVAIL OVER THE INCOME TAX ACT. - IN THE CASE OF THE APPELLANT, THE AAIFR HAS PASSED AN ORDER DATED 27 TH FEBRUARY, 2008 WHICH CLEARLY STIPULATES THAT THE APPELLANT COMPANY WILL NOT SELL ANY OF THE ASSETS OF THE COMPANY WITHOUT THE PERMISSION OF THE COURTS. - FURTHER, THE AAIFR VIDE ORDER DATED 03.02.2009 HAS DIRECTED THE APPELLANT TO MAINTAIN STATUS QUO WITH RESPECT TO FINANCIAL AND PHYSICAL ASSETS OF THE COMPANY. PAGE 28 OF 44 IN VIEW OF THE ABOVE, IT IS APPARENT THAT THE APPELLANT IS NOT AT ALL COMPETENT TO TRANSFER/ SELL THE PROPERTY(IES) AND THUS, THE AGREEMENTS ENTERED INTO BY THE APPELLANT CANNOT BE REGARDED AS CON TRACT FOR TRANSFER OF IMMOVABLE PROPERTY AS ENVISAGED IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1822. AGREEMENT - CONTINGENT UPON FUTURE CONDITIONS NOT CONTRACT APART FROM THE AFORESAID , IT IS FURTHER SUBMITTED THAT ANOTHER NECESSARY CONDITION OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT, IS THAT THERE MUST BE WRITTEN CONTRACT WHEREFROM THE CONDITIONS OF TRANSFER MUST BE ASCERTAINABLE WITH REASONABLE CERTAINTY . THE EMPHASIS ON THE WORD REASONABLE CERTAINTY, IT IS SUBMITTED, PRE - SUPPOSES THAT THERE MUST EXIST FAIR DEGREE OF CERTAINTY IN THE TERMS OF THE CONTRACT. IN THE CASE OF THE APPELLANT, EXECUTION OF THE AGREEMENT ENTERED INTO BY THE APPELLANT ITSELF IS UNCERTAIN, SINCE THE EXECUTION IS HEDGED BY FULFILLMENT OF VARIOUS NECESSARY/ FUTURE CONDITIONS AND HAPPENING OF VARIOUS UNCERTAIN EVENTS, AS DISCUSSED HEREUNDER: ON PERUSAL OF THE AGREEMENT, IT WILL KINDLY BE NOTICED THAT THE TERMS OF THE AGREEMENT CLEARLY STIPULATE THAT THE SAID QUARTERS HAVE BEEN MORTGAGED WITH FINANCIAL INSTITUTIONS AND THE APPELLANT IS BARRED FROM SELLING/ DISPOSING OF THE RESIDENTIAL QUARTERS, WITHOUT PRIOR PERMISSION OF THE FINANCIAL INSTITUTIONS (REFER PAGES 281 - 283 OF THE PAPER BOOK). THUS, ON PERUSAL OF THE TERMS OF THE AGREEMENT, IT CLEARLY GOES TO ESTABLISH THAT THE AGREEMENT, ITSELF IS DEPENDENT ON THE OCCURRENCE OF VARIOUS CONTINGENT EVENTS, I.E. APPROVAL FROM FINANCIAL INSTITUTIONS/BANKS AND OTHER NECESSARY APPROVALS. THE AGREEMENT CLEARLY PROVIDE S THAT IF THE FINANCIAL INSTITUTIONS/BANKS AND/ OR OTHER NECESSARY APPROVALS ARE NOT RECEIVED, THIS AGREEMENT SHALL BE TREATED AS CANCELLED. TO PUT IT SIMPLY, THE ENTIRE AGREEMENT IS SUBJECT TO UNCERTAIN EVENT OF APPROVAL BEING GRANTED BY THE : (A) FINANCI AL INSTITUTIONS/BANKS; AND (B) OTHER REGULATORY AUTHORITY(IES), AND PAGE 29 OF 44 IN CASE EITHER OR BOTH OF THE AFORESAID APPROVALS ARE NOT RECEIVED, THE AGREEMENT SHALL STAND TERMINATED. IN THIS REGARD, THE APPELLANT HAD, DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE CIT(A), FILED COPY OF LETTER DATED 15TH FEBRUARY, 2005 ADDRESSED TO THE DEPUTY GENERAL MANAGER OF THE INDUSTRIAL DEVELOPMENT BANK OF INDIA (IDBI BANK), BEING THE OPERATING AGENCY APPOINTED FOR REVIVAL OF THE APPELLANT BY THE BIFR, INTIMATING THE M ABOUT THE UNAUTHORIZED OCCUPATION OF THE SAID RESIDENTIAL QUARTERS BY EX - EMPLOYEES OF THE APPELLANT AND AGREEMENT TO SELL ENTERED INTO BY THE APPELLANT WITH SUCH UNAUTHORIZED OCCUPANTS. [REFER PAGE 290 TO 292 OF THE PAPERBOOK] THE AFORESAID CORRESPONDE NCE, IT IS SUBMITTED, CATEGORICALLY STATES THAT THE SAID RESIDENTIAL QUARTERS WOULD BE TRANSFERRED ONLY ON RECEIVING FORMAL PERMISSION FROM THE FINANCIAL INSTITUTIONS AND THAT THE APPELLANT HAS ONLY RECEIVED INTEREST FREE ADVANCE FROM THE INTENDED PURCHA SER(S), WHICH WOULD BE REFUNDED IF THE SAID TRANSACTION DID NOT MATERIALIZE ON ACCOUNT OF NON - RECEIPT OF REQUISITE PERMISSIONS FROM THE FINANCIAL INSTITUTIONS. FURTHER, THE APPELLANT ALSO FILED COPY OF LEGAL OPINION SOUGHT, ON THE BASIS OF WHICH THE APPELL ANT PROCEEDED TO ENTER INTO AGREEMENT TO SELL FOR THE RESIDENTIAL QUARTERS WHICH ARE MORTGAGED WITH FINANCIAL INSTITUTIONS. THE SAID OPINION CLEARLY PROVIDES THAT A MERE AGREEMENT TO SELL DOES NOT CREATE ENCUMBRANCE ON THE PROPERTY UNLESS THE SALE DEED I S EXECUTED BY THE APPELLANT AFTER OBTAINING SPECIFIC PERMISSION FROM THE FINANCIAL INSTITUTIONS. [REFER PAGES 277 TO 278 OF THE PAPERBOOK] PROVISIONS OF INDIAN CONTRACT ACT, 1872 EVEN IN TERMS OF SECTION 32 OF THE INDIAN CONTRACT ACT, 1872, CONTINGENT CONT RACTS TO DO OR NOT TO DO ANYTHING IF AN UNCERTAIN FUTURE EVENT HAPPENS CANNOT BE ENFORCED BY LAW UNLESS AND UNTIL THAT EVENT HAS HAPPENED. IN THE PRESENT CASE, IT IS RESPECTFULLY SUBMITTED THAT THE APPELLANT HAS, TILL DATE, NOT RECEIVED APPROVAL FROM THE F INANCIAL INSTITUTIONS/BANKS AND OTHER REGULATORY AUTHORITY TO TRANSFER THE ABOVE QUARTERS. WHETHER OR NOT, AND WHEN, THE APPELLANT WOULD BE ABLE TO GET THE NECESSARY APPROVALS IS, PRESENTLY, TOTALLY UNCERTAIN. IN SUCH CIRCUMSTANCES, THE AGREEMENT ENTERED I NTO BY THE APPELLANT WITH THE OTHER PARTY IS NOT EVEN ENFORCEABLE IN LAW. PAGE 30 OF 44 FOR THE AFORESAID REASONS, IT IS SUBMITTED THAT THE AGREEMENT ENTERED INTO BY THE APPELLANT IS NOT A CONTRACT FOR TRANSFER OF IMMOVABLE PROPERTY AS ENVISAGED IN SECTION 53A OF THE T PA, SINCE: (I) THE APPELLANT IS BARRED FROM SELLING/ DISPOSING OFF ANY ASSETS OF THE COMPANY; (II) AGREEMENT ENTERED INTO BY THE APPELLANT IS CONTINGENT IN NATURE AND HENCE, NOT ENFORCEABLE. (B) : POSSESSION NOT HANDED OVER IN THE CASE OF THE APPELLANT, IT IS FURTHER SUBMITTED THAT THE APPELLANT DID NOT EVEN HAND OVER THE POSSESSION OF THE PROPERTY IN PURSUANCE OF THE AGREEMENT, AS REQUIRED IN SECTION 53A OF THE TPA AND ON THE CONTRARY THE OCCUPANTS WERE IN ILLEGAL/ FORCED POSSESSION OF THE PREMISES AND FOR THA T REASON, TOO, PROVISIONS OF SECTION 2(47)(V) OF THE ACT ARE NOT APPLICABLE, AS ELABORATED HEREUNDER: IT WILL KINDLY BE APPRECIATED THAT IT IS ONE OF THE NECESSARY INGREDIENTS OF SECTION 53A OF THE TPA, THE TRANSFEREE MUST EITHER TAKE POSSESSION OR MUST C ONTINUE TO REMAIN IN POSSESSION OF THE PROPERTY IN PART PERFORMANCE OF THE CONTRACT . IT IS SUBMITTED THAT MERE OCCUPATION/ POSSESSION OF THE PREMISES IS NOT ENOUGH, SUCH GIVING OR RETAINING OF POSSESSION MUST BE IN PART PERFORMANCE OF THE CONTRACT. IN THE CASE OF THE APPELLANT, IT IS EMPHATICALLY SUBMITTED THAT UNAUTHORIZED POSSESSION OF THE PROPERTY IS ALREADY WITH THE TRANSFEREE; POSSESSION HAS NOT BEEN GIVEN BY THE APPELLANT IN PART PERFORMANCE OF THE AGREEMENT TO SELL. THE PURCHASERS HAVE ADMIT TEDLY BEEN IN ILLEGAL AND UNAUTHORIZED POSSESSION OF THE PROPERTY FOR A LONG TIME AND THE APPELLANT, BEING UNABLE TO HAVE THE PROPERTY VACATED, HAS MERELY ENTERED INTO AN AGREEMENT WITH THE PERSONS IN UNAUTHORIZED OCCUPATION THEREOF. PAGE 31 OF 44 IT NEEDS TO BE APPRECIATED THAT ILLEGAL CONTINUANCE IN POSSESSION OF THE PROPERTY DOES NOT AMOUNT TO VOLUNTARY DELIVERY OF POSSESSION IN PART PERFORMANCE OF THE AGREEMENT TO SELL. ON PERUSAL OF THE AGREEMENT, IT WILL KINDLY BE NOTICED THAT THE TERMS OF THE AGREEMENT TO S ELL NOWHERE MENTIONS/SPECIFIES THAT THE POSSESSION OF THE PROPERTY HAS BEEN GIVEN IN PART PERFORMANCE OF THE CONTRACT. THE AGREEMENT ENTERED INTO BY THE APPELLANT ONLY REFERS TO THE OTHER PARTY ALREADY BEING IN POSSESSION OF THE PREMISES, BUT THE AGREEMEN T NOWHERE RECOGNIZES THE POSSESSION OF THE OCCUPIER AS LEGAL NOR PROVIDES FOR HANDING OVER OF POSSESSION IN FURTHERANCE OF THE AGREEMENT TO SELL. ON PERUSAL OF THE AFORESAID, IT WILL, THUS, KINDLY BE APPRECIATED THAT CONDITIONS OF SECTION 53A OF TPA ARE N OT SATISFIED IN THE PRESENT CASE, SINCE: (A) THE APPELLANT HAS NOT HANDED OVER, NOR ALLOWED RETENTION OF POSSESSION OF THE PROPERTY IN FURTHERANCE OF THE AGREEMENT TO SELL; (B) THE AGREEMENT ENTERED INTO BY THE APPELLANT IS SUBJECT TO UNCERTAIN EVENTS OF APPROVA L BEING GRANTED BY THE FINANCIAL INSTITUTIONS/BANKS, AND OTHER REGULATORY AUTHORITY(IES) AND IN CASE EITHER OR BOTH OF THE APPROVALS ARE NOT RECEIVED, THE AGREEMENT STANDS TERMINATED, THEREBY: (I) RENDERING THE TERMS OF THE AGREEMENT NOT ASCERTAINABLE WITH R EASONABLE CERTAINTY, WHICH TOO, IS ANOTHER FUNDAMENTAL CONDITION OF SECTION 53A OF TPA; (II) MAKING THE AGREEMENT ITSELF UNENFORCEABLE IN LAW IN TERMS OF SECTION 32 OF THE INDIAN CONTRACT ACT, 1872. (C) IN TERMS OF THE BINDING DIRECTIONS OF THE BIFR/ AAIFR AS WEL L AS THE TERMS OF THE LOAN AGREEMENTS, THE APPELLANT CANNOT DISPOSE OFF ITS ASSETS, WHICH PERMISSION HAS NOT BEEN RECEIVED TILL DATE, WHICH AGAIN MAKES IT CLEAR THAT NEITHER THE APPELLANT CAN, IN LAW, GRANT VALID POSSESSION OF THE PROPERTY NOR ENTER INTO A NY ENFORCEABLE CONTRACT WITH ANYONE UNLESS SUCH PERMISSION IS RECEIVED. PAGE 32 OF 44 IT WILL KINDLY BE APPRECIATED THAT HAVING REGARD TO THE AFORESAID, THE APPELLANT CONTINUED TO RECOGNIZE THE AMOUNT RECEIVED UNDER THE AGREEMENT AS ITS LIABILITY IN THE AUDITED ACCOUNT S. IT IS ALSO EMPHASIZED THAT NORMALLY AN AGREEMENT TO SELL IS ENTERED INTO ALONG WITH GRANT OF POWER OF ATTORNEY IN RESPECT OF THE PROPERTY SO AS TO PUT THE BUYER IN A POSITION OF ENJOYMENT OF THE PROPERTY AS AN OWNER. IN THE PRESENT CASE, IT IS EMPHATI CALLY SUBMITTED THAT NO POWER OF ATTORNEY HAS BEEN EXECUTED BY THE APPELLANT. AO/ CIT(A) PROCEEDED ON ASSUMED SATISFACTION OF CONDITIONS OF SECTION 2(47)(V) THE ASSESSING OFFICER, IN THE PRESENT CASE, IT IS RESPECTFULLY SUBMITTED, MERELY PROCEEDED ON THE GROUND THAT AGREEMENT TO SELL HAD BEEN ENTERED AND SINCE POSSESSION WAS ALREADY WITH THE OTHER PARTY(IES), THE CONDITIONS OF SECTION 53A OF TPA WERE FULFILLED, WITHOUT APPRECIATING THE AFORESAID FACTUAL AND LEGAL POSITION. VARIOUS DECISIONS RELIED UP ON AND REFERRED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ARE NOT APPLICABLE SINCE IN THOSE CASES THE COURTS HAVE ANALYZED THE DISTINCTION BETWEEN THE PRE - 1987 AND POST - 1987 PROVISIONS OF SECTION 2(47) OF THE ACT AND HAVE HELD THAT REGISTRATION OF I MMOVABLE PROPERTY IS NOT NECESSARY FOR THE PURPOSE OF TRANSFER. THE COURTS HAVE HELD THAT GIVING OF POSSESSION UNDER SECTION 53A OF THE TPA IS NOW ALSO REGARDED AS TRANSFER. THE CIT(A) ALSO PROCEEDED ON THE PREMISE THAT SINCE AGREEMENT WAS ENTERED INTO BY THE APPELLANT WITH THE EXISTING OCCUPANTS, THE CONDITIONS OF SECTION 2(47)(V) OF THE ACT ARE FULFILLED. THE APPELLANT IS, FIRSTLY, NOT AT ALL DISPUTING THE SETTLED LEGAL POSITION REGARDING CAPITAL GAINS BEING TAXABLE IF CONDITIONS OF SECTION 2(47 ) (V ) OF THE ACT ARE FULFILLED. THE CASE OF THE APPELLANT, HOWEVER, IS THAT FOR THE REASONS ELABORATELY DISCUSSED SUPRA, THE CONDITIONS SPECIFIED IN SECTION 53A OF TPA ARE NOT FULFILLED IN THE PRESENT CASE AND HENCE THE PROVISIONS OF SECTION 2(47)(V) OF THE AC T ARE NOT APPLICABLE. PAGE 33 OF 44 25. FURTHER LD. AUTHORIZED REPRESENTATIVE SUBMITTED THE COPY OF THE RELEVANT EXTRACTS OF THE AUDITED FINANCIAL STATEMENT OF THE APPELLANT FOR ASSESSMENT YEAR 2016 17, DETAILS OF MUNICIPAL TAXES PAID BY THE APPELLANT OF THE COMPANY ON THE WHOEL OF THE PROPERTY TILL TO DATE, AND STRONG RELIANCE WAS PLACED ON INDIAN CONTRACT ACT 1872 AS WELL AS SECURITIZATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002. 26. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES AND SU BMITTED THAT THAT ASSESSEE HAS RECEIVED FULL MONEY, POSSESSION OF THE ASSETS ARE GIVEN LANG BACK AS IT IS ALREADY WITH THE BUYER PRIOR TO THE AGREEMENT , AGREEMENT TO SELL HAVE BEEN ENTERED , THERE IS NO POSSIBILITY OF TAKING BACK POSSESSION BY THE ASSESSEE FROM THE OCCUPANTS OF THE PROPERTY, NOTHING IS REQUIRED TO BE PAID NOW BY THE OCCUPANTS TO THE ASSESSEE, THEREFORE, MERELY BECAUSE THE SALE DEED HAS NOT BEEN EXECUTED IT CANNOT BE SAID TH AT THE TRANSFER HAS NOT TAKEN PLACE. HE FURTHER SUBMITTED THAT HAD IT SUCH BEEN THE CASE, THEN LAW WOULD HAVE PROVIDED THAT TRANSFER OF THE PROPERTY ONLY OCCUR AT THE TIME OF EXECUTION OF THE SALE DEED. HE REFERRED TO PROVISION OF SECTION 2 (47) (V) OF TH E ACT. THEREFORE, HE SUBMITTED THAT LOWER AUTHORITIES ARE CORRECT IN CHARGING THE AMOUNT AND SHORT TERM CAPITAL GAINS. 27. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IT IS AN UNDISPUTED FACT THAT ASSESSE E HAS RECEIVED A SUM OF RS. 325.97 LAKHS ON ACCOUNT OF AGREEMENT TO SELL OF 150 RESIDENTIAL QUARTERS DURING THE FINANCIAL YEAR 2007 08. NOTE NO. 39, APPENDED TO THE ANNUAL ACCOUNTS OF THE COMPANY VIDE SCHEDULE 14 MENTIONS THAT TILL 31/03/2008 , CERTAIN QUARTERS OF THE COMPANY WERE OCCUPIED BY EX EMPLOYEES/OUTSIDERS. THE COMPANY HAS ENTERED INTO AGREEMENT TO SELL FOR 150 INCLUDING 12 REGISTERED AGREEMENTS ENTERED INTO DURING THE CURRENT YEAR FOR THOSE QUARTERS WITH SUCH PARTIES. SALE CONSIDERATION AMOUN TING TO RS. 325.97 LAKHS HAS BEEN RECEIVED AS INTEREST - FREE ADVANCES. THESE AGREEMENTS CLEARLY STIPULATES THAT FINAL SALE OF SUCH QUARTERS ARE SUBJECT TO APPROVAL OF FINANCIAL INSTITUTIONS TO WHOM THESE QUARTERS HAVE BEEN MORTGAGED AND THE COMPANY PROPOSES TO SEEK THE SAME BEFORE AFFECTING FINAL SALES OF SUCH QUARTERS. ACCORDINGLY SALE OF SUCH QUARTERS WILL BE ACCOUNTED FOR ONLY ON RECEIPT OF APPROVAL OF FINANCIAL INSTITUTIONS. FURTHER, THE COMPANY HAS BEEN PAGE 34 OF 44 LEGALLY ADVISED THAT IT CAN ENTER INTO SUCH AGREE MENT TO SELL. THE AMOUNT OF SALE CONSIDERATION RECEIVED BY THE ASSESSEE IS SHOWN AS UNSECURED LOAN FROM THE BUYERS OF THE PROPERTY, THE IMMOVABLE PROPERTIES SUBJECT TO THOSE AGREEMENTS ARE SHOWN IN THE BALANCE SHEET OF THE COMPANY, THE PROPERTY IS ALREADY IN THE POSSESSION OF THE BUYERS SINCE THEN. LOOKING TO THE PECULIAR FACTS OF THE CASE, DURING THE COURSE OF HEARING, IT WAS ASKED TO THE LD. AUTHORISED REPRESENTATIVE TO PROVIDE THE DETAILS WHEN THE PERMISSION WAS TAKEN FROM THE FINANCIAL INSTITUTION FOR EXECUTING SAE DEED BY THE ASSESSEE, WHEN THE ACTUAL REGISTERED SALE DEEDS WERE EXECUTED IN FAVOUR OF THE BUYERS AND TO PRODUCE THE BALANCE SHEET OF THE COMPANY AS AT 31/03/2016 TO SHOW US THAT WHEN SALE CONSIDERATION IS OFFERED FOR CAPITAL GAINS TAX . IN RESPONSE TO THIS LD. AUTHORISED REPRESENTATIVE PROVIDED US THE BALANCE SHEET OF THE COMPANY AS AT 31 ST OF MARCH 2016. ON PERUSAL OF THAT BALANCE SHEET NOTE NO. 33 [ PAGE NO. 79 OF THE ANNUAL REPORT ] READS AS UNDER: - 33. TILL 31 ST MARCH, 2016, CERTAIN QUARTERS OF THE COMPANY ARE OCCUPIED ON AUTHORISEDLY BY EX EMPLOYEES/OUTSIDERS. THE COMPANY HAS ENTERED INTO AGREEMENT TO SELL FOR 215 (PREVIOUS YEAR 215), SUCH RESIDENTIAL QUARTERS WITH SUCH PARTIES. SALE C ONSIDERATION AMOUNTING TO R S. 5 04.50 LAKH (PREVIOUS YEAR RS. 504.50 LAKHS) HAS BEEN RECEIVED AS INTEREST - FREE ADVANCES. THESE AGREEMENTS CLEARLY STIPULATES THAT FINAL SALE OF SUCH QUARTERS ARE SUBJECT TO APPROVAL OF FINANCIAL INSTITUTIONS TO WHOM THESE QUARTERS HAVE BEEN MORTGAGED A ND THE COMPANY PROPOSES TO SEEK THE SAME BEFORE AFFECTING FINAL SALE OF SUCH QUARTERS. ACCORDINGLY, THE SALE OF SUCH QUARTERS WILL BE ACCOUNTED FOR ONLY ON RECEIPT OF APPROVAL OF FINANCIAL INSTITUTIONS. FURTHER, THE COMPANY HAS BEEN LEGALLY ADVISED THAT IT CAN ENTER INTO SUCH AGREEMENT TO SELL. FROM THE ABOVE DISCLOSURE IT IS APPARENT THAT TILL NOW THE SALES DEED HAVE NOT BEEN EXECUTED BY ASSESSEE IN FAVOUR OF THE BUYERS AND NOR THE ADVANCE RECEIVED HAVE BEEN RETURNED TO THEM. THEREFORE IT IS ALSO THE F ACT THAT POSSESSION STILL REMAINS WITH THOSE BUYERS. THEREAFTER, IT WAS ASKED THAT WHEN THE ASSESSEE HAS APPROACHED THE FINANCIAL INSTITUTIONS FOR TAKING APPROVAL FOR EXECUTING THOSE SALE DEEDS. IN RESPONSE TO THIS THE ASSESSEE SUBMITTED THE COPY OF THE C OMMUNICATION DATED 14/07/2003 RECEIVED FROM I NDUSTRIAL D EVELOPMENT B ANK OF INDIA WHICH SPEAKS THAT IN 2003 ITSELF THE PAGE 35 OF 44 BANK ADVISED THE COMPANY THAT BANK HAS COME TO KNOW THAT COMPANY HAS OFFERED THE QUARTERS TO SOME PERSONS FOR SALE OR LEASE OR RENT WITH R IGHT OF PURCHASE GIVEN TO THE LESSEE. IT WAS ALSO CAUTIONED BY THE BANK THAT THESE QUARTERS ARE MORTGAGED TO THE INSTITUTIONS AND THE COMPANY HAS NO RIGHT TO SALE THESE ASSETS. FURTHER, THE COMPANY WAS ALSO REQUIRED TO TAKE PRIOR APPROVAL OF FINANCIAL INST ITUTIONS BEFORE UNDERTAKING SALE OF ASSETS. IT WAS FURTHER STATED BY THE BANK TO THE ASSESSEE TO PROVIDE THE DETAILS OF OFFER MADE BY THE COMPANY R EGARDING THE SALE OF THE ABOVE Q UARTERS. HOWEVER, THOUGH ABOVE COMMUNICATION RELATES TO 2003 PRIOR TO THE A SSESSMENT YEAR IN APPEAL BEFORE US, TILL MARCH 2016 THE SAME SITUATION PREVAILS. IT WAS NOT SHOWN TO US THAT AFTER THE ABOVE COMMUNICATION COMPANY HAS APPROACHED TO THE BANKERS FOR OBTAINING THE APPROVAL FOR SALE OF THOSE QUARTERS. IT IS ALSO INTERESTING TO NOTE THAT FULL SALE CONSIDERATION HAS BEEN RECEIVED BY THE ASSESSEE AND SAME IS SHOWN AS UNSECURED LOAN BUT ASSESSEE HAS NEVER CARED TO OBTAIN/SEEK APPROVAL OF THE FINANCIAL INSTITUTIONS FOR EXECUTING THE SALE DEED. AT LEAST , NO SUCH EFFORTS ARE S HOWN TO USE OR MONEY HAS NOT ALSO BEEN REPAID TO THE BUYERS. IT WAS ALSO THE CLAIM OF THE ASSESSEE THAT IT IS A COMPANY WHICH IS REGISTERED UNDER BIFR AND THEREFORE ACCORDING TO THE APPLICABLE PROVISIONS THE ASSESSEE CANNOT SALE ITS PROPERTIES WITHOUT THE APPROVAL OF THE BOARD. IT WAS FURTHER THE CLAIM OF THE ASSESSEE THAT AS ASSESSEE HAS NOT GIVEN POSSESSION TO THOSE PARTIES IN PURSUANCE TO AGREEMENT TO SELL BUT BUYERS WERE ALREADY IN POOSESSION OF THOSE PROPERTIES UNAUTHORISEDLY, THE PROVISIONS OF S ECTION 53A OF THE TRANSFER OF PROPERTY ACT AS WELL AS PROVISIONS OF SECTION 2 (47) (V) OF THE INCOME TAX ACT ARE NOT TRIGGERED. IT WAS FURTHER THE CLAIM ED THAT THE CONTRACT ENTERED INTO WITH THE BUYER ARE CONTINGENT IN NATURE AND THEREFORE THEY CANNOT BE E NFORCED. PROVISION OF SECTION 2 (47) PROVIDES AS UNDER : - 47 ) 83 ['TRANSFER' 84 , IN RELATION TO A CAPITAL ASSET, INCLUDES, ( I ) THE SALE 84 , EXCHANGE 84 OR RELINQUISHMENT 84 OF THE ASSET ; OR ( II ) THE EXTINGUISHMENT OF ANY RIGHTS THEREIN 84 ; OR ( III ) THE COMPULSORY ACQUISITION THEREOF UNDER ANY LAW ; OR ( IV ) IN A CASE WHERE THE ASSET IS CONVERTED BY THE OWNER THEREOF INTO, OR IS TREATED BY HIM AS, STOCK - IN - TRADE OF A BUSINESS CARRIED ON BY HIM, SUCH CONVERSION OR TREATMENT ;] 85 [OR] 86 [( IVA ) THE MATURITY OR REDEMPTION OF A ZERO COUPON BOND; OR] PAGE 36 OF 44 87 [( V ) ANY TRANSACTION INVOLVING THE ALLOWING OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A 88 OF THE TRANSFER OF PROPERTY ACT, 1882 (4 OF 1882) ; OR ( VI ) ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEMBER OF, OR ACQUIRING SHARES IN, A CO - OPERATIVE SOCIETY, COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER) WHICH HAS THE EFFECT OF TRANSFERRING, OR ENABLING THE ENJOYMENT OF, ANY IMMOVABLE PROPERTY. 89 [ E XPLANATION 1 ]. FOR THE PURPOSES OF SUB - CLAUSES ( V ) AND ( VI ), 'IMMOVABLE PROPERTY' SHALL HAVE THE SAME MEANING AS IN CLAUSE ( D ) OF SECTION 269UA .] 90 [ EXPLANATION 2. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT 'TRANSFER' INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDED DISPOSING OF OR PARTING WITH AN ASSET OR ANY INTEREST THEREIN, OR CREATING ANY INTEREST IN ANY ASSET IN ANY MANNER WHATSOEVER, DIRECTLY OR INDIRECTLY, ABSOLUTELY OR CONDITIONALLY, VOLUNTARILY OR INVOLUNTARILY, BY WAY OF AN AGREEMENT (WHETHER ENTERED INTO IN INDIA OR OUTSIDE INDIA) OR OTHERWISE, NOTWITHSTANDING THAT SUCH TRANSFER OF RIGHTS HA S BEEN CHARACTERISED AS BEING EFFECTED OR DEPENDENT UPON OR FLOWING FROM THE TRANSFER OF A SHARE OR SHARES OF A COMPANY REGISTERED OR INCORPORATED OUTSIDE INDIA;] PROVISION OF SECTION 53A OF THE TRANSFER OF PROPERTY ACT 1882 PROVIDES THAT SECTION 53A OF TRANSFER OF PROPERTY ACT, 1882 PART PERFORMANCE. 53A. WHERE ANY PERSON CONTRACTS TO TRANSFER FOR CONSIDERATION ANY IMMOVABLE PROPERTY BY WRITING SIGNED BY HIM OR ON HIS BEHALF FROM WHICH THE TERMS NECESSARY TO CONSTITUTE THE TRANSFER CAN BE ASCERTAINED WITH REASONABLE CERTAINTY, AND THE TRANSFEREE HAS, IN PA RT PERFORMANCE OF THE CONTRACT, TAKEN POSSESSION OF THE PROPERTY OR ANY PART THEREOF, OR THE TRANSFEREE, BEING ALREADY IN POSSESSION, CONTINUES IN POSSESSION IN PART PERFORMANCE OF THE CONTRACT AND HAS DONE SOME ACT IN FURTHERANCE OF THE CONTRACT, AND THE TRANSFEREE HAS PERFORMED OR IS WILLING TO PERFORM HIS PART OF THE CONTRACT, THEN NOTWITHSTANDING THAT WHERE THERE IS AN INSTRUMENT OF TRANSFER, THAT THE TRANSFER HAS NOT BEEN COMPLETED IN THE MANNER PRESCRIBED THEREFOR BY THE LAW FOR THE TIME BEING IN FORC E, THE TRANSFEROR OR ANY PERSON CLAIMING UNDER HIM SHALL BE DEBARRED FROM ENFORCING AGAINST THE TRANSFEREE AND PERSONS CLAIMING UNDER HIM ANY RIGHT IN RESPECT OF THE PROPERTY OF WHICH THE TRANSFEREE HAS TAKEN OR CONTINUED IN POSSESSION, OTHER THAN A RIGHT EXPRESSLY PROVIDED BY THE TERMS OF THE CONTRACT : PROVIDED THAT NOTHING IN THIS SECTION SHALL AFFECT THE RIGHTS OF A TRANSFEREE FOR CONSIDERATION WHO HAS NO NOTICE OF THE CONTRACT OR OF THE PART PERFORMANCE THEREOF. HERE IN THE CASE BEFORE US THE TRANSF EREE HAS TAKEN THE POSSESSION OF THE ASSETS, WHICH WAS ALREADY THERE WITH HIM, THEREFORE HE HAS RETAINED THE POSSESSION IN TERMS OF THIS CONTRACT. FURTHER TRANSFEREE HAS ALSO PAID THE CONSIDERATION IN PURSUANCE OF THE CONTRACT TO THE APPELLANT COMPANY, HENCE ACCORDING TO US TRANSFEREE HAS PERFORMED THE ENTIRE ACT REQUIRED TO BE DONE BY HIM. IT IS MERELY BECAUSE OF THE REASON THAT ASSESSEE WAS TO OBTAIN THE PERMISSION FROM THE BANKERS AND REGULATORY AUTHORITIES AND LAST SUCH EFFORTS WERE MADE AS SHOWN T O US IN 2003 ONLY, WE ARE OF THE OPINION THAT LOWER AUTHORITIES HAVE CORRECTLY HELD THAT ON THESE TRANSACTIONS SUM IS CHARGEABLE TO CAPITAL GAIN TAX IN TERMS OF PROVISION OF SECTION 2 (47) (V) OF THE PAGE 37 OF 44 ACT. HOWEVER THE CAPITAL GAIN IS CHARGEABLE ON THE TRANSFER OF A CAPITAL ASSETS DURING THE YEAR . FROM THE INFORMATION AVAILABLE WITH US ON RECORD, UP TO 31/3/2008 ASSESSEE HAS ENTERED IN TO 150 AGREEMENTS AND FOR THE YEAR THERE ARE ONLY 12 AGREEMENTS , HENCE, IT IS NOT CLEAR THAT HOW MANY OF THE AGREEMENTS WERE EXECUTED DURING THE YEAR AND HOW MUCH CONSIDERATION WAS RECEIVED DURING THE YEAR AND WHAT IS THE ACTUAL COST OF THOSE ASSETS , THEREFORE WE SET ASIDE THIS ISSUE TO THE FILE OF AO TO DETERMINE THE CAPITAL GAIN IN TER MS OF THE PROVISIONS OF SECTION 45, 48 AND 50 OF THE ACT. THOUGH WE DONOT FIND ANY INFIRMITY IN THE ORDERS OF LOWER AUTHORITIES IN HOLDING THAT THE ABOVE TRANSACTION IS TRANSFER WITHIN THE MEANING OF SECTION 2 (47) (V) OF THE ACT BUT FOR THE PURPOSES OF COMPUTATION OF CAPITAL GAIN THE ISSUE IS SET ASIDE TO THE FILE O THE LD AO. IN THE RESULT GROUND NO 6 OF APPEAL OF THE ASSESSEE IS ALLOWED ACCORDINGLY . 28. GROUND NO 7 OF THE APPEAL OF THE ASSESSEE IS WITH RESPECT TO TAXING UNDER THE HEAD CAPITAL GAIN ONLY THE SUM WHICH IS RECEIVED DURING THE YEAR. WE FIND THAT SUCH ARGUMENT IS AGAINST THE PROVISION OF SECTION 45 AND SECTION 48 OF THE ACT AS FULL VALUE OF CONSIDERATION IS REQUIRED TO CONSIDERED FOR THE TAXATION IN THE YEAR IN WHICH THE TRANSFER TAKES PLACE. HOWEVER AS WE HAVE SET ASIDE THE ISSUES AS AGITATED IN GROUND NO 6 OF THE APPEAL OF THE ASSESSEE TO THE FILE OF THE LD AO FOR ASCERTAINING TRANSFER DURING THE YEAR AND THEN COMPUTE CAPITAL GAIN THEREON, WE DISMISS THIS GROUND OF APPEAL. 29. GRO UND NO 8 OF THE APPEAL OF THE ASSESSEE AGAINST CHARGING OF INTEREST U/S 234 A IS CONSEQUENTIAL IN NATURE AND THEREFORE DISMISSED. 30. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 31. BOTH THE GROUNDS RAISED IN THE APPEAL OF THE REVENUE ARE FALL OUT OF THE GROUND NO 2 AND 3 OF THE APPEAL OF THE ASSESSEE. AS IN THE APPEAL OF THE ASSESSEE WE HAVE ALREADY ALLOWED THIS GROUND IN FAVOUR OF THE ASSESSEE, BOTH THE GROUNDS OF APPEAL OF REVENUE DO NOT SURVIVE. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. 32. IN THE RESULT FOR AY 2008 - 09 APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. A Y 2009 - 10 ITA NO : 789/ DEL/2103 ( BY ASSESSEE) PAGE 38 OF 44 ITA NO : - 1658/DEL/2013 ( BY REVENUE) 33. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 789/DEL/2013: - 1 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN AFFIRMING THE ACTION OF THE ASSESSING OFFICER IN ASSESSING RENTAL INCOME OF RS.22,23,640/ - , DERIVED FROM LETTING OUT OF CORPORATE OFFICE, AND QUARTERS UNDER THE HEAD 'BUSINESS INCOME 1 AS AGAINST THE SAME BEING DECLARED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. 1.1 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN HOLDING THAT THE CORPORATE OFFICE AND QUARTERS WERE L ET OUT TO THE SISTER CONCERNS OF THE APPELLANT ON A TEMPORARY BASIS AND, THEREFORE THE RENTAL INCOME SO DERIVED WAS ASSESSABLE TO TAX UNDER THE HEAD 'BUSINESS INCOME'. 1 .2 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN DISALLO WING STATUTORY DEDUCTION @ 30% OF THE ANNUAL VALUE UNDER SECTION 24 OF THE ACT, AGAINST THE RENTAL INCOME RECEIVED BY THE APPELLANT, AFTER TREATING THE RENTAL INCOME FROM OFFICE AND QUARTERS AS 'BUSINESS INCOME'.' 2. THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN TREATING THE RENTAL INCOME OF RS.4,20,000 RECEIVED FROM LETTING OUT OF M.D. OFFICE (SOAP UNIT MERGED WITH M.D. OFFICE) AS 'INCOME FROM OTHER SOURCES' INSTEAD OF 'INCO ME FROM HOUSE PROPERTY' DECLARED BY THE APPELLANT. 2.1 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) FAILED TO APPRECIATE THAT THE RENTAL INCOME FROM M.D. OFFICE (SOAP UNIT MERGED WITH M.D. OFFICE) WAS NOT RECEIVED ONLY FOR LETTING OUT OF LAND ALONE BUT FOR LAND AND BUILDING APPURTENANT THERETO. 2.2 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN DISALLOWING STATUTORY DEDUCTION @30% OF THE ANNUAL VALUE UNDER SECTION 24 OF THE ACT, AGAINST THE RENTAL INCOME RECEIVED BY THE APP ELLANT, AFTER TREATING THE RENTAL INCOME FROM (SOAP UNIT MERGED WITH M.D. OFFICE) AS 'INCOME FROM OTHER SOURCES'. 3. WITHOUT PREJUDICE, THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN ASSESSING RENTAL INCOME OF RS.4,20,000 AS 'INCOME FROM OTHER SOURCES' AND NOT AS 'BUSINESS INCOME' OF THE APPELLANT. 4. THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 178.53 LACS AS 'SHORT TERM C'APITAL GAINS' UNDER SECTION 50 OF THE A CT ON ACCOUNT OF ALLEGED 'TRANSFER' OF 65 RESIDENTIAL QUARTERS. 4. 1 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN HOLDING THAT ENTERING INTO AGREEMENT TO SELL IN RESPECT OF 65 RESIDENTIAL QUARTERS AMOUNTED TO 'TRANSFER' IN TE RMS OF SECTION 2(47) OF THE ACT READ WITH SECTION 53A OF THE TRANSFER OF PROPERTY ACT, 1882. PAGE 39 OF 44 4.2 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) FAILED TO APPRECIATE MAT THE APPELLANT, BEING A SICK COMPANY, WAS BARRED FROM SELLING/ DISPOSING OFF ANY ASSET OF THE COMPANY, INCLUDING THE ABOVE RESIDENTIAL QUARTERS, WITHOUT THE PRIOR PERMISSION OF THE BIFR AND THE FINANCIAL INSTITUTIONS. 34. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 1658/DEL/2013: - 1. ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE, THE CIT{A) HAS ERRED IN DIRECTING THE A.O. TO BIFURCATE THE INCOME AND ASSESS THE SAME UNDER DIFFERENT HEADS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (A) HAS ERRED IN NOT APPRECIATING THE OBSERVATION OF THE A.O. AND ISSUED DIRECTIONS TO THE A.O. TO BIFURCATE THE INCOME AND ASSESS THE SAME UNDER DIFFERENT HEADS. 3. THE ORDER OF THE CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 35. NOW FIRST WE TAKE UP THE APPEAL OF THE ASSESSEE. BITH THE PARTIES HAVE CONFIRMED BEFORE US THAT THE ISSUES ARE IDENTICAL IN BOTH THE APPEAL OF THE ASSESSEE AND REVENUE AS WERE IN AY 2008 - 09. NO NEW ARGUMENTS WERE ADVANCED BY THE PARTIES. THERFORE THE ISSUES ARE DECIDED AS UNDER : - GR NO PARTICULARS COVERED BY GROUND NO OF APPEAL OUR DECISION IN THIS APPEAL FOR THE REASONS GIVEN IN AY 2008 - 09 ASSESSEES APPEAL 1 RENT OF CORPORATE OFFICE OF RS 2223640/ - GROUND NO 1 ALLOWED 2 & 3 RENTAL INCOME OF RS 420000/ - GROUND NO 2 ALLOWED 4 CHARGEABILITY OF SHORT TERM CAPITAL GAINS OF RS 178.53 LAKHS FOR TRANSFER OF 65 GROUDN NO 6 & 7 PARTY ALLOWED SETTING ASIDE THE GROUND TO THE FILE FO LD AO FOR COMPUTATION OF PAGE 40 OF 44 RESIDENTIAL UNITS CAPITAL GAIN WITH RESPECT TO FLATS TRANSFERRED DU RING THE YEAR REVENUES APPEAL GR NO 1 BIFURCATING THE SUMS GR NO 1 & 2 DISMISSED. 36. IN THE RESULT FOR AY 2009 - 10 APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. A Y 2010 - 11 IAT NO 2039/ DEL/2014 ( BY ASSESSEE) ITA NO 2389/DEL/2014 ( BY REVENUE) 37. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 2039/DEL/2014: - 1. THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN AFFIRMING THE ACTION OF THE ASSESSING OFFICER IN ASSESSING RENTAL INCOME OF RS.24,21,017/ - , DERIVED FROM LETTING OUT OF SHOPS AND QUARTERS OF CORPORATE OFFICE UNDER THE HEAD 'BUSINESS INCOME' AS AGAINST THE SAME BEING DECLARED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. 1.1 THAT THE COMMISSIONER OF INCO ME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN HOLDING THAT THE SHOPS AND QUARTERS OF CORPORATE OFFICE WERE LET OUT TO THE SISTER CONCERNS OF THE APPELLANT ON A TEMPORARY BASIS AND, THEREFORE THE RENTAL INCOME SO DERIVED WAS ASSESSABLE TO TAX UNDER THE HEAD 'BUSINESS INCOME*. 1.2 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN DISALLOWING STATUTORY DEDUCTION @ 30% OF THE ANNUAL VALUE UNDER SECTION 24 OF THE ACT, AGAINST THE RENTAL INCOME RECEIVED BY THE APPELLANT, AFTER TREATING TH E RENTAL INCOME FROM OFFICE AND QUARTERS AS 'BUSINESS INCOME*. 2. THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN TREATING THE RENTAL INCOME OF RS.4,20,000 RECEIVED FROM LETTING O UT OF M.D. OFFICE (SOAP UNIT MERGED WITH M.D. OFFICE) AS 'INCOME FROM OTHER SOURCES' INSTEAD OF 'INCOME FROM HOUSE PROPERTY' DECLARED BY THE APPELLANT. 2.1 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) FAILED TO APPRECIATE THAT THE RENTAL INCOME FROM M.D. OFFICE (SOAP UNIT MERGED WITH M.D. PAGE 41 OF 44 OFFICE) WAS NOT RECEIVED ONLY FOR LETTING OUT OF LAND ALONE BUT FOR LAND AND BUILDING APPURTENANT THERETO. 2.2 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN DISALLOWING STATUTORY DEDUCTION @30 % OF THE ANNUAL VALUE UNDER SECTION 24 OF THE ACT, AGAINST THE RENTAL INCOME RECEIVED BY THE APPELLANT, AFTER TREATING THE RENTAL INCOME FROM M.D. OFFICE (SOAP UNIT MERGED WITH M.D. OFFICE) AS 'INCOME FROM OTHER SOURCES'. 3. WITHOUT PREJUDICE, THAT THE COM MISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN ASSESSING RENTAL INCOME OF RS.4,20,000 AS INCOME FROM OTHER SOURCES' AND NOT AS 'BUSINESS INCOME' OF THE APPELLANT. 4. THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING EXPENDITURE OF RS.50,500/ - INCURRED BY THE APPELLANT ON ACCOUNT OF CONTRIBUTION TOWARDS ANNUAL MEMBERSHIP OF CLUBS CLAIMED AS DEDUCTION UNDER SECTION 37(1) OF THE INCOME TAX ACT. 4.1 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER THAT SUCH CLUB EXPENSES WERE NOT EXPENDED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES AND FURTHER THAT IT WAS NOT COMMERCIALLY EXPEDIENT TO DO SO. 4.2 THAT THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING AN ADHOC ADDITION OF RS.50,500/ - BEING 50% OF THE TOTAL CLUB EXPENSES INCURRED BY THE APPELLANT ON THE ALLEGED CONT ENTION THAT THE FULL AND PROPER SUPPORTING DOCUMENTS WERE NOT FURNISHED BY THE APPELLANT. 38. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 2389/DEL/2013: - 1. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE, THE CIT(A) HAS ERRED IN DIRECTING THE A.O. TO BIFURCATE THE INCOME AND ASSESS THE SAME UNDER DIFFERENT HEADS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN NOT APPRECIATING THE OBSERVATION OF THE A.O. AND ISSUED DIRECTIONS TO THE A.O. TO BIFURCATE THE INCOME AND ASSESS THE SAME UNDER DIFFERENT HEADS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 3,96,000/ - MADE BY THE A.O. ON ACCOUNT OF EXPENSES IN LIEU OF EXEMPT INCOME IN VIEW OF PROV ISION OF SECTION 14AOF THE INCOME TAX ACT 1961, READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. 4. THE ORDER OF THE CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 39. NOW FIRST WE TAKE UP THE APPEAL OF THE ASSESSEE. BOTH THE PARTIES HAVE CONFIRMED BEFORE US THAT THE ISSUES ARE IDENTICAL IN BOTH THE APPEAL OF THE ASSESSEE AND REVENUE AS WERE IN AY 2008 - 09. NO NEW ARGUMENTS WERE ADVANCED BY THE PARTIES. THERFORE THE ISSU ES ARE DECIDED AS UNDER : - PAGE 42 OF 44 GR NO PARTICULARS COVERED BY GROUND NO OF APPEAL OUR DECISION IN THIS APPEAL FOR THE REASONS GIVEN IN AY 2008 - 09 ASSESSEES APPEAL 1 RENT OF CORPORATE OFFICE OF RS 2 412017/ - GROUND NO 1 ALLOWED 2 & 3 RENTAL INCOME OF RS 420000/ - GROUND NO 2 ALLOWED 40. GROUND NO 4 OF THE APPEAL OF THE ASSESSEE WAS AGAINST THE DISALLOWANCE OF CLUB MEMBERSHIP FEES OF RS 50500/ - . DURING THE YEAR THE COMPANY HAS SPENT A SUM OF RS. 1.01 LAKHS ON ACCOUNT OF CONTRIBUTION TOWARDS ANN UAL MEMBERSHIP FEES OF CLUBS. HOWEVER, IN ABSENCE OF PROPER DETAILS. THE LD. ASSESSING OFFICER DISALLOWED 50% OF SUCH EXPENSES. SAME WAS CONFIRMED BY THE LD. 1 ST APPELLATE AUTHORITY. BEFORE US RIVAL PARTIES AGREED THAT THE ABOVE ISSUE IS SQUARELY COVERED NOW IN FAVOUR OF THE ASSESSEE. IN VIEW OF DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF SAMTEL COLOUR LTD. 326 ITR 425 GROUND NO. 4 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 41. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 42. COMING TO THE APPEA L OF THE REVENUE WHERE 3 EFFECTIVE GROUNDS OF APPEAL ARE RAISED. THE GROUND NO. 1 AND 2 OF THE APPEAL ARE WITH RESPECT TO THE ORDER OF THE LD. CIT A, IN DIRECTING THE AO TO BIFURCATED THE INCOME AND ASSESSED THE SAME UNDER DIFFERENT HEADS. THE ABOVE ISSU E IS DECIDED IN APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2008 - 2009 WHEREIN THE ISSUE OF CHARGEABILITY OF RENTAL INCOME WAS DECIDED IN FAVOUR OF THE ASSESSEE. IN VIEW OF THIS WE DISMISS GROUND NO. 1 AND 2 OF THE APPEAL OF THE REVENUE. 43. GROUND NO. 3 OF THE APPEAL OF THE REVENUE IS AGAINST THE ACTION OF THE LD. CIT APPEAL OF DELETION OF DISALLOWANCE OF RS. 3.96 LACS PAID BY THE ASSESSING OFFICER ON ACCOUNT OF EXPENSES IN LIEU OF EXEMPT INCOME. IN VIEW OF THE PROVISIONS OF SECTION 14 A OF THE INCOME TAX ACT 1 961 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. PAGE 43 OF 44 44. IT WAS NOTED BY THE LD. ASSESSING OFFICER DURING THE YEAR THAT ASSESSEE HAS EARNED INCOME OF RS. 21 LAKHS IS DIVIDEND, WHICH IS EXEMPT UNDER SECTION 10 OF THE INCOME TAX ACT. THEREFORE, THE ASSESSEE WAS ASKED WIDE ORDER SHEET ENTRY DATED 21/08/2012 TO EXPLAIN AS TO WHY THE PROPORTIONATE EXPENSES INCURRED ON EXEMPT INCOME SHOULD NOT BE DISALLOWED UNDER THE PROVISIONS OF SECTION 14 A OF THE INCOME TAX ACT. THE ASSESSEE SUBMITTED THAT NO EXPENDITURE HAS BEEN INCURRED ON EARNING OF THIS DIVIDEND BECAUSE NO FRESH INVESTMENT HAS BEEN MADE DURING THE YEAR AND ALL THE INVESTMENTS MADE ARE VERY OLD ON WHICH THE DIVIDEND HAS BEEN RECEIVED DURING THE YEAR UNDER CONSIDERATION. THE LD. ASSESSING OFFICER REJECTED THE AB OVE EXPLANATION AND APPLIED RULE 8D OF THE INCOME TAX ACT AND DISALLOWED A SUM OF RS. 3.96 LACS. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT A, ON THIS ISSUE, WHO DELETED THE DISALLOWANCE FOR THE REASON THAT LD. AO HAS NOT RECORDED ANY SATISFACTION WI TH RESPECT TO THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED FOR EARNING DIVIDEND INCOME ON SHARES HELD BY THE APPELLANT AND FURTHER NO SHARE INVESTMENT WAS MADE DURING THE YEAR. WE HAVE ALSO CAREFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIE S AND HEARD RIVAL CONTENTIONS. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE CLAIMED THAT IT IS NOT INCURRED ANY EXPENDITURE ON EARNING EXEMPT INCOME. HOWEVER, THE LD. ASSESSING OFFICER WITHOUT RECORDING THE SATISFACTION AS APPLIED THE PROVISIONS OF RULE 8D OF THE INCOME TAX ACT AND MADE THE DISALLOWANCE OF RS. 3.96 LACS. ABOVE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF CIT VERSUS TAIKISAH INDUSTRIES LIMITED 370 ITR 338. IN THE RESULT G ROUND NO. 3 OF THE APPEAL OF THE REVENUE IS DISMISSED. 45. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ACCORDINGLY, APPEALS OF THE ASSESSEE FOR ASSESSMENT YEAR 2010 11 WERE PARTLY ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 / 0 8 / 2017 . - SD/ - - SD/ - ( I.C.SUDHIR ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24 / 0 8 / 2017 A K KEOT COPY FORWARDED TO PAGE 44 OF 44 1. APPLICAN T 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI
Other Referred Cases
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Laws Referred To
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1:1 Consultation on Business Valuations
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1:1 Consultation on Tax Litigation
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Consultation on Entity Formation
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Shipping and Logistics Agreement
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Sales Forecasting Sheet
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