DCIT, New Delhi V. M/s. Onkareshwar Properties Pvt. Ltd., New Delhi

ITA 6049/DEL/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6790 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 28-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARAMITA M BISWAS
• Keywords: Capital asset; Business income; Earning of tax free income; Question of law; Date of conversion; Fair market value; TDS; Capital Gains
• Section: 271(1)(c); 45(2); 143(3); 2(14); 14A; 40(a)(ia)

Judgement Text

ITA NO.- 6049/DEL/2016. ONKARESHWARE PROPERTIES PVT. LTD. PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: E: NEW DELHI) BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA NO:- 6049/DEL/2016 ( ASSESSMENT YEAR: 2011-12) DCIT, CIRCLE 19(1), NEW DELHI. VS. M/S ONKARESHWAR PROPERTIES PVT. LTD., FLATE NO. G-5, PLOT NO. G- 1/4, MODEL TOWN-III, NEW DELHI-110009. PAN NO: AAACO7076M APPELLANT RESPONDENT REVENUE BY : MS. PARAMITA M. BISWAS, CIT(DR) ASSESSEE BY : SHRI RAJESH JAIN, CA DATE OF HEARING : 17/10/2019 DATE OF ORDER : 18/10/2019 ORDER PER ANADEE NATH MISSHRA, AM (A) THIS APPEAL BY REVENUE IS FILED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-36, NEW DELHI, [LD. CIT(A), FOR SHO RT] DATED 26.09.2016 FOR ASSESSMENT YEAR 2011-12. THE GROUNDS OF APPEAL ARE AS UNDER: 1. ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING PENALTY IMPOSED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 ITA NO.- 6049/DEL/2016. ONKARESHWARE PROPERTIES PVT. LTD. PAGE 2 OF 11 ON THE ADDITION CONFIRMED BY THE LD. CIT(A) ON ACCO UNT OF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 14A R.W.R. 8D. 2. IN THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY LEVIED ON THE ADDITIO N MADE U/S 40(A)(IA) IN THE LIGHT OF THE JUDGEMENTS OF THE COURT REFERRED AND I GNORING THE NOTIFICATION NO. 56/2012 NON DEDUCTION OF TDS ON CERTAIN CASE S, ISSUED BY CBDT VIDE F.NO. 275/53/2012-IT(B)/SO 3069(E), DATED 31.12.201 2. 3. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FR ESH GROUND(S) OF APPEAL AND / OR DELETE OR AMEND ANY OF THE GROUND(S) OF AP PEAL. (B) THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 ( I.T. ACT, FOR SHORT) ON 26.02.2014 BY DETERMINING THE ASSESSABLE INCOME AS UNDER: 1. DISALLOWANCE U/S 40(A)(IA) RS. 4,05,970/- 2. DISALLOWANCE U/S 14A RS. 40,55,600/- (B.1) THEREAFTER, PENALTY U/S 271(1)(C) OF I.T. ACT WAS LEVIED BY THE ASSESSING OFFICER (AO, FOR SHORT) VIDE ORDER DATED 26.02.2016, AMOUNTING T O RS. 16,47,08,371/- WHICH WAS @ 100% OF TAX SOUGHT TO BE EVADED. AGAINST THE PENALTY OR DER DATED 26.02.2016, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO, VIDE HER ORDER DATED 26 .09.2016 DELETED THE AFORESAID PENALTY U/S 271(1)(C) OF I.T. ACT, AND ALLOWED THE APPEAL O F THE ASSESSEE. THE PRESENT APPEAL BEFORE INCOME TAX APPELLATE TRIBUNAL (ITAT, FOR SHORT) H AS BEEN FILED BY REVENUE AGAINST THE AFORESAID ORDER DATED 26.09.2016 WHEREIN LD. CIT(A) DELETED THE PENALTY. AT THE TIME OF HEARING BEFORE US, THE LEARNED AUTHORIZED REPRESENT ATIVE (LD. AR, FOR SHORT) FOR ASSESSEE SUBMITTED THAT VIDE ORDER DATED 21.01.2019, ITAT HA S DELETED THE AFORESAID QUANTUM ADDITION IN ITA NO. 1823/DEL/2015 FOR ASSESSMENT YEAR 2011-1 2. HE FILED A COPY OF THE AFORESAID ITA NO.- 6049/DEL/2016. ONKARESHWARE PROPERTIES PVT. LTD. PAGE 3 OF 11 ORDER DATED 21.01.2019 PASSED IN ITA NO.- 1823/DEL/ 2015. THE RELEVANT PORTION OF THE ORDER OF ITAT IS REPRODUCED AS UNDER: 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PE RUSED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS. IT IS AN UNDISPUTED F ACT THAT ASSESSEE ALL THROUGHOUT HAS BEEN SHOWING LAND AS AN INVESTMENT R IGHT FROM THE ASSESSMENT YEAR 2006-07 TILL THIS YEAR. THE LAND IN QUESTION WAS PURCHASED IN ASSESSMENT YEAR 2006-07 AND WAS SHOWN AS FIXED ASSE TS. IN THAT YEAR ASSESSMENT WAS MADE U/S 143(3), WHEREIN SUCH TREATM ENT OF THE LAND IN QUESTION WAS ACCEPTED AS BUSINESS ASSETS. THEREAFTE R, PART OF THIS LAND WAS SOLD IN ASSESSMENT YEAR 2008- 09 WHEREIN THE ASSESS EE HAS DECLARED LONG TERM CAPITAL GAIN AND IN WHICH HAS NOT BEEN DISTURB ED BY THE DEPARTMENT. HERE IN THIS CASE BOTH AO AND LD. CIT (A) HAVE REFE RRED TO THE SIMILAR TREATMENT DONE BY THE AO IN THE ASSESSMENT YEAR 200 9-10. HOWEVER, IN THE THAT YEAR THE TRIBUNAL HAD DEALT AND DISCUSSED THIS ISSUE IN DETAIL AND TOOK NOTE OF JUDGMENTS RELIED UPON THE AO AND LD. CIT (A ). THE RELEVANT OBSERVATION AND THE FINDING OF THE TRIBUNAL IN THIS REGARD READS AS UNDER:- 18. THE MAIN ISSUE WHICH ARISES FOR CONSIDERATION IS AS TO WHETHER THE LAND HELD BY THE ASSESSEE WAS BEING HELD AS A CAPITAL AS SET OR NOT. THERE IS NO DISPUTE TO THE FACT THAT THIS LAND WAS PURCHASED IN THE YEAR 2005-06. THERE ALSO DOES NOT APPEAR TO BE ANY DISPUTE THAT NO ACTI VITY HAS BEEN CARRIED ON, ON THIS LAND OR IN RELATION TO THIS LAND. THE ASSES SEE HAS CLASSIFIED THIS LAND AS A CAPITAL ASSET IN ITS BOOKS OF ACCOUNT AND HAS ALS O DISCLOSED THE SAME AS CAPITAL ASSET IN THE ANNUAL ACCOUNTS FOR THE FINANC IAL YEAR 2005-06 I.E. A.Y. 2006-07. THIS CLASSIFICATION AS CAPITAL ASSET HAS C ONTINUED IN THE SUBSEQUENT YEARS AS WELL. THERE IS NO ADVERSE MATERIAL OR FIND ING IN RELATION TO THIS LAND BEING HELD AS CAPITAL ASSET. THE ASSESSEE HAS ALSO NOT CLAIMED ANY EXPENDITURE IN RELATION TO THIS LAND. ON GOING THRO UGH THE PROFIT AND LOSS ACCOUNT FOR EACH YEAR IT IS ALSO EVIDENT THAT THE A SSESSEE HAD A COLUMN OF PURCHASE LAND WHEREBY IT HAS SHOWN 'NIL' FIGURE EVE RY YEAR. THUS THE ASSESSEE IN THE ACCOUNTS FOR EACH OF THE YEAR HAS NOT BEEN H OLDING ANY LAND AS STOCK- IN-TRADE. IN THE PRECEDING ASSESSMENT YEAR 2008-09 WHEN A SMALL PORTION OF THE LAND WAS SOLD, THE ASSESSEE INCURRED A LOSS OF RS.23,33,205/-. THIS LOSS WAS ALSO DECLARED AS CAPITAL LOSS AND WAS NOT SET O F AGAINST ANY OTHER INCOME. FROM THESE FACTS IT IS QUITE CLEAR THAT THE INTENTI ON AS WELL AS DECLARATION BOTH CONFIRMS THE ASSESSEE'S STAND THAT THE LAND WAS BEI NG HELD AS A CAPITAL ASSET. THERE, IS NO CHANGE OF POSITION IN THE YEAR UNDER C ONSIDERATION ALSO. 19. THE ASSESSING OFFICER AS WELL AS LEARNED CIT(A) ARE SILENT ON ABOVE ASPECTS AND IN FACT HAVE NOT BROUGHT ANY MATERIAL O R EVIDENCE RELATING TO THE PRECEDING THREE YEARS WHEREBY THE INTENTION AND DEC LARATION OF THE ASSESSEE COMPANY IS SO CATEGORICAL TO DEMONSTRATE THAT WHAT WAS DECLARED AND INTENDED WAS NOT TRUE. THUS THE FINDING OF THE ASSE SSING OFFICER AND LEARNED CIT(A) BOTH ARE WITHOUT ANY SUPPORTING MATERIAL TO HOLD THAT INCOME ARISING FROM SALE OF LAND IS NOT FROM THE SALE OF A CAPITAL ASSET BUT BUSINESS INCOME. 20. THE ASSESSING OFFICER AND LEARNED CIT(A) BOTH H AVE REFERRED TO ANOTHER ITA NO.- 6049/DEL/2016. ONKARESHWARE PROPERTIES PVT. LTD. PAGE 4 OF 11 AGREEMENT ENTERED INTO DURING THE YEAR BY THE ASSES SEE COMPANY WITH A DEVELOPER. FIRSTLY THIS AGREEMENT WILL NOT CHANGE T HE NATURE AND CHARACTER OF THE LAND HELD AS CAPITAL ASSET ON WHICH INCOME HAS ARISEN DURING THE YEAR. ALL THAT THE ASSESSEE COMPANY HAS DONE IS THAT IN RESPE CT OF THE OTHER LAND IT HAS ENTERED INTO AN AGREEMENT. ENTERING INTO SUCH AGREE MENT WILL NOT CHANGE THE NATURE AND CHARACTER OF THE LAND HELD AS CAPITAL AS SET AND SOLD BY THE ASSESSEE DURING THE YEAR. ASSESSEE IS PERMITTED TO HAVE TWO PORTFOLIOS, ONE AS INVESTMENT AND ANOTHER AS STOCK-IN TRADE. EVEN FOR THE SAKE OF AN ARGUMENT IT IS ASSUMED THAT BY ENTERING INTO AN AGREEMENT IN RE SPECT OF ANOTHER LAND WITH A DEVELOPER, THAT LAND HAS BECOME A PART OF THE BUS INESS, AND THEN THIS WILL NOT CHANGE THE NATURE AND CHARACTER OF THIS LAND HE LD AS CAPITAL ASSET WHICH HAS BEEN SOLD AND ON WHICH CAPITAL GAIN HAS BEEN EA RNED. IN FACT AS RIGHTLY CONTENDED BY THE LEARNED AR THAT SECTION 45(2) OF T HE INCOME TAX ACT DO PERMIT AN ASSESSEE TO CONVERT AN ASSET HELD AS STOC K IN TRADE OF A BUSINESS CARRIED ON BY HIM. IT MAY BE RELEVANT TO REFER TO T HE PROVISIONS OF SECTION 45(2) WHICH READS AS UNDER.- '45(2) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SE CTION (I), THE PROFITS OR GAINS ARISING FROM THE TRANSFER BY WAY O F CONVERSION BY THE OWNER OF A CAPITAL ASSET INTO, OR ITS TREATMENT BY HIM AS STOCK-IN-TRADE OF A BUSINESS CARRIED ON BY HIM SHALL BE CHARGEABLE TO INCOME-TAX AS HIS INCOME OF THE PREVIOUS YEAR IN WHICH SUCH STOCK -IN-TRADE IS SOLD OR OTHERWISE TRANSFERRED BY HIM AND, FOR THE PURPOSES OF SECTION '48, THE FAIR MARKET VALUE OF THE ASSET ON THE DATE OF SUCH CONVERSION OR TREATMENT SHALL BE DEEMED TO BE THE FULL VALUE OF T HE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET. 21. AS PER THE ABOVE PROVISION OF SECTION 45(2) IN THE CASE OF SUCH CONVERSION ALSO THE INCOME TILL THE DATE OF CONVERSION IS COMP UTED ON -THE BASIS OF FAIR MARKET VALUE AS ON THE DATE OF THE TRANSFER IS TO B E ASSESSED AS CAPITAL GAIN AND INCOME ARISING OVER AND ABOVE FAIR MARKET VALUE AFTER SUCH CONVERSION IS TO BE ASSESSED AS BUSINESS INCOME AND THAT TOO IN T HE YEAR IN WHICH THE ULTIMATE SALE TAKES PLACE. THUS THE AGREEMENT ENTER ED INTO WITH M/S VATIKA ABOUT THE OTHER LAND WILL NOT CHANGE THE TRANSACTIO N UNDER CONSIDERATION KEEPING IN VIEW THE FACT THAT THE LAND FROM THE DAT E OF ITS PURCHASE IS BEING CONTINUOUSLY HELD AS A CAPITAL ASSET AND THERE IS N O MATERIAL OR EVIDENCE WHATSOEVER TO ALLEGE THAT THE LAND SO HELD WAS NOT A CAPITAL ASSET. CONSIDERING THESE FACTS WE DO NOT CONSIDER IT RELEVANT TO GO IN TO FURTHER ARGUMENTS ADVANCED BY THE LEARNED AR THAT THE GAIN ARISING BY ENTERING INTO AN AGREEMENT WITH M/S VATIKA WILL ALSO NOT BE CHARGEAB LE AS BUSINESS INCOME AS THE HOLDER OF A CAPITAL ASSET IS ENTITLED TO MAXIMI ZE ITS GAIN IF IT CAN BE SO ACHIEVED BY ENTERING INTO SUCH ARRANGEMENT. 22. AS REGARDS THE CONTENTION OF THE LEARNED DR THA T THE ASSESSEE HAS SHOWN THIS GAIN AS PART OF THE PROFIT AND LOSS ACCOUNT AN D HENCE IT IS TO BE CONSIDERED AS BUSINESS INCOME. THIS CONTENTION OF THE LEARNED DR IS NOT SUSTAINABLE. INCOME WHETHER IT IS FROM RENT, BUSINESS OR INCOME FROM OTHER SOURCES SUCH AS INTEREST, ETC. INCLUDING CAPITAL GAIN IS TO BE S HOWN IN THE PROFIT AND LOSS ACCOUNTS OF THE COMPANY. AS PER THE COMPANIES ACT E VERY COMPANY IS REQUIRED TO PREPARE ITS PROFIT AND LOSS ACCOUNT AND IN SUCH PROFIT AND LOSS ITA NO.- 6049/DEL/2016. ONKARESHWARE PROPERTIES PVT. LTD. PAGE 5 OF 11 ACCOUNT IT IS SUPPOSED TO INCLUDE EVERY TYPE OF INC OME NOT ONLY THE BUSINESS INCOME. 'ON THE CONTRARY, AS RIGHTLY ARGUED BY THE LEARNED AR, THE PROFIT AND LOSS ACCOUNT SUPPORTS THE CONTENTION OF THE ASSESSE E THAT IT HAS NOT CLASSIFIED THE LAND AS PURCHASE AND SALE AS IS DONE WHILE DOIN G TRADING. IT IS ONLY THE GAIN ON SALE OF LAND, HELD AS CAPITAL ASSET HAS BEE N DECLARED IN THE PROFIT AND LOSS ACCOUNT. 23. AS REGARDS THE OTHER CONTENTION OF THE ASSESSIN G OFFICER AND LEARNED CIT(A) THAT AS PER THE MEMORANDUM AND ARTICLES OF A SSOCIATION THE MAIN OBJECT OF THE COMPANY IS TO CARRY ON THE BUSINESS O F CONSTRUCTION OR RESIDENTIAL HOUSE, HOTELS, VENDORS, ETC. WE ARE OF THE VIEW THA T THIS WILL NOT MEAN THAT THE INCOME ARISING ON SALE OF CAPITAL ASSETS WILL B ECOME BUSINESS INCOME. THE MAIN OBJECT MAY BE TO CARRY ON THE BUSINESS OF REAL ESTATE BUSINESS BUT THAT WILL NOT DEBAR SUCH A COMPANY FROM HOLDING AN ASSET AS CAPITAL ASSET. IF THE COMPANY HOLDS THE LAND AS, A CAPITAL INCOME ARISING ON SALE OF SUCH CAPITAL ASSET WILL BE CHARGEABLE TO TAX UNDER THE HEAD CAPI TAL GAIN AND NOT AS BUSINESS INCOME IN VIEW OF THE SPECIFIC MANDATE OF SECTION 45(1) OF THE INCOME TAX ACT. IN THIS REGARD IT MAY BE RELEVANT T O REFER TO SECTION 45(1) WHICH READS AS UNDER:- '45.(1) ANY PROFITS OR GAINS ARISING FROM THE TRANS FER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL, SAVE AS OTHERW ISE PROVIDED IN SECTIONS 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G AN D 54H, BE CHARGEABLE TO INCOME-TAX UNDER 'THE HEAD 'CAPITAL G AINS', AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHI CH THE TRANSFER TOOK PLACE. ' 24. AS PER THE ABOVE PROVISION, GAIN ARISING FROM T RANSFET OF A CAPITAL ASSET IS TO BE TAXED UNDER THE HEAD CAPITAL GAIN. FURTHER SE CTION 2(14) DEFINES 'CAPITAL ASSET' AS UNDER:- 2(14) 'CAPITAL ASSET MEANS- (A) PROPERTY OF ANY KIND HELD BY AN ASSESSEE, WHETH ER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION,' BUT DOE S NOT INCLUDE (I) ANY STOCK IN TRADE, CONSUMABLES, STORES OR RAW MATERIALS HELD FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. ' . 25. ON GOING THROUGH THE ABOVE DEFINITION IT IS QUI TE CLEAR THAT CAPITAL ASSET DOES NOT INCLUDE ANY STOCK-IN-TRADE, CONSUMABLE STO CK OR RAW MATERIAL HELD FOR THE PURPOSE OF BUSINESS OR PROFESSION, IN THE PRESE NT CASE, AS IS EVIDENT FROM THE FACTS ON RECORD, THIS LAND WAS NOT HELD AS STOC K-IN-TRADE. THUS THE RELIANCE BY THE ASSESSING OFFICER AS WELL AS LEARNED CIT(A) ON THE OBJECTS CLAUSE OF THE MEMORANDUM AND ARTICLES OF ASSOCIATION IS NOT JUSTI FIED. AN ASSESSEE CARRYING ON THE BUSINESS AND HOLDING THE ASSET AS STOCK-IN-T RADE, THE INCOME ARISING THERE FROM WILL DEFINITELY BE BUSINESS INCOME. BUT IF THE ASSESSEE THOUGH HAVING OBJECT CLAUSE OF CARRYING ON THE BUSINESS OF REAL ESTATE 'IN THE MEMORANDUM AND ARTICLES OF ASSOCIATION BUT HOLDING LAND AS CAPITAL ASSET, THAT LAND WILL NOT BECOME STOCK-IN TRADE BECAUSE TH E MEMORANDUM AND ARTICLES OF ASSOCIATION HAS AN OBJECT CLAUSE TO CAR RY ON THE BUSINESS OF THE REAL ITA NO.- 6049/DEL/2016. ONKARESHWARE PROPERTIES PVT. LTD. PAGE 6 OF 11 ESTATE. AN INCOME HAS TO BE ASSESSED UNDER THE HEAD AS PER THE PROVISIONS OF THE INCOME TAX ACT. ' THE JUDGMENT OF THE HONOURABL E SUPREME COURT IN THE CASE OF SULTAN BROS (P) LTD. VS. CIT 51 ITR 353 (SC ) ALSO SUPPORTS THE CASE OF THE ASSESSEE ON THIS ISSUE. AS STATED BY US HEREINA BOVE, THERE IS NO MATERIAL OR EVIDENCE BROUGHT ON RECORD BY THE AO OR REFERRED TO BY THE LD. CIT'(A) THAT THE LAND HELD BY THE ASSESSEE WAS NOT A CAPITAL ASS ET PARTICULARLY, KEEPING IN VIEW THE FACT THAT ITS STATEMENT IN THE BOOKS OF AC COUNT AND THE DISCLOSURE IN THE BALANCE SHEET IS CERTIFIED BY THE AUDITORS AND ALSO FILED WITH THE REGISTRAR OF COMPANIES. WE HAVE ALSO PERUSED THE PROFIT AND L OSS ACCOUNT OF THE PRECEDING YEARS STARTING FROM F.Y. 2005-06. ON GOIN G THROUGH THE SAME IT IS APPARENT THAT ASSESSEE HAS NOT CARRIED OUT ANY ACTI VITY WITH REFERENCE TO THIS LAND. IN FACT NO EXPENDITURE HAS BEEN CLAIMED ON AC COUNT OF ANY DEVELOPMENT. THERE IS NO ADMINISTRATIVE EXPENDITURE . HAD THE INTENTION BEING TO HOLD THE LAND AS STOCK IN TRADE THEN THE ASSESSE E WOULD HAVE DECLARED THE SAME AS PURCHASE OF LAND AND CARRIED IT OVER AS CLO SING STOCK. THE FACT THAT ASSESSEE DID NOT CARRY ON ANY ACTIVITY ON THE LAND NOR ANY DEVELOPMENT, DIVISION OR SUB-DIVISION AND ALSO DID NOT INCUR ANY EXPENDITURE ALSO SUPPORTS THE CONTENTION OF THE ASSESSEE. THE FACT THAT ASSES SEE HAS DECLARED CAPITAL LOSS IN THE PRECEDING YEAR ALSO CANNOT BE IGNORED. NO DOUBT PRINCIPLES OF RES JUDICATA ARE NOT APPLICABLE TO INCOME TAX PROCEEDIN GS BUT THE INTENT AND NATURE OF THE ASSET HELD CAN BE JUDGED FROM THESE F ACTS. THE NATURE OF ASSET HELD AS CAPITAL ASSET IN THE PRECEDING YEAR AND ACC EPTED AS SUCH WILL NOT CHANGE TO STOCK IN TRADE IN THE NEXT YEAR MERELY BE CAUSE THE GAIN ARISING ON SALE OF STOCK IN TRADE WILL BE CHARGEABLE AT THE RA TE OF 30 PER CENT AS AGAINST 20 PER CENT CHARGEABLE ON CAPITAL GAIN. THE LEARNED DR COULD NOT CONTROVERT THE FACT THAT IN THE PRECEDING YEAR SUCH LOSS HAS B EEN ASSESSED AS CAPITAL LOSS. 26. THE LAW EVEN PERMITS PERSON CARRYING ON THE BUS INESS IN PARTICULAR NATURE OR TRADE SUCH PERSON TO MAKE INVESTMENT AND HOLD SI MILAR TYPE OF ASSET AS CAPITAL ASSET. IN THE CASE OF CIT VS. GOPAL PUROHIT 336 ITR 287 (BORN) AN ISSUE HAS ARISEN WHEREBY THE ASSESSEE WAS TRADING IN SHAR ES AND WAS HOLDING CERTAIN SHARES AS .INVESTMENT. THE HONBLE BOMBAY C OURT HAS HELD-THAT 'THE FIRST SET OF TRANSACTIONS INVOLVED INVESTMENT IN SHARES. THE SECOND SET OF TRANSACTIONS INVOLVED DEALING IN SHAR ES FOR THE PURPOSES OF BUSINESS. THE TRIBUNAL HAS CORRECTLY APPLIED THE PRINCIPLE OF LAW IN ACCEPTING THE POSITION THAT IT IS OPEN TO AN ASSESS EE TO MAINTAIN TWO SEPARATE PORTFOLIOS, ONE RELATING TO INVESTMENT IN SHARES AND ANOTHER RELATING TO BUSINESS ACTIVITIES INVOLVING DEALING I N SHARES. THE TRIBUNAL HELD THAT THE DELIVERY BASED TRANSACTIONS IN THE PR ESENT CASE, SHOULD BE TREATED AS THOSE IN THE NATURE OF INVESTMENT TRA NSACTIONS AND THE PROFIT RECEIVED THERE FROM SHOULD BE TREATED EITHER AS SHORT-TERM OR, AS THE CASE MAY BE, LONGTERM CAPITAL GAIN, DEPENDING U PON THE PERIOD OF THE HOLDING. THE TRIBUNAL HAS OBSERVED IN ITS JUDGM ENT THAT THE ASSESSEE HAS FOLLOWED A CONSISTENT PRACTICE IN REGA RD TO THE NATURE OF THE ACTIVITIES, THE MANNER OF KEEPING RECORDS AND T HE PRESENTATION OF SHARES AS INVESTMENT AT THE END OF THE YEAR, IN ALL THE YEARS. THE TRIBUNAL CORRECTLY ACCEPTED THE POSITION THAT THE P RINCIPLE OF RES JUDICATA IS NOT ATTRACTED SINCE EACH ASSESSMENT YEA R IS SEPARATE IN ITA NO.- 6049/DEL/2016. ONKARESHWARE PROPERTIES PVT. LTD. PAGE 7 OF 11 ITSELF. THE TRIBUNAL HELD THAT THERE OUGHT TO BE UN IFORMITY IN TREATMENT AND CONSISTENCY WHEN THE FACTS AND CIRCUMSTANCES AR E IDENTICAL, PARTICULARLY IN THE CASE OF THE ASSESSEE. THIS APPR OACH A/THE TRIBUNAL CANNOT BE FAULTED. ' 27. THE SLP FILED AGAINST THE ABOVE JUDGMENT STAND DISMISSED BY THE HON'BLE SUPREME COURT VIDE ORDER DATED 15TH NOVEMBER, 2010. THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF G. VENKATASWAM I NAIDU VS CLT 35 ITR 594(S.C) RELIED UPON BY THE ASSESSING OFFICER AS WE LL AS LEARNED CIT(A) IN FACT SUPPORTS THE CASE OF THE ASSESSEE WHEREBY THE HONOU RABLE SUPREME COURT HAS HELD AS UNDER :- IF A PERSON INVESTS MONEY IN LAND INTENDING TO HOL D IT, ENJOYS ITS INCOME FOR SOME TIME AND THEN SELLS IT AT A PROFIT, THEN IT WOULD BE A CLEAR CASE OF CAPITAL ACCRETION AND NOT PROFIT DERI VED FROM AN ADVENTURE IN THE NATURE OF TRADE.' 28. THE HON'BLE SUPREME COURT IN ITS JUDGMENT HAS C LEARLY MENTIONED THAT IF MONEY WAS INVESTED IN LAND WITH THE INTENTION OF HO LDING IT, THEN. ANY PROFIT DERIVED FROM THE SALE OF SUCH LAND IS TO BE TREATED AS 'CAPITAL GAIN' RATHER THAN AS 'BUSINESS INCOME' 29. SIMILARLY THE HONOURABLE DELHI HIGH COURT IN TH E CASE OF CIT VS. PNB FINANCE AND INDUSTRIES LTD. 46 DTR 345(DEL) HAS HEL D AS UNDER:- 'ASSESSEE WAS NOT INVOLVED IN THE BUSINESS OF BUYIN G AND SELLING OF SHARES AFTER 1ST APRIL 1997. IT HAD PURCHASED THE S HARES IN QUESTION ON 27TH JAN.'1996 AND HELD THE SAME FOR SEVEN YEARS B EFORE SELLING THEM. THOUGH THE OBJECT INCORPORATED IN ITS MEMORANDUM OF ASSOCIATION STATES THAT THE ASSESSEE CAN DEAL IN SHARES, THERE WAS NO SUCH REGULAR ACTIVITY. A TAXPAYER CAN HAVE TWO PORTFOLIOS I.E., AN INVESTMENT PORTFOLIO COMPRISING OF SECURITIES WHICH ARE TO BE TREATED AS CAPITAL ASSETS AND A TRADING PORTFOLIO COMPRISING OF STOCK- IN-TRADE WHICH ARE TO BE TREATED AS TRADING ASSETS. SHARES IN QUESTION WE RE HELD BY THE ASSESSEE AS INVESTMENT. THEREFORE) SALE THEREOF GAV E RISE TO CAPITAL GAINS AND NOT BUSINESS INCOME' 30. IN THE PRESENT CASE THE APPELLANT COMPANY HAS A CQUIRED THE LAND IN THE YEAR 2005-06 AS A CAPITAL ASSET. IT HAS ACCOUNTED F OR THE SAME AS CAPITAL ASSET. IT HAS CONTINUED TO HOLD THE SAME AS A CAPIT AL ASSET. IT HAS NOT CONVERTED THAT CAPITAL ASSET. IT HAS NOT CONVERTED THAT CAPITAL ASSET TO STOCK- IN-TRADE. THERE ARE NO MULTIPLE TRANSACTIONS.. IT H AS DECLARED THE CAPITAL LOSS IN THE PRECEDING YEAR. CONSIDERING ALL THESE FACTS AND TAKING INTO CONSIDERATION ALL THE ABOVE FACTS AND CIRCUMSTANCES WE ARE OF THE VIEW THAT THE INCOME ARISING FROM THE SALE OF THE LAND HELD AS A CAPITAL ASSET IS TO BE ASSESSED AS LONG TERM CAPITAL GAIN AND THE ASSESSING OFFICER AN D LEARNED CIT (APPEALS) WERE NOT RIGHT IN TREATING THE INCOME AS BUSINESS I NCOME. ACCORDINGLY THE ASSESSING OFFICER IS DIRECTED TO ASSESS THE INCOME AS CAPITAL GAIN. THUS THE APPEAL IS ALLOWED, 3L. IN RESULT, THE APPEAL IS ALLOWED. ITA NO.- 6049/DEL/2016. ONKARESHWARE PROPERTIES PVT. LTD. PAGE 8 OF 11 9. THE JUDGMENT OF THE TRIBUNAL WAS APPEALED BY THE REVENUE BEFORE THE HONBLE DELHI HIGH COURT, WHEREIN THE HONBLE COURT HAS CON FIRMED THE ORDER OF THE TRIBUNAL AND DISMISSED THE REVENUES APPEAL IN THE FOLLOWING MANNER :- 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 23RD OCTOBER 2015 PASSED BY THE INCOME TAX APPELLATE TRI BUNAL (ITAT) IN ITA NO. 5754/DEL/2013 FOR THE ASSESSMENT YEAR (AY) 2009-1 0. 2. THE QUESTION SOUGHT TO BE URGED BY THE REVENUE I S WHETHER THE ITAT WAS CORRECT IN HOLDING THAT THE ASSESSING OFFICER ('AO' ) AND THE COMMISSIONER OF INCOME TAX (APPEALS) ['CIT (A)'] WERE NOT RIGHT IN TREATING THE INCOME OF THE ASSESSEE AS BUSINESS INCOME AND IN ACCEPTING THE PL EA OF THE ASSESSEE THAT THE INCOME SHOULD BE ASSESSED AS CAPITAL GAIN FROM THE SALE OF LAND? 3. THE ASSESSEE WAS FORMED WITH THE MAIN OBJECT OF DEALING IN THE ASSESSEE ENTERED INTO AN AGREEMENT WITH M/S VATIKA LTD. IN R ESPECT OF DEVELOPMENT OF ITS LAND DURING THE AY IN QUESTION WHICH IT HAD ACQ UIRED IN THE YEAR 2005-06 AND HAD SHOWN AS A CAPITAL ASSET. THERE WAS NO CONV ERSION OF CAPITAL ASSET INTO STOCK-IN-TRADE. THE ITAT FOUND THAT THERE WAS NO TRANSACTION FOR THE AY IN QUESTION IN RELATION TO SAID CAPITAL ASSET. 4. SIGNIFICANTLY, THE ITAT NOTICED THAT THE ASSESSE E HAD CLASSIFIED THE LAND IN QUESTION AS CAPITAL ASSET FROM AY 2006-07 ONWARDS. IT HAD NOT CLAIMED ANY EXPENDITURE IN RELATION TO SUCH LAND. IN THE ACCOUN TS FOR EACH OF THE YEAR IT HAD NOT SHOWN ANY LAND BEING HELD AS STOCK-IN-TRADE . IN THE AY 2008-09, A SMALL PORTION OF THE LAND WAS SOLD AND THE LOSS THE REFROM WAS DECLARED AS A CAPITAL LOSS AND WAS NOT SET OFF AGAINST ANY OTHER INCOME. THE ITAT HELD THAT A MERE FACT THAT A DEVELOPMENT AGREEMENT WAS ENTERE D INTO BY THE ASSESSEE WITH VATIKA LTD. WOULD NOT CHANGE THE NATURE AND CH ARACTER OF THE LAND SINCE IN TERMS OF THE AGREEMENT IT WAS THE DEVELOPER WHO WOULD UNDERTAKE THE WORK OF DEVELOPMENT UPON BEING PAID A FEE BY THE AS SESSEE. IT WAS ALSO OBSERVED THAT ALTHOUGH THE MAIN OBJECT OF THE ASSES SEE MAY BE TO CARRY ON THE BUSINESS OF REAL ESTATE, THAT WOULD NOT PREVENT THE ASSESSEE FROM HOLDING THE LAND IN QUESTION AS A CAPITAL ASSET. THEREFORE THE INCOME GENERATED THROUGH THE SALE OF LAND WOULD BE CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAINS AND NOT AS BUSINESS INCOME. 5. HAVING HEARD MR. DILEEP SHIVPURI, LEARNED SENIOR STANDING COUNSEL FOR THE REVENUE AND HAVING EXAMINED THE ORDERS OF THE AO, C IT(A) AND THE IMPUGNED ORDER OF THE ITAT, THE COURT IS NOT PERSUA DED TO AGREE WITH THE REVENUE'S SUBMISSION THAT THE IMPUGNED ORDER OF THE ITAT IS PERVERSE. 6. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CA SE, NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION. THE APPEAL IS DISM ISSED. 10. THUS, WHEN SAME ISSUE ON SIMILAR SET OF FACTS A ND REASONING HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL WHICH HAS AL SO BEEN UPHELD BY THE HONBLE DELHI HIGH COURT, THEN THIS ISSUE BECOMES A BINDING JUDICIAL PRECEDENT AND NO CONTRARY VIEW CAN BE TAKEN IN THIS YEAR. MOREOVER W HEN IN ALL THE YEARS, THE ASSESSEE HAS BEEN SHOWING THE LAND WHICH IS IN DISPUTE AS A PART OF FIXED ASSETS WHICH STOOD ACCEPTED YEAR AFTER YEAR AS AN INVESTMENT / FIXED A SSETS, THEN SALE OF SUCH LAND WILL ITA NO.- 6049/DEL/2016. ONKARESHWARE PROPERTIES PVT. LTD. PAGE 9 OF 11 ONLY GIVE RISE TO CAPITAL GAIN CHARGEABLE U/S 45(2) . THUS, THE ORDER OF THE AO AND LD. CIT (A) IN TREATING IT AS A BUSINESS INCOME IS REVE RSED AND THE ASSESSEES CLAIM FOR TAXABILITY OF SUCH GAIN ON SALE OF LAND UNDER THE H EAD CAPITAL GAIN IS AFFIRMED. IN THE RESULT, GROUND RAISED BY THE ASSESSEE ON THIS SCORE IS ALLOWED. 11. IN SO FAR AS DISALLOWANCE U/S 40(A) (IA) IS CON CERNED, IT IS SEEN THAT AO HAS MADE DISALLOWANCE ON THE GROUND THAT ASSESSEE SHOULD HAV E DEDUCTED TDS AND BANK COMMISSION / GUARANTEE FEE. HE HAS ALSO TOOK NOTE O N CBDT CIRCULAR NO. 56/2012 AND HELD THAT THE SAID NOTIFICATION WAS ONLY APPLIC ABLE FROM 1ST JANUARY, 2013; AND THEREFORE, THIS NOTIFICATION WILL NOT APPLY UPON TH E ASSESSEE. LD. CIT (A) TOO HAS CONFIRMED THE SAID ADDITION. 12. ON PERUSAL OF THE SAID CBDT CIRCULAR, IT IS SEE N THAT CBDT HAS CLARIFIED THAT NO TDS IS REQUIRED TO BE DEDUCTED ON BANK GUARANTEE CO MMISSION, ETC. SUCH A CIRCULAR WAS BROUGHT TO REDUCE THE HARDSHIP AND THE COMPLIAN CE COST OF THE ASSESSEE. ONCE A BENEVOLENT CIRCULAR HAS BEEN ISSUED TO REMOVE THE H ARDSHIP FOR THE ASSESSEE THEN IT CANNOT HE HELD THAT ANY SUCH PAYMENT MADE PRIOR TO THE SAID CIRCULAR WHICH WAS CAUSING HARDSHIP TO THE ASSESSEES SHOULD CONTINUE. IT IS A WELL SETTLED PROPOSITION THAT CBDT CIRCULAR REMOVING THE HARDSHIP IN FAVOUR OF TH E ASSESSEE HAS TO BE TREATED AS RETROSPECTIVE AND ACCORDINGLY, WE HOLD THAT NO DISA LLOWANCE U/S 40(A)(IA) CAN BE MADE FOR NON DEDUCTION OF TDS. IN THE RESULT THIS I SSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 13. LASTLY, IN SO FAR AS DISALLOWANCE U/S 14A IS CO NCERNED, LD. COUNSEL HAS SUBMITTED THAT ADMITTEDLY THERE IS NO DIVIDEND ON EXEMPT INCO ME EARNED BY THE ASSESSEE AND ACCORDINGLY NO DISALLOWANCE U/S 14A CAN BE MADE IN VIEW OF THE ISSUE OF THE JUDGEMENT OF HONBLE JURISDICTIONAL HIGH COURT IN T HE CASE OF CHEMINVEST VS. ITO. (2015) 378 ITR 33 (DELHI) WHEREIN HONBLE COURT HAS HELD THAT ONCE THERE IS NO EXEMPT INCOME EARNED BY THE ASSESSEE, THEN NO DISAL LOWANCE U/S 14A CAN BE TRIGGERED. ACCORDINGLY, IN VIEW OF THE BINDING JUDI CIAL PRECEDENT IN THE CASE OF CHEMINVEST LTD. (SUPRA), WE HOLD THAT IN ABSENCE OF ANY EXEMPT INCOME EARNED BY THE ASSESSEE, NO DISALLOWANCE CAN BE MADE U/S 14A. THUS, THIS ISSUE IS ALLOWED IN FAVOUR OF THE ASSESSEE. 14. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . (C) THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE PENA LTY LEVIED U/S 271(1)(C) OF I.T. ACT SHOULD BE DELETED TOO, AS THE CORRESPONDING QUANTUM ADDITION HAS ALREADY BEEN DELETED BY ITAT. ON THE OTHER SIDE, THE LEARNED COMMISSIONER OF INCOME TAX (DEPARTMENTAL REPRESENTATIVE) [LD. CIT(DR), FOR SHORT] APPEARING FOR REVENUE RELIED ON THE ORDER OF THE ASSESSING OFFICER. WE ARE OF THE VIEW THAT PENALTY U/S 271(1)(C) I.T. ACT AMOUNTING TO RS. 16,47,08,371/- LEVIED BY AO, AND ALREADY DELETED BY THE LD. CIT(A); HAS NO LEGS TO STAND ITA NO.- 6049/DEL/2016. ONKARESHWARE PROPERTIES PVT. LTD. PAGE 10 OF 11 WHEN THE CORRESPONDING ADDITIONS MADE BY THE AO HAV E ALREADY BEEN DELETED BY ITAT VIDE ITS AFORESAID ORDER DATED 21.01.2019. WHEN THE QUANTUM ADDITION DOES NOT SURVIVE, THE PENALTY LEVIED U/S 271(1)(C) OF I.T. ACT ON THE CORRESPONDI NG QUANTUM ADDITION ALSO CANNOT SURVIVE. WE TAKE SUPPORT FROM JUDICIAL PRECEDENT IN THE CASE OF K.C. BUILDERS VS. ACIT 135 TAXMAN 461 (SC), IN WHICH THE HONBLE APEX COURT HELD THAT WHE RE THE ADDITIONS MADE IN THE ASSESSMENT ORDER, ON THE BASIS OF WHICH PENALTY FOR CONCEALMEN T WAS LEVIED, ARE DELETED, THERE REMAINS NO BASIS AT ALL FOR LEVYING THE PENALTY FOR CONCEAL MENT, AND THEREFORE, IN SUCH A CASE, NO SUCH PENALTY CAN SURVIVE AND THE SAME IS LIABLE TO BE CA NCELLED. IN VIEW OF THE FOREGOING, APPEAL FILED BY REVENUE IS HEREBY DISMISSED. (D) IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/10/2019. SD/- SD/- (SUSHMA CHOWLA) (ANADEE NATH MISSHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18/10/2019 (POOJA) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO.- 6049/DEL/2016. ONKARESHWARE PROPERTIES PVT. LTD. PAGE 11 OF 11 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER