M/s. Ansal Properties & Infrastructure Ltd., New Delhi V. DCIT, New Delhi

ITA 790/DEL/2015

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6376 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 10-02-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJAY GOYAL
• Assessee Lawyers: H SIVA PRASAD REDDY
• Keywords: Capital asset; Business income; Retrospective amendment; Wholly owned subsidiary; Fair market value; Revenue expenditure; Capital expenditure; Capital Gains
• Section: 143(3); 37(1); 13; 22; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH A AA A : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI (THROUGH VIDEO CONFERENCING) (THROUGH VIDEO CONFERENCING) (THROUGH VIDEO CONFERENCING) (THROUGH VIDEO CONFERENCING) BEFORE SHRI G.S. PANNU BEFORE SHRI G.S. PANNU BEFORE SHRI G.S. PANNU BEFORE SHRI G.S. PANNU, ,, , VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND MS. SUCHITRA KAMBLE MS. SUCHITRA KAMBLE MS. SUCHITRA KAMBLE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO S SS S . .. . 790/DEL/2015, 791/DEL/2015 & 792/DEL/2015 790/DEL/2015, 791/DEL/2015 & 792/DEL/2015 790/DEL/2015, 791/DEL/2015 & 792/DEL/2015 790/DEL/2015, 791/DEL/2015 & 792/DEL/2015 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR S SS S : : : : 2010 2010 2010 2010 - -- - 11, 11, 11, 11, 2011 2011 2011 2011 - -- - 12 & 2012 12 & 2012 12 & 2012 12 & 2012 - -- - 13 1313 13 M/S ANSAL PROPERTIES & M/S ANSAL PROPERTIES & M/S ANSAL PROPERTIES & M/S ANSAL PROPERTIES & INFRASTRUCTURE LIMITED, INFRASTRUCTURE LIMITED, INFRASTRUCTURE LIMITED, INFRASTRUCTURE LIMITED, 115 115 115 115- -- -ANSAL BHAWAN, ANSAL BHAWAN, ANSAL BHAWAN, ANSAL BHAWAN, 16, K.G. MARG, 16, K.G. MARG, 16, K.G. MARG, 16, K.G. MARG, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 001. 110 001. 110 001. 110 001. PAN : AAACA0006D. PAN : AAACA0006D. PAN : AAACA0006D. PAN : AAACA0006D. VS. VS. VS. VS. DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -2(2), 2(2), 2(2), 2(2), (ERSTWHILE CENTRAL CIRCLE (ERSTWHILE CENTRAL CIRCLE (ERSTWHILE CENTRAL CIRCLE (ERSTWHILE CENTRAL CIRCLE- -- -20), 20), 20), 20), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H. SIVA PRASAD REDDY, ADVOCATE. RESPONDENT BY : SHRI SANJAY GOYAL, CIT - DR. DATE OF HEARING : 23.06 23.06 23.06 23.06.2021 .2021 .2021 .2021 DATE OF PRONOUNCEMENT : 16.07.2021 16.07.2021 16.07.2021 16.07.2021 ORDER ORDER ORDER ORDER PER G.S. PANNU PER G.S. PANNU PER G.S. PANNU PER G.S. PANNU, , , , V VV VP PP P: :: : THE CAPTIONED ARE THREE APPEALS PREFERRED BY THE S AME ASSESSEE PERTAINING TO DIFFERENT ASSESSMENT YEARS OF 2010-11 TO 2012-13 INVOLVING CERTAIN COMMON ISSUES AND, THEREFORE, THE Y HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. THE APPEAL IN ITA NO.790/DEL/2015 FOR ASSESSMENT YEAR 2010-11 IS BEING TAKEN AS THE LEAD CASE. THIS APPEAL OF TH E ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-24 (ERSTWHILE C IT(A)-31), NEW DELHI DATED 27 TH NOVEMBER, 2014, WHICH IN TURN HAS ARISEN FROM AN O RDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3 ) OF THE INCOME- ITA-790 TO 792/DEL/2015 2 TAX ACT, 1961 (IN SHORT THE ACT) DATED 25 TH MARCH, 2013 PERTAINING TO ASSESSMENT YEAR 2010-11. 3. IN THIS APPEAL, THE ASSESSEE HAS FILED THE FOLLO WING GROUNDS OF APPEAL ALONG WITH ORIGINAL MEMORANDUM OF APPEAL :- 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN LAW IN CONFIR MING THE ADDITION OF NOTIONAL ANNUAL LETTING VALUE OF RS.5,74,42,675/- (OUT OF RS.6,93,49,975/-) ON CLOSI NG STOCK OF FLATS/SPACES BY FOLLOWING THE HONBLE DELHI HIGH COURTS DECISION IN WHICH VARIOUS RELEVANT FACTS WERE NOT F ULLY BROUGHT OUT BEFORE THEIR LORDSHIPS AND THEREFORE CO ULD NOT BE CONSIDERED BY THEM. 1.2 THAT WITHOUT PREJUDICE TO THE GROUND NO.1.1 ABO VE, THE APPELLANT HAS ALSO FILED AN APPEAL BEFORE THE A PEX COURT WHICH HAS BEEN ADMITTED AND IS PENDING FOR DE CISION. 2. THAT WITHOUT PREJUDICE TO THE FOREGOING GROUND, THE DECISION RENDERED BY HON'BLE DELHI HIGH COURT RELAT ED TO THE ASSESSMENT YEAR 1988-89 AND RENDERED IN THE CON TEXT OF THE PROVISIONS OF SECTION 23 AS THEY EXISTED PRI OR TO SUBSTITUTION BY THE FINANCE ACT, 2001 W.E.F. 1.4.20 02. THE LEARNED CIT(A) FAILED TO CONSIDER THE ISSUE IN THE LIGHT OF THE AMENDED PROVISIONS AS APPLICABLE TO THE YEAR UNDER APPEAL WHICH WERE SUBSTANTIALLY DIFFERENT. THE ISSUE SHOU LD HAVE BEEN RECONSIDERED AND DECIDED IN THE LIGHT OF THE A MENDED PROVISIONS. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) HAS ERRED IN REJECTING THE CLA IM OF THE APPELLANT FOR DEDUCTION OF RS.34,08,17,701/- U/S 80 IA(4)(III) OF THE ACT ON THE GROUND THAT DUE NOTIFICATION BY T HE CENTRAL GOVERNMENT OF THE ASSESSEES PROJECT WAS NO T AVAILABLE IN THE APPELLANTS CASE. IN THE LIGHT OF THE FACT AND THE EVIDENCE ADDUCED THAT THE APPELLANTS PETIT ION FOR APPROVAL FROM THE CENTRAL GOVERNMENT WAS UNDER PROC ESS AND THERE WAS LIKELIHOOD OF THE NOTIFICATION BEING ISSUED WITH RETROSPECTIVE EFFECT, THE LEARNED CIT(APPEALS) SHOULD HAVE GIVEN DIRECTION THAT IN CASE THE NOTIFICATION WAS ISSUED BY CENTRAL GOVERNMENT WITH RETROSPECTIVE EFF ECT COVERING THE YEAR UNDER APPEAL, HIS DECISION TO CON FIRM DISALLOWANCE WOULD ACCORDINGLY STAND REVERSED. ITA-790 TO 792/DEL/2015 3 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND OR FOREGO ANY GROUNDS OF APPEAL AT THE TIME O F HEARING. 4. THEREAFTER, THE ASSESSEE HAS FILED THE FOLLOWING REVISED AND ADDITIONAL GROUNDS OF APPEAL WHICH, INTER-ALIA , ALSO SUBSUME THE GROUNDS OF APPEAL ORIGINALLY FILED ALONG WITH THE M EMORANDUM OF APPEAL :- 1.1 THE APPELLANT MOST RESPECTFULLY PRAYS THAT THE HONBLE TRIBUNAL MAY BE PLEASED TO ALLOW THE ADMISS ION OF ADDITIONAL GROUNDS OF APPEAL AND REDRAFTING OF GROU ND NOS.1.1, 1.2, & 2 ORIGINALLY TAKEN IN FORM NO.36 FO R THE FOLLOWING REASONS. (I) IT IS CONSIDERED NECESSARY AS WELL AS APPROPRIA TE TO REFRAME THE GROUNDS OF APPEAL TO SET-OUT THE RELEVA NT FACTS IN RIGHT AND PROPER PERSPECTIVE, AND; (II) THE ADDITIONAL GROUNDS GO TO THE ROOT OF THE M ATTER AND DOES NOT REQUIRE CONSIDERATION OF ANY MATERIAL EVIDENCE OUTSIDE THE RECORD. 1.2 IT IS SETTLED LAW THAT LEGAL GROUNDS ARE ALLOWE D TO BE TAKEN BEFORE THE HONBLE TRIBUNAL. THE HON'BLE SUP REME COURT REITERATED THIS SETTLED LEGAL POSITION IN THE CASE OF THE CIT VS SINGHAD TECHNICAL EDUCATION SOCIETY, CIV IL APPEAL NO.11080 OF 2017, WHERE THE LEGAL GROUND ON RECORDING OF SATISFACTION U/S 153C WAS TAKEN FOR TH E FIRST TIME AS ADDITIONAL GROUND BEFORE THE HONBLE TRIBUN AL, WHICH THE REVENUE HAD OBJECTED. RELIANCE IS ALSO P LACED ON THE DECISION OF THE LARGER BENCH (3 MEMBER) OF H ON'BLE SUPREME COURT IN NATIONAL THERMAL POWER CO.LTD., (1 998) 229 ITR 383 (SC). 1.3 FOR THE SAKE OF CLARITY AND CONVENIENCE, THE ADDITIONAL GROUNDS AND THE REVISED/REFRAMED GROUNDS ARE MERGED AND SET-OUT AS UNDER. REVISED AND ADDITIONAL GR REVISED AND ADDITIONAL GR REVISED AND ADDITIONAL GR REVISED AND ADDITIONAL GROUNDS OF APPEAL OUNDS OF APPEAL OUNDS OF APPEAL OUNDS OF APPEAL NOTIONAL ANNUAL LETTING VALUE (ALV) NOTIONAL ANNUAL LETTING VALUE (ALV) NOTIONAL ANNUAL LETTING VALUE (ALV) NOTIONAL ANNUAL LETTING VALUE (ALV) 1.1 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED CIT(A) ERRED IN UPHOLDING AN ADDITI ON OF ITA-790 TO 792/DEL/2015 4 RS.5,74,42,675/- (OUT OF RS.6,93,49,975/-) UNDER TH E HEAD INCOME FROM HOUSE PROPERTY WITHOUT APPRECIATING T HAT THE PROPERTIES IN QUESTION WERE STOCK-IN-TRADE OF THE ASSESSEES BUSINESS AND PROVISIONS RELATING TO S.22 TO S.26 OF IT ACT ARE NOT AT ALL APPLICABLE TO PROPERTY FOR MING PART OF STOCK-IN-TRADE IN THE BUSINESS OF THE ASSESSEE A S ARGUED BY THE REVENUE ITSELF BEFORE THE HONBLE HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS NEHA BUILDERS (P) LTD. (2008) 296 ITR 661 (GUJ) AND APPROVED BY THE H ONBLE HIGH COURT WAY BACK IN 2006. 1.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , LEARNED CIT(A) ERRED IN UPHOLDING AN ADDITION OF RS.5,74,42,675/- (OUT OF RS.6,93,49,975/-) UNDER TH E HEAD INCOME FROM HOUSE PROPERTY WITHOUT APPRECIATING T HAT S.23 OF THE INCOME TAX ACT 1961 HAS UNDERGONE AMENDMENT VIDE FINANCE ACT 2001 W.E.F. 1.4.2002 AND OLD LAW CANNOT BE APPLIED TO THE YEAR UNDER CONSIDERATI ON. 1.3 WITHOUT PREJUDICE TO THE ABOVE GROUND NO.1.1, LEARNED CIT(A) ERRED (A) IN NOT APPRECIATING THAT THE QUESTION OF TAXATI ON OF ALV OF UNSOLD FLATS/OFFICE SPACES, LYING VACANT AND HELD AS STOCK-IN-TRADE, ARISES ONLY WHEN A FINDING IS RECOR DED, HAVING REGARD TO THE OBJECTS OF THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE APPELLANT-COMPANY, T HAT INCOME FROM SUCH UNSOLD PROPERTIES IS LIABLE TO BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY, AND NO T AS BUSINESS INCOME IN THE LIGHT OF THE DECISION OF HON 'BLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES AND INVESTMENTS LTD. VS COMMISSIONER OF INCOME TAX CENT RAL II TAMIL NADU (IN CIVIL APPEAL NOS 4491 TO 4494 OF 200 4). (B) IN NOT APPRECIATING THAT WITHOUT EXAMINING THE MEMORANDUM OF ASSOCIATION (MOA) AND ITS OBJECT CLAU SES, IT IS NOT PERMISSIBLE TO ARRIVE TO ANY FINDING OR C ONCLUSION THAT INCOME FROM UNSOLD FLATS/OFFICE SPACES, LYING VACANT AND HELD AS STOCK-IN-TRADE, IS LIABLE TO BE TAXED A S INCOME FROM HOUSE PROPERTY ON THE BASIS OF THE NOTIONAL AL V. (C) IN NOT APPRECIATING THAT ONE OF THE MAIN OBJECT S OF THE ASSESSEE IS TO SELL, LEASE, LET, MORTGAGE OR OT HERWISE DISPOSE OF THE LANDS, HOUSES, BUILDINGS AND OTHER P ROPERTY, APART FROM ACQUIRING AND DEVELOPING OF PROPERTIES A ND THEREFORE, THE RENTAL INCOME, IF AT ALL EARNED, FRO M UNSOLD PROPERTIES HELD AS STOCK-IN-TRADE IS LIABLE TO BE T AXED UNDER THE HEAD, INCOME FROM BUSINESS. ITA-790 TO 792/DEL/2015 5 (D) IN NOT APPRECIATING THAT UNLESS THE CERTIFICATE OF COMPLETION OF CONSTRUCTION OF THE PROPERTY IS OBTAI NED IN RESPECT OF THE PROPERTIES LYING VACANT AS STOCK-IN- TRADE, THE ALV OF THE PROPERTIES IS NOT LIABLE TO BE TAXED ON NOTIONAL BASIS AS IT IS ILLEGAL TO RESIDE/OCCUPY SUCH PROPER TY AND HENCE COULD NOT HAVE BEEN LET OUT. (E) IN UPHOLDING THE ADDITION WITHOUT RETURNING A F INDING OF FACT AS TO WHETHER IT WAS ACTUALLY FEASIBLE AND PRACTICALLY POSSIBLE AT ALL TO EARN ANY RENTAL INCOME FROM THE SAID UNSOLD FLATS/SPACE AS THE SAID FLATS WERE MEANT FOR SALE AND WERE NOT READY FOR IMMEDIATE OCCUPATION BY THE PROSPECTIVE TENANTS AND DID NOT HAVE THE BASIC NECE SSITIES LIKE ELECTRIC FITTINGS, PUCCA WALL PAINTING, COMPLE TION CERTIFICATES ETC. (F) IN UPHOLDING THE ADDITION WITHOUT RETURNING A F INDING OF FACT AS TO WHETHER IT WAS FACTUALLY POSSIBLE FOR THE ASSESSEE TO TAKE THE RISK OF LETTING OUT UNSOLD FLA TS/SPACES AND ASKING THE PROSPECTIVE BUYER TO WAIT TILL THE T ENANT VACATES THE FLAT FOR IT TO BE SOLD AND GIVEN POSSES SION. (G) IN NOT APPRECIATING THAT EVEN NOTIONAL ALV NEED S TO BE ARRIVED AT BASED UPON REALITIES AND ACTUAL FACTS ON THE GROUND AND COULD NOT HAVE BEEN DETERMINED THROUGH A GUESS WORK. 1.4 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , LEARNED CIT(A) ERRED IN LAW AS THE AMENDMENT BY WAY OF INSERTION OF SUB-SECTION (5) IN SECTION 23 OF THE A CT VIDE THE FINANCE ACT, 2017 IS PROSPECTIVE WITH EFFECT FROM 0 1-04- 2018 ENABLING TAXING OF UNSOLD FLATS/OFFICE SPACES HELD AS STOCK-IN-TRADE AND THE POST-AMENDMENT LAW CANNOT BE APPLIED TO THE PRE-AMENDMENT ASSESSMENT YEARS, EVEN IF THE INCOME IN RESPECT OF SUCH PROPERTIES IS HELD TO BE ASSESSABLE UNDER THE HEAD, INCOME FROM HOUSE PROPER TY. OTHER GROUNDS RETAINED OTHER GROUNDS RETAINED OTHER GROUNDS RETAINED OTHER GROUNDS RETAINED 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) HAS ERRED IN REJECTING THE CLA IM OF THE APPELLANT FOR DEDUCTION OF RS.34,08,17,701/- U/S 80 IA(4)(III) OF THE ACT ON THE GROUND THAT DUE NOTIFICATION BY T HE CENTRAL GOVERNMENT OF THE ASSESSEES PROJECT WAS NO T AVAILABLE IN THE APPELLANTS CASE. IN THE LIGHT OF THE FACT AND THE EVIDENCE ADDUCED THAT THE APPELLANTS PETIT ION FOR APPROVAL FROM THE CENTRAL GOVERNMENT WAS UNDER PROC ESS ITA-790 TO 792/DEL/2015 6 AND THERE WAS LIKELIHOOD OF THE NOTIFICATION BEING ISSUED WITH RETROSPECTIVE EFFECT, THE LEARNED CIT(APPEALS) SHOULD HAVE GIVEN DIRECTION THAT IN CASE THE NOTIFICATION WAS ISSUED BY CENTRAL GOVERNMENT WITH RETROSPECTIVE EFF ECT COVERING THE YEAR UNDER APPEAL, HIS DECISION TO CON FIRM DISALLOWANCE WOULD ACCORDINGLY STAND REVERSED. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND OR FOREGO ANY GROUNDS OF APPEAL AT THE TIME O F HEARING. 5. THE APPELLANT BEFORE US IS A COMPANY INCORPORATE D UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND, IS INTER -ALIA, ENGAGED IN THE BUSINESS OF REAL ESTATE, INCLUDING DEVELOPMENT OF INFRASTRUCTURE PROJECTS, AFFORDABLE HOUSING, TOWNSHIP, INTEGRATED TOWNSHIPS FOR WORK AND RESIDENCE, CONSTRUCTING AND OPERATING HOLIDAY H OMES, ETC. IN AN ASSESSMENT FINALIZED UNDER SECTION 143(3) OF THE AC T, THE ASSESSING OFFICER ASSESSED THE TOTAL INCOME AT `75,30,19,546/ - AS AGAINST THE RETURNED INCOME OF `34,22,05,962/- WHEREIN THE DIFF ERENCE BETWEEN THE ASSESSEE AND THE REVENUE WAS ON ACCOUNT OF DISA LLOWANCE OF CLAIM OF DEDUCTION UNDER SECTION 80IA; CHARGING OF NOTION AL ANNUAL LETTING VALUE (ALV) OF UNSOLD VACANT PROPERTIES; DEPRECIATI ON ON COMPUTERS; AND, DISALLOWANCE OF AMORTIZATION OF LAND IN RESPEC T OF WIND POWER PROJECTS. IN APPEAL BEFORE THE LEARNED CIT(A), ASSE SSEE WAS ALLOWED PARTIAL RELIEF AND, NOT BEING SATISFIED WITH THE OR DER OF THE CIT(A), ASSESSEE IS IN FURTHER APPEAL IN ABOVE STATED GROUN DS OF APPEAL. 6. IN THIS BACKGROUND, THE RIVAL REPRESENTATIVES HA VE BEEN HEARD. INSOFAR AS GROUND NOS.1.1 TO 2 IN THE ORIGINAL MEMO RANDUM OF APPEAL AS WELL AS GROUND NOS.1.2 TO 1.4 IN THE REVISED AND ADDITIONAL GROUNDS ARE CONCERNED, THE SUM AND SUBSTANCE OF THE DISPUTE RELATES TO THE ACTION OF THE ASSESSING OFFICER IN BRINGING TO TAX THE NOTIONAL ALV OF THE UNSOLD PROPERTIES BEING VACANT COMMERCIAL, RESIDENT IAL/SELF-OCCUPIED ASSETS IN TERMS OF SECTION 22 OF THE ACT. THE ASSE SSING OFFICER NOTED THAT THERE WAS UNSOLD STOCK-IN-TRADE BEING VACANT P ROPERTIES AND, ACCORDING TO HIM, THE NOTIONAL ALV OF THE SAID PROP ERTIES WAS ITA-790 TO 792/DEL/2015 7 ASSESSABLE UNDER THE HEAD INCOME FROM HOUSE PROPER TY. THE STAND OF THE ASSESSING OFFICER IS INDEED SUPPORTED BY THE JU DGMENT OF HON'BLE DELHI HIGH COURT IN ASSESSEES OWN CASE. WHEN ASSE SSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A), HE ALSO AFFIRMED THE STAND OF THE ASSESSING OFFICER IN PRINCIPLE. HOWEVER, HE GRANTED PARTIAL RELIEF INASMUCH AS IN RESPECT OF SUCH PROPERTIES WHERE THE COMPLETION CERTIFICATES WERE NOT RECEIVED, AND/OR THE PROPERTY UNITS WERE UNDER SELF-OCCUPATION FOR THE PURPOSE OF BUSINESS OR SUCH PROPERTY UNITS WHICH WERE NOT IN EXISTENCE DURING THE YEAR, THE CI T(A) DIRECTED THAT THE ALV OF SUCH UNITS BE EXCLUDED FROM THE COMPUTAT ION OF INCOME. 7. BEFORE US, THE LEARNED REPRESENTATIVE FOR THE AS SESSEE FIRSTLY POINTED OUT THAT SO FAR AS THE ORIGINAL GROUNDS ARE CONCERNED, THE SAME RELATE TO THE ACTION OF THE ASSESSING OFFICER IN BRINGING TO TAX THE ALV OF THE UNITS AND THAT THE ADDITIONAL GROUNDS SO UGHT TO BE RAISED ARE BASED ON A PLEA THAT HAVING REGARD TO THE FACT THAT THE PROPERTY UNITS IN QUESTION WERE HELD AS STOCK-IN-TRADE AND V ACANT, THEIR ASSESSABILITY COULD NOT BE CONSIDERED UNDER THE HEA D INCOME FROM HOUSE PROPERTY AND, RATHER, IT WAS TO BE CONSIDERE D UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION, AND, IN SUPP ORT OF SUCH PROPOSITION, REFERENCE HAS BEEN MADE TO THE JUDGMEN T OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. NEHA BUIL DERS P.LTD. [2008] 296 ITR 661 (GUJ). THE LEARNED COUNSEL ALSO POINTE D OUT THAT THE AFORESAID PLEA, WAS A LEGAL ISSUE FOR WHICH THE NEC ESSARY FACTS ARE CLEARLY AVAILABLE ON RECORD AND THAT THE SAME BE CO NSIDERED FOR ADJUDICATION. 8. THE LEARNED DR ASSERTED THAT THE ISSUE WAS FULLY COVERED IN FAVOUR OF THE REVENUE BY THE JUDGMENT OF HON'BLE DE LHI HIGH COURT IN ASSESSEES OWN CASE ITSELF AND REFERRED TO ANSAL HO USING FINANCE & LEASING COMPANY LTD. [2013] 354 ITR 180 (DELHI) I N THIS REGARD. HE ALSO REFERRED TO SUBSEQUENT JUDGMENT OF HON'BLE DEL HI HIGH COURT IN ITA-790 TO 792/DEL/2015 8 THE CASE OF ANSAL HOUSING & CONSTRUCTION LTD. [20 16] 389 ITR 373 (DELHI) TO SHOW THAT EVEN THE RATIO OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES & INVESTMEN TS LIMITED [2015] 373 ITR 673 (SC) HAS BEEN CONSIDERED. 9. HAVING CONSIDERED THE RIVAL STANDS, IN OUR VIEW, SO FAR AS THE REVISED AND ADDITIONAL GROUNDS RELATING TO THE ASSE SSMENT OF INCOME BY WAY OF NOTIONAL ALV UNDER SECTION 22 OF THE ACT IS CONCERNED, THERE IS NO SUBSTANTIVE DIFFERENCE IN THE DISPUTE RAISED VIS-A-VIS THE GROUNDS IN THE ORIGINAL MEMORANDUM OF APPEAL. THE ONLY DIF FERENCE BETWEEN THE ORIGINAL GROUNDS OF APPEAL AND THE REVISED ONE IS THE FRESH PLEA OF THE ASSESSEE BASED ON THE JUDGMENT OF HONBLE GUJAR AT HIGH COURT IN THE CASE OF NEHA BUILDERS P.LTD. (SUPRA) AND ALSO O F HON'BLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES & INVESTMEN TS LIMITED (SUPRA) FOR THE PROPOSITION THAT THE INCOME FROM THE PROPER TIES IN THE INSTANT CASE BE HELD TO BE ASSESSABLE UNDER THE HEAD INCOM E FROM BUSINESS OR PROFESSION AND THAT, IF IT IS SO HELD, THE SAME WOULD OUST THE CHARGE MADE BY THE ASSESSING OFFICER BY INVOKING SECTION 2 2 OF THE ACT UNDER THE HEAD INCOME FROM HOUSE PROPERTY. EVEN IF IT IS TAKEN THAT THE AFORESAID PLEA IS THE NEW PLEA RAISED BY THE ASSESS EE, IT IS QUITE CLEAR THAT ALL THE FACTS NECESSARY TO ADJUDICATE THE SAME ARE AVAILABLE ON RECORD AND, THEREFORE, WE HAD MADE KNOWN TO THE PAR TIES THAT THE SAID PLEA IS ADMISSIBLE, AND ACCORDINGLY, BOTH SIDES HAD ADDRESSED US ON THE MERITS OF THE SAME ALSO. 10. COMING TO THE MERITS OF THE ADDITION, WHICH HAS BEEN SUSTAINED BY THE LEARNED CIT(A), IN OUR VIEW, WE ARE IN CONCU RRENCE WITH THE ASSERTION MADE BY THE LEARNED CIT-DR THAT THE MATTE R STANDS FULLY COVERED IN FAVOUR OF THE REVENUE EVEN WITH REGARD T O THE PLEA OF THE ASSESSEE BASED ON THE JUDGMENT OF HONBLE GUJARAT H IGH COURT IN THE CASE OF NEHA BUILDERS P.LTD. (SUPRA). IN FACT, HON 'BLE DELHI HIGH COURT IN THE CASE OF ANSAL HOUSING FINANCE & LEASING COMP ANY LTD. (SUPRA) ITA-790 TO 792/DEL/2015 9 CONSIDERED THE RATIO OF THE JUDGMENT OF HON'BLE SUP REME COURT IN THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LIMITED (S UPRA) AND HELD THAT THE SAME WAS NOT APPLICABLE TO THE FACTS OF TH E CASE AND, ACCORDINGLY, HAD REITERATED ITS EARLIER JUDGMENT ON THE INSTANT ISSUE IN THE CASE OF ANSAL HOUSING FINANCE & LEASING COMPANY LTD. (SUPRA). NOTABLY, ASSESSEES OWN CASE WAS ALSO CLUBBED WITH THE CASE OF ANSAL HOUSING FINANCE & LEASING COMPANY LTD. (SUPRA) BEFO RE THE HONBLE HIGH COURT. THEREFORE, IN THIS VIEW OF THE MATTER, WE FIND NO MERIT IN THE PLEA RAISED BY THE ASSESSEE. ACCORDINGLY, THE ORDER OF LEARNED CIT(A) IS LIABLE TO BE AFFIRMED. 11. BEFORE PARTING, WE MAY ALSO MENTION HERE THAT O NE OF THE POINTS RAISED BY THE ASSESSEE BEFORE US WAS TO THE EFFECT THAT THE MATTER BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE AS TO WHETHER THE RATIO OF THE JUDGMENT OF HON'BLE SUPREM E COURT IN THE CASE OF CHENNAI PROPERTIES & INVESTMENTS LIMITED (S UPRA) AND/OR NEHA BUILDERS P.LTD. (SUPRA) WAS APPLICABLE SO AS TO MIT IGATE THE ASSESSMENT OF IMPUGNED SUMS UNDER THE HEAD INCOME FROM HOUSE PROPERTY. WE FIND NO REASONS TO ACCEDE TO THE AFORESAID PLEA ONC E HAVING NOTED THAT HON'BLE DELHI HIGH COURT IN THE CASE OF ANSAL HOUSI NG FINANCE & LEASING COMPANY LTD. (SUPRA) HAS ALREADY CONSIDERED THE RATIO OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CH ENNAI PROPERTIES & INVESTMENTS LIMITED (SUPRA) AND FOUND IT INAPPLIC ABLE TO THE GIVEN FACTS; AND, IN ANY CASE, IT IS NOT THE CASE OF THE ASSESSEE THAT ANY FRESH FACTS HAVE ARISEN WHICH WOULD REQUIRE ANY REVIEW. IN SUM AND SUBSTANCE, THE DISPUTE REMAINS THE SAME AS IN THE P AST, AND THUS, WE HEREBY AFFIRM THE ORDER OF LEARNED CIT(A) AND THE G ROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 12. INSOFAR AS GROUND OF APPEAL NO.3 OF THE ORIGINA L GROUNDS AND RENUMBERED AS GROUND NO.2 IN THE ADDITIONAL GROUNDS IS CONCERNED, THEY ARE SIMILAR AND RELATE TO THE ASSESSEES CLAIM FOR DEDUCTION OF ITA-790 TO 792/DEL/2015 10 `34,08,17,701/- UNDER SECTION 80IA(4)(III) OF THE A CT. PERTINENTLY, ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IA(4 )(III) WITH RESPECT TO THE PROFITS FROM INDUSTRIAL PARK. THE ASSESSING OFFICER AS WELL AS LEARNED CIT(A) HAVE DENIED THE CLAIM OF THE ASSESSE E ON THE PLEA THAT THE REQUISITE NOTIFICATION BY THE CBDT IN TERMS OF THE INDUSTRIAL PARK SCHEME, 2008 (AS AMENDED BY THE INDUSTRIAL PARK (AM ENDMENT) SCHEME, 2010) WAS NOT AVAILABLE. 13. IN THIS BACKGROUND, THE LEARNED REPRESENTATIVE SUBMITTED THAT THE NON-AVAILABILITY OF THE REQUISITE NOTIFICATION CONTINUES EVEN AT THIS STAGE, SO, HOWEVER, IT IS POINTED OUT THAT THE ASSE SSEE HAD FILED A REVIEW PETITION BEFORE THE CBDT ON 12 TH MAY, 2014, WHICH IS STILL PENDING FOR DISPOSAL. IT WAS ASSERTED THAT A REMIN DER APPLICATION HAD ALSO BEEN FILED BEFORE THE CBDT. IN VIEW THEREOF, THE ONLY PRAYER OF THE ASSESSEE BEFORE US IS THAT SUITABLE ORDERS BE PASSE D DIRECTING THE ASSESSING OFFICER TO MODIFY THE ASSESSMENT IN CASE THE REQUISITE NOTIFICATION IS RECEIVED FROM THE CBDT IN FUTURE. 14. LEARNED DR HAS PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW BUT HAS NOT SERIOUSLY CONTESTED THE PRAYER OF THE ASSESSEE. 15. HAVING CONSIDERED THE RIVAL STANDS, IN OUR VIEW , THE ACTION OF THE LOWER AUTHORITIES IN DENYING THE CLAIM OF THE ASSES SEE FOR DEDUCTION UNDER SECTION 80IA(4)(III) OF THE ACT CANNOT BE FAU LTED FOR THE REASONS ASCRIBED IN THEIR RESPECTIVE ORDERS. THE REQUISITE NOTIFICATION ENTITLING THE ASSESSEE FOR THE DEDUCTION HAS BEEN REJECTED BY THE CBDT, AS IS EMERGING FROM THE RECORD AND THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE ACTION OF THE LOWER AUTHORITIES. THE PLEA OF THE ASSESSEE THAT IN CASE THE NOTIFICATION IS RECEIVED IN FUTURE IN P URSUANCE TO ASSESSEES REVIEW PETITION PENDING BEFORE THE CBDT, IT IS SUFF ICIENT TO DIRECT THE ASSESSING OFFICER THAT IN CASE, HE IS APPROACHED BY THE ASSESSEE WITH ITA-790 TO 792/DEL/2015 11 THE REQUISITE NOTIFICATION ON A LATER DATE, HE SHAL L DEAL WITH THE SAME IN ACCORDANCE WITH LAW. 16. WITH THE ABOVE OBSERVATIONS, THE GROUND OF APPE AL RAISED BY THE ASSESSEE IS DISMISSED. 17. INSOFAR AS ITA NO.790/DEL/2015 RELATING TO ASSE SSMENT YEAR 2010-11 IS CONCERNED, THERE IS NO OTHER ISSUE AND A CCORDINGLY, THE SAME IS DISMISSED AS ABOVE. 18. NOW, WE TAKE UP THE APPEAL OF THE ASSESSEE IN I TA NO.791/DEL/2015 FOR ASSESSMENT YEAR 2011-12, WHICH IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-24 (ERSTWHILE C IT(A)-31), NEW DELHI DATED 27 TH NOVEMBER, 2014, WHICH IN TURN HAS ARISEN FROM THE ORDER OF DCIT, CENTRAL CIRCLE-20, NEW DELHI DATED 26 TH MARCH, 2014. 19. AS WAS THE CASE IN ASSESSMENT YEAR 2010-11, HER EIN ALSO, THE ASSESSEE HAS FILED REVISED AND ADDITIONAL GROUNDS O F APPEAL AS WELL AS THE GROUNDS FILED ORIGINALLY ALONG WITH THE MEMORAN DUM OF APPEAL. THE ORIGINAL GROUNDS AS WELL AS REVISED AND ADDITIO NAL GROUNDS FILED (WHICH, INTER-ALIA, SUBSUME THE ORIGINAL GROUNDS OF APPEAL), ARE REPRODUCED HEREUNDER :- ORIGINAL GROUNDS :- 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN LAW IN CONFIR MING THE ADDITION OF NOTIONAL ANNUAL LETTING VALUE OF RS.4,83,96,980/- (OUT OF RS.5,90,67,704/-) ON CLOSI NG STOCK OF FLATS/SPACES BY FOLLOWING THE HONBLE DELHI HIGH COURTS DECISION IN WHICH VARIOUS RELEVANT FACTS WERE NOT F ULLY BROUGHT OUT BEFORE THEIR LORDSHIPS AND THEREFORE CO ULD NOT BE CONSIDERED BY THEM. ITA-790 TO 792/DEL/2015 12 1.2 THAT WITHOUT PREJUDICE TO THE GROUND NO.1.1 ABO VE, THE APPELLANT HAS ALSO FILED AN APPEAL BEFORE THE A PEX COURT WHICH HAS BEEN ADMITTED AND IS PENDING FOR DE CISION. 2. THAT WITHOUT PREJUDICE TO THE FOREGOING GROUND, THE DECISION RENDERED Y HON'BLE DELHI HIGH COURT RELATE D TO THE ASSESSMENT YEAR 1988-89 AND RENDERED IN THE CONTEXT OF THE PROVISIONS OF SECTION 23 AS THEY EXISTED PRIOR TO SUBSTITUTION BY THE FINANCE ACT, 2001 W.E.F. 1.4.20 02. THE LEARNED CIT(A) FAILED TO CONSIDER THE ISSUE IN THE LIGHT OF THE AMENDED PROVISIONS AS APPLICABLE TO THE YEAR UNDER APPEAL WHICH WERE SUBSTANTIALLY DIFFERENT. THE ISSUE SHOU LD HAVE BEEN RECONSIDERED AND DECIDED IN THE LIGHT OF THE A MENDED PROVISIONS. 3.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(APPEALS) HAS ERRED IN DISALLOWING THE E NTIRE EXPENDITURE OF RS.9,46,22,358/- U/S 37(1) AS CAPITA L NATURE ON THE GROUND THAT THE SAME RELATED TO ISSUE OF EQU ITY SHARES OF THE COMPANY TO SELECTED QUALIFIED INSTITU TIONAL BUYERS BY APPLYING THE RATIO OF THE APEX COURT IN B ROOK BOND INDIA LIMITED VS. CIT (1997) 225 ITR 798. HE FAILED TO APPRECIATE THAT UNLIKE IN BROOK BONDS CASE, THE FU NDS RECEIVED BY ISSUE OF SHARES WAS NOT A PUBLIC ISSUE BUT WAS RESTRICTED TO A FEW QUALIFIED INSTITUTIONAL BUYERS ONLY ON NEGOTIATED TERMS. 3.2 THAT WITHOUT PREJUDICE TO GROUND NO.3.1, THE LE ARNED CIT(APPEALS) ERRED IN COMPLETING IGNORING AND NOT APPRECIATING THAT THE SUM OF RS.9,46,22,358/- INCLU DED HEAVY EXPENSES INCURRED PRIOR TO TAKING THE DECISIO N WHETHER TO GO FOR ISSUE OF SHARES OR EXPLORE OTHER ALTERNATIVE FINANCIAL AVENUES COULD NOT BE DISALLOW ED AS EXPENSES INCURRED ON THE ISSUE. THE DISALLOWANCE C OULD AT BEST BE RESTRICTED TO EXPENSES INCURRED ON THE ISSU E AFTER OPTING FOR THE AVENUE OF GOING IN FOR ISSUE. 3.3 THAT WITHOUT PREJUDICE TO THE FOREGOING GROUNDS THAT THE DISALLOWABLE EXPENSES RELATING TO ISSUE AMOUNTE D ONLY TO RS.45,89,080 (RS.23,14,080/- BEING STAMP DUTY PA ID FOR ISSUE OF SHARES, RS.15,000/- BEING COST OF PRINTING AND STATIONERY AND RS.11,30,000/- AND RS.11,30,000/- BE ING FEE PAID TO STOCK EXCHANGES), THE OTHER EXPENSES BEING NOT IN RELATION TO THE ISSUE OF SHARES TO QUALIFIED INSTIT UTIONAL BUYERS COULD NOT BE DISALLOWED U/S 37(1) AS CAPITAL EXPENDITURE. ITA-790 TO 792/DEL/2015 13 3.4 THAT WITHOUT PREJUDICE TO THE FOREGOING GROUNDS , THE LEARNED CIT(APPEALS) SHOULD HAVE IN ANY CASE OUT OF RS.9,46,22,358/- ALLOWED THE SUM OF RS.27,35,440/- BEING THE EXPENSES INCURRED PRIOR TO TAKING THE DECISION OF GOING FOR THE CAPITAL ISSUE. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND OR FOREGO ANY GROUNDS OF APPEAL AT THE TIME O F HEARING. REVISED & ADDITIONAL GROUNDS :- THE APPELLANT MOST RESPECTFULLY PRAYS THAT THE HON BLE TRIBUNAL MAY BE PLEASED TO ALLOW THE ADMISSION OF ADDITIONAL GROUNDS OF APPEAL AND REDRAFTING OF GROU ND NOS.1.1, 1.2, & 2 ORIGINALLY TAKEN IN FORM NO.36 FO R THE FOLLOWING REASONS. (I) IT IS CONSIDERED NECESSARY AS WELL AS APPROPRIA TE TO REFRAME THE GROUNDS OF APPEAL TO SET-OUT THE RELEVA NT FACTS IN RIGHT AND PROPER PERSPECTIVE, AND; (II) THE ADDITIONAL GROUNDS GO TO THE ROOT OF THE M ATTER AND DOES NOT REQUIRE CONSIDERATION OF ANY MATERIAL EVIDENCE OUTSIDE THE RECORD. 1.2 IT IS SETTLED LAW THAT LEGAL GROUNDS ARE ALLOWE D TO BE TAKEN BEFORE THE HONBLE TRIBUNAL. THE HON'BLE SUP REME COURT REITERATED THIS SETTLED LEGAL POSITION IN THE CASE OF THE CIT VS SINGHAD TECHNICAL EDUCATION SOCIETY, CIV IL APPEAL NO.11080 OF 2017, WHERE THE LEGAL GROUND ON RECORDING OF SATISFACTION U/S 153C WAS TAKEN FOR TH E FIRST TIME AS ADDITIONAL GROUND BEFORE THE HONBLE TRIBUN AL, WHICH THE REVENUE HAD OBJECTED. RELIANCE IS ALSO P LACED ON THE DECISION OF THE LARGER BENCH (3 MEMBER) OF H ON'BLE SUPREME COURT IN NATIONAL THERMAL POWER CO.LTD., (1 998) 229 ITR 383 (SC). 1.3 FOR THE SAKE OF CLARITY AND CONVENIENCE, THE ADDITIONAL GROUNDS AND THE REVISED/REFRAMED GROUNDS ARE MERGED AND SET-OUT AS UNDER. REVISED AND ADDITIONAL GROUNDS OF APPEAL NOTIONAL ANNUAL LETTING VALUE (ALV) ITA-790 TO 792/DEL/2015 14 1.1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW LEARNED CIT(A) ERRED IN UPHOLDING AN ADDITIO N OF RS. 4,83,96,980/ (OUT OF RS.5 90,67,704/-) UNDER THE HE AD 'INCOME FROM HOUSE PROPERTY WITHOUT APPRECIATING TH AT THE PROPERTIES IN QUESTION WERE 'STOCK-IN-TRADE' OF THE ASSESSEE'S BUSINESS AND PROVISIONS RELATING TO S.22 TO S.26 OF IT ACT ARE NOT ALL APPLICABLE TO PROPERTY FORMIN G PART OF STOCK-IN-TRADE IN THE BUSINESS O THE ASSESSEE AS AR GUED BY THE REVENUE ITSELF BEFORE THE HONBLE HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS NEHA BUILDER S (P) LTD. (2008) 296ITR 661 (GUJ) AND APPROVED BY THE HO N'BLE HIGH COURT WAY BACK IN 2006. 1.2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, LEARNED CIT(A) ERRED IN UPHOLDING AN ADDITION OF RS . 4,83,96,980/- (OUT OF RS.5,90,67,704/-) UNDER THE H EAD 'INCOME FROM HOUSE PROPERTY' WITHOUT APPRECIATING T HAT S.23 OF THE INCOME TAX ACT 1961 HAS UNDERGONE AMENDMENT VIDE FINANCE C 2001 W.E.F.1.4.2002 AND OL D LAW CANNOT BE APPLIED TO THE YEAR UNDER CONSIDERATI ON. 1.3. WITHOUT PREJUDICE TO THE ABOVE GROUND NO. 1.1, LEARNED CIT(A) ERRED:- (A). IN NOT APPRECIATING THAT THE QUESTION OF TAXAT ION OF ALV OF UNSOLD FLATS/OFFICE SPACES, LYING VACANT AND HEL D AS STOCK-IN-TRADE, ARISES ONLY WHEN A FINDING IS RECOR DED, HAVING REGARD TO THE OBJECTS OF THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE APPELLANT- COMPANY, THAT INCOME FROM SUCH UNSOLD PROPERTIES IS LIABLE TO BE TAXED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY', AND NO T AS BUSINESS INCOME IN THE LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES AND INVESTMENTS LTD VS COMMISSIONER OF INCOME TAX CENTR AL II TAMIL NADU (IN CIVIL APPEAL NOS. 4491 TO 4494 OF 2 004). (B) IN NOT APPRECIATING THAT WITHOUT EXAMINING THE MEMORANDUM OF ASSOCIATION (MOA) AND ITS OBJECT CLAU SES, IT IS NOT PERMISSIBLE TO ARRIVE AT ANY FINDING OR C ONCLUSION THAT INCOME FROM UNSOLD FLATS/OFFICE SPACES, LYING VACANT AND HELD AS STOCK-IN-TRADE, IS LIABLE TO BE TAXED A S INCOME FROM HOUSE PROPERTY ON THE BASIS OF THE NOTIONAL AL V. (C) IN NOT APPRECIATING THAT ONE OF THE MAIN OBJECT S OF THE ASSESSEE IS TO SELL, LEASE, LET, MORTGAGE OR OT HERWISE DISPOSE OF THE LANDS, HOUSES, BUILDINGS AND OTHER P ROPERTY, APART FROM ACQUIRING AND DEVELOPING OF PROPERTIES A ND THEREFORE, THE RENTAL INCOME, IF AT ALL EARNED, FRO M UNSOLD ITA-790 TO 792/DEL/2015 15 PROPERTIES HELD AS STOCK-IN-TRADE IS LIABLE TO BE T AXED UNDER THE HEAD, INCOME FROM BUSINESS. (D) IN NOT APPRECIATING THAT THAT UNLESS THE CERTI FICATE OF COMPLETION OF CONSTRUCTION OF THE PROPERTY IS OBTAI NED IN RESPECT OF THE PROPERTIES LYING VACANT AS STOCK-IN- TRADE, THE ALV OF THE PROPERTIES IS NOT LIABLE TO BE TAXED ON NOTIONAL BASIS AS IT IS ILLEGAL TO RESIDE / OCCUPY SUCH PROP ERTY AND HENCE COULD NOT HAVE BEEN LET OUT. (E) IN UPHOLDING THE ADDITION WITHOUT RETURNING A FINDING OF FACT AS TO WHETHER IT WAS FACTUALLY FEASIBLE AND PRACTICALLY POSSIBLE AT ALL TO EARN ANY RENTAL INCO ME FROM THE SAID UNSOLD FLATS / SPACE AS THE SAID FLATS WER E MEANT FOR SALE AND WERE NOT READY FOR IMMEDIATE OCCUPATIO N BY THE PROSPECTIVE TENANTS AND DID NOT HAVE THE BASIC NECESSITIES LIKE ELECTRIC FITTINGS, PUCCA WALL PAIN TING, COMPLETION CERTIFICATES ETC. (F) IN UPHOLDING THE ADDITION WITHOUT RETURNING A FINDING OF FACT AS TO WHETHER IT WAS FACTUALLY POSSIBLE FOR THE ASSESSEE TO TAKE THE RISK OF LETTING OUT UNSOLD FLA TS / SPACES AND ASKING THE PROSPECTIVE BUYER TO WAIT TILL THE T ENANT VACATES THE FLAT FOR IT TO BE SOLD AND GIVEN POSSES SION. (G) IN NOT APPRECIATING THAT EVEN NOTIONAL ALV NEE DS TO BE ARRIVED AT BASED UPON REALITIES AND ACTUAL FACTS ON THE GROUND AND COULD NOT HAVE BEEN DETERMINED THROUGH A GUESS WORK. 1.4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, LEARNED CIT(A) ERRED IN LAW AS THE AMENDMENT BY WAY OF INSERTION OF SUB-SECTION (5) IN SECTION 23 OF THE A CT VIDE THE FINANCE ACT, 2017 IS PROSPECTIVE WITH EFFECT FROM 0 1-04- 2018 ENABLING TAXING OF UNSOLD FLATS/ OFFICE SPACES HELD AS STOCK-IN-TRADE AND THE POST-AMENDMENT LAW CANNOT BE APPLIED TO THE PRE-AMENDMENT ASSESSMENT YEARS, EVEN IF THE INCOME IN RESPECT OF SUCH PROPERTIES IS HELD TO BE ASSESSABLE UNDER THE HEAD, INCOME FROM HOUSE PROPER TY. OTHER GROUNDS RETAINED. 2.1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) HAS ERRED IN DISALLO WING THE ENTIRE EXPENDITURE OF RS. 9,46,22,358/- U/S 37(1) A S CAPITAL NATURE ON THE GROUND THAT THE SAME RELATED TO ISSUE OF EQUITY SHARES OF THE COMPANY TO SELECTED QUALIFIED INSTITUTIONAL BUYERS BY APPLYING THE RATIO OF THE A PEX COURT ITA-790 TO 792/DEL/2015 16 IN BROOK BOND INDIA LIMITED VS. CIT (19.97) 225 ITR 798. HE FAILED TO APPRECIATE THAT UNLIKE IN BROOK BOND'S CA SE, THE FUND RECEIVED BY ISSUE OF SHARES WAS FOR INCREASING THE WORKING CAPITAL OF THE APPELLANT AND SECONDLY, THE ISSUE WAS NOT A PUBLIC ISSUE BUT WAS RESTRICTED TO A FEW QUALIFIED INSTITUTIONAL BUYERS ONLY ON NEGOTIATED TERMS. 2.2. THAT WITHOUT PREJUDICE TO GROUND NO. 2.1, THE LEARNED CIT(APPEALS) ERRED IN COMPLETELY IGNORING A ND NOT APPRECIATING THAT THE SUM OF RS. 9,46,22,358/- INCL UDED HEAVY EXPENSES INCURRED PRIOR TO TAKING THE DECISIO N WHETHER TO GO FOR ISSUE OF SHARES OR EXPLORE OTHER ALTERNATIVE FINANCIAL AVENUES COULD NOT BE DISALLOW ED AS EXPENSES INCURRED ON THE ISSUE. THE DISALLOWANCE CO ULD AT BEST BE RESTRICTED TO EXPENSES INCURRED ON THE ISSU E AFTER OPTING FOR THE AVENUE OF GOING IN FOR ISSUE. 2.3. THAT WITHOUT PREJUDICE TO THE FOREGOING GROUND S THAT THE DISALLOWABLE EXPENSES RELATING TO ISSUE AMOUNTE D ONLY TO RS. 45,89,080 (RS. 23,14,080/- BEING STAMP DUTY PAID FOR ISSUE OF SHARES, RS. 15,000/- BEING COST OF PRINTIN G AND STATIONERY AND RS. 11,30,000/- AND RS. 11,30,000/- BEING FEE PAID TO STOCK EXCHANGES), THE OTHER EXPENSES BE ING NOT IN RELATION TO THE ISSUE OF SHARES TO QUALIFIED INS TITUTIONAL BUYERS COULD NOT BE DISALLOWANCE U/S 37(1) AS CAPI TAL EXPENDITURE. 2.4. THAT WITHOUT PREJUDICE TO THE FOREGOING GROUND S, THE LEARNED CIT(APPEALS) SHOULD HAVE IN ANY CASE OUT OF RS. 9,46,22,358/- ALLOWED THE SUM OF RS. 27,35,440/- BE ING THE EXPENSES INCURRED PRIOR TO TAKING THE DECISION OF G OING FOR THE CAPITAL ISSUE. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND OR FOREGO ANY GROUNDS OF APPEAL AT THE TIME O F HEARING. FOR THESE AND OTHER GROUNDS THAT MAY BE UR GED AT THE TIME OF HEARING, IT IS PRAYED THAT THE HON'BLE TRIBUNAL MAY BE PLEASED TO ALLOW THE APPEAL IN THE INTEREST OF EQUITY AND JUSTICE. 20. INSOFAR AS GROUND NOS.1.1 TO 1.4 RELATING TO AL V IS CONCERNED, THE FACTS AND CIRCUMSTANCES ARE PARI-MATERIA TO THE DIS PUTE DECIDED BY US IN THE EARLIER PART OF THIS ORDER FOR ASSESSMENT YE AR 2010-11. OUR DECISION IN THE EARLIER PARAGRAPHS IN RELATION TO A SSESSMENT YEAR 2010- ITA-790 TO 792/DEL/2015 17 11 APPLIES MUTATIS MUTANDIS HEREIN ALSO. THE SAID GROUNDS ARE ACCORDINGLY DISMISSED. 21. THE ONLY OTHER ISSUE WHICH ARISES IN THIS APPEA L IS WITH REGARD TO THE CLAIM MADE BY THE ASSESSEE FOR DEDUCTION OF `9, 46,22,358/- REPRESENTING EXPENSES INCURRED IN CONNECTION WITH I SSUE OF EQUITY SHARES TO QUALIFIED INSTITUTIONAL BUYERS (QIBS). P ERTINENTLY, THE RELEVANT FACTS IN THIS CONTEXT, AS EMERGING FROM THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE OTHER MATERIAL ON RECORD, ARE AS FOLLOWS. 22. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE COMPANY STAKED A CLAIM FOR DEDUCTION OF EXPENSES AG GREGATING TO `9,46,22,358/- INCURRED DURING THE YEAR IN CONNECTI ON WITH THE ISSUE OF EQUITY SHARES TO QIBS. ASSESSEE POINTED OUT THAT I N THE BOOKS OF ACCOUNT, THE SAID EXPENDITURE WAS NOT DEBITED TO TH E PROFIT & LOSS ACCOUNT BUT WAS DEBITED (OR REDUCED) FROM THE SHARE PREMIUM ACCOUNT. THE ASSESSEE ALSO REFERRED TO A NOTE AP PENDED TO THE RETURN OF INCOME WHEREBY THE ENTIRE FACTS IN RELATI ON TO THE SAID CLAIM OF EXPENDITURE WERE DETAILED. THE SAID NOTE APPEND ED TO THE RETURN OF INCOME CONTAINED AN AVERMENT THAT THE AFORESAID EXP ENDITURE WAS AN ALLOWABLE EXPENDITURE AND THAT THE SAME BE ALLOWED WHILE COMPUTING THE TAXABLE INCOME DURING THE ASSESSMENT PROCEEDING S. WE FIND THAT THE ASSESSING OFFICER, IN PARAGRAPH 4 OF THE ASSESS MENT ORDER, HAS TAKEN NOTE OF SUCH ASSERTION OF THE ASSESSEE BUT HA S REJECTED THE CLAIM FOR ALLOWABILITY OF SUCH EXPENDITURE. AS PER THE A SSESSING OFFICER, ANY EXPENDITURE INCURRED IN CONNECTION WITH THE ISSUE O F SHARES FOR INCREASING CAPITAL BY A COMPANY WAS IN THE NATURE O F A CAPITAL EXPENDITURE, FOLLOWING THE JUDGMENT OF HON'BLE SUPR EME COURT IN THE CASE OF BROOKE BOND INDIA LIMITED VS. CIT (1997) 225 ITR 798 (SC) AND, THEREFORE, THE SAME COULD NOT BE ALLOWED AS A REVENUE EXPENDITURE WHILE COMPUTING THE TAXABLE INCOME. ITA-790 TO 792/DEL/2015 18 23. BEFORE THE CIT(A) ALSO, THE ASSESSEE DID NOT SU CCEED INASMUCH AS THE CIT(A) UPHELD THE RELIANCE PLACED BY THE ASSESS ING OFFICER ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF BR OOKE BOND INDIA LIMITED (SUPRA) FOR REJECTING THE INSTANT CLAIM. B EFORE THE LEARNED CIT(A), ASSESSEE ALSO RAISED AN ALTERNATIVE PLEA WH EREBY IT WAS CANVASSED THAT THE DISALLOWANCE BE SCALED DOWN TO E XCLUDE THE EXPENSES INCURRED PRIOR TO THE ISSUE OF EQUITY SHAR ES, FOR INSTANCE, PROFESSIONAL SERVICES, DATA PROCESSING, ETC., AS, A CCORDING TO THE ASSESSEE, SUCH EXPENDITURE DID NOT BEAR THE CHARACT ER OF SHARE ISSUE EXPENSES. THE SAID CLAIM ALSO CAME TO BE REJECTED BY THE CIT(A) FOLLOWING THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF BROOKE BOND INDIA LIMITED (SUPRA). 24. IN THE ABOVE BACKGROUND, THE ASSESSEE IS IN APP EAL BEFORE US ON THE AFORESTATED GROUNDS OF APPEAL. BEFORE US, APAR T FROM REITERATING ITS STAND THAT THE IMPUGNED EXPENDITURE WAS ALLOWAB LE AS A DEDUCTION UNDER SECTION 37(1) OF THE ACT, A NEW TWIST HAS BEE N IMPARTED TO THE CONTROVERSY BY THE APPELLANT. IN SUPPORT OF ITS CL AIM FOR DEDUCTION OF THE IMPUGNED EXPENDITURE, IT IS SOUGHT TO BE CANVAS SED BEFORE US THAT NOTWITHSTANDING THE CLAIM FOR DEDUCTION UNDER SECTI ON 37(1) OF THE ACT, THE IMPUGNED EXPENDITURE INCURRED IN CONNECTION WIT H ISSUE OF EQUITY SHARES TO QIBS ALSO QUALIFIES FOR DEDUCTION IN TERM S OF THE PROVISIONS OF SECTION 35D OF THE ACT. EXPLAINING THE RATIONALE OF THE AFORESAID PLEA, WHICH WAS HITHERTO NOT RAISED BEFORE THE LOWER AUTH ORITIES, THE LEARNED REPRESENTATIVE OF THE ASSESSEE REFERRED TO THE JUDG MENT OF HON'BLE SUPREME COURT IN THE CASE OF SHASUN CHEMICALS & DRU GS LIMITED VS. CIT [2016] 388 ITR 1 (SC), WHEREBY IT HAS BEEN HE LD THAT THE RATIO OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE O F BROOKE BOND INDIA LIMITED (SUPRA) WOULD NOT BE ATTRACTED IN CAS ES WHERE THE EXPENDITURE RELATED TO PUBLIC ISSUE OF SHARES AS TH E JUDGMENT IN THE CASE OF BROOKE BOND INDIA LIMITED (SUPRA) WAS RENDE RED WHEN THE RELEVANT PROVISIONS OF SECTION 35D WERE NOT ON THE STATUTE. ITA-790 TO 792/DEL/2015 19 ELABORATING HIS ARGUMENT, THE LEARNED COUNSEL POINT ED OUT THAT THE ISSUE OF SHARES TO QIBS IS LIABLE TO BE REGARDED AS ISSUE OF SHARES TO PUBLIC INASMUCH AS HAVING REGARD TO THE SEBI GUID ELINES AND THE RELEVANT SECURITIES CONTRACTS (REGULATION) RULES, 1 957, QIBS ARE LIABLE TO BE REGARDED AS PUBLIC SHAREHOLDERS AS DISTINCT FROM PROMOTER SHAREHOLDERS. ON THIS ASPECT, SPECIFIC RELIANCE WA S PLACED ON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF YES BANK LIMITED [2020] 117 TAXMANN.COM 974 (MUMBAI-TRIB.) WHERE THE STATUS OF QIBS, HAS BEEN EXAMINED AND FOUND TO BE N OT IN THE NATURE OF PROMOTER SHAREHOLDERS. JUSTIFYING THE RAISING OF THE SAID NEW PLEA BEFORE THE TRIBUNAL, THE LEARNED COUNSEL POINTED OU T THAT THE FACTS NECESSARY FOR ADJUDICATION OF THE SAID PLEA ARE ALR EADY ON RECORD AND IT IS A LEGAL ISSUE, AND, THEREFORE, SUCH A PLEA CAN B E ADMITTED FOR ADJUDICATION BY THE TRIBUNAL. IN SUPPORT, RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF NA TIONAL THERMAL POWER CO.LIMITED [1998] 229 ITR 383 (SC). 25. ON THE OTHER HAND, LEARNED CIT-DR APPEARING FOR THE REVENUE OPPOSED THE PLEA OF THE ASSESSEE TO RAISE THE FRESH ALTERNATIVE PLEA BASED ON SECTION 35D OF THE ACT. FIRSTLY, ACCORDIN G TO LEARNED CIT-DR, THE SAID CLAIM IS BEING RAISED AT A LATE STAGE AND THAT NO FORMAL GROUND HAS BEEN FILED AND THEREFORE, SUCH FRESH ALTERNATE CLAIM MAY NOT BE ADMITTED. SECONDLY, THE LEARNED CIT-DR REITERATED THAT THE RATIO OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF BR OOKE BOND INDIA LIMITED (SUPRA) TREATS THE EXPENDITURE INCURRED ON ISSUE OF EQUITY SHARES AS A CAPITAL EXPENDITURE AND, THEREFORE, THE INSTANT EXPENDITURE DOES NOT FALL FOR CONSIDERATION UNDER SECTION 35D O F THE ACT. THIRDLY, IT WAS POINTED OUT THAT IN THE PAST TWO ASSESSMENT YEA RS 2007-08 AND 2008-09, THE EXPENDITURE INCURRED ON THE ISSUE OF S HARES TO QIBS WAS DISALLOWED BY THE INCOME-TAX AUTHORITIES, AND THE S AME HAS BEEN AFFIRMED BY THE TRIBUNAL. ACCORDING TO LEARNED CIT -DR, IN THE EARLIER TWO YEARS, THE ASSESSEE DID NOT PUT FORTH THE ALTER NATIVE CLAIM OF THE ITA-790 TO 792/DEL/2015 20 DEDUCTION UNDER SECTION 35D OF THE ACT AND THEREFOR E, SUCH A PLEA OUGHT NOT TO BE ENTERTAINED IN THIS YEAR. ANOTHER PLEA WHICH HAS BEEN RAISED BEFORE US IS THAT IN CASE THE PLEA IS TO BE CONSIDERED, THE QUESTION AS TO WHETHER OR NOT QIBS CONSTITUTE A PAR T OF PUBLIC SHAREHOLDING AND NOT THAT OF PROMOTERS SHAREHOLDIN G, IS REQUIRED TO BE EXAMINED, AND, FOR THAT MATTER, THE ISSUE MAY BE RE MANDED BACK TO THE ASSESSING OFFICER. 26. IN REPLY, THE LEARNED REPRESENTATIVE FOR THE AS SESSEE POINTED OUT THAT THE ALTERNATIVE PLEA BASED ON SECTION 35D OF T HE ACT WAS IN SUPPORT OF THE SUBSTANTIVE GROUND WHEREBY THE ASSES SEE HAS AGITATED THE DISALLOWANCE OF ITS CLAIM FOR DEDUCTION OF EXPE NDITURE INCURRED ON ISSUE OF SHARES TO QIBS. ACCORDING TO THE LEARNED REPRESENTATIVE, RULE 11 OF THE APPELLATE TRIBUNAL RULES, 1963 CLEARLY EM POWERS THE TRIBUNAL TO CONSIDER AND DECIDE THE INSTANT PLEA. ASSAILING THE ASSERTION OF THE LEARNED CIT-DR THAT IN THE ABSENCE OF A FORMAL FILI NG OF ADDITIONAL GROUND, THE AFORESAID PLEA CANNOT BE ENTERTAINED, T HE LEARNED REPRESENTATIVE REFERRED TO THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SANJAY SAWHNEY VS. PCIT [202 0] 116 TAXMANN.COM 701 (DELHI), WHEREIN IT HAS BEEN OBSERV ED THAT THERE IS NO PRESCRIBED FORMAT FOR FILING AN ADDITIONAL GROUN D AND, IN ANY CASE, AN ISSUE, A PLEA OF WHICH IS INTERLINKED WITH A GRO UND ALREADY TAKEN, OUGHT TO BE PERMITTED TO BE URGED BY THE PARTIES. JUSTIFYING THE RAISING OF THE SAID PLEA AT THIS STAGE, THE LEARNED REPRESE NTATIVE POINTED OUT THAT SINCE THE PLEA WAS BASED ON THE JUDGMENT OF HO N'BLE SUPREME COURT IN THE CASE OF SHASUN CHEMICALS & DRUGS LIMIT ED (SUPRA) WHICH WAS RENDERED AFTER THE PASSING OF THE IMPUGNED ORDE R OF THE CIT(A), THE SAID PLEA COULD ONLY HAVE BEEN RAISED BY THE AS SESSEE AT THE PRESENT STAGE; AND, THEREFORE, IT WAS ALSO NOT AVAI LABLE TO BE RAISED IN THE PAST YEARS. ITA-790 TO 792/DEL/2015 21 27. IN THE ABOVE BACKGROUND, WE HAVE GIVEN OUR ANXI OUS THOUGHTS TO THE RIVAL SUBMISSIONS. AT THE OUTSET, IT IS PERTIN ENT TO OBSERVE THAT SO FAR AS THE PLEA OF THE ASSESSEE FOR DEDUCTION OF TH E IMPUGNED EXPENDITURE INCURRED ON ISSUE OF SHARES TO QIBS IN TERMS OF SECTION 37(1) OF THE ACT IS CONCERNED, THE SAME IS LIABLE T O BE DECIDED AGAINST THE ASSESSEE FOLLOWING THE PRECEDENTS IN THE ASSESS EES OWN CASE. BE THAT AS IT MAY, THE MORE SIGNIFICANT PLEA RAISED BE FORE US, AND WHICH WAS HITHERTO NEITHER RAISED IN THE PAST YEARS AND N OR BEFORE THE LOWER AUTHORITIES IN THE INSTANT YEAR, IS THE CLAIM BASED ON THE PROVISIONS OF SECTION 35D OF THE ACT. NOTABLY, SECTION 35D(1) OF THE ACT PERMITS DEDUCTION BY WAY OF AMORTIZATION OVER A PERIOD OF T EN YEARS OF CERTAIN EXPENDITURE SPECIFIED IN SUB-SECTION (2) THEREOF. SO FAR AS THE INSTANT PLEA OF THE ASSESSEE IS CONCERNED, IT IS PRIMARILY ON THE BASIS OF THE PROVISIONS OF SECTION 35D(2)(C)(IV) WHEREBY EXPENDI TURE INCURRED IN CONNECTION WITH THE ISSUE OF PUBLIC SUBSCRIPTION OF SHARES OF A COMPANY OF THE NATURE SPECIFIED THEREIN, QUALIFIES FOR AMOR TIZATION UNDER SECTION 35D(1) OF THE ACT. INSOFAR AS THE NATURE OF THE IN STANT EXPENDITURE HAVING BEEN INCURRED IN CONNECTION WITH THE ISSUE O F SHARES IS CONCERNED, THERE IS NO DISPUTE BETWEEN THE PARTIES. IT HAS BEEN EXPLAINED BEFORE US THAT THE SAID PLEA CAME TO BE R AISED ONLY AFTER THE HON'BLE SUPREME COURT IN THE CASE OF SHASUN CHEMICA LS & DRUGS LIMITED (SUPRA). IN THE CASE OF SHASUN CHEMICALS & DRUGS LIMITED (SUPRA), THE EXPENSES ON THE PUBLIC ISSUE OF SHARES WERE CLAIMED FOR AMORTIZATION OVER A PERIOD OF 10 YEARS AS ONE-TENTH EACH YEAR IN TERMS OF SECTION 35D OF THE ACT. THE CLAIM WAS SOUGHT TO BE DISALLOWED BY THE REVENUE ON THE GROUND THAT THE SHARE ISSUE EXPE NSES ARE NOT ELIGIBLE FOR DEDUCTION IN VIEW OF THE JUDGMENT OF T HE SUPREME COURT IN BROOKE BOND INDIA LTD. (SUPRA). THE HON'BLE SUPREM E COURT NOTICED THAT WITH THE INTRODUCTION OF SECTION 35D OF THE AC T, THE LEGAL POSITION LAID DOWN IN BROOKE BOND INDIA LTD. (SUPRA) GOT ALT ERED, AND THAT THE EXTANT CASE WAS TO BE DECIDED KEEPING IN VIEW THE P ROVISIONS OF SECTION 35D OF THE ACT. THUS, IN VIEW OF THE JUDGE MENT IN THE CASE OF ITA-790 TO 792/DEL/2015 22 SHASUN CHEMICALS & DRUGS LIMITED (SUPRA), THE FRESH PLEA OF THE ASSESSEE, BASED ON SECTION 35D OF THE ACT, CANNOT B E OUSTED BASED ON THE JUDGEMENT OF BROOKE BOND INDIA LTD. (SUPRA). F URTHERMORE, IT HAS BEEN BROUGHT TO OUR NOTICE THAT OUR COORDINATE BENC HES AT MUMBAI AND HYDERABAD IN THE CASES OF YES BANK LIMITED (SUP RA) AND DCIT VS. DECCAN CHRONICLE HOLDINGS LIMITED [2015] 60 TAXMA NN.COM 240 (HYD-TRIB.) RESPECTIVELY HELD THAT THE QIBS ARE T O BE REGARDED AS PUBLIC IN TERMS OF THE SECURITIES CONTRACTS (REGU LATION) RULES, 1957, SEBI GUIDELINES, ETC., WHICH ARE APPLICABLE TO ALL PUBLIC LISTED COMPANIES. 28. IT IS QUITE OBVIOUS THAT DUE TO THE ADVENT OF T HE AFORESAID LEGAL SITUATION, WHICH HAS EVOLVED AFTER PASSING OF THE I MPUGNED ORDERS BY THE LOWER AUTHORITIES, THE ASSESSEE HAS RAISED THIS PLEA FOR THE FIRST TIME BEFORE THE TRIBUNAL. THERE IS NO CONTROVERSIO N TO THE POINT MADE BY THE LEARNED REPRESENTATIVE FOR THE ASSESSEE THAT THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF SHASUN CHEMICA LS & DRUGS LIMITED (SUPRA) WAS RENDERED SUBSEQUENT TO THE IMPU GNED ORDER OF LEARNED CIT(A) AND, THEREFORE, IT IS ONLY IN THE LI GHT OF THE LATER-EVOLVED LEGAL POSITION, THE SAID PLEA IS BEING RAISED BEFOR E THE TRIBUNAL. 29. IN OUR CONSIDERED OPINION, THE AFORESAID FRESH PLEA WHICH INVOLVES A PURE POINT OF LAW DESERVES TO BE ADMITTED AND ADJ UDICATED. THERE IS NO DENYING THE FACT THAT ASSESSEE HAS BEEN CONSISTE NTLY CANVASSING THAT THE EXPENDITURE INCURRED ON ISSUE OF SHARES TO QIBS IS AN ALLOWABLE EXPENDITURE. NOW, IN THE LIGHT OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF SHASUN CHEMICALS & DRUGS LIMIT ED (SUPRA), AND THE DECISIONS OF OUR COORDINATE BENCHES IN THE CASE S OF YES BANK LIMITED (SUPRA) AND DECCAN CHRONICLE (SUPRA), THE N EW PLEA OF THE ASSESSEE, THOUGH BASED ON SECTION 35D AND NOT SECTI ON 37(1) AS PURSUED EARLIER, IS IN ESSENCE IN FURTHERANCE OF AS SESSEES EARLIER STAND THAT THE IMPUGNED IS AN ALLOWABLE EXPENDITURE. TH E ONLY DIFFERENCE IS ITA-790 TO 792/DEL/2015 23 THAT FOR SUPPORTING ITS PLEA THAT THE EXPENDITURE I S DEDUCTIBLE, SECTION 35D OF THE ACT IS BEING PRESSED INTO SERVICE, AS DI STINCT FROM THE ERSTWHILE PLEA OF THE EXPENDITURE BEING DEDUCTIBLE UNDER SECTION 37(1) OF THE ACT. THEREFORE, THE FRESH PLEA BASED ON SEC TION 35D OF THE ACT IS VERY MUCH INTERLINKED WITH THE ORIGINAL CLAIM BEING PURSUED BY THE ASSESSEE AND, IN ANY CASE, HAVING REGARD TO THE JUD GMENT OF HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO.LIMITED (SUPRA), THE SAID PLEA DESERVES TO BE ADMITTED. OS TENSIBLY, THE HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO.LIMITED (SUPRA) HAS LAID DOWN THAT A FRESH PLEA WHICH INVOL VES A PURE POINT OF LAW FOR WHICH THE NECESSARY FACTS ARE ALREADY ON RE CORD AND WHICH IS BONAFIDELY RAISED AND IS RELEVANT TO DECIDE THE TAX LIABILITY OF AN ASSESSEE, SHOULD BE ALLOWED TO BE RAISED EVEN FOR T HE FIRST TIME BEFORE THE APPELLATE AUTHORITIES. HAVING REGARD TO THE CI RCUMSTANCES IN WHICH THE SAID PLEA HAS BEEN RAISED BEFORE US, WHICH WE H AVE ALREADY NOTED IN SOME DETAIL ABOVE, IN OUR VIEW, THE SAME, BEING A POINT OF LAW FOR WHICH THE RELEVANT FACTS ARE ON RECORD, AND BEING B ONAFIDELY RAISED AND BEING RELEVANT FOR ASSESSING THE CORRECT LIABILITY OF THE ASSESSEE, DESERVES TO BE ADMITTED FOR ADJUDICATION. 30. AS REGARDS THE OBJECTION OF THE LEARNED CIT-DR THAT THERE HAS BEEN NO FORMAL FILING OF ADDITIONAL GROUND AND THER EFORE SUCH A PLEA CANNOT BE ENTERTAINED IS CONCERNED, THE SAME, IN OU R VIEW, IS TOO TECHNICAL AN APPROACH. ADMITTEDLY, THERE IS NO FOR MAT PRESCRIBED YET FOR FILING OF AN ADDITIONAL GROUND BEFORE THE TRIBU NAL. IN ANY CASE, IN OUR CONSIDERED OPINION, THE INSTANT IS NOT A CASE O F AN ADDITIONAL GROUND IN ABROGATION OF AN EARLIER CLAIM, BUT IS ME RELY AN ALTERNATIVE CLAIM BASED ON A LEGAL POSITION PROPOUNDED BY THE H ON'BLE SUPREME COURT. IN THIS CONTEXT, WE MAY REFER TO THE FOLLOW ING OBSERVATION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S VMT SPINNING CO.LTD. 389 ITR 326, WHEREIN IT HAS BEEN HELD THA T THE TRIBUNAL WOULD ITA-790 TO 792/DEL/2015 24 BE WITHIN ITS POWER TO ENTERTAIN SUCH LIKE ALTERNAT IVE CLAIMS MADE BY AN APPELLANT IN TERMS OF RULE 11 OF THE APPELLATE T RIBUNAL RULES, 1963:- THE RULE 11 OF THE ITAT RULES IN FACT CONFERS WIDE POWERS ON THE TRIBUNAL AND ALTHOUGH IT REQUIRES A PARTY TO SEEK THE LEAVE OF THE TRIBUNAL, IT DOES NOT REQUIRE THE SAME TO BE IN WRITING. IT MERELY STATES THAT THE APPELLANT SHALL NOT, EXCEPT BY LEAVE OF THE TRIBUNAL, URGE OR TO BE HEAR D IN SUPPORT OF ANY GROUND NOT SET FORTH IN THE MEMORAND UM OF APPEAL. IN A FIT CASE IT IS ALWAYS OPEN TO THE TRI BUNAL TO PERMIT AN APPELLANT TO RAISE AN ADDITIONAL GROUND N OT SET FORTH IN THE MEMORANDUM OF APPEAL. THE SAFEGUARD I S IN THE PROVISO TO RULE 11 ITSELF. 31. IN VIEW OF THE AFORESAID, WE FIND NO REASONS TO RESTRICT THE ASSESSEE FROM RAISING A PLEA FOR DEDUCTION OF THE I MPUGNED EXPENDITURE BASED ON SECTION 35D OF THE ACT. AT TH E TIME OF HEARING, THE AFORESAID WAS PUT ACROSS TO THE PARTIES AND THE MERITS OF THE CLAIM HAVE ALSO BEEN ARGUED BEFORE US. 32. INSOFAR AS THE MERIT OF THE CLAIM IS CONCERNED, WE HAVE ALREADY NOTED HEREINABOVE THE RELEVANT PROVISIONS OF SECTIO N 35D OF THE ACT. THE HON'BLE SUPREME COURT IN THE CASE OF SHASUN CHE MICALS & DRUGS LIMITED (SUPRA) ADDRESSED THE ISSUE AS TO WHETHER E XPENSES INCURRED TOWARDS PUBLIC SUBSCRIPTION OF SHARES IN THE CASE O F A COMPANY WERE ALLOWABLE UNDER SECTION 35D OF THE ACT. IN THIS CO NTEXT, THE FOLLOWING DISCUSSION IN THE JUDGMENT OF HON'BLE SUPREME COURT IS RELEVANT :- '13. IN THE INCOME TAX RETURN WHICH WAS FILED FOR T HE ASSESSMENT YEAR 1995-96 THE ASSESSEE HAD CLAIMED TH AT IT HAD INCURRED A SUM OF RS.45,51,890/- TOWARDS THE SH ARE ISSUE EXPENSES AND HAD CLAIMED 1/10TH OF THE AFORES AID SHARE ISSUE EXPENSES UNDER SECTION 35D OF THE ACT F ROM THE ASSESSMENT YEARS 1995-96 TO 2004-05. THIS CLAIM OF THE ASSESSEE WAS FOUND TO BE JUSTIFIED AND ALLOWABL E UNDER THE AFORESAID PROVISIONS AND ON THAT BASIS L/10TH S HARE ISSUE EXPENSES WAS ALLOWED UNDER SECTION 35D OF THE ACT. WHEN IT WAS AGAIN CLAIMED FOR THE ASSESSMENT YEAR 1 996- 97, THOUGH IT WAS DISALLOWED AND ON DIRECTIONS OF T HE APPELLATE AUTHORITY, THE ASSESSING OFFICER MADE PHY SICAL ITA-790 TO 792/DEL/2015 25 VERIFICATION OF THE FACTORY PREMISES. HE WAS SATISF IED THAT THERE WAS EXPANSION OF THE FACILITIES TO THE INDUST RIAL UNDERTAKING OF THE ASSESSEE. IT IS ON THIS SATISFAC TION THAT FOR THE ASSESSMENT YEAR 1996-97 ALSO THE EXPENSES W ERE ALLOWED. ONCE, THIS POSITION IS ACCEPTED AND THE CL OCK HAD STARTED RUNNING IN FAVOUR OF THE ASSESSEE, IT HAD T O COMPLETE THE ENTIRE PERIOD OF 10 YEARS AND BENEFIT GRANTED IN FIRST TWO YEARS COULD NOT HAVE BEEN DENIED IN TH E SUBSEQUENT YEARS AS THE BLOCK PERIOD WAS 10 YEARS S TARTING FROM THE ASSESSMENT YEAR 1995-96 TO ASSESSMENT YEAR 2004- 05. THE HIGH COURT, HOWEVER, DISALLOWED THE S AME FOLLOWING THE JUDGMENT OF THIS COURT IN THE CASE OF BROOK BOND INDIA LTD (SUPRA). IN THE SAID CASE IT WAS HEL D THAT THE EXPENDITURE INCURRED ON PUBLIC ISSUE FOR THE PURPOS E OF EXPANSION OF THE COMPANY IS A CAPITAL EXPENDITURE. HOWEVER, IN SPITE OF THE ARGUMENT RAISED TO THE EFF ECT THAT THE AFORESAID JUDGMENT WAS RENDERED WHEN SECTION 35 D WAS NOT ON THE STATUTE BOOK AND THIS PROVISION HAD ALTERED THE LEGAL POSITION, THE HIGH COURT STILL CHOSE TO FOLLOW THE SAID JUDGMENT. IT IS HERE WHERE THE HIGH COURT WENT WRONG, THE INSTANT CASE IS TO BE DECIDED KEEPING IN VIEW T HE PROVISIONS OF SECTION 35D OF THE INCOME TAX ACT, 19 61 (HEREINAFTER CALLED 'THE ACT'). IN ANY CASE, IT WARRANTS REPETITION THAT IN THE INSTANT CASE UNDER THE VERY SAME PROVISIONS BENEFIT IS ALLOWED FOR THE FIRST TWO ASS ESSMENT YEARS AND, THEREFORE, IT COULD NOT HAVE BEEN DENIED IN THE SUBSEQUENT BLOCK PERIOD. WE, THUS, ANSWER QUESTION NO. 1 IN FAVOUR OF THE ASSESSEE HOLDING THAT THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF SECTION 35D FOR THE ASSE SSMENTS YEARS IN QUESTION. (UNDERLINED FOR EMPHASIS BY US) 33. THE AFORESAID DISCUSSION CLEARLY SHOWS THAT THE IMPUGNED EXPENDITURE INCURRED IN CONNECTION WITH ISSUE OF SH ARES BE CONSIDERED IN TERMS OF SECTION 35D OF THE ACT EVEN IF BEFORE T HE LOWER AUTHORITIES, THE CLAIM REVOLVED AROUND SECTION 37(1) OF THE ACT ONLY. IN FACT, IN THE CASE BEFORE THE HON'BLE SUPREME COURT, THE MATTER B Y THE LOWER AUTHORITIES WAS CONSIDERED IN THE LIGHT OF THE EARL IER JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF BROOKE BOND IN DIA LIMITED (SUPRA), AN APPROACH WHICH WAS NOT APPROVED BY HON' BLE SUPREME COURT HAVING REGARD TO THE FACT THAT SECTION 35D OF THE ACT CAME ON THE STATUTE AFTER THE RENDERING OF THE DECISION IN THE CASE OF BROOKE ITA-790 TO 792/DEL/2015 26 BOND INDIA LIMITED (SUPRA). THEREFORE, IN OUR VIEW , THE INSTANT CLAIM OF THE ASSESSEE WOULD FALL FOR CONSIDERATION IN TERMS OF SECTION 35D OF THE ACT PROVIDED OF COURSE, THE EXPENDITURE IS IN CONNE CTION WITH ISSUE OF PUBLIC SUBSCRIPTION OF SHARES AS PER SECTION 35D( 2)(C)(IV) OF THE ACT. 34. THE CASE SET-UP BY THE ASSESSEE IS THAT THE EXP ENDITURE INCURRED ON ISSUE OF SHARES TO QIBS IS FOR PUBLIC SUBSCRIPTI ON OF SHARES INASMUCH AS QIBS CONSTITUTE PUBLIC SHAREHOLDERS AND DO NOT FORM PART OF PROMOTER SHAREHOLDERS. IN SUPPORT OF THIS, THE F OLLOWING DISCUSSION OF THE COORDINATE BENCH IN THE CASE OF YES BANK LIMITE D (SUPRA) IS RELEVANT :- '6.2. FURTHER; WE FIND THAT THE APPELLANT BEING A L ISTED COMPANY IS BOUND BY LISTING AGREEMENT', WHICH PROVI DES FOR THE DISCLOSURE REQUIREMENTS FOR THE SHARE HOLDI NG PATTERN OF A LISTED COMPANY. AS CAN BE SEEN THEREFR OM, THERE ARE ONLY TWO CATEGORIES OF SHAREHOLDERS- 'PROMOTER/PROMOTER GROUP' AND 'PUBLIC'. FOR THE DEF INITION OF THESE TERMS IN CLAUSE 35, REFERENCE IS MADE TO C LAUSE 40A OF THE LISTING AGREEMENT. AS CAN BE SEEN THEREF ROM, MUTUAL FUNDS/FINANCIAL INSTITUTIONS WHICH ARE QIBS ARE CLASSIFIED UNDER 'PUBLIC SHAREHOLDING'. THE TERMS A RE DEFINED IN CLAUSE 40A OF THE SEBI LISTING AGREEMENT . FURTHER, THE LISTING AGREEMENT TAKES US TO SECURITI ES CONTRACTS (REGULATION) RULES, 1957 (IN SHORT 'SCRR' ). ALSO RULE 19(2)(B) AND RULE 19A OF THE SCRR PROVIDE THAT COMPANIES ARE REQUIRED TO MAINTAIN MINIMUM PUBLIC SHAREHOLDING OF 25% IN CASE OF FIRST TIME LISTING A ND IN CASE OF CONTINUOUS LISTING AGREEMENT RESPECTIVELY. IN TH IS CONTEXT, WE MAY REFER TO SECTION 2(D) OF SCRR DEFIN ING THE TERM 'PUBLIC'. IT (PUBLIC) IS DEFINED TO MEAN ANY P ERSON OTHER THAN THE PROMOTER, PROMOTER GROUP, SUBSIDIARI ES AND ASSOCIATES OF THE COMPANY. THUS ANY PERSON OTHER TH AN THUS ANY PERSON OTHER THAN THUS ANY PERSON OTHER THAN THUS ANY PERSON OTHER THAN THESE FOUR QUALIFY TO BE CONSIDERED AS PUBLIC. AS C AN BE SEEN THESE FOUR QUALIFY TO BE CONSIDERED AS PUBLIC. AS C AN BE SEEN THESE FOUR QUALIFY TO BE CONSIDERED AS PUBLIC. AS C AN BE SEEN THESE FOUR QUALIFY TO BE CONSIDERED AS PUBLIC. AS C AN BE SEEN FROM THE LIST OF QIBS TO WHOM SHARES ARE ISSUED, TH E SHARES FROM THE LIST OF QIBS TO WHOM SHARES ARE ISSUED, TH E SHARES FROM THE LIST OF QIBS TO WHOM SHARES ARE ISSUED, TH E SHARES FROM THE LIST OF QIBS TO WHOM SHARES ARE ISSUED, TH E SHARES ARE NOT ISSUED TO ANY OF THE AFORESAID CATEGORY. TH US QIBS, ARE NOT ISSUED TO ANY OF THE AFORESAID CATEGORY. TH US QIBS, ARE NOT ISSUED TO ANY OF THE AFORESAID CATEGORY. TH US QIBS, ARE NOT ISSUED TO ANY OF THE AFORESAID CATEGORY. TH US QIBS, NOT BEING PROMOTERS, PROM NOT BEING PROMOTERS, PROM NOT BEING PROMOTERS, PROM NOT BEING PROMOTERS, PROMOTER GROUP, SUBSIDIARIES A ND OTER GROUP, SUBSIDIARIES AND OTER GROUP, SUBSIDIARIES AND OTER GROUP, SUBSIDIARIES AND ASSOCIATES OF THE COMPANY WOULD QUALIFY AS 'PUBLIC' . ASSOCIATES OF THE COMPANY WOULD QUALIFY AS 'PUBLIC' . ASSOCIATES OF THE COMPANY WOULD QUALIFY AS 'PUBLIC' . ASSOCIATES OF THE COMPANY WOULD QUALIFY AS 'PUBLIC' . AS SPECIFIED IN CLAUSE 40A(II) OF THE LISTING AGREE MENT, PUBLIC SHAREHOLDING CAN BE INCREASED BY ANY OF THE MODES SPECIFIED THEREIN TO COMPLY WITH RULE 19(2) AND 19A OF ITA-790 TO 792/DEL/2015 27 SCRR. ONE SUCH NOTE IS THE ISSUE OF IIP IN ACCORDAN CE WITH CHAPTER VIIIA OF THE SEBI-ICDR. CHAPTER VIIIA HAS B EEN INCLUDED TO PROVIDE FOR FRESH ISSUE OF SHARES TO CO MPLY WITH MINIMUM SHAREHOLDING REQUIREMENT IN RULE 19(2) AND 19A OF SCRR. REG. 91B DEFINES IPP AS A FURTHER PUBLIC O FFER MADE ONLY TO QIBS. THESE REGULATIONS PROVIDE THAT W HEN A COMPANY HAS A PUBLIC SHAREHOLDING LOWER THAN THE REQUIREMENTS SPECIFIED, THEN THE COMPANY MAY ISSUE IPP TO QIBS AND RAISE THE PUBLIC SHAREHOLDING TO THE REQUI RED LEVELS. IT THUS IMPLIES THAT QIBS FORM PART OF PUBL IC. FURTHER, EVEN REG. 82 WHICH GIVES CONDITIONS FOR QIP, PROVID ES THAT THE SAME MUST BE IN COMPLIANCE WITH THE REQUIREMENT S OF PUBLIC SHAREHOLDING. THAT A SECTION OF PUBLIC QUALIFIES AS PUBLIC HAS BEEN CLARIFIED IN NITTA GELATINE INDIA LTD. (SUPRA) AND ANDHRA CHAMBER OF COMMERCE (SUPRA) (UNDERLINED FOR EMPHASIS BY US) 35. THE AFORESAID DETAILED DISCUSSION BY OUR COORDI NATE BENCH CLEARLY ESTABLISHES THAT THE QIBS QUALIFY TO BE TRE ATED AS PUBLIC SHAREHOLDERS IN TERMS OF THE SEBI LISTING REQUIREME NTS. THEREFORE, THE MOST PERTINENT CONDITION PRESCRIBED IN SECTION 35D( 2)(C)(IV) OF THE ACT, I.E., THE EXPENDITURE IS IN CONNECTION WITH PUBLIC SUBSCRIPTION OF SHARES STANDS FULFILLED. 36. AT THIS STAGE, WE MAY ALSO REFER TO THE PLEA OF THE LEARNED CIT-DR THAT THE MATTER MAY BE REMANDED BACK TO THE ASSESSI NG OFFICER TO ASCERTAIN WHETHER QIBS ARE PUBLIC SHAREHOLDERS OR N OT? IN OUR CONSIDERED OPINION, REMANDING THE MATTER ON THIS AS PECT TO THE ASSESSING OFFICER WOULD ONLY PROLONG THE LITIGATION AND NOT ACHIEVE ANY SUBSTANTIVE PURPOSE. WE HAVE PERUSED THE ASSESSMEN T ORDER AND THE DISCUSSION MADE BY THE ASSESSING OFFICER IN THIS RE GARD. IN PARAGRAPH 4, THE ASSESSING OFFICER HAS DISCUSSED THE PLEA OF THE ASSESSEE FOR ALLOWABILITY OF EXPENSES INCURRED IN CONNECTION WIT H ISSUE OF EQUITY SHARES TO QIBS. THE SUBMISSIONS OF THE ASSESSEE, W HICH HAVE BEEN REPRODUCED BY THE ASSESSING OFFICER IN THE ASSESSME NT ORDER, INTER-ALIA CONTAIN A REFERENCE TO THE NOTE APPENDED WITH THE R ETURN OF INCOME AS ITA-790 TO 792/DEL/2015 28 WELL AS THE FURNISHING OF DETAILS OF THE EXPENDITUR E IN QUESTION AGGREGATING TO `9,46,22,358/-. IN FACT, IT HAS ALS O BEEN ASSERTED IN THE SUBMISSIONS THAT THE SHARE PLACEMENT DOCUMENT WHICH WAS IN THE FORM OF A PRINTED BOOKLET ALONG WITH OTHER DOCUMENTS IN CONNECTION WITH THE ISSUE OF SHARES WAS ALSO FURNISHED BEFORE THE ASSES SING OFFICER. NONE OF THE ASSERTIONS HAVE BEEN FOUND TO BE WRONG IN AN Y MANNER. THE CLAIM OF THE ASSESSEE HAS BEEN NEGATED BY THE ASSES SING OFFICER ON A SINGLE POINT, I.E., THAT THE EXPENDITURE IN CONNECT ION WITH THE ISSUANCE OF SHARES FOR INCREASING CAPITAL BY A COMPANY IS A CAPITAL EXPENDITURE FOLLOWING THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF BROOKE BOND INDIA LIMITED (SUPRA). THEREFORE, IT IS NOT A CASE WHERE THE FRESH ALTERNATE PLEA OF THE ASSESSEE, BASED ON SECTION 35 D OF THE ACT, IS REQUIRED TO BE EXAMINED ON THE BASIS OF ANY FRESH F ACTS OR MATERIAL, WHICH WAS HITHERTO NOT BEFORE THE ASSESSING OFFICER . THE SHORT POINT IS AS TO WHETHER THE RATIO OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF BROOKE BOND INDIA LIMITED (SUPRA) WOULD APPLY IN THE CONTEXT OF CLAIM UNDER SECTION 35D OR NOT? THIS AS PECT IS CLEARLY ANSWERED BY THE HON'BLE SUPREME COURT IN THE CASE O F SHASUN CHEMICALS & DRUGS LIMITED (SUPRA). FURTHERMORE, ON THE ISSUE OF CLASSIFICATION OF QIBS AS A PART OF PUBLIC SHAREHO LDERS IS CONCERNED, THE SAID ISSUE IS COVERED BY THE DECISION OF OUR CO ORDINATE BENCHES. THUS, THE ALTERNATIVE PLEA OF THE ASSESSEE WITH REG ARD TO THE ALLOWABILITY OF EXPENDITURE OF `9,46,22,358/- INCUR RED ON ISSUE OF SHARES TO QIBS IS ALLOWABLE IN TERMS OF SECTION 35D OF THE ACT. SO, HOWEVER, WHILE UPHOLDING THAT THE EXPENDITURE IN QU ESTION QUALIFIES FOR THE DEDUCTION UNDER SECTION 35D OF THE ACT, WE REST ORE THE MATTER TO THE ASSESSING OFFICER FOR THE LIMITED PURPOSE FOR Q UANTIFYING SUCH EXPENDITURE HAVING REGARD TO THE PROVISIONS OF SECT ION 35D OF THE ACT. 37. IN CONCLUSION, WE REITERATE THAT SO FAR AS THE CLAIM OF DEDUCTION UNDER SECTION 37(1) OF THE ACT IS CONCERNED, THE SA ME IS DECIDED AGAINST THE ASSESSEE BUT THE CLAIM UNDER SECTION 35 D OF THE ACT IS ITA-790 TO 792/DEL/2015 29 ALLOWED IN TERMS OF OUR ABOVE DISCUSSION. THUS, AS SESSEE PARTLY SUCCEEDS IN THIS GROUND OF APPEAL. 38. NOW, WE TAKE UP THE APPEAL OF THE ASSESSEE IN I TA NO.792/DEL/2015 FOR ASSESSMENT YEAR 2012-13, WHICH IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-24 (ERSTWHILE C IT(A)-31), NEW DELHI DATED 27 TH NOVEMBER, 2014, WHICH IN TURN HAS ARISEN FROM THE ORDER OF DCIT, CENTRAL CIRCLE-20, NEW DELHI DATED 28 TH MAY, 2014. 39. AS WAS THE CASE IN ASSESSMENT YEAR 2010-11, HER EIN ALSO, THE ASSESSEE HAS FILED REVISED AND ADDITIONAL GROUNDS O F APPEAL AS WELL AS THE GROUNDS FILED ORIGINALLY ALONG WITH THE MEMORAN DUM OF APPEAL. THE ORIGINAL GROUNDS AS WELL AS REVISED AND ADDITIO NAL GROUNDS FILED (WHICH, INTER-ALIA, SUBSUME THE ORIGINAL GROUNDS OF APPEAL), ARE REPRODUCED HEREUNDER :- ORIGINAL GROUNDS :- 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN LAW IN CONFIR MING THE ADDITION OF NOTIONAL ANNUAL LETTING VALUE OF RS.5,19,06,540/- (OUT OF RS.5,66,49,424/-) ON CLOSI NG STOCK OF FLATS/SPACES BY FOLLOWING THE HONBLE DELHI HIGH COURTS DECISION IN WHICH VARIOUS RELEVANT FACTS WERE NOT F ULLY BROUGHT OUT BEFORE THEIR LORDSHIPS AND THEREFORE CO ULD NOT BE CONSIDERED BY THEM. 1.2 THAT WITHOUT PREJUDICE TO THE GROUND NO.1.1 ABO VE, THE APPELLANT HAS ALSO FILED AN APPEAL BEFORE THE A PEX COURT WHICH HAS BEEN ADMITTED AND IS PENDING FOR DE CISION. 2. THAT WITHOUT PREJUDICE TO THE FOREGOING GROUND, THE DECISION RENDERED Y HON'BLE DELHI HIGH COURT RELATE D TO THE ASSESSMENT YEAR 1988-89 AND RENDERED IN THE CONTEXT OF THE PROVISIONS OF SECTION 23 AS THEY EXISTED PRIOR TO SUBSTITUTION BY THE FINANCE ACT, 2001 W.E.F. 1.4.20 02. THE LEARNED CIT(A) FAILED TO CONSIDER THE ISSUE IN THE LIGHT OF THE AMENDED PROVISIONS AS APPLICABLE TO THE YEAR UNDER APPEAL WHICH WERE SUBSTANTIALLY DIFFERENT. THE ISSUE SHOU LD HAVE ITA-790 TO 792/DEL/2015 30 BEEN RECONSIDERED AND DECIDED IN THE LIGHT OF THE A MENDED PROVISIONS. 3.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMING THE RE JECTION OF THE APPELLANTS CLAIM THAT THE SURPLUS OF RS.70. 06 CRORES ARISING ON THE TRANSFER OF INFRASTRUCTURE ASSETS TO ITS WHOLLY OWNED SUBSIDIARY COMPANY ANSAL API INFRASTRUCTURE L IMITED WAS EXEMPT U/S 47(IV) ON THE ERRONEOUS GROUNDS :- A) THAT NO SUFFICIENT MATERIAL WAS THERE TO TAKE A VIEW THAT THE SURPLUS ARISING OUT OF TRANSFER WAS CAPITA L IN NATURE; AND B) THAT SINCE THE RECEIPT WAS ON ACCOUNT OF ASSETS EMPLOYED IN THE BUSINESS THAT RECEIPT COULD NOT BE TREATED AS OF CAPITAL ASSETS. NO SPECIFIC QUERY OR REQUIREMENT WAS RAISED BY THE LEARNED CIT(APPEALS) DURING THE HEARING. ALL THE REQUIRED EVIDENCE WAS FILED. FURTHER, THAT THESE CAPITAL ASSETS WERE EMPLOYED IN THE BUSINESS COULD NOT ALTER THEIR CAPITAL NATURE. 3.2 THAT THE LEARNED CIT(APPEALS) FAILED TO APPRECI ATE THAT INFRASTRUCTURE ASSETS, LIKE TRUNK ROADS, TRUNK SEWER NETWORK, POWER DISTRIBUTION NETWORK ASSETS ETC UNDE R CONSTRUCTION/DEVELOPMENT WERE TO BE HELD AS CAPITAL ASSETS. IT WAS ON THE TRANSFER OF THESE ASSETS UND ER CONSTRUCTION/DEVELOPMENT THAT THE SURPLUS WAS REALI ZED AND THE PROVISIONS OF SECTION 47(IV) WERE SQUARELY APPLICABLE IN THE CASE. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND OR FOREGO ANY GROUNDS OF APPEAL AT THE TIME O F HEARING. REVISED & ADDITIONAL GROUNDS :- THE APPELLANT MOST RESPECTFULLY PRAYS THAT THE HON BLE TRIBUNAL MAY BE PLEASED TO ALLOW THE ADMISSION OF ADDITIONAL GROUNDS OF APPEAL AND REDRAFTING OF GROU ND NOS.1.1, 1.2, & 2 ORIGINALLY TAKEN IN FORM NO.36 FO R THE FOLLOWING REASONS. ITA-790 TO 792/DEL/2015 31 (I) THE GROUNDS ARE NOT CONSCIENCE AND THEY ARE NOT ASSIGNED ANY DISTINCT HEADS, (II) IT IS CONSIDERED NECESSARY AS WELL AS APPROPRI ATE TO REFRAME THE GROUNDS OF APPEAL TO SET-OUT THE RELEVA NT FACTS IN RIGHT AND PROPER PERSPECTIVE, AND; (III) THE ADDITIONAL GROUNDS GO TO THE ROOT OF THE MATTER AND DOES NOT REQUIRE CONSIDERATION OF ANY MATERIAL EVIDENCE OUTSIDE THE RECORD. 1.2 IT IS SETTLED LAW THAT LEGAL GROUNDS ARE ALLOWE D TO BE TAKEN BEFORE THE HONBLE TRIBUNAL. THE HON'BLE SUP REME COURT REITERATED THIS SETTLED LEGAL POSITION IN THE CASE OF THE CIT VS SINGHAD TECHNICAL EDUCATION SOCIETY, CIV IL APPEAL NO.11080 OF 2017, WHERE THE LEGAL GROUND ON RECORDING OF SATISFACTION U/S 153C WAS TAKEN FOR TH E FIRST TIME AS ADDITIONAL GROUND BEFORE THE HONBLE TRIBUN AL, WHICH THE REVENUE HAD OBJECTED. RELIANCE IS ALSO P LACED ON THE DECISION OF THE LARGER BENCH (3 MEMBER) OF H ON'BLE SUPREME COURT IN NATIONAL THERMAL POWER CO.LTD., (1 998) 229 ITR 383 (SC). 1.3 FOR THE SAKE OF CLARITY AND CONVENIENCE, THE ADDITIONAL GROUNDS AND THE REVISED/REFRAMED GROUNDS ARE MERGED AND SET-OUT AS UNDER. NOTIONAL ANNUAL LETTING VALUE (ALV). 1.1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, LEARNED CIT(A) ERRED IN UPHOLDING AN ADDITI ON OF RS. 5,19,06,540/- (OUT OF RS.5,66,49,424/-) UNDER THE H EAD 'INCOME FROM HOUSE PROPERTY' WITHOUT APPRECIATING T HAT THE PROPERTIES IN QUESTION WERE 'STOCK-IN-TRADE' OF THE ASSESSEE'S BUSINESS AND PROVISIONS RELATING TO S.22 TO S.26 OF IT ACT ARE NOT AT ALL APPLICABLE TO PROPERTY FOR MING PART OF STOCK-IN-TRADE IN THE BUSINESS OF THE ASSESSEE A S ARGUED BY THE REVENUE ITSELF BEFORE THE HON'BLE HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS NEHA BUILDERS (P) LTD. (2008) 296 ITR 661 (GUJ) AND APPROVED BY THE H ON'BLE HIGH COURT WAY BACK IN 2006. 1.2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) ERRED IN UPHOLDING AN ADDITIO N OF RS. 5,19,06,540/- (OUT OF RS.5,66,49,424/-) UNDER THE H EAD 'INCOME FROM HOUSE PROPERTY' WITHOUT APPRECIATING T HAT S.23 OF THE INCOME TAX ACT 1961 HAS UNDERGONE ITA-790 TO 792/DEL/2015 32 AMENDMENT VIDE FINANCE ACT 2001W.E.F.1.4.2002 AND O LD LAW CANNOT BE APPLIED TO THE YEAR UNDER CONSIDERATI ON. 1.3. WITHOUT PREJUDICE TO THE ABOVE GROUND NO. 1.1 , LEARNED CIT(A) ERRED:- (A). IN NOT APPRECIATING THAT THE QUESTION OF TAXA TION OF ALV OF UNSOLD FLATS/OFFICE SPACES, LYING VACANT AND HELD AS STOCK-IN-TRADE, ARISES ONLY WHEN A FINDING IS RECOR DED, HAVING REGARD TO THE OBJECTS OF THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE APPELLANT- COMPANY,. THAT INCOME FROM SUCH UNSOLD PROPERTIES IS LIABLE TO BE TAXED UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY', AND NO T AS BUSINESS INCOME IN THE LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CHENNAI PROPERTIES AND INVESTMENTS LTD VS COMMISSIONER OF INCOME TAX CENTR AL II TAMIL NADU (IN CIVIL APPEAL NOS 4491 TO 4494 OF 200 4). (B). IN NOT APPRECIATING THAT WITHOUT EXAMINING THE MEMORANDUM OF ASSOCIATION (MOA) AND ITS OBJECT CLAU SES, IT IS NOT PERMISSIBLE TO ARRIVE AT ANY FINDING OR C ONCLUSION THAT INCOME FROM UNSOLD FLATS/OFFICE SPACES, LYING VACANT AND HELD AS STOCK-IN-TRADE, IS LIABLE TO BE TAXED AS INCOME FROM HOUSE PROPERTY ON THE BASIS OF THE NOTIONAL AL V. (C) IN NOT APPRECIATING THAT ONE OF THE MAIN OBJEC TS OF THE ASSESSEE IS TO SELL, LEASE, LET, MORTGAGE OR OT HERWISE DISPOSE OF THE LANDS, HOUSES, BUILDINGS AND OTHER P ROPERTY, APART FROM ACQUIRING AND DEVELOPING OF PROPERTIES A ND THEREFORE, THE RENTAL INCOME, IF AT ALL EARNED, FRO M UNSOLD PROPERTIES HELD AS STOCK-IN-TRADE IS LIABLE TO BE T AXED UNDER THE HEAD, INCOME FROM BUSINESS. (D) IN NOT APPRECIATING THAT THAT UNLESS THE CERTIF ICATE OF COMPLETION OF CONSTRUCTION OF THE PROPERTY IS OBTAI NED IN RESPECT OF THE PROPERTIES LYING VACANT AS STOCK-IN- TRADE, THE ALV OF THE PROPERTIES IS NOT LIABLE TO BE TAXED ON NOTIONAL BASIS AS IT IS ILLEGAL TO RESIDE / OCCUPY SUCH PROP ERTY AND HENCE COULD NOT HAVE BEEN LET OUT. (E) IN UPHOLDING THE ADDITION WITHOUT RETURNING A FINDING OF FACT AS TO WHETHER IT WAS FACTUALLY FEASIBLE AND PR ACTICALLY POSSIBLE AT ALL TO EARN ANY RENTAL INCOME FROM THE SAID UNSOLD FLATS / SPACE AS THE SAID FLATS WERE MEANT F OR SALE AND WERE NOT READY FOR IMMEDIATE OCCUPATION BY THE PROSPECTIVE TENANTS AND DID NOT HAVE THE BASIC NECE SSITIES LIKE ELECTRIC FITTINGS, PUCCA WALL PAINTING, COMPLE TION CERTIFICATES ETC. ITA-790 TO 792/DEL/2015 33 (F) IN UPHOLDING THE ADDITION WITHOUT RETURNING A FINDING OF FACT AS TO WHETHER IT WAS FACTUALLY POSSIBLE FOR THE ASSESSEE TO TAKE THE RISK OF LETTING OUT UNSOLD FLA TS / SPACES AND ASKING THE PROSPECTIVE BUYER TO WAIT TILL THE T ENANT VACATES THE FLAT FOR IT TO BE SOLD AND GIVEN POSSES SION. (G) IN NOT APPRECIATING THAT EVEN NOTIONAL ALV NEE DS TO BE ARRIVED AT BASED UPON REALITIES AND ACTUAL FACTS ON THE GROUND AND COULD NOT HAVE BEEN DETERMINED THROUGH A GUESS WORK. 1.4 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, LEARNED CIT(A) ERRED IN LAW AS THE AMENDMENT BY WA Y OF INSERTION OF SUB-SECTION (5) IN SECTION 23 OF I.T. ACT VIDE THE FINANCE ACT, 2017 IS PROSPECTIVE WITH EFFECT FROM 0 1-04- 2018 ENABLING TAXING OF UNSOLD FLATS/OFFICE SPACES HELD AS STOCK-IN-TRADE AND THE POST-AMENDMENT LAW CANNOT BE APPLIED TO THE PRE-AMENDMENT ASSESSMENT .EARS, EVEN IF THE INCOME IN RESPECT OF SUCH PROPERTIES IS HELD TO BE ASSESSABLE UNDER THE HEAD, INCOME FROM HOUSE PROPER TY. SURPLUS AND SECTION 47(IV) 2.1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, LEARNED CIT(A) ERRED IN CONFIRMING THE REJECTION OF THE APPELLANT'S CLAIM THAT THE SURPLUS OF RS. 70. 06 C RORES ARISING ON TRANSFER OF ITS CAPITAL ASSET NAMELY INF RASTRUCTURE ASSETS TO ITS WHOLLY OWNED SUBSIDIARY, M/S ANSAL AP I INFRASTRUCTURE LTD., IS NOT TAXABLE WITHOUT APPRECI ATING THAT SUCH TRANSFER OF CAPITAL ASSET BY A COMPANY TO ITS WHOLLY OWNED SUBSIDIARY IS NOT A 'TRANSFER' AS PER SECTION 47(IV) OF THE ACT AND ACCORDINGLY THE SURPLUS SHOULD NOT BE I NCLUDED IN COMPUTING THE TOTAL INCOME OF THE COMPANY. 2.2. THE LEARNED AO FAILED TO APPRECIATE THAT MERE INCLUSION OF SURPLUS AS INCOME IN THE RETURN FILED IS NOT A BAR FOR ALLOWING THE EXEMPTION U/S 47(IV), SINCE TH E TOTAL INCOME, AS DEFINED IN SECTION 2(45) OF THE ACT, OUG HT TO BE COMPUTED IN THE MANNER LAID DOWN UNDER THE ACT AS P ER THE SETTLED LAW AND THAT THERE IS NO ESTOPPEL AGAIN ST THE LAW AND DUE CLAIM IN THIS REGARD WAS DULY MADE. 2.3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADD ITION ON THE GROUND OF INSUFFICIENCY OF MATERIAL WITHOUT RAISING ANY QUERY DURING THE APPEAL PROCEEDINGS AND IGNORIN G THAT THE RELEVANT MATERIAL FACTS WERE ALREADY PART OF TH E RECORDS ITA-790 TO 792/DEL/2015 34 AND SUFFICIENT ENOUGH TO UPHOLD THE ASSESSEE'S CLAI M WHICH HAD BEEN REJECTED ARBITRARILY BY THE LEARNED AO. GENERAL GROUND (AS PER THE ORIGINAL GROUNDS OF APPEAL NUMBERED 4 NOW RENUMBERED AS 3). 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D OR FOREGO ANY GROUNDS OF APPEAL AT THE TIME OF HEARING . FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE HON'BLE TRIBUNAL MAY BE PLEASED TO ALLOW THE APPEAL IN THE INTEREST OF EQUITY AND JUSTICE. 40. INSOFAR AS GROUND NOS.1.1 TO 1.4 RELATING TO AL V ARE CONCERNED, THE FACTS AND CIRCUMSTANCES ARE PARI-MATERIA TO THE DISPUTE DECIDED BY US IN THE EARLIER PART OF THIS ORDER FOR ASSESSMENT YEAR 2010-11. OUR DECISION IN THE EARLIER PARAGRAPHS IN RELATION TO A SSESSMENT YEAR 2010- 11 APPLIED MUTATIS MUTANDIS HERE ALSO. THE SAID GR OUNDS ARE ACCORDINGLY DISMISSED. 41. THE ONLY OTHER ISSUE WHICH ARISES IN THIS APPEA L IS WITH REGARD TO THE CLAIM OF THE ASSESSEE WITH REGARD TO THE SURPLU S OF `70.06 CRORES ARISING ON TRANSFER OF ITS CAPITAL ASSET, VIZ., INF RASTRUCTURE ASSETS TO ITS WHOLLY OWNED SUBSIDIARY M/S ANSAL API INFRASTRUCTUR E LTD. (IN SHORT, AAIL). THE PRIMARY DISPUTE ON THIS ASPECT IS WITH REGARD TO SECTION 47(IV) OF THE ACT WHEREBY THE CLAIM OF THE ASSESSEE IS THAT THE TRANSFER IN QUESTION IS NOT EXIGIBLE TO THE CHARG E OF CAPITAL GAINS UNDER SECTION 45 OF THE ACT. ON THIS ISSUE ALSO, T HE ASSESSEE HAS REVISED THE ORIGINAL GROUND OF APPEAL BUT, IN SUM A ND SUBSTANCE, GROUND NO.3.2 IN THE ORIGINAL MEMORANDUM OF APPEAL AND GROUND NOS.2.1 TO 2.3 IN THE REVISED GROUNDS OF APPEAL ARE SUBSTANTIALLY THE SAME. 42. THE RELEVANT FACTS IN THIS REGARD ARE THAT THE ASSESSEE COMPANY WAS SHORTLISTED BY THE GOVERNMENT OF UTTAR PRADESH FOR DEVELOPMENT OF A HI-TECH TOWNSHIP AT SULTANPUR ROAD, LUCKNOW UN DER THE HI-TECH ITA-790 TO 792/DEL/2015 35 TOWNSHIP POLICY OF THE GOVERNMENT OF UTTAR PRADESH OF NOVEMBER, 2003. IN TERMS THEREOF, ASSESSEE STARTED CONSTRUCT ION OF CERTAIN INFRASTRUCTURE WHICH WOULD HITHERTO BE DESCRIBED AS TRUNK INFRASTRUCTURE ASSETS (IN SHORT, TIA) SINCE EARLIER YEARS. DURING THE YEAR UNDER CONSIDERATION, THE SAID TIA OR THE CAPITAL WO RK IN PROGRESS WERE TRANSFERRED TO ONE AAIL. IT IS TO BE NOTED THAT AA IL WAS A SPECIAL PURPOSE VEHICLE (SPV) SET UP BY THE ASSESSEE AS A 1 00% SUBSIDIARY FOR THE DEVELOPMENT AND MAINTENANCE OF THE INFRASTRUCTU RE IN THE SUSHANT GOLF CITY, I.E., THE HI-TECH TOWNSHIP BEING DEVELOP ED BY THE ASSESSEE IN TERMS OF THE AWARD BY THE GOVERNMENT OF UTTAR PR ADESH. IT APPEARS FROM THE RECORD THAT SUCH ASSETS WERE TRANSFERRED T O AAIL AT FAIR MARKET VALUE IN TERMS OF THE INFRASTRUCTURE & MAINT ENANCE DEVELOPMENT AGREEMENT DATED 17 TH MARCH, 2012, A COPY OF WHICH HAS ALSO BEEN PLACED IN THE PAPER BOOK FILED BEFORE US. THIS TRANSFER RESULTED IN A SURPLUS OF `70.05 CRORES WHICH WAS CR EDITED TO THE PROFIT & LOSS ACCOUNT. IN THE RETURN OF INCOME FILED, THE A FORESAID SURPLUS REMAINED A PART OF THE INCOME COMPUTED I.E., THAT S UCH SURPLUS WAS NOT EXCLUDED FROM THE TOTAL INCOME DECLARED IN THE RETURN OF INCOME. HOWEVER, IN THE RETURN OF INCOME, A NOTE NO.3 WAS A NNEXED WHICH HAS ALSO BEEN REPRODUCED BY THE ASSESSING OFFICER IN PA RAGRAPH 4 OF HIS ASSESSMENT ORDER. IN TERMS OF THE ASSERTIONS MADE IN THE SAID NOTE, ASSESSEE SOUGHT EXCLUSION OF SUCH SURPLUS FROM THE TOTAL INCOME ON THE GROUND THAT SUCH SURPLUS BEING A RESULT OF TRANSFER OF INFRASTRUCTURE ASSETS/CAPITAL WORK-IN-PROGRESS TO A 100% SUBSIDIAR Y, THE SAME WAS NOT LIABLE FOR CAPITAL GAINS IN TERMS OF SECTION 47 (IV) OF THE ACT. IN THE SAID NOTE, REFERENCE WAS ALSO INVITED TO NOTE 32(C) APPEARING IN THE NOTES ACCOMPANYING THE ANNUAL FINANCIAL STATEMENTS, WHICH DETAILED THE SUBJECT TRANSFER. 43. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSIN G OFFICER REQUIRED THE ASSESSEE TO EXPLAIN THE POSITION AND A CCORDINGLY, ASSESSEE MADE SUBMISSIONS BY REITERATING THE NOTE A NNEXED TO THE ITA-790 TO 792/DEL/2015 36 RETURN OF INCOME, WHICH WE HAVE NOTED ABOVE. THE A SSESSING OFFICER DID NOT ACCEPT THE SUBMISSION OF THE ASSESSEE PRIMA RILY FOR THE REASON THAT THE ASSESSEE ITSELF HAS OFFERED FOR TAXATION A ND FURTHER THAT THE ASSESSEE DID NOT FURNISH ANYTHING TO PROVE THAT THE AMOUNT WAS EXEMPT FROM TAX. 44. BEFORE THE CIT(A), ASSESSEE SUBMITTED THAT THE CONCLUSION DRAWN BY THE ASSESSING OFFICER WAS NOT JUSTIFIED AND THAT SECTION 47(IV) OF THE ACT CLEARLY BROUGHT OUT THAT TRANSFER OF SUCH INFRA STRUCTURE ASSETS/CAPITAL WORK-IN-PROGRESS WAS NOT REGARDED AS A TRANSFER FOR THE PURPOSE OF CHARGE OF CAPITAL GAINS. WE FIND THAT T HE CIT(A) ALSO SUSTAINED THE DECISION OF THE ASSESSING OFFICER BY A VERY BRIEF DISCUSSION IN PARAGRAPH 4.7.2 OF HIS ORDER. THE SU M AND SUBSTANCE OF THE REASONING TAKEN BY THE CIT(A) IS TO THE EFFECT THAT THE INSTANT SURPLUS WAS ON ACCOUNT OF THE TRANSFER OF ASSETS EM PLOYED IN THE BUSINESS AND, THEREFORE, THE SAME WAS NOT EXEMPT AS CLAIMED BY THE ASSESSEE. 45. IN THIS BACKGROUND, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE VEHEMENTLY POINTED OUT THAT BOTH THE LOWER AUTHORIT IES HAVE REJECTED THE CLAIM ON SUPERFICIAL GROUND INASMUCH AS SUFFICI ENT DETAILS WERE AVAILABLE BEFORE THEM TO EXAMINE THE JUSTIFIED CLAI M OF THE ASSESSEE IN TERMS OF SECTION 47(IV) OF THE ACT. IT WAS POINTED OUT THAT SECTION 47(IV) OF THE ACT RELATED TO TRANSFER OF CAPITAL AS SETS TO A 100% INDIAN SUBSIDIARY WHICH WAS THE INSTANT CASE. REFERRING T O VARIOUS MATERIAL FILED BEFORE THE LOWER AUTHORITIES INCLUDING THE AN NUAL FINANCIAL STATEMENTS FOR THE YEAR UNDER CONSIDERATION, IT WAS POINTED OUT THAT THE TRANSFEREE BEING A 100% SUBSIDIARY I.E., AAIL A ND THE TRANSFER BEING OF AN INFRASTRUCTURE ASSET OR CAPITAL WORK-IN -PROGRESS, THE CONDITIONS OF SECTION 47(IV)(A) STOOD SATISFIED. ITA-790 TO 792/DEL/2015 37 46. ON THE POINT OF LAW, IT WAS CANVASSED THAT THE COORDINATE BENCH OF THE DELHI TRIBUNAL IN THE CASE OF MOTHER DIARY F RUITS & VEG.(P) LTD. (2011) 45 SOT 186 (DELHI), CONSIDERED THE TRANSFER OF A WORK-IN- PROGRESS TO A 100% SUBSIDIARY IN THE CONTEXT OF SEC TION 47(IV) OF THE ACT AND CONCLUDED THAT SUCH SURPLUS WAS NOT CHARGEA BLE TO TAX AS CAPITAL GAINS. IN THIS MANNER, THE CLAIM OF THE AS SESSEE FOR EXCLUSION OF THE SURPLUS ON TRANSFER OF CAPITAL WORK-IN-PROGRESS TO AAIL WAS SOUGHT TO BE JUSTIFIED. 47. ON THIS POINT, THE LEARNED DR FILED WRITTEN SUB MISSIONS AND DID NOT CONTROVERT THE LEGAL POSITION SOUGHT TO BE CANV ASSED BY THE ASSESSEE IN PRINCIPLE BUT CONTENDED THAT THE ARRANG EMENT OF TRANSFER I.E., THE INFRASTRUCTURE AND MAINTENANCE DEVELOPMEN T AGREEMENT DATED 17 TH MARCH, 2012 HAS NOT BEEN ANALYZED BY ANY OF THE AU THORITIES BELOW AND THEREFORE, THE MATTER MAY REQUIRE FURTHER EXAMINATION AT THE LEVEL OF THE ASSESSING OFFICER OR THE CIT(A). IT IS SOUGHT TO BE POINTED OUT THAT THE CIT(A) HAS ALSO OBSERVED THAT THE SURPLUS IS ON ACCOUNT OF TRANSFER OF ASSETS EMPLOYED IN THE BUSIN ESS AND THEREFORE, ON THIS COUNT ALSO, THE IMPUGNED SURPLUS COULD NOT BE HELD AS EXEMPT IN TERMS OF SECTION 47(IV) OF THE ACT. 48. IN REPLY, THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE ARGUMENT TAKEN BY THE LEARNED CIT-DR WAS N ON STARTER INASMUCH AS THE ENTIRE MATERIAL WAS BEFORE THE ASSE SSING OFFICER AS WELL AS BEFORE THE CIT(A). IT WAS ASSERTED THAT TH E FINDINGS OF THE ASSESSING OFFICER AS WELL AS THE CIT(A), THOUGH ADV ERSE TO THE ASSESSEE, HAVE BEEN RECORDED ONLY AFTER EXAMINING T HE RELEVANT MATERIAL AND THEREFORE, THERE WAS NO JUSTIFICATION FOR THE LEARNED DR TO SEEK THE REMANDING OF THE MATTER BACK TO THE LOWER AUTHORITIES. IT WAS POINTED OUT THAT MERELY BECAUSE THERE WAS NO ADVERS E FINDING WITH REGARD TO ANY OF THE CLAUSES OF THE INFRASTRUCTURE & MAINTENANCE DEVELOPMENT AGREEMENT DATED 17 TH MARCH, 2012, IT COULD NOT BE SAID ITA-790 TO 792/DEL/2015 38 THAT THE NECESSARY TRANSFER ARRANGEMENT BEFORE THE ASSESSEE AND ITS 100% SUBSIDIARY I.E., AAIL HAS NOT BEEN EXAMINED BY THE LOWER AUTHORITIES. OUR ATTENTION WAS DRAWN TO THE COPY O F THE AGREEMENT PLACED IN THE PAPER BOOK WHICH, ACCORDING TO THE LE ARNED COUNSEL, WAS VERY MUCH BEFORE THE LOWER AUTHORITIES. IT WAS POI NTED OUT THAT IN THE ABSENCE OF ANY CONTRARY MATERIAL OR THE FINDING POI NTED OUT BY THE LEARNED DR AS TO HOW THE CONDITIONS PRESCRIBED IN S ECTION 47(IV) ARE NOT SATISFIED IN THE INSTANT CASE, MERELY MAKING OU T A NEW CASE FOR REMANDING OF THE MATTER BACK TO THE LOWER AUTHORITI ES, WAS NOT JUSTIFIED. IT WAS POINTED OUT THAT THE NECESSARY M ATERIAL REQUIRED TO DECIDE THE IMPUGNED CONTROVERSY CLEARLY FORMS A PAR T OF RECORD OF PROCEEDINGS BEFORE THE LOWER AUTHORITIES AND THEREF ORE, THE PLEA OF THE LEARNED DR BE REJECTED. 49. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. SECTION 47(IV) OF THE ACT PRESCRIBES THAT NOTHING CONTAINED IN SECTION 45 SHALL APPLY TO THE TRANSFERS SPECIFIED THEREIN, WHICH INT ER-ALIA INCLUDE SUB- SECTION (4) ENUMERATING TRANSFER OF A CAPITAL ASSET BY A COMPANY TO ITS SUBSIDIARY COMPANY. THE ONLY CONDITION PRESCRIBED IS THAT THE HOLDING COMPANY OR ITS NOMINEE SHALL HOLD THE WHOLE OF THE SHARE CAPITAL OF THE SUBSIDIARY COMPANY AND THAT THE SUBSIDIARY COMPANY IS AN INDIAN COMPANY. 50. IN THE INSTANT CASE, THE TRANSFER IN QUESTION I S OF CERTAIN INFRASTRUCTURE ASSETS OR CAPITAL WORK-IN-PROGRESS I N TERMS OF AN INFRASTRUCTURE & MAINTENANCE DEVELOPMENT AGREEMENT DATED 17 TH MARCH, 2012 BETWEEN THE ASSESSEE AND ITS SUBSIDIARY I.E., AAIL. WE HAVE PERUSED THE SAID AGREEMENT DATED 17 TH MARCH, 2012 (SUPRA) AND NOTE THAT IT INVOLVES TRANSFER OF CERTAIN FACILITIE S CONSTRUCTED BY THE ASSESSEE AT SUSHANT GOLF CITY, A PROJECT WHICH WAS BEING DEVELOPED BY THE ASSESSEE IN TERMS OF AN AWARD BY THE GOVERNMENT OF UTTAR PRADESH. IN TERMS OF THE AGREEMENT, IT IS SEEN THA T THE ASSESSEE WAS ITA-790 TO 792/DEL/2015 39 AWARDED THE PROJECT TO DEVELOP SUSHANT GOLF CITY SP READ OVER 3530 ACRES AND IN TWO PARTS VIZ., MOTHER CITY AND EXTENS ION CITY, EACH COMPRISING OF 1765 ACRES. THE ASSESSEE WAS RESPONS IBLE FOR DEVELOPMENT OF TRUNK INFRASTRUCTURE OF THE ENTIRE P ROJECT CONSISTING OF DEVELOPING THE ROADS, WATER AND POWER SUPPLY, SEWAG E AND DRAINING SYSTEMS, SECURITY, PARKS AND GARDENS, STREET LIGHTS , SOLID WASTE MANAGEMENT, ETC. IT IS SEEN THAT THE AWARD BY THE GOVERNMENT OF UTTAR PRADESH AUTHORIZED THE ASSESSEE TO COLLECT US ER CHARGES FOR DEVELOPMENT, OPERATION AND MAINTENANCE OF SUCH TRUN K INFRASTRUCTURE. THE ASSESSEE HAD STARTED CONSTRUCTION OF SUCH TRUNK INFRASTRUCTURE IN THE MOTHER CITY SINCE THE AWARD OF THE CONTRACT. D URING THE YEAR, IT WAS DECIDED THAT THE WORK PERTAINING TO THE CONSTRU CTION AND DEVELOPMENT OF INFRASTRUCTURE FACILITIES IN THE MOT HER CITY AND THE PROVISION OF MAINTENANCE SERVICES IN THE MOTHER CIT Y BE UNDERTAKEN THROUGH A SPECIAL PURPOSE VEHICLE FOR WHICH AAIL WA S SET UP AS A 100% SUBSIDIARY. TO GIVE EFFECT, THE INFRASTRUCTURE DEV ELOPMENT AND MAINTENANCE AGREEMENT DATED 17 TH MARCH, 2012 WAS ENTERED INTO. IN TERMS OF THE SAID AGREEMENT, THE RESPONSIBILITIES O F THE AAIL EVOLVED DEVELOPMENT, CONSTRUCTING AND MANAGING THE TRUNK IN FRASTRUCTURE AT HIS OWN COST AFTER THE TRANSFER FROM THE ASSESSEE O N 1.4.2011 AT FAIR MARKET VALUE. SO, HOWEVER, IN TERMS OF CLAUSE 3.2, AAIL HAD NO RIGHT TO TRANSFER OR SELL THIS TRUNK INFRASTRUCTURE TO AN Y PARTY WITHOUT PRIOR CONSENT OF THE ASSESSEE. AAIL WAS ALSO AUTHORIZED TO CONNECT AND LINKING OF THE INFRASTRUCTURE FOR WHICH IT WAS TO R ECEIVE PAYMENTS FROM ASSESSEE ON THE BASIS OF RUNNING BILLS. THE SUBSID IARY WAS RESPONSIBLE FOR THE OPERATION UPKEEP AND MAINTENANCE OF THE INF RASTRUCTURE FACILITIES. THE SUBSIDIARY WAS ALSO RESPONSIBLE TO PROVIDE THE MAINTENANCE SERVICES TO END USERS IN THE MOTHER CIT Y AND ALSO CHARGE AND COLLECT END USER FEES WHICH SHALL GO INTO THE T RUST AND RETENTION ACCOUNT OF THE LENDERS. THE AGREEMENT ALSO PROVIDE D THAT IN ORDER TO ENABLE AAIL TO CARRYING OUT ITS RESPONSIBILITIES, A SSESSEE UNDERTOOK TO ITA-790 TO 792/DEL/2015 40 STAND GUARANTEE TO THE LENDERS/FINANCIERS AND TO MA KE ADVANCE PAYMENTS IN CASE OF SHORTFALLS FACED BY AAIL IN SER VICING ITS DEBTS. 51. IN SUM AND SUBSTANCE, THE TERMS OF THE AGREEMEN T BRING OUT THAT THE DEVELOPMENT AND MAINTENANCE OF THE TRUNK INFRAS TRUCTURE WAS THE RESPONSIBILITY OF THE ASSESSEE IN TERMS OF THE PROJ ECT AWARDED BY THE GOVERNMENT OF UTTAR PRADESH. THE ASSESSEE WAS TO E ARN USER CHARGES ETC. FROM THIS ASSET IN TERMS OF THE AWARD BY THE G OVERNMENT OF UTTAR PRADESH. THIS TRUNK INFRASTRUCTURE WAS TRANSFERRED TO AAIL FOR THE REASON THAT THE ASSESSEE DESIRED THAT THE INFRASTRU CTURE RELATED WORK AND ITS MAINTENANCE AND SERVICING TO END USERS BY A SPECIAL PURPOSE VEHICLE. THE SUPPORTING INFRASTRUCTURE FOR LINKING THE TRUNK INFRASTRUCTURE TO END USERS WAS BEING DEVELOPED BY THE ASSESSEE ITSELF BUT THROUGH AAIL. ANOTHER IMPORTANT FEATURE WAS TH AT AAIL WAS NOT PERMITTED TO TRANSFER THE TRUNK INFRASTRUCTURE TO A NY THIRD PARTY. 52. IN TERMS OF THE AFORESAID FACTUAL BACKGROUND, T HE CASE MADE OUT BY THE ASSESSEE IS THAT THE TRUNK INFRASTRUCTURE OR THE CAPITAL WORK-IN- PROGRESS DEVELOPED BY IT AS ON 1.4.2011 WAS TRANSFE RRED AT FAIR MARKET VALUE TO ITS 100% SUBSIDIARY AAIL RESULTING IN A SU RPLUS OF `17.05 CRORES. ALTHOUGH THE SAID SURPLUS WAS NOT EXCLUDED FROM THE TOTAL INCOME IN THE RETURN OF INCOME, THE CLAIM OF THE AS SESSEE WAS THAT THIS SURPLUS WAS EXEMPT IN TERMS OF SECTION 47(IV) OF TH E ACT. QUITE CLEARLY, THE TRUNK INFRASTRUCTURE ASSETS WHICH HAVE BEEN TRA NSFERRED IN TERMS OF THE AGREEMENT WAS A CAPITAL ASSET OF THE ASSESSE E BECAUSE IT WAS EMPLOYED AS A PROFIT EARNING APPARATUS. THIS WAS T RANSFERRED AT FAIR MARKET VALUE TO A WHOLLY-OWNED SUBSIDIARY AAIL AND THEREFORE, SECTION 47(IV) CLEARLY COMES INTO PICTURE. NOTABLY, SECTIO N 45 OF THE ACT PROVIDES THAT ANY PROFITS AND GAINS ARISING FROM A TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR WILL BE CHARGEA BLE TO INCOME TAX UNDER THE HEAD CAPITAL GAINS. SUCH CAPITAL GAINS ARE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TRANS FER TOOK PLACE. ITA-790 TO 792/DEL/2015 41 SECTION 47 ENUMERATES A LIST OF TRANSACTIONS WHICH WOULD NOT BE CONSIDERED AS A TRANSFER UNDER SECTION 45(1) OF THE ACT, WHICH, INTER- ALIA INCLUDES SUB-SECTION (IV) PRESCRIBING FOR TRAN SFER OF A CAPITAL ASSET BY A COMPANY TO ITS WHOLLY-OWNED INDIAN SUBSIDIARY. FROM THE AFORESAID LEGAL POSITION AND THE TERMS OF ARRANGEME NT AVAILABLE BEFORE US, IT IS EVIDENT THAT THE TRANSFER IN QUESTION IS OF A CAPITAL ASSET UNDER DEVELOPMENT I.E., CAPITAL WORK-IN-PROGRESS AND SUCH TRANSFER BEING TO A 100% SUBSIDIARY, CANNOT BE TREATED AS A TRANSFER FO R THE PURPOSE OF SECTION 45 OF THE ACT IN VIEW OF SECTION 47(IV) OF THE ACT. THE RELIANCE PLACED BY THE LEARNED REPRESENTATIVE OF THE ASSESSE E ON THE DECISION OF OUR COORDINATE BENCH IN THE CASE OF MOTHER DIARY FRUITS & VEG.(P) LTD. (SUPRA) IS QUITE APT UNDER THE PRESENT CIRCUMS TANCES. 53. THE CASE OF THE INCOME-TAX AUTHORITIES, THAT IT WAS A TRANSFER OF AN ASSET EMPLOYED IN THE BUSINESS AND THEREFORE S ECTION 47(IV) IS NOT ATTRACTED, IS QUITE UNJUSTIFIED AND UNTENABLE. IT DOES NOT REQUIRE MUCH GAIN SAYING THAT EVEN THE CAPITAL ASSETS OWNED BY A BUSINESS ARE EMPLOYED IN THE BUSINESS BUT THE SAME DOES NOT OBLI TERATE THE DIFFERENCE BETWEEN THE CAPITAL ASSET AND REVENUE/TR ADING ASSETS. THE SECOND ASPECT CONSIDERED BY THE INCOME-TAX AUTHORIT IES VIZ., THAT ASSESSEE HAD ITSELF OFFERED THE SAME FOR TAXATION I N THE RETURN OF INCOME DOES NOT TAKE THE CASE OF THE REVENUE ANY FU RTHER. OSTENSIBLY, THE ASSESSEE DID NOT EXCLUDE SUCH INCOME FROM THE T OTAL INCOME IN THE RETURN OF INCOME BUT CLAIMED IT BY WAY OF A NOTE FO RMING PART OF THE RETURN OF INCOME, AND MORE IMPORTANTLY, ALSO RAISED THIS ISSUE DURING THE ASSESSMENT PROCEEDINGS. OBVIOUSLY, DURING ASSE SSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS CONSIDERED T HE EFFICACY OF SUCH A CLAIM AND DISAGREED WITH THE ASSESSEE AND DENIED THE EXEMPTION CLAIMED UNDER SECTION 47(IV) OF THE ACT. IT IS A W ELL-SETTLED LEGAL PROPOSITION THAT THE CLAIMS MADE BY THE ASSESSEE HA VE TO BE EXAMINED IN THE LIGHT OF THE APPLICABLE FACTUAL AND LEGAL PO SITION AND NOT MERELY ON THE BASIS OF THE POSITION TAKEN IN THE FINANCIAL STATEMENTS OR ITA-790 TO 792/DEL/2015 42 OTHERWISE. IN THIS VIEW OF THE MATTER, WE DO NOT F IND THE STAND OF THE CIT(A) OR THE ASSESSING OFFICER TO BE TENABLE IN TH IS REGARD. INSOFAR AS THE PLEA OF THE LEARNED DR TO REMAND THE MATTER BAC K TO THE LOWER AUTHORITIES IS CONCERNED, THE SAME, IN OUR VIEW, IS NOT, AT ALL, MERITED. IT HAS BEEN DEMONSTRATED BY THE ASSESSEE BEFORE US, AND WHICH HAS NOT BEEN CONTROVERTED BY THE LEARNED DR, THAT THE E NTIRE MATERIAL WAS BEFORE THE LOWER AUTHORITIES AND THERE IS NOTHING T O SHOW THAT THE SAME HAS NOT BEEN EXAMINED BY THE LOWER AUTHORITIES. TH EREFORE, CONSIDERING THE ENTIRETY OF THE CIRCUMSTANCES, AND IN VIEW OF THE AFORESAID DISCUSSION, WE HEREBY ALLOW THE CLAIM OF THE ASSESSEE. 54. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ABOVE DECISION WAS ANNOUNCED IN THE OPEN COURT ON 1 6.07.2021. SD/- SD/- ( (( ( SUCHITRA KAMBLE SUCHITRA KAMBLE SUCHITRA KAMBLE SUCHITRA KAMBLE ) )) ) (G.S. PANNU (G.S. PANNU (G.S. PANNU (G.S. PANNU ) )) ) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR