×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
This appeal by the assessee is directed against order dated 05/10/2018 passed by the Ld. Commissioner of Income-tax (Appeals)-XXVI, New Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2013-14, raising following grounds:
1. That under the facts and circumstances of the case Ld. CIT(A) has erred in law as which the addition of Rs. 50,61,000/- is upheld.
2. That under the facts and circumstances of the case Ld. CIT(A) has erred in law as much as in fact in upholding the applicability of provisions of section 50C of the Act. Section 50C, according to the facts of the case, does not apply as the nature of gains is gains from business of developing the property for the purpose of earning income and Section 50C(1) is not applicable to the gains from business.
3. Without prejudice to the above ground, in any case, the addition made by the AO is contrary to the provision of section 50C of the Act particularly in view of the fact that the assessee during the course of assessment proceedings had submitted evidence before the AO in which it was claimed that value adopted or assessed or assessable by the stamp valuation authority under sub section (1) of section 50C exceeds the fair market value of the property as on the date of transfer, therefore, the case of the assessee was covered by the provision of clause (a) of sub-section (2) of section 50C. The addition made by the AO is in complete disregard of Secti n 50C (2)(a) and CIT(A) also has failed to appreciate such disregard of the provision of Section 50C(2)(a) by the AO and has wrong y upheld the action of the AO on the ground that there was specif c requirement laid down in the provisions for demand of valua ion by the assessee.
4. That ld. CIT(A) has erred in law as much as in fact in upholding the chargeability of interest under section 234B, 234C and 234D of the Act.
2. Briefly stated facts of the case are that the assessee, an individual, filed return of income on 27/03/2015 declaring total income of Rs18,98,510/-which included salary from M/s Frontline Business Solutions Private Limited, profit and gains of the business from trading in “Agarbatties”, “Papad” and “badies” and short-term and long-term capital gain on sale of properties. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Income-tax Act, 1961 (in short ‘the Act’) was issued and complied with. During the year, the assessee sold 14 immovable properties. The Assessing Officer noted that out of those 14 properties, 9 flats were sold below the value prescribed by the Stamp Value Authority (SVA) of the relevant State government. In view of the provisions of section 50C of the Act, the sale consideration for the purpose of computing capital gain, was to be taken as actual sale consideration or the value adopted by the Stamp Valuation Authority (SVA) of the state government, whichever is higher. The learned Assessing Officer computed the short-term capital gain from sale of 13 properties at Rs.1,01,56,314/- in the assessment passed under section 143(3) of the Act, as against the short-term capital gain of Rs.52,44,274/- declared by the assessee. On further appeal, the Ld. CIT(A) upheld the addition made by the Assessing Officer. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above.
3. The sole issue involved in the grounds raised by the assessee is of invoking section 50C of the Act and computing the short-term capital gain.
3.1 Before us, the ld. counsel of the assessee submitted that in the grounds of appeal, the assessee has contested addition of Rs.50,61,000/-, which has two components as under:
3.2 In view of the above, the learned counsel submitted that while computing the assesseed income, the Assessing Officer started with returned income as profit of Rs.74,478/-, as against loss of Rs.74,478/- declared by the assessee. Thus, the Assessing Officer has made addition of Rs.74,478/-, which is an arithmetical error in the computation of total income. The learned counsel submitted that addition of Rs.74,478/- should accordingly be deleted.
3.3 Further, on the issue of addition of Rs.49,12,040/- the Ld counsel submitted that the activity of sale of properties was in the nature of the business and thus gain if any on sale of those properties must be computed under the head “profit and gains of the business” rather than under the head “capital gain”. The learned counsel submitted that though the assessee has declared the income is short-term capital gain, but the assessee is entitled to claim even for first-time before the Tribunal that the nature of activity carried by the assessee in respect of those flat is in the nature of the business. According to him, nomenclature given to a transaction is irrelevant and true nature is to be determined from the affairs of the transaction. In support of the contention he relied on the following judicial pronouncement:
❖ CIT vs Arvind Kumar Jain  205 Taxman 44 (Delhi)(MAG.);
❖ CIT vs Avery India Ltd.  255 ITR 485 (Calcutta);
❖ CIT vs Bhatia General Hospital  405 ITR 24 (Bombay); and
❖ Radial International Vs ACIT  367 ITR 1 (Delhi)
3.4 The Ld. counsel further submitted that in case of the income under the head profit and gains of the business, the provisions of the section 50C are not applicable. In support of the contention, he relied on the following judicial pronouncement:
❖ CIT vs Glowshine Builders & Developers (P.) Ltd  405 ITR 540 (Bombay) Para 7 upto para 11.
❖ CIT vs Thiruvengadam Investments (P.) Ltd  320 ITR 345 (Madras) Para 7
❖ CIT vs Neelkamal Realtors & Erectors India (P.) Ltd.  246 Taxman 274 (Bombay) para 3(f)