DEPUTY COMMISSIONER OF INCOME TAX, BANGALORE vs. BOYANCE INFRASTRUCTURE PRIVATE LTD, BANGALORE

These two appeals are filed by the Department in the case of BOYANCE INFRASTRUCTURE PRIVATE LTD[ The Assessee] For two different assessment years.

ITA No 2097/ B/2025 is filed by the Deputy Commissioner of Income tax , Circle 2 (2), BANGLORE [ THE LD. Ao ] against the order of the Ld. CIT (Appeals)-15, Bengaluru [ld. CIT(A)] dated 30-Jul-2025 for the Assessment Years 2016-17 wherein the appeal of the assessee against the assessment order passed u/s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 [the Act] dated 30.3.2022 assessing total income of the assessee at NIL was allowed and therefore the AO is in appeals before us.

The ld. AO has raised a solitary ground that the ld. CIT(A) has erred in holding that indexation benefit should be allowed from the FY 2008-09 even though occupancy certificate for township was issued during FY 2010-11 relevant to AY 2011-12.

for AY 2016-17 show that the assessee filed its return of income on 15.10.2016 at a loss of Rs.87,53,78,625 which was assessed u/s. 143(3) r.w.s. 147 of the Act on 30.3.2022 determining total income of the assessee at NIL. The fact shows that assessee company was incorporated on 29.9.2008. Another company, DOMUS merged into the assessee company as per the Scheme of Amalgamation approved by the Hon’ble High Court of Karnataka as per Order dated 26.9.2012. The assessee company sold the immovable property being Township for a consideration of Rs.75.50 crores on 23.6.2015. In fact, DOMUS constructed the Township during FY 2008-09 which was let out to GMR and rental income was earned from 15.11.2008 onwards. The above rental income was shown as income of DOMUS. This DOMUS is amalgamated with the assessee on the appointed date of amalgamation of 1.4.2010. When this property was sold, the assessee claimed long term capital loss of Rs.31.94 Crores on the sale of Township and short term capital loss of Rs.7.72 Crores, aggregating to total loss of Rs.39.66 Crores for the impugned assessment year. The cost inflation index was applied from FY 2008-09 as since then the property was on rent to GMR. Notice u/s. 133(6) of the Act was also issued to the Purchaser of the asset as assessee did not submit the complete details of the transaction.

The ld. AO found that the Township on the land was constructed over the period of FY 2008-09 to FY 2010-11 and Occupancy Certificate was also issued on 30.7.2010. Despite this, the assessee has claimed indexation cost from FY 2008-09 which is incorrect. Therefore ld. AO found that the sale consideration of the Township results into a short term capital gain of Rs.23,08,41,003 and short term capital loss on sale of furniture results into loss of Rs.3,23,00,000. Accordingly, addition of Rs.19,85,16,766 was made. The reassessment order was passed on 30.3.2022.

The ld. CIT(A) deleted the addition, observing that the ld. AO had incorrectly treated the amalgamation of M/s Domus Infra Pvt. Ltd. [DOMUS] with the assessee as a taxable transaction. Under section 47(vi), the transaction did not constitute a transfer of the asset. The ld. CIT(A) therefore held that the assessee was entitled to claim a long-term capital loss of Rs.31,94,36,733 on the sale of the township as town ship was on rent since 2008-09 and Rs.7,72,05,000 on the sale of furniture, and accordingly deleted the addition.

The ld. AO is in appeal before us. The ld. DR vehemently supported the order of the ld. AO.

The ld. AR, Shri K R Pradeep and Ms. Girija, Advocates supported the order of the ld. CIT(A).

We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. The fact show that assessee company was incorporated on 29.9.2008. Another company, DOMUS merged into the assessee company as per the Scheme of Amalgamation approved by the Hon’ble High Court of Karnataka as per Order dated 26.9.2012. The assessee company sold the immovable property being Township for a consideration of Rs.75.50 crores on 23.6.2015. In fact, DOMUS has constructed the Township during the FY 2008-09 which was let out to GMR and rental income was earned from 15.11.2008 onwards. The above rental income was shown as income of DOMUS. This DOMUS is amalgamated with the assessee on the appointed date of amalgamation of 1.4.2010. When this property was sold, the assessee claimed long term capital loss of Rs.31.94 Crores on the sale of Township and short term capital loss of Rs.7.72 Crores, aggregating to total loss of Rs.39.66 Crores for the impugned assessment year. The cost inflation index was applied from FY 2008-09 as since then the property was on rent to GMR.

There is no dispute on capital gain, but the only dispute is from which date the cost of indexation has to be taken. As in the hands of the assessee, the rental income is earned from 2008-09, therefore it is apparent that the property was in existence on that date. The ld. AO took the date of Occupancy Certificate issued by Gram Panchayat. Undoubtedly there is an amalgamation between the DOMUS and assessee company, therefore the transfer of asset from DOMUS to the assessee due to amalgamation is tax neutral. The period of holding is also required to be taken from FY 2008-09.

The ld. CIT(A) has dealt with the issue as under:-

As the ld. CIT(DR) could not show us that why the year of acquisition should not be considered FY 2008-09, as in that year DOMUS was earning rental income which was offered for taxation on the property. Accordingly, the ld. CIT(A) is correct in allowing the claim of the assessee for granting indexation benefit from FY 2008-09.

Thus, the appeal filed by the ld. AO for AY 2016-17 is dismissed.

ITA No. 2098/Bang/2025 concerns AY 2022-23 and arises from the order of the ld. CIT(A) dated 30.7.2025. For this year, the assessee filed its return of income on 29.10.2022, and the assessment was completed under section 143(3) of the Act at a total income of Rs.69,09,35,930. The disputed addition relates to the sale of units of Bharath Nirman Fund [BNF] to the assessee’s subsidiary, Malkhed Real Estate Private Limited [MREPL].

BNF is an Alternate Investment Fund [AIF]. On 15.6.2021, the assessee purchased 17,88,000 units from GMR at Rs.83.89 per unit based on a valuation by SKA Business Advisory Services Pvt. Ltd., a registered valuer. Of these, 35,000 units were transferred on 30.9.201 to the assessee’s subsidiary at a NAV of Rs.20.77 per unit, as per another registered valuer’s report. On this basis, the ld. AO treated the transaction as non-genuine and a colourable device and disallowed the assessee’s claimed loss of Rs.4,00,81,200.

Before the ld. CIT(A), the assessee contended that both the purchase and sale involved AIF units and that the valuations at the time of purchase and sale were based on market value and supported by reports of registered valuers. It argued that there was no basis to treat the transaction as non- genuine and that the ld. AO had wrongly assumed that the valuation method adopted at the time of sale was incorrect. The assessee also placed before the ld. CIT(A) the valuation reports for both dates, and submitted that the mere difference in NAV over a period of six months could not by itself justify rejecting the valuation of the AIF units. In support, it also furnished the valuer’s report, annual accounts, and details of the AIF investments.

After considering the assessee’s explanation, the ld. CIT(A) held that the ld. AO had ignored the valuation report of the registered valuer, which adopted the correct method of valuation. The ld. CIT(A) further noted that the assessee had furnished details of the investments showing a decline in the value of the Fund’s underlying companies, which led to a corresponding fall in the value of the AIF units. He also held that the transaction could not be treated as improper or a colourable device merely because it was between related parties. The ld. CIT(A) discussed this issue in para 4.3 as under:

Accordingly, the addition made by the ld. AO was deleted.

The ld. AO is aggrieved by the deletion and contends that the assessee created an artificial loss to avoid tax, since both the purchaser and seller of the units are related parties. It is further contended that the valuation report dated 30.9.2021 does not comply with Rules 11U and 11UA of the Income-tax Rules, as it relies on undated financial statements of several companies in which the AIF had invested. The ld. AO also points to the sharp fall in the AIF’s NAV from Rs.83.89 per unit on 15.6.2021 to Rs.20.77 per unit on 30.9.2021, and submits that this drastic reduction remains unexplained. It is further stated that the valuation report furnished by the assessee does not provide supporting details regarding the liabilities incurred.

The ld. CIT(DR) reiterated the above submissions. The ld. AR supported the order of the ld. CIT(A).

We have carefully considered the rival submissions and perused the orders of the lower authorities. The facts show that the assessee purchased 17,88,000 units of BNF from GMR on 15.6.2021 at Rs.83.89 per unit and later sold them on 30.9.2021 to its subsidiary, MREPL, at Rs.20.77 per unit, thereby claiming a short-term capital loss. At the time of purchase, the units were valued by SKA Business Advisory Services Pvt. Ltd., and at the time of sale, they were valued by Vikas Goyal. The ld. AO held that the acquisition valuation was based on the NAV method, whereas the sale valuation adopted the market approach. However, in para 4.3.1 of the order, the ld. CIT(A) specifically found that both valuations were in fact based on the NAV method, as noted from para 11 of the valuation report. He therefore concluded that the same valuation methodology had been applied at both stages. The Ld. CIT DR could not show us that there are different methods of valuation adopted by valuer at the time of sale and at the time of purchase. The ld. CIT (A) confirms that both are same. Although there was a significant difference between the purchase price and the sale price, the valuation report explained the reasons for the decline. The record also contains details of BNF’s investments as on the dates of purchase and sale. The AIF reported a reduction of Rs.57.79 crores in the value of its investments, explaining that the fair market value of some of BNF’s underlying investments had eroded. Although these materials were produced before the ld. AO, he neither verified them with the AIF nor confronted the assessee on this aspect. Further, since the AIF is a SEBI-regulated entity, the loss suffered by BNF during this period could not be doubted in the absence of contrary material. Merely because the transaction was between related parties, it could not be regarded as a colourable device unless there was some other indication of tax avoidance. In these circumstances, we find no infirmity in the order of the ld. CIT(A) deleting the addition of Rs.4,00,81,200 representing the short- term capital loss claimed by the assessee.

Thus, the appeal filed by the ld AO for AY 2022-23 is dismissed.

In the result, both the appeals filed by the Department are DISMISSED.