KOHINOOR PLANET CONSTRUCTIONS PRIVATE LIMITED,MUMBAI vs. INCOME TAX OFFICER-6(3)(1), MUMBAI

आयकरअपीलीयअिधकरण�ायपीठमुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JM & SHRI ARUN KHODPIA, AM I.T.A. No.5691/Mum/2025 (Assessment Year: 2023-24) Kohinoor Planet Constructions Income Tax Officer – 6(3)(1) 5th Floor, Aayakar Bhawan, M.G. Road Private Limited Kohinoor Corporate Office Churchgate, Mumbai-400021 Vs. Senapati Bapat Marg, Dadar West, Mumbai-400026 PAN: AABCR6994E Assessee- अपीलाथ� / Appellant Revenue-��थ�/ Respondent :

: Shri Jayesh Dadia Assesseeby : Shri Ritesh Misra, CIT DR Revenueby : 17.02.2026 Date of Hearing Date of Pronouncement : 14.05.2026 O R D E R Per Arun Khodpia, AM: The captioned appeal is preferred by the assessee against the order of Commissioner of Income Tax Appeals/ National Faceless Appeal Centre (NFAC), Delhi [in short, “the Ld. CIT(A)”] dated 07.08.2025, for the assessment year 2023-24, which in turn arises from the assessment order u/s 143(3) of the Income Tax Act, 1961 (in short, “the Act”) dated 26.03.2025 passed by Assessment Unit, Income Tax Department (in short, “the Ld. AO”). The grounds of appeal are as under:

ITA No. 5691/Mum/2025 Kohinoor Planet Constructions Private Limited “1) The Ld. CIT(A) has erred in law and on the facts of the case in making an addition of Rs.12,14,97,528 as Business Income under section 28 of the Income Tax Act. The action is unjustified and unwarranted as income / loss to be computed under the head Capital Gain as the premises sold were held as Investment. Without prejudice, the addition is excessive.” 2. Brief facts of the case as recorded by the Ld. CIT(A) are extracted as under: “2.1. The assessee is a company engaged in the business of Property development, Construction of Buildings and has filed its return of income for the A.Y. 2023-24 on 10.10.2023 declaring total income NIL. The assessee's case was selected for scrutiny through CASS for the following reasons: 1. Assessee has claimed high interest expenditure in P&L a/c and shown huge advances in balance sheet which is in excess of total proprietors/partners fund. It may be examined whether advances given are interest bearing and whether they meet the test of commercial expediency. If not, proportionate disallowance from the interest paid may be made. 2. The assessee has claimed substantial amount of refund. It is required to be verified whether thetaxable income has been disclosed correctly. 3. The assessee has shown substantial expenses relating to entities not registered under GST. There is a possibility that assessee has booked bogus expenses in order to reduce its profit/taxable income. Therefore, the genuineness /correctness of expenses related to entities not registered under GST may be verified. 4. The assessee has reported lesser amount disallowable under section 40(a)(i) as per Part A-Ol of ITR in comparison to the default found u/s. 200A as per data received from CPCTDS. Therefore, to know the correct of amount of expenditure to be disallowed, the claimed disallowed amount may be verified. 5. Assessee who is an unlisted company has invested substantial part of its funds in assets like Residential House, Land or Building, Capital Contribution to other entities, Loans and Advances, Motor Vehicles, Aircrafts etc. It needs to be verified whether the company is a benami or shell company. Sources of its funds may be fully verified.” 3. The sole controversy in the present matter pertains to an addition made by the Ld. AO of Rs.12,14,97,528/- treating it as Business Income of the assessee, which as per the assessee was in the nature of Capital Gain. Accordingly, the assessee computed the same under the head ‘Capital Gains’,since the profit/loss hadarisenfromthe selling of investment in immovable properties. The issue has 2

ITA No. 5691/Mum/2025 Kohinoor Planet Constructions Private Limited been examined by the Ld. CIT(A), who was not convinced with the submissions of the assessee, therefore, had dismissed the grounds of appeal on the aforesaid aspect by observing as under: “3.4 Decision on Merits 3.5 I have carefully considered the facts of the case, order of the Assessing Officer and submissions made by the appellant. The central point of dispute in this ground of appeal is regarding the head of income under which the profit earned on sale of units, B1A1 and B1A2 is taxable. The appellant has vehemently claimed that as per the policy of the company and the accounting treatment, the appellant had accounted these units as capital assets and not as business assets. On the other hand, the Assessing Officer is of the view that the entire income earned by the appellant on sale of shares is taxable as business income. 3.6 To analyse this issue in detail, it is pertinent to examine the whole scheme of affairs that has resulted in the said transaction. It is seen that the appellant has made investment in its subsidiary company M/s. KCTNL which was also engaged in the business of construction, by way of preference shares amounting to Rs. 250 crores in F.Y. 2008-09. Out of the said investment, M/s. KCTNL has purchased a plot from National Textile Corporation by availing loan of Rs. 936 crores from a consortium of banks led by State Bank of India (SBI) and had also taken additional loan to the tune of Rs. 295 crores in September, 2014. 3.7 The subsidiary company M/s. KCTNL, who is the promoter has planned to development of the said land by constructing a high rise Information Technology park, commercial office, residential, Hotel and public parking lot building to be known as Kohinoor Square developed this piece of land. As per the sanctioned plan, the said building known as Kohinoor Square consists of three level basement and three wings viz, A, B, C and a semi-detached structure known as Energy Centre. Wing B where the disputed sale happened consist of Ground and 48 upper floors. 3.8 Vide agreement of sale or transfer deed dated 25th September 2014, the appellant purchased unit B1A1 and unit B1A2 from the promoter and the subsidiary company M/s. KCTNL. It is to be noted that appellant is into the business of Property development and Construction of Buildings. To decide the exact nature of the transactions undertaken by the appellant, it is very important to examine the treatment of this original investment the appellant has made in its subsidiary company M/s. KCTNL. 3.9 This issue was a matter of adjudication before the Hon'ble ITAT, Mumbai in appellant's own case in ITA No. 1158/Mum/2024 (Assessment Year: 2017-18) And ITA No. 1159/Mum/2024 (Assessment Year: 2016-17. The Hon'ble ITAT was adjudicating on Ground 2 in the above-mentioned ITA Nos. Ground no. 2 pertained to the disallowance made by the Id. AO u/s. 37 of the Act amounting to Rs.50 crores being diminution in the value of preference shares which was added by the Id. AO and deleted by the Id. CIT(A). Before the ITAT, Revenue contended that the investment made by the assessee-in-M/s. KCTNL was not for business expediency and the same cannot be a business loss on non-recovery of the same. The Id. DR further stated that it cannot be 3

ITA No. 5691/Mum/2025 Kohinoor Planet Constructions Private Limited allowed neither u/s. 36(2) nor u/s. u/s: 37 of the Act, as the same amounts to loss of capital and not a business loss. 3.10 The Id. AR on the other hand controverted the said fact and stated that the issue was clearly covered by the decision of the Hon'ble Jurisdictional High Court in the case of Colgate Palmolive (India) Ltd. (supra) and the Karnataka High Court in the case of ACE Designers Ltd. (supra). The Id. AR relied on the order of the Id. CIT(A). The relevant portion of the findings of the Tribunal is reproduced below: "24.Having heard the rival submissions and perused the material available on record, it is observed that the assessee has made investment in its subsidiary company M/s. KCTNL which was also engaged in the business of construction, by way of preference shares amounting to Rs. 250 crores in F.Y. 2008-09. Out of the said investment, M/s. KCTNL has purchased a plot from National Textile Corporation by availing loan of Rs. 936 crores from a consortium of banks led by State Bank of India (SBI) and had also taken additional loan to the tune of Rs. 295 crores in September, 2014. It is stated that M/s. KCTNL has commenced the project of multi storied PublicParking Lot ("PPL") after due approval from the Municipal Corporation of Greater Mumbai, where the said project was stalled for 3 to 4 years due to change in government policies and was also facing litigations due to the same. This issue reached up to the Hon'ble Apex Court and after the consent terms dated 25.07.2013, the project commenced. Due to the delay in contesting the litigation M/s. KCTNL faced financial crunches and its account became NPA. The consortium of banks then transferred assets of M/s. KCTNL to Edelweiss ARC which had filed petition under IBC for recovery and the same was pending before the Hon'ble NCLT, which vide order dated 21.02.2018 accepted the resolution plan. For the above-mentioned reason, the assessee also had to face the hardship caused due to this. The assessee's contentions is that the said investment is for strategic business purpose and the write off of the investment arised due to peculiar facts and circumstances which was incidental to the business and the same amounted to loss due to commercial expediency and business necessity. The assessee has placed reliance on the decision of the Hon'ble Jurisdictional High Court in the case of Colgate Palmolive (India) Ltd. (supra) which on identical facts has held that the loss on write off of investment made in subsidiary company is business loss which was for the purpose of the extension of business activity and does not entitle for creating capital asset by holding shares. It was was also held that there there was no acquisition of capital asset neither was the expenditure incurred for enduring benefits and further there is no relinquishment or transfer of capital asset to any third party. The relevant extract of the decision in the case of ACE Designers Ltd. (supra) which has dealt with the decision of the Hon'ble Jurisdictional High Court in the case of Colgate Palmolive (India) Ltd. (supra) is cited herein under for ease of reference: - "8. Thus, from perusal of the aforesaid facts, it is evident that the issue involved in this appeal is covered by decision of Bombay High Court in Colgate Palm Olive (India) Ltd. (supra), which has been upheld by the Supreme Court. The ratio of aforesaid decision is where the assessee makes investment in its 100% subsidiary for business purpose, loss or sale of investment has to be treated as business loss of the assessee. In the instant case, the assessee made investment in the shares of WOS for the business purpose i.e., for the enhancement of business activity of the assessee in global market which primarily related to business operation of the assessee. The WOS suffered losses and 4

ITA No. 5691/Mum/2025 Kohinoor Planet Constructions Private Limited therefore the assessee wrote off the assessment of Rs. 3,41,23,200/- as business loss. The investment was made for the purpose of extension of business activity and not with a view to creating capital asset in the form of holding shares. It is also pertinent to note that the assessee never acquired any capital asset or expenditure of enduring benefits to WOS and there is no relinquishment or transfer of capital asset to any third party. In view of preceding analysis, the first substantial question of law is answered in the negative and in favour of the assessee. It is not necessary for us to answer the remaining substantial questions of law in view of our answer to the first substantial question of law. In the result, the order of the Tribunal dated 14-12-2012 to the extent of the findings contained against the assessee is quashed. Accordingly, the appeal is allowed." 25. From the above decision, it is observed that the investment made by the assessee in its subsidiary company was for its commercial expediency and for promoting business operations. Non-recovery of the said amount tantamount to a business loss where the subsidiary company was unable to complete its project due to reasons beyond its control. The assessee had to write off the said loss as revenue expenditure, for the reason that there was no capital asset introduced out of such investment. The revenue has also failed to establish that the investment was in view of creating capital asset by way of holding preference shares in the said company and also whether the investment was incurred for the enduring benefit. In the absence of the same, we find no infirmity in the order of the Id. CIT(A) in allowing the said claim of the assessee. The ground no. 2 raised by the revenue is hereby dismissed. 26.In the result, the appeal filed by the revenue is hereby dismissed." 3.11 Thus, the ratio of the above judgement clearly envisages that considering the peculiar facts and circumstances of the case, any a loss incurred from investment in subsidiary company which was engaged in the similar business is clearly relatable to business expansion of the parent company therefore, the same amounts to in continuation of business necessity and commercial expediency and accordingly treating it business expenditure is justified. 3.12 From the above judgement, it is evident that the appellant had treated the same investment with its subsidiary company as an investment for strategic business purpose and treated the loss due to write off as a business loss as per commercial expediency and business necessity. Whereas the appellant in the case of sale of two units in the same property which is intrinsically linked with the same investment, is given a different treatment as per their convenience which is not at all acceptable. Moreover, the appellant is also in the same line of business of Property development and Construction of Buildings 3.13 I have carefully considered the submissions of the appellant and perused the assessment records. It is observed that the appellant has claimed a deduction on the ground that the income arising from the sale of certain units should be assessed under the head "Capital Gains". However, on scrutiny, it is evident that the same investment was treated as a business asset in an earlier assessment year, wherein income/loss arising from the same investment was declared as "Business Income". The units now sold are intrinsically linked to the original investment and form part of the same investment. The assessee cannot be permitted to alter the character of the investment arbitrarily from year to year to derive a tax advantage. 5

ITA No. 5691/Mum/2025 Kohinoor Planet Constructions Private Limited

3.14 It is a settled position in law that the nature of an asset-whether held as investment or stock-in-trade-must be determined based on the intention of theassessee, conduct over the years, and consistency in treatment in the books of accounts. In this regard, the Hon'ble Supreme Court in Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) held that though res judicata does not apply to income-tax proceedings, there should be consistency in approach unless there is a material change in facts or law. "We are aware of the fact that strictly speaking resjudi-cata does not apply to income- tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year." 3.15 In the present case; no substantive change in facts or the nature of the investment has been demonstrated by the appellant to justify a departure from its earlier position. The sale of units, intrinsically linked to the same pool of investment, cannot be segregated for tax purposes by changing the head of income merely to obtain a deduction. Allowing such treatment would lead to fiscal indiscipline and defeat the principle of consistency upheld in Distributors (Baroda) Pvt. Ltd. v. Union of India (1985) 155 ITR 120 (SC) and CIT v. Excel Industries Ltd. (2013) 358 ITR 295 (SC). 3.16 In light of the above judicial pronouncements and considering the principle of consistency, I find no merit in the appellant's claim. The deduction sought on the re- characterized nature of income is therefore disallowed and the action of the Assessing Officer is upheld. 3.17 Grounds No. 1 is therefore, dismissed.” 4. Being aggrieved with the aforesaid decision of Ld. CIT(A), the assessee is in appeal in the instant case. 5. At the outset, Ld. Counsel of the assessee submitted that the assessee is a builder engaged in the business of construction of building, developing and selling of the same. The flats constructed by the assessee company are shown as stock-in-trade/inventory. The assessee company has also purchased flats/commercial premises in buildings other than the buildings which are constructed by assessee itself. Such purchases are shown as investment in the books of accounts of the assessee. During the year under consideration, the 6

ITA No. 5691/Mum/2025 Kohinoor Planet Constructions Private Limited assessee had sold two units namely, B1A1 and B1A2 which are shown as investment in the books of accounts and accordingly, the gain/loss on such transactions was offered for tax under the head long-term capital gains. 6. Ld. AO had treated these transactions as business transaction of the assessee as the assessee’s main business was of construction and developing of flats. Further while treating the transaction of sale as business transactions, the Ld. AO has not considered sale value of such flats as per agreement or stamp duty valuation, but has calculated the sale price by taking average sale price of all inventories sold by the assessee during the entire relevant year, which is apparently incorrect and unjustified. Ld. AR raised two questions emanating from the impugned order of Ld. CIT(A) for our consideration that (i) whether the transaction qua the properties which are shown as investment and not under the head inventory/ stock-in-trade, can be treated as business transactions? (ii) Whether the Assessing Officer is right in replacing the actual sale consideration with the calculations made by him taking the average of all sales transactions made by the assessee during the year. 7. To clarify the factual aspect of the impugned transactions, Ld. AR submitted that as per audited accounts of the assessee in note no.5 (APB page 6) under the head ‘Investment” at Sr. no. “E”, Unit-B-1A at Kohinoor Square, Dadar is shown for Rs.3445.39/- Lakhs, as on 31st March, 2023. It is submitted that this fact was not disputed by the Assessing Officer. It is further clarified that the property was purchased on 24.09.2014, under agreement from Kohinoor CTNL 7

ITA No. 5691/Mum/2025 Kohinoor Planet Constructions Private Limited Infrastructure Private Company Ltd, which is not a strategic business transaction but an investment, copy of purchase agreement placed before us in the written submissions. The aforesaid properties are sold by the assessee separately during the year on 13.12.2022 and 29.03.2023. It is brought to our knowledge that Ld. AO has held that since the assessee company has invested in long/preference capital in the other company M/s. KCTNL, when capital money was lost, it was claimed by the assessee as business loss, which is allowed by the Hon’ble Tribunal, therefore, the investment in property with the said concern would also be treated as business transaction. On this issue, Ld. AR submitted that the investment in loan/ share capital was made under a business proposal in 2008-09, which has nothing to do with the impugned investment in the property. Therefore, Ld. CIT(A) was not correct in deciding the issue that claim of business loss on account of loss of capital/loan is equivalentto the transaction of investment impugned in the present matter. It is submitted that the assessee company had rightly calculated the loss on account of sale of property, shown and treated as investment under the head capital gain / loss. 8. On the issue of valuation of the sale consideration received by the assessee on impugned transaction, computed on average,taking basis of the other transactions of sale by the assessee during the year under consideration, Ld. AR furnished a written submission which is extracted as under: “Ground No.2 Under the Income Tax Laws, provision of sections 43CA/50C/56(2)(x) the sale consideration in respect of any property should be higher of two; (1) the actual

ITA No. 5691/Mum/2025 Kohinoor Planet Constructions Private Limited consideration and (2) stamp duty valuation. The Assessing Officer cannot take any another value other than these two values. In this case the valuation are as under (1) (2) (3) (4) Higher of 1st and Unit No. Actual Stamp duty Taken by the 2nd Consideration valuation column Assessing (Rupees) (Rupees) (Rupees) Officer B1A1 11,55,00,000 11,77,98,405 11,55,00,000 19,68,04,614 B1A2 12,29,80,000 12,54,43,461 12,54,53,461 19,68,04,614 Thus, Your Honour will observe that the sale value shown by the Assesse Company in column No. 3 above cannot be replaced by any other figures. Direction may be given to the Assessing Officer to take the sale consideration value as per column 3 above while calculating the loss/profit on sale of property shown above as Investment.” 9. It was the prayer that the value of sale consideration of the property was wrongly adopted by the Ld. AO by averaging the total sales of the assessee during the year without any basis, whereas the assessee had shown actual consideration and stamp duty valuation. It is argued that such arbitrary action of Ld. AO is liable to be set aside and the values taken by the assessee may be directed to be treated as sale consideration on the investment of the assessee.

ITA No. 5691/Mum/2025 Kohinoor Planet Constructions Private Limited losses were incurred and it was concluded that the loss of investment in subsidiary company is a business loss, which was madefor the purpose of extension of business activities and it is not for creating ofany capital asset by holding the shares. Following the same ratio, Ld. CIT(A) observed that the assessee had treated the investment in subsidiary company as strategic investments for business purpose and accordingly, the loss arises from such investment was written off as business loss as per commercial expediency and business necessity. Therefore, the sale of two units in the same property, which is intrinsicallylinked with the same investment cannot be given a different treatment at the convenience of the assessee. Moreover, the assessee is also in the same line of business of property development and construction.

ITA No. 5691/Mum/2025 Kohinoor Planet Constructions Private Limited company Kohinoor CTNL Infrastructure Company Private Ltd., as its investment as shown in the audited balance-sheet of the assessee and the parties have also entered into registered purchased agreement before the Joint Sub-Registrar of the Mumbai on 25.09.2014, having no clause or terms to bring it within the ambit of business expediency or strategic business deal for expansion of the objects pf business. If the assessee would have made strategic investment on account of business expediency, such amount would have provided through buying of share capital or extending of further loans. The assessee chooses to invest in the properties/ units of the subsidiary company to create a capital asset. It is also a fact that assessee, even if dealing with in the same field of business, can buy some products as its investment to be sold at an appropriate time as per its financial planning. The two transactions compared by the Ld. CIT(A) are altogether stands on different footings. The same are characterized by the assessee in its books of accounts under different aspects. Therefore, the investment in units of Kohinoor CTNL Infrastructure Private Ltd., which are purchased on 24.09.2014 and sold during the year under consideration, cannot be treated at parity with the transactions of investment in preference shares or granting of loan to the subsidiary company.

ITA No. 5691/Mum/2025 Kohinoor Planet Constructions Private Limited assessee, that it would be treated as an investment and not the stock in trade. Accordingly, any profit or loss arising from sale of such invest shall be taxed under the hear, “Income from Capital Gain / Loss”.

ITA No. 5691/Mum/2025 Kohinoor Planet Constructions Private Limited 15. In result, the instant appeal of the assessee is allowed / allowed for statistical purposes, in terms of our aforesaid observations. Order pronounced in the open court on 14-05-2026.

Sd/- Sd/- (ARUN KHODPIA) (AMIT SHUKLA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated: 14-05-2026. Ankit K., Sr. PS

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT

BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai