CHETTINAD BUILDERS P LTD.,CHENNAI vs. DCIT CORPORATE CIRCLE 1(2), CHENNAI

O R D E R

PER DUVVURU RL REDDY, JUDICIAL MEMBER:

by the assessee. We have perused the decision in the case of Maxopp Investment Ltd. v. CIT (supra), wherein, the Hon’ble Supreme Court has observed that as long as an exempt income was earned, the expenditure incurred as attributable to earning such exempt income, had to be disallowed under section 14A of the Act. Moreover, the Hon’ble Supreme Court has also held that irrespective of the objective of investment in shares (when the shares are held as stock-in-trade with a view to earn trading profits or as investment representing controlling interest) and the taxpayer earned an incidental exempt dividend income, section 14A was triggered which was based on the theory of apportionment of expenditure between taxable and exempt income. In this case, the assessee has not admitted any expenditure warranting any specific satisfaction to be recorded by the Assessing Officer a contended by the assessee in the grounds of appeal. Thus, the Assessing Officer is directed to consider only those investments for computing average value of investment which yielded exempt income during the year under consideration as per Rule 8D(2)(iii) in view of the Delhi Special Bench of the Tribunal in the case of ACIT v. Vireet Investment (P) Ltd. (2017) 165 ITD

27. (Delhi)(SB) and the disallowance shall be recomputed. Thus, this ground of appeal is partly allowed.

6. The next ground raised in the appeal of the assessee relates to confirmation of addition to income from capital gains. The Assessing Officer observed that the assessee sold agricultural land measuring 18.63 acres for the total consideration of ₹.40,05,000/- taking into account the cost of land at ₹.26.72 lakhs. The assessee calculated the long term capital gains at ₹.13,32,141/- and claimed the same as exempt. Since the assessee failed to place on record the evidences to show that the land was agricultural land and it had been used for agricultural cultivation and moreover, the assessee has sold the land to M/s. Vamana Builders Pvt. Ltd., which showed that the intention of both the assessee as well as the buyer was to put the land to use for non-agricultural purposes, the Assessing Officer denied the claim of the assessee and brought to tax.

6.1 On appeal, the submissions made by the assessee as well as observations of the ld. CIT(A) are reproduced as under: “9. In the course of appeal, the appellant submitted that they had furnished the details of land tax paid as per the records of the State Revenue. The appellant also stated that they had furnished the Encumbrance Certificate for the said land which showed that the land was agricultural land. The appellant also submitted that they had been offering agricultural income in the return. As regards the definition of Capital Asset under section 2(14), the appellant submitted that the land was beyond the distance of 5 kms from Kancheepuram and total population to the village was only 671. It was submitted that the impugned land did not fall within the definition of capital asset.

6.3 We have heard both the sides, perused the materials available on record and gone through the orders of authorities below including paper book filed by the assessee. Since the assessee failed to place on record complete evidences to show that the land was agricultural land and it had been used for agricultural cultivation and moreover, the assessee has sold the land to M/s. Vamana Builders Pvt. Ltd., which showed that the intention of both the assessee as well as the buyer was to put the land to use for non- agricultural purposes, the Assessing Officer denied the claim of the assessee. On appeal, the ld. CIT(A) has observed that when the assessee sold 18.63 acres during the year, the assessee has placed on record only sample documents in the form of Encumbrance Certificate and downloads from State Revenue Authority in connection with Property Tax. Since the encumbrance certificate was only for a part of the property, while some of the certificates are very old, and in the absence of any valid documentary evidences, the ld. CIT(A) has held that relief cannot be allowed for the entire property. Moreover, the assessee has not filed the sale deed from which the relevant survey can be ascertained. Further, the ld. CIT(A) has held that the land is situated beyond the distance of 5 kms from Kancheepuram is also not verifiable in the absence of sale deed of the property, on the basis of which these claims can be verified. Therefore, following the decision in the case of Smt. Sarifabibi Mohmed Ibrahim v. CIT (supra), wherein, the Hon’ble Supreme Court has held that whenever the intention of the sale was not to use it for agricultural purpose but exploit it commercially, the benefit of the agricultural land cannot be allowed, the ld. CIT(A) dismissed the ground raised by the assessee. 6.4 Before us, in support of the claim of the assessee, the ld. Counsel for the assessee has filed schedule of immovable properties containing the details of document number, area, survey number, village/taluk/district/SRO and boundary, located at Thottipalayam village of Tirupur, Karapakkam village & Sholinganallur village of Tambaram Taluk, Madukarai village of Coimbatore South Taluk, Kavundanpalayam village of Coimbatore North taluk, Neelambur village of Sulur Taluk, Senneerkuppam village of Poonamallee Taluk, Sanganoor village of Coimbatore Taluk, but what prevented the assessee in filing the sale deed either before the authorities below or before the Tribunal has not been explained. Moreover, the assessee has placed on record sample documents in the form of Encumbrance Certificate pertaining to Neervallur village property, whereas, as per the said schedule of immovable properties, this property disappears. Anyhow, to meet the ends of natural justice, we direct the assessee to file complete sale deeds of the properties sold, and other original relevant revenue records for verification of the properties as agricultural land or not by the Assessing Officer. The Assessing Officer is accordingly directed to verify complete documentary evidences for the claim of the assessee that the lands sold by it are agricultural land and it had been used for agricultural cultivation and in case, if the assessee fails to furnish complete documentary evidences for verification, the assessment already completed and confirmed the ld. CIT(A) stands sustained.

6.5 The ld. Counsel for the assessee on behalf of the assessee has raised following two additional grounds of appeal by way of separate petition for adjudication:

1. The CIT(A) erred in sustaining the long term capital gains computed by the Assessing Officer on the land sold during the assessment year under consideration without assigning proper reasons and justification.

2. The CIT(A) failed to appreciate that in any event the Assessing Officer ought to have allowed indexation benefit while computing long term capital gains on the land sold during the assessment year under consideration as mandated in the provisions of the Act. The ld. Counsel for the assessee has also filed copy of the judgement of Hon’ble High Court of Bombay in the case of PCIT v. Reliance Capital Asset Management Ltd. [2017] 86 taxmann.com 200 and decision of the ITAT Bangalore Bench in the case of DCIT v. Subramanya Constructions & Development Co. Ltd. [2015] 58 taxmann.com 219. First of all, both the case law have no relevance to the additional grounds of appeal raised in the memorandum of additional grounds of appeal. Secondly, while confirming the disallowance, the ld. CIT(A) followed the decision of Hon’ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT 402 ITR 640, which was pronounced on 12.02.2018, supersedes the decisions of the older lower courts’. 6.6 Since the taxation of long term capital gain issue has been remitted back to the file of the Assessing Officer, the Assessing Officer is also directed to adjudicate the additional ground raised by the assessee with regard to allowability of indexation benefit.