M/S. SUNNYGOLD WINERIES PRIVATE LTD.,,PUNE vs. JOINT COMMISSIONER OF INCOME-TAX,,

आदेश / ORDER

PER D. KARUNAKARA RAO, AM :

This appeal filed by assessee is directed against the order of Commissioner of Income Tax (Appeals)-4, Pune dated 19.10.2015 for the assessment year 2010-11.

2 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited

“1. The learned Commissioner of Income Tax (Appeal) erred in disallowing interest to the extent of Rs.77,58,595/- on account of interest paid on borrowed capital, as proportionate interest allocated towards interest free loans and advances given to sister concerns.

is aggrieved with the findings of CIT(A) in disallowing proportionately the

interest expenditure to the tune of Rs.77,58,595/-on account of interest paid

on borrowed capital. The other issues raised in grounds No.3 and 4 relate to

taxation of capital gains for the assessment year 2010-11 against offering the

same to tax in the assessment year 2011-12 qua the provisions of section 38

of the Sales Tax Act. Other grounds i.e. ground No. 5 and 6 are general in

nature and are dismissed as such.

The Assessing Officer disallowed the same by stating that the assessee gave

loans/advances of Rs. 4.86 Crore to the sister concerns and related persons

out of interest bearing funds. The Assessing Officer applied 15% rate of

3 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited

interest. The CIT(A) confirmed the same ignoring the fact that the assessee

possesses interest free funds of Rs.1.78 Crores.

of interest paid, the Ld. Counsel for the assessee submitted that the assessee

has interest free funds to the tune of Rs.1.78 Crores (share capital

Rs.78,02,000/- + Reserves Rs.99,89,655/-). In principle, while accepting the

disallowance of interest, the Ld. Counsel submitted that said disallowance

may be restricted to the (i) net advances given to sister concern/ related

persons (i.e. 4.85 Crores-1.78 Crore); and (ii) while calculating the

disallowance interest/expenditure, the number of days of loan/advance given

should be considered and not the full financial years as done by the

AO/CIT(A) in the assessment.

the assessee are reasonable. The settled legal proposition relating to

presumption of investment out of the interest free funds as highlighted in the

various judgments i.e. CIT Vs. Reliance Utilities & Power Ltd reported as

313 ITR 340 and CIT vs. HDFC Bank Ltd [2014] reported as 366 ITR 505

(Bom) shall help the assessee on the argument raised above.

Further, we also find calculating the disallowable interest on the yearly

basis is not a correct approach of the AO as the loan/advance is given for the

part of previous year too. In that case, the number of months or days

becomes relevant. Accordingly, we are of the considered opinion that this

issue may be remanded back to the file of Assessing Officer for fresh

adjudication after considering of findings above. In the set aside proceedings,

the facts about availability of interest free funds/reserves as well as the

4 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited

loans/advances given to sister concerns and period of loan should be

considered as stated above. The Assessing Officer shall decide the issue

afresh after considering binding judgments (supra.). The Assessing Officer

shall grant reasonable opportunity of being heard to the assessee in

accordance with set principles of natural justice. The Assessing Officer is

directed to compute disallowable interest after examining availability of funds

with the assessee. In the result, subject to the above directions, the ground

Nos. 1 and 2 raised in appeal by the assessee are allowed for statistical

purpose.

briefly stated relevant facts include that the assessee owned a land

admeasuring 7.6 acre at Bhima and sold the said land on 18.09.2009 to M/s.

Kider (India) Pvt. Ltd for a total consideration of Rs.12.50 Crores. The

payment was made during the period from 10.06.2009 to 09.09.2009. Date of

registration of the sale deed is 18.09.2009. The assessee stated that there are

several attachments on the said property and the said property was

mortgaged to Punjab National Bank. The owner has outstanding dues to the

Sales Tax Department and therefore, Sales Tax Department attached the said

property. In fact, the name of Sales Tax Department appears in the revenue

records. As per sale deed dated 18.09.2009, by the date of registration

mortgaged property was released by virtue of payment of Rs.5.35 crore on

09.09.2009. There was pending possession of the retained land of 261136 sq.

ft. worth around Rs.1,00,00,000/- which was transferred to escrow account.

Regarding sales tax liability, the assessee had to give eight undated cheques

amounting to Rs.1,05,10,242/- within nine months from the date

18.09.2009. The sale deed referred to all these liabilities and attachment

5 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited

pending with the said property. Mutation entry No.5050 reveals that sales tax

dues payable are recorded at Rs.7,74,61,524/-, which is much higher than

the sales tax liability. Strictly following the date of registration of the property

i.e. 18.09.2009 relevant to A.Y.2010-11, the Assessing Officer taxed the

capital gains for this assessment year. The contents of Para 20 to 37 of the

assessment order are relevant in this regard. There were long term capital

gain attachment on the land works out at Rs. 9.54 Crore (rounded off) and

short term capital gain attachment in factory and building works out at

Rs.2.85 Crores. Therefore, this is a case of preponement of the taxes by the

AO on the capital gains for the year under consideration against the

assessee’s decision to offer the same in the subsequent assessment year i.e.

2011-12.

submissions stating that the amount involved in capital gains has been

rightly offered by the assessee in subsequent assessment year

notwithstanding of the fact the date of registration and receipt of part of the

sale consideration. This issue is analyzed in Para 4 and sub-paras of the

order of CIT(A). The CIT(A) extracted the same in Para 4.1 of his order.

Eventually, relying on the Judgment of Hon'ble Supreme Court of India in the

case of Suraj Lamp & Industries (P) Ltd Vs. State of Haryana reported in 14

taxmann.com 103. The CIT(A) held that the transfer of the property was

effected by the assessee in the year under consideration and confirmed the

conclusion of the Assessing Officer in brining to tax the capital gains in the

year under consideration. The contents of Para 4.4.4 of the order of CIT(A)

are relevant in this regard and the same is reproduced herein below:

“4.4.4. In view of the preceding discussion it is held that the transfer of the impugned property was effected by the appellant in the year under

6 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited

appeal and the order of Assessing Officer in brining to tax capital gains in this year is confirmed. Ground No. 2 is also dismissed.”

In connection with the above said sale of land sold to M/s. Kider (India) Pvt.

Ltd, the assessee claimed brokerage payment of Rs.77,24,632/- in the

assessment year 2011-12. The assessee was asked to substantiate the same

with documentary evidences by the Assessing Officer. In reply, the assessee

submitted that Rs.5.59 lakhs paid to M/s. Paras Soft Exports and Rs.17.08

lakhs to Shri Ajay Sonalkar which totals to Rs.22.67 Lakhs as against 77.24

lakhs as claimed by the assessee. Further, the assessee submitted that huge

expenditure of Rs.1,00,06,000/- was incurred in aggregate of brokerage of

Rs.27,65,000/- and Rs.72,40,500/- towards land filling on dismantling of the

old factory premises. In this respect, the assessee submitted before the

CIT(A) that if the capital gain is considered to be taxable in assessment year

2010-11, then the same may be allowed as deductable amount during the

year, since the expenditure is connected to the sale of land. On consideration,

the CIT(A) quantified the total brokerage expenses to the tune of

Rs.27,65,500/- only. He has further opined that the said expenses cannot be

termed as expenses incurred in connection with transfer of capital asset and

held not allowable under the provision of section 48(i) of the Act. Eventually,

the CIT(A) dismissed the ground as per the discussion given in Para 5.2 of his

order. For the sake of completeness, the relevant paragraph is extracted as

under:

“5.2 The submissions of the appellant are considered carefully. The total expenses as per the books of the appellant for the period 01.04.2010 to 31.03.2011 are Rs.27,65,500/-. The appellant had itself admitted that some of the bills do not pertain to brokerage and land development and the same had been inadvertently included as brokerage expenses. Perusal of the impugned bills shows that admittedly the vouchers and invoices of M/s Paras Soft

7 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited

Exports pertained to software programming and provision for software; hence the two bills of Rs.5,59,000/- and Rs.4,98,500/- totaling Rs.10,57,500/- have been wrongly claimed and are not expenses incurred in connection with the transfer. The two other bills of the broker Ajit Sonalkar for Rs.8,23,000/- and Rs.8,85,000/-- have been disallowed by the Assessing Officer on the ground that the appellant had not claimed the said expense in the return of income for the impugned year. Perusal of the bills and invoices shows that the pertained to the month of September and October 2010, whereas the impugned land and building had been sold in September 2009 itself. The appellant has not specified as to what were the services rendered by the said broker, specially in the background that the physical possession of the property had been handed over to the buyer, except for a small portion of licensed premises which continued to be occupied by the appellant. In the absence of any proof of services rendered, as also the fact that the expenses have been incurred after the date of handing over possession and thereby transfer of the property, I am inclined to accept the view of the Assessing Officer that these cannot be termed as expenses incurred in connection with transfer of the capital asset, in accordance with the provision of section 48(i). Further, the appellant has also claimed that certain other expenses claimed that had been incurred in the subsequent year relating to land filling, development and dismantling of the old factory premises may also be allowed. This submission is unacceptable considering the fact that the sale deed in question does not speak of any improvement to the land being desired by the buyer. Rather, as per the sale deed, the vacant land along with the attached godown, office and dilapidated constructions made over some part as described in schedule-I have been handed over by the appellant to the buyer. Since the vacant and peaceful possession of almost the entire land has been handed over to the buyer by the appellant as on 18.09.2009, except for a small portion measuring 26,136 sq. ft. retained by the appellant on lease basis, it is clear that no expenses were required to be incurred after that date by the appellant. Even considering the fact that the mutation of the impugned property stands recorded in favour of the buyer MIs Kider (India) Pvt. Ltd. dated 09.10.2009 and sales tax lien on the property stands removed with effect from 11.06.2010, all the expenditure related to land filling and dismantling of the old factory that has been claimed falling after the said dates (namely 11.09.2010, 16.09.2010, 18.10.2010 and 03.11.2010) cannot be said to be expenses incurred wholly and exclusively in connection with the transfer of the capital asset. Accordingly no relief can be provided to the appellant on account of the expenses that are claimed to have been incurred on transfer. Ground no.3 is also dismissed.”

by raising the grounds as extracted above.

and on the allowability of the brokerage expenditure, the Ld. A.R. made

8 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited

various arguments. On the issue of year of taxability of the gains, the Ld.

Counsel for the assessee submitted that the case of the assessee is that the

capital gain is taxable in assessment year 2011-12 and not in assessment

year 2010-11. According to the Ld. AR , the registered deed dated 18.09.2009

is void as it is against the spirit of section 38 of the Sales Tax Act, Govt. of

Maharashtra.

Per contra, the view of the Assessing Officer that sale transactions

entered into by the assessee with M/s. Kider (India) Pvt. Ltd is not void as the

sale deed is already registered in the year under consideration. For his

proposition, the Ld. AR relied on the judgment of Hon’ble Gujrat High Court

in the case of CIT Vs. Vithalbhai P. Patel, 236 ITR 1001. This is a case where

the assessee sold certain plots and did not recognize income in the year as

the said sale transactions were stopped by District Magistrate of the District,

Surat. Ignoring the same, the Assessing Officer taxed the said income

relatable to the said void or illegal sale transactions. The Tribunal granted

relief to the assessee. The Hon'ble High Court held that the sale transaction is

void till attachments are lifted formally. Bringing our attention to the

provision of section 38 of the Sales Tax Act, taking the similarity of the facts,

the Ld. A.R. for the assessee submitted that the said decision revolved the

spirit of the provision of section 38 of the Sales Tax Act. Therefore, the ratio

laid down in the case of Vithalbhai P. Patel (supra.) is squarely applicable to

the facts of the present case. He further submitted that the CIT(A)

erroneously relied on the decision of CIT Vs. Dr. Arvind S. Phake, reported as

409 ITR 96 (Bom.) which is actually relevant to the assessment year on

which the sale deed is registered. However, the Ld. AR for the assessee

explained that the said judgement is distinguishable on facts as it was the

case of development agreement not the transaction of outright sale as in the

9 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited

case of the assessee. Referring payment made by the assessee, the Ld.

Counsel submitted that assessee received only three payments in the

assessment year under appeal and not the entire sale consideration. The

sales tax payment was also made on 07.06.2010 by buyer (M/s. Kider (India)

Pvt. Ltd.) and the same is relevant for the assessment year 2011-12 only and

not the year under consideration. The Registration deed contains all the

details about the outstanding liability to the Sales Tax Department and

various contentions which have been already referred before the Lower

Authorities. The Ld. Counsel for the assessee, further, referring to section

2(47)(v) of the Act submitted that the said section is applicable in the context

of an agreement for sale of property and the present case is not so. The

present case is a sale deed which is executed.

Ld. Counsel submitted that similar provisions are existed in section 281 of

the Income Tax Act which declares that such transfer is void. He also relied

on the similar provision existed in Contract Act. i.e. section 65 of Contract Act

as well as 64(1) of CPC. Relying on the decision of Calcutta High Court in the

case of Jaymac Lesetron P. Ltd. reported as 245 ITR 734, Ld. Counsel

submitted that there were outstanding income tax liability because of which

the property was attached. The transfer of such property is void u/s. 281 of

the IT Act. He also relied on the decision in the case of Thane Janata

Sahakari Bank Vs. The Commissioner of Sales Tax, reported as 148 SOT 32

(Bom.) and submitted that the transfer of sale attached to land by the Sales

Tax Department was considered to be void and therefore, the Ld. Counsel

made following submissions:

“9. Thus, it is submitted that in this case as the sales tax liability was not cleared till 31.03.2010, the sale deed had to be considered as void and there was no transfer u/s. 2(47) which could lead to capital gains

10 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited

for A.Y.2010-11. It is only in A.Y.2011-12, that the sales tax liability was fully cleared; the sales tax department also lifted its charge on the property on 24.06.2010 ( page 121 of Paper Book), the transfer of the property took place only in A.Y.2011-12 and therefore, the capital gains should be taxed in A.Y.2011-12 only and the present appeal for A.Y.2010-11 be allowed.”

submissions. He further explained the facts of the case culled out the relevant

clause relating to attachment of land, payment to sales tax Department,

mortgage of the property with Punjab National Bank etc. According to the Ld.

DR, the sale deed dated 18.09.2009 narrates the date and details of sales tax

payable by the assessee and also referred to the attachment of the property

with the said Department. Ld. DR further submitted that the provision of

section 38 of the Sales Tax Act cannot override when it comes to Central

Laws. Ld. DR submitted that formal conveyance deed has been entered and

Sales Tax liabilities have been adequately addressed in the sale deed itself by

fixing liability to pay the same to the buyer of the property. Reiterating the

facts, the attachment on impugned property was lifted on 11.06.2010 after

the assessee company procured stay from the higher authority, Ld. DR

submitted that the property was duly registered as well as relevant mutation

was done in the name of buyer by Revenue Authorities. Further relying on the

decision of in the case of CIT Vs. K. Jeelani Basha reported as 256 ITR 282

(Mad.), Ld. DR submitted that once the possession of the property is partly

or fully handed over to the buyer, the provisions of section 2(47)(v) r.w.s. 45 of

the Act are met and transfer is completed. He also relied on the decision of

Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia

Vs. CIT, reported as 260 ITR 491 wherein it has been held that capital gain

was taxable in the year in which such transaction were entered into even if

the transfer of immovable property is not effective or complete under the

11 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited

general rule. Ld. DR further placed reliance on the decision of CIT Vs. Dr.

Arvind S Phake (supra.) wherein it has been held that if substantial payment

have been made in view of the sale deed executed then considering the terms

and conditions incorporated in the sale deed, the date of transfer for the

purpose of income Tax Act ought to be taken to be 18.09.2009. Eventually,

the Ld. DR concluded his submissions in Para 10, 11 and 12 and the same

reads as under:

“10. In view of the above. since there has been registration of the sale agreement, as well as the possession of the 7.6 acres of land except some small amount had been handed over, they essentially constitute as per the provision of sec 2(47) (v) of the Income tax Act. Secondly, this is a peculiar case where despite attachment of Sales Tax Department, the buyer had taken adequate care of its own rights and interest by accepting undated cheques and therefore, there are no legal encumbrances on the property as advocated by the appellant and also in view of sec 62 of the Contract Act, the sale deed cannot be considered void by both the parties, the sale has indeed occurred on the date of transfer i.e. 18.9.2009 (FY. 2009-10 relevant to the A.Y. 2009-10). Hence the registered sale deed document NO.3439 of 2009 dated 18-09-2009, which transfers all rights of the appellant and ownership and possession over the land/ building to the buyer except for a small portion retained by the seller for the transitional period and a result of which the entire sale consideration except for a sum of Rs. 1 crore in the Escrow account to be encashed by the appellant once the possession of the retained portion is handed over to the buyer is the final proof that transfer had taken place in the impugned year. In such a situation, the mutation entries 5049 and 5050 of 2010, showing the removal of lien registered in the name of the Sales Tax Department is neither material nor relevant to the question of transfer of impugned capital assets. 11. Undoubtedly, one of the main ingredients of sec 53A of Transfer of Property Act is for registration of document as per provisions of sec 17( 1 A) of the Registration Act to invoke the provisions of sec 2(47(v) of the Act and all these conditions stand fulfilled in the case of the appellant. In this regard, the Hon'ble Allahabad High Court in the case of CIT Vs Ziauddiin Ahmed(2016) 283 CTR 223 (All) [ANNEXURE 'H'] has held that capital gain would be taxable in the year in which the possession is handed over to the buyer. Similarly, applying the ratio of the decision of Chaturbhuj Dwarkadas Kapadia (supra) with the real facts and circumstances of the case, it was clear intention of the assessee to make transfer of the said land by virtue of the agreement itself, under Registration Act 1908.

12 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited

about the facts i.e. sale consideration, sales tax liabilities, payment by buyer

and attachment of land by Sales Tax Department etc. It is a fact that assessee

offered tax towards relevant gains both land as well as building. There is no

dispute about quantification of the said gains too. The assessee offered tax

for the same in assessment year 2011-12 following the decision of Hon'ble

Gujarat High Court in the case of CIT Vs. Vithalbhai P. Patel (supra.). The

main issue which arises before us is whether the aforesaid judgment of

Hon'ble Gujarat High Court (supra) is applicable to the facts of the present

case and if the gains were rightly offered to tax in the subsequent year or not.

Court. The facts of the said judgment include that the assessee sold land of

his share and filed return in respect of capital gain. During the assessment

proceedings, the Assessing Officer noted that assessee sold 105 plots out of

survey No. 23 and worked out the long term capital gain and added the same

in the total income of the assessee. The Appellate Assistant Commissioner

held there was order of the Collector, Surat who declared the said sale as null

and void vide order dated 27th March,1975 in view of provisions of section 4

of the Gujarat Vacant Lands in Urban Areas (Prohibition of Alienation) Act,

1972. The order of Appellate Assistant Commissioner was upheld by the

Tribunal. On this fact, the Hon'ble High Court held the order of collector

declaring sale transactions was null and void, do not permit the AO to tax

related capital gains/profits in the year of the order. Therefore, there was no

sale transaction in the eye of law and there could be no capital gain arising

out of null and void transfer of such land. Accordingly, the Hon'ble High

Court confirmed the order of Tribunal and not taxed the gains on such void

sale of the plots. Bringing analogy of the facts and the ratio, the Ld. Counsel

13 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited

submitted that the law against sale of land attached by the Government

Authority likes Sales Tax Department in this case, the transfer or registration

of such property constitutes null and void as in the case of sale transaction of

plot of land in the case of CIT Vs. Vithalbhai P. Patel (supra.). The

transactions involved in this case are not valid in the eye of law and therefore,

it is a case where there is no transaction in the eye of law, will not liable to

tax on capital gain arising from sale of land and factory building. Relevant

findings of the said judgment extracted herein below:

“Held, that the sale was null and void under the provisions of section 4 of the Gujarat Vacant Lands in Urban Areas (Prohibition of Alienation) Act, 1972. The transaction in question was void ab initio and it was so declared by the Collector by his order dated March 29, 1975. The order of the Collector declaring that the sale transaction was null and void, was not challenged. Thus, as there was no sale transaction in the eye of law, there could be no capital gain arising out of a null and void transfer of such land. Therefore, the Tribunal was right in coming to the conclusion that no capital gain had accrued to the assessee.”

Maharashtra Government relating to ‘Transfer to defraud revenue void’ and

the same is extracted here as under:

“38. Transfer to defraud revenue void. (1) Where, during the pendency of any proceedings under this Act or after the completion thereof, the Commissioner has reason to believe that the liability of the dealer to pay tax or any other sum payable under this Act, is likely to be in excess of rupees twenty five thousand and the dealer creates a charge on, or parts with the possession by any mode of transfer whatsoever, including sale, mortgage, gift or exchange of any of the assets of his business valued at rupees ten thousand or more in favour of any other person with intent to defraud revenue, then, notwithstanding anything contained in any Act or contract to the contrary such charge or transfer shall be void as against any claim in respect of any tax or other sum payable by the dealer as a result of the completion of such proceedings or otherwise: Provided that, such charge or transfer shall not be void if made for adequate consideration and without notice of the pendency of the proceeding or of the liability to pay any sum on completion of any proceedings. (2) Where any person liable to pay tax or other sum payable under this Act has, during the pendency of any proceeding under this Act or after completion thereof, created a charge on or parted with possession by any mode of transfer including sale, mortgage, gift or exchange of any of his

14 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited

assets in favour of any other person and the Commissioner is of the opinion that such charge or transfer becomes void under sub- section(1), then the Commissioner shall issue a notice and hold enquiry and decide whether the charge or transfer became void under sub- section (1). (3) If, after holding such enquiry the Commissioner is satisfied that the charge or transfer is void, he shall make an order declaring such charge or transfer to be void for the purposes of this Act.”

The above provision is very categorically stating that certain

transfer/sale/ charge shall be void subject to exception provided under the

proviso. It is not the case of the Revenue that charge created on the asset by

transferring asset to M/s. Kider India Private Limited while the assessee has

still liability to Sales Tax Department during the year under consideration.

The payments of outstanding dues to Sales Tax Department were duly paid

by the assessee in the subsequent assessment year. In fact, in the mutation

entries, there is reference to the Sales Tax Department in the records of

Revenue Department.

supremacy of the Central Laws and Laws of State Government as well as the

supremacy of the provisions of section 53 of the TP Act qua provisions of

section 38 of the IT Act or for that matter the provisions of section 281 of the

IT Act. This aspect is addressed by the Hon'ble Calcutta High Court in the

case of Jaymac Lasetron (P) Ltd ANR Vs. CIT & Ors, 245 ITR 734. In para 15

of the said judgment, the Hon'ble High Court held that the provision of

section 281 of the IT Act or for that matter section 38 of the Sales Tax Act,

Maharashtra Government are more rigorous than the scope and ambit of

section 53 of the Transfer of Property Act. The provision of both the sections

mentioned above, more safeguard in the interest of the Government so far as

the revenue collection is concerned. The mala-fide transactions or to defraud

15 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited

the Government/ Revenue exchequer of the country are completely

discouraged. Therefore, the transfer of any kind of the properties which are

under attachment or strictly prohibited and they are void.

registered Sale Deed mentioning of the details of attachment by Sales Tax

Department and by Punjab National Bank without clearing dues in the year

under consideration. Therefore, so far as the year of taxation of gains, the

same is assessable to tax in the year under consideration so long as the name

of Sales Tax Department appears in the mutation record of Revenue

Department. The same is ultimately reflected in the subsequent assessment

year after the payment of outstanding dues to the Sales Tax Department by

the assessee or by the buyer. As such, this is not a case of Central Laws Vs.

State Laws. It is case of the taking the decision of interest of the revenue

exchequer of the Country and therefore, the argument of the Ld. DR on this

aspect is not relevant to the issue raised in the present case.

reliance i.e. (i) CIT Vs. Dr. Arvind S. Phake (supra.) (ii) CIT Vs. K. Jeelani

Basha (supra.) (iii) Chaturvhuj Dwarkadas Kapadia Vs. CIT (supra.) and (iv)

CIT Vs. G. Soraja etc. and find that these decisions were delivered in the

context of development agreement and illegal occupation of the land etc.

These decisions cannot be considered in the context of the facts as closely

comparable to the facts of the present case. Therefore, we are of the

considered opinion that the assessee has rightly offered the capital gains both

short term capital gains and long term capital gains for the assessment year

2011-12, the year in which sales tax liabilities were duly paid and the orders

of Sales Tax Department and attachment of the land by Punjab National bank

16 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited

were lifted satisfactorily. Accordingly, ground No. 3 raised in appeal by

assessee is allowed.

payment of brokerage Rs.77,24,632/-in the year 2011-12 and other

development expenditure. This amount consists of Rs.27,65,500/- and

balance amount is incurred for development of the land. The assessee

claimed the said expenses exclusively in connection with the transfer of the

asset and claimed the expenditure amount is allowable u/s. 48(i) of the Act.

The Assessing Officer and CIT(A) dismissed the claim of assessee stating that

the assessee failed to produce any evidence qua the services rendered by the

broker. With regard to the expenses incurred on land development, the

Assessing Officer and CIT(A) was of the view that sale deed in question does

not speak of any improvement to the land being desired by the buyer.

Accordingly, assessee is not entitled to grant any relief on account of

expenses that are claimed to have been incurred on transfer.

interlinked to ground No. 3 relating to the correct assessment year of taxation

of capital gains. We have held that the transfer of the land on 18.09.2009 is

not complete considering the judgment of Hon'ble Gujarat High Court in the

case of CIT Vs. Vithalbhai P. Patel (supra.). In our view, this issue requires

scrutiny of the facts relating to services rendered by the broker on one side

and furnishing particulars of expenditure incurred in development of the land

by assessee on other side. In any case, this aspect becomes relevant for the

assessment year 2011-12 where gains become tenable as offered by the

assessee. The assessee filed written submissions in this regard and para 3 is

relevant. The same is extracted as under:

17 ITA No.703 /PUN/2015 M/s. Sunnygold Wineries Private Limited

“3) The assessee submitted that if the capital gains are held to be taxable in A.Y. 2011-12, the question of allowing the deduction of Rs.77,24,632/- will arise only in that year and not in A.Y.2010-11. This is because, if the income by way of capital gains itself is not taxed in this year, the question of allowing or disallowing these expenses of Rs.77,24,632/- in this year does not arise and accordingly, the assessee’s ground of appeal can be dismissed.”

Therefore, adjudication of this ground No.4 becomes an academic exercise. Accordingly ground No. 4 is dismissed as academic in the assessment year 2011-12.

Order pronounced on Wednesday, the 18th day of July, 2018.

Sd/- Sd/- (�वकास अव�थी /Vikas Awasthy) (डी. क�णाकरा राव/D. KARUNAKARA RAO) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER

पुणे / Pune; �दनांक / Dated : 18th July, 2018. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeals)-4, Pune. 4. The Pr. CIT-3, Pune. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “ए” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.