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Income Tax Appellate Tribunal, DELHI BENCH : H : NEW DELHI
Before: SHRI R.S. SYAL, AM & SMT. BEENA. A. PILLAI, JM
This appeal by the Revenue and the Cross Objections by the assessee arise out of the order passed by the CIT(A) on 23.8.2013 in relation to Assessment Years 2008-09.
Qua the appeal by the Revenue, the ld. AR submitted that pursuant to the mandate of section 268A, the CBDT has issued Circular No. 21 of 2015 dated 10.12.2015 with retrospective effect, revising the monetary limit to Rs.10,00,000/- for not filing appeals before the Tribunal. He further submitted that as the tax effect involved in the instant appeal is less than Rs.10,00,000/-, the extant appeal is not maintainable. The ld. D.R., although supported the order of the Assessing Officer, but could not controvert the fact that tax effect involved in this appeal is less than Rs.10,00,000/-.
Para 10 of the above Circular divulges that the Instruction is applicable to the pending appeals also with retrospective effect and there is a clear-cut direction to the Department to 3 CO No.59/Del/2014 withdraw or not press such appeals filed before the ITAT wherein tax effect is less than Rs.10,00,000/-. Going by the prescription of the aforenoted Circular, we are of the view that the Revenue should have either not filed the instant appeal before the Tribunal or withdrawn the same as the tax effect in this appeal is admittedly less than the prescribed limit for not filing the appeals. Ex conseqeunti, we dismiss the instant appeal filed by the Department without going into merits of the case.
The first ground of Cross Objections is against the confirmation of addition to the extent of Rs.2,76,560/- made by the AO on account of interest.
Briefly stated, the facts of this ground are that the assessee was found to have obtained unsecured loans of Rs.45.20 lac on which interest was paid @ 15%. During the course of assessment proceedings, the AO observed that the assessee withdrew a sum of Rs.21.92 lac for his personal use. It was also noticed that the assessee’s capital as on 31.3.2008 stood at Rs.5,43,730/-. By calculating interest @ 15% on 4 CO No.59/Del/2014 withdrawn amount of Rs.21.92 lac made by the assessee, the AO worked out the disallowance of interest at Rs.3,28,832/-. The ld. CIT(A) restricted the addition to Rs.2,76,560/-, against which the assessee has come up in the cross objection before us.
After considering the rival submissions and perusing the relevant material on record, we find from the Annual accounts of the assessee that his opening capital stood at Rs.8.30 lac. A sum of Rs.12.65 lac was deposited. Apart from certain other additions and withdrawals, the closing capital of the assessee stood at a credit of Rs.5,43,730/-. This shows that the assessee’s opening as well as closing capital was a credit balance and also his capital balance remained in credit throughout the year. We are unable to appreciate as to how any disallowance of interest can be made when the proprietor withdraws his own capital for personal use. Since the withdrawal made by the assessee from his proprietorship concern never resulted in a debit balance, we hold that the ld. CIT(A) was not justified in sustaining addition of interest at this level. The same is, therefore, ordered to be deleted.
5 CO No.59/Del/2014 7. The only other issue raised in this C.O. is against the confirmation of addition of Rs.1 lac made by the AO by invoking the provisions of section 50C of the Act.
Succinctly, the assessee jointly purchased a property on 4.6.2007 at Sahibabad, with his individual share at Rs.6,75,000/-. The said property was sold jointly on 5.7.2007 with the assessee’s individual share in full value of consideration at Rs.8,75,000/-. The AO noticed that the assessee paid stamp duty on the circle rate for this property at Rs.9,75,000/-. Invoking the provisions of section 50C, he made an addition of Rs.1 lac apart from short-term capital gain on the sale of property. The ld. CIT(A) sustained this addition. The assessee is aggrieved against the sustenance of the addition of Rs.1.00 lac.
We have heard the rival submissions and perused the relevant material on record. To rule out the application of section 50C, the assessee has made out a case that the property which was subject matter of purchase and sale during the year was his stock in trade and not a capital asset. On being called upon to adduce necessary evidence to demonstrate that the property in question was his stock, the assessee
6 CO No.59/Del/2014 could not lead any evidence worth the name except for stating that he was doing the business in properties as well. From the material on record, it is observed that the main business of the assessee is `Distribution of soft drinks’. No other property except the instant one was sold by the assessee during the year. There is no doubt that an isolated transaction can be an adventure in the nature of trade, but for that the assessee needs to prove the existence of such trade with relevant details and necessary factors. In the absence of the assessee proving such positive factors or bringing on record the existence of any carrying on of business in property, even though at a lower level, we hold that the said property has to be treated as capital asset, the profit from whose transfer is chargeable under Chapter IV-E of the Act. That being the position, the provisions of section 50C will consequently attract. It is an admitted position that the stamp value of the property sold was Rs.9,75,000/- and if the same is taken into consideration, the addition of Rs.1 lac becomes justifiable. We, therefore, approve the view taken by the ld. CIT(A) on this score.
7 CO No.59/Del/2014 10. In the result, the appeal of the Revenue is dismissed and the Cross Objection by the assessee is partly allowed. The decision was pronounced in the open court on 19th January,
2016.