Case Law Details
Maniar Injectoplast Pvt. Ltd. Vs. ITO (ITAT Mumbai)
It was specifically mentioned in the agreement of sale assessee was to make out a clear and marketable title to plot of land, free of all encumbrances, to the satisfaction of the purchaser’s advocate and after fulfilling the other conditions it would execute and register a deed of conveyance in the favour of purchaser. Accordingly, the assessee entered into sale Deed dated 9-12-2010 with the purchaser which was registered on same date. On execution of the said Sale Deed assessee received balance amount of Rs. 20,00,000 and handed over the possession of the said property to the purchaser. Thus, it was clear that actual transfer had taken place on 9-12-2010 and capital gains were, therefore, taxable in assessment year 2011-12.
FULL TEXT OF THE ITAT JUDGMENT
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-20, Mumbai, (in short CIT(A)) in appeal No. CIT(A)-20/9(2)(3)/IT-99/201 3-14 dated 16-10-2014. The Assessment was framed by Income Tax Officer-Ward 9(2)(3), Mumbai (ITO) for the A.Y. 2010-11 vide order dated 26-03-2013 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. The first two inter-connected issues i.e. assessment of short term capital gain on consideration received on sale of factory building with furniture and fixture and disallowance of depreciation of this factory during the year by the AO and confirmed by CIT(A) has been challenged by assessee vide ground Nos. 2,3 and 4 as under: –
“2. Addition by treating the consideration received on sale of factory building with furniture and fixtures as ‘Short Term Capital Gain‘ unjustified Rs.22, 06179/-:
i. The Id. CIT(A) erred in confirming the action of the AO in treating the sale of factory building with furniture and fixtures as Short Term Capital Gain without appreciating the facts and circumstances of the case. The Appellant, therefore, prays that the addition of Rs.22,06,779/- under the head Short Term Capital Gain is without any basis and the same may be deleted.
ii. The Ld. CIT(A) failed to appreciate that the factory building with furniture and fixtures has been transferred in the previous year relevant to the Assessment Year 2011-12. Hence, the Appellant has declared the Long Term Capital Gain on sale of factory premises in the next Assessment Year 2011- The Appellant, therefore, prays that the addition on account of Short Term Capital Gain amounting to Rs.22, 06,779/- is unjustified and the same may be deleted.
3. Addition on account of Long Term Capital Gain on sale of factory land unjustified –Rs.24, 32,370/-:
i. The Id. CIT(A) erred in confirming the action of the Id. A.O. in making addition on account of Long Term Capital Gain on sale of factory land amounting to Rs. 24.32,370/- without appreciating the facts and circumstances of the case.
ii. The Ld. CIT(A) failed to appreciate that the factory land was transferred in the previous year relevant to Assessment Year 2011-12. Thus, the Appellant has declared the Long Term Capital Gain on sale of factory land in the next Assessment Year. Hence, the addition of Rs.24,32,370/- under the head Long Term Capital Gain is unjustified and the same may be deleted.
4. Disallowance of depreciation unjustified – Rs.2,27,513/-
The Ld. CIT(A) erred in confirming the action of the Ld. A. O. in disallowing the depreciation of Rs.2,27,513/- claimed during the impugned assessment year without appreciating the fact that the actual sale of fixed asset took place in the assessment year 2011-12. Hence, the disallowance of claim of depreciation of Rs. 2,27,513/- is unjustified and the same may be deleted.”
3. The assessee is a Private Limited Company engaged in the business of manufacturing and job work of plastic molded articles. During the relevant assessment year assessee availed the cash credit and Term Loan facilities from the Shamrao Vithal Co-op Bank Limited against the security of the Industrial Plot with Industrial shed at Gat No. 1233. Sanaswadi, Tal-Shirur, District-Pune owned by the assessee (Including land and factory building along with furniture and fixture). The assessee decided to sell the said plot and shed due to financial crisis. The assessee entered into an Agreement for Sale on 26.02.2010 with Mr. Sunil Nagarhalli and others (Purchasers). A copy of the said agreement is enclosed at pages 1 to 18 of the assessee paper book. As per clause 4(a) of the said agreement total consideration was Rs. 85,00,000/- out of the same, assessee received an amount of Rs.65.00,000/- as an earnest money which was ultimately paid to the Shamrao Vithal Co-op Bank Limited to relinquish the charge on secured assets in the form of Land and Factory building along with furniture and Fixture. A copy of the confirmation of the Bank for receipt of payment is enclosed at pages 19 of the assessee paper book. The said bank handed over the possession of the secured asset vide its letter dated 02.03.2010. A copy of the said letter is enclosed at pages 20-21 of the assessee paper book. It is specifically mentioned in the agreement that the assessee shall make out a clear and marketable title to the said land, free of all encumbrances, to the satisfaction of the purchaser’s advocate and after fulfilling the other conditions it will execute and register a Deed of conveyance in the favour of Purchaser. Accordingly, the assessee entered into sale Deed dated 09.12.2010 with the Purchasers, which was registered on same date. On execution of the said Sale Deed assessee received balance amount of Rs.20,00,000/- and handed over the possession said of the said property to the Purchaser. It was claimed by the assessee that the actual transfer has taken place on 09.12.2010 i.e. in the A.Y. 2011-12. The assessee has offered the STCG of Rs.22,06,779/- derived from sale of factory building and LTCG of Rs.24,32,370/- derived from sale of land in the A.Y. 2011-12 and department also accepted the same in the A.Y. 2011-12.
4. But according to AO, in the agreement of sale at page 4 point 4(a), it is mentioned that a sum of Rs. 65,00,000/- paid by way of earnest money on execution of the agreement dated 26-02-2010 vide cheque No. 0271659 of HDFC bank Ltd. through RTGS to Shamrao Vithal Co-op Bank Ltd A/c of the Maniar Injectoplast Pvt. Ltd. (assessee) and the balance amount will be paid at the time of Sale deed. As per this agreement of sale, it is evident that the assessee has received payment in the month of Feb, 210 and not in the month of June 2010 as alleged by the assessee. It is a settled position that, even if the sale consideration on transfer of capital asset is received in installment, the capital gain on transfer of such asset it taxable in the year when the first installment was received. According to AO as per clause 10(a) of the agreement, the assessee received a sum of Rs. 65,00,000/- on 06-02-2010 and the agreement was registered with sub registrar, Talegaon, Dhamdhere and registration fees paid at Rs. 34,000/-.
5. The AO analyzing the reasons held that the agreement in this case gives rise to transfer in the year in which transaction took place and relating them to the provisions of section 2(47)(v) of the Act, that allowing of possession to be taken or retain in this section does not necessarily mean physical possession of the property, but any arrangement by which the transfer confers privileges of ownership without executing conveyance. Applying this to the facts of this case, when agreement was executed, the buyer was conferred with the privileges of ownership amounting to allowing the possession to be taken or retained. In view of the above facts, the AO held that the said property was transferred in F.Y. 2009-10 pertaining to the A.Y. 2010-I1. Hence, he assessed the capital gain on transfer of business asset as taxable in the A. Y. 2010-I1. It is not taxable in A.Y. 2011-12 as claimed by the Appellant. Thus the LTCG is determined on sale of Land amounting to Rs.24,32,370 and STCG determined at Rs.22,06,779/- on sale of factory building along with furniture and fixture. The CIT(A) also held that the AO has rightly assessed STCG of Rs.22,06,779/- because during the year assessee has sold out factory building along with electrical installation furniture, fixture, geyser pump and office building on which depreciation was claimed. According to him, as per the provision of law u/s. 50 of the Act the assessee is liable for STCG on sale of such block of assets and assessee itself by a letter dated 27.11.2012 has given the working of STCG which the AO has taken on record and has assessed accordingly. Hence, the CIT(A) sustained taxation of Capital Gain in this year. Aggrieved, now assessee is in second appeal before Tribunal.
6. We have heard rival contentions and gone through facts and circumstances of the case. We find from the facts of the case that the assessee is a Private Limited Company engaged in the business of manufacturing and job work of plastic molded articles. During the relevant assessment year, assessee availed the cash credit and Term Loan facilities from the Shamrao Vithal Co-op Bank Ltd against the security of the Industrial Plot with Industrial shade at Gat No. 1233. Sanaswadi. Tal-Shirur, District-Pune owned by the assessee (Including land and factory building along with furniture and fixture. Further due to the financial crisis assessee decided to sell the said plot and shade. Thus, the assessee entered into an Agreement to Sale’ on 26.02.2010 with Mr. Sunil Nagarhalli and others (Purchasers). A copy of the said agreement is enclosed at pages 1 to 18 of the assessee’s paper book. As per clause 4(a) of the said agreement total consideration was Rs. 85,00,000/- out of consideration was Rs. 85,00,000/- out of which Appellant received an amount of Rs.65.00,000/- as an earnest money which was ultimately paid to the Shamrao Vithal Co-op Bank Limited to relinquish the charge on secured assets in the form of Land and Factory building along with furniture and Fixture. A copy of the continuation of the Bank for receipt of payment is enclosed at pages 19 of the paper book. The said bank handed over the possession of the secured asset vide its letter dated 02.03.2010. A copy of the said letter enclosed at pages 20-21 of the paper book. It is specifically mentioned in the agreement that the assessee shall make out a clear and marketable title to the said land, free of all encumbrances, to the satisfaction of the purchaser’s advocate and after fulfilling the other conditions it will execute and register a Deed of conveyance in the favour of Purchaser. Accordingly, the assessee entered into sale Deed dated 09.12.2010 with the Purchaser which was registered on same date. On execution of the said Sale Deed assessee received balance amount of Rs.20,00,000/- and handed over the possession said of the said property to the Purchaser. Thus, from the above facts it is clear that the actual transfer has taken place on 09.12.2010 i.e. in the A.Y. 2011-12 and the assessee has offered the STCG of Rs.22,06,779/- derived from sale of factory building and LTCG of Rs.24,32,370/- derived from sale of land in the A.Y. 2011-12 which was accepted by the department. We find from the facts of the case that the sale of land and sale of factory building was offered by assessee in AY 2011-12 in the return of income and accepted by the Department and now before us, the departmental representative could not controvert this fact.
7. In view of the above facts, we have also examined the agreement and particularly, in the clause 10(f) it was mentioned that if the said property was not approved by purchaser’s advocate, the vendor shall refund the earnest money within 30 days, he shall be liable to pay interest @3% per month up to the date of payment of earnest money. If the deal was not materialized, then the clause 10(f) will come into force. The assessee has made sale deed with Rs. 100 of India non judicial stamp paper dated 18.06.2010. This agreement is not registered in any registered office to avoid the capital gains from the A.Y. 2010-I1. Accordingly, the assessee has taken stand that the capital gains were offered in A.Y. 2011-12. Whenever, an owner of any immovable property transfers its property, it has to pay income tax. If it is holding the immovable property as capital asset or investment, then it is liable to pay capital gain tax till 31 March, 2010 in the absence of a registered conveyance deed, if owner of an immovable property had put the purchaser in possession of immovable property, he was not required to pay capital gains tax. The law was amended to rectify this loophole and the clause ‘v’ was inserted in the section 2(47) of the Act. Till recently it was interpreted in layman’s language that possession is synonymous with transfer. It was believed that the possession of immovable property is a transaction and liability for capital gains tax arises when this transaction of possession takes place. However, recent decision of Hon’ble Bombay High Court in the case of Chaturbhuj Dwaarakadas Kapadia vs. CIT (2003) 260 ITR 491 (Bom.) has compelled many assessee’s to rethink as to the correct interpretation of clause (v) of section 2(47) whether transaction of possession or whether transaction means transaction of possession or whether transaction means act of entering into an agreement laying down the terms and conditions about possession of immovable properties. In view of the above facts and circumstances, we are of the considered view that the AO as well as CIT(A) has gone wrong in interpreting the facts of the case and hence, we are of the view that the transfer of the above stated property took place only in AY 2011-12, when assessee has declared the capital gain accordingly and paid the taxes. Consequently, the assessee is also entitled for depreciation on the factory and its machinery in this year i.e. AY 2010-11. Accordingly, we allow this inter-connected issue of the assessee’s appeal.
8. The second issue in this appeal of assessee is against the order of confirming the action of the AO in disallowing unabsorbed depreciation carried forward/ brought forward from AY 1999-2000 to 2001-02. For this assessee has raised following ground No.5: –
“5. Disallowance of unabsorbed depreciation unjustified -‘ Rs. 1377,86O/-
1. The 14. CIT(A) erred in confirming the action of the Ld. A. O. in making disallowance of claim of brought forward unabsorbed depreciation of Rs. 13,77,860/ – pertaining to A.Y. 1999-2000 to 2001- 02 without appreciating the facts and circumstances of the case.
ii. The ld. CIT(A) failed to appreciate that the Appellant is entitled to claim the brought forward unabsorbed depreciation beyond’ the period of 8 years as per the provisions of section 32(2) of the Act. Hence, disallowance of claim of brought forward unabsorbed depreciation of Rs. 13,77,860/- is unjustified and the same may be deleted.”
9. Briefly stated facts are that the assessee has claimed unabsorbed depreciation for AYs 1999-00 to 2010-11. The AO disallowed the unabsorbed depreciation for the period up to AY 2001-02 by stating that the unabsorbed depreciation for the period up to AY 2001-02 can be unabsorbed depreciation from AY 2001-02, which can be claimed at that time and therefore, depreciation was not allowed to be carried forward beyond 8 years. The CIT(A) also followed the decision of Mumbai Special Bench of ITAT in the case of DCIT vs. Times Guaranty Limited (2010) 4 ITR (Trib.) 210 (Mumbai) (SB). According to CIT(A), the Tribunal has considered the applicability of amended section 32(2) of the Act and has reached to the conclusion that depreciation beyond 8 years shall not be The CIT(A) also followed the Tribunal decision in the case of Times Guaranty Limited (Supra). Aggrieved, assessee is in second appeal before Tribunal.
10. We have considered the rival contentions and gone through the facts and circumstances of the case. We find that this issue is squarely covered by the decision of Hon’ble Gujarat High Court in the case of General Motors India (P.) Limited Vs. DCIT [2013] 354 ITR 244 (Gujarat), wherein the issue regarding unabsorbed depreciation available to assessee as on 01-04-2002 will be dealt in accordance with provisions of section 32(2) as amended by the Finance Act 2001 and not by the provisions of Section 32(2) of the Act as it stood before the amendment. Hon’ble Gujarat High Court in General Motors India (P.) Limited (supra), finally held as under: –
“37. The CBDT Circular clarifies the intent of the amendment that it is for enabling the industry to conserve sufficient funds to replace plant and machinery and accordingly the amendment dispenses with the restriction of 8 years for carry forward and set off of unabsorbed depreciation. The amendment is applicable from assessment year 2002 -03 and subsequent years. This means that any unabsorbed depreciation available to an assessee on 1st day of April, 2002 (A. Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001 and not by the provisions of section 32(2) as it stood before the said amendment. Had the intention of the Legislature been to allow the unabsorbed depreciation allowance worked out in A. Y. 1997-98 only for eight subsequent assessment years even after the amendment of section 32(2) by Finance Act, 2001 it would have incorporated a provision to that effect. However, it does not contain any such provision. Hence keeping in view the purpose of amendment of section 32(2) of the Act, a purposive and harmonious interpretation has to be taken. While construing taxing statutes, rule of strict interpretation has to be applied, giving fair and reasonable construction to the language of the section without leaning to the side of assessee or the revenue. But if the legislature fails to express clearly and the assessee becomes entitled for a benefit within the ambit of the section by the clear words used in the section, the benefit accruing to the assessee cannot be denied. However, Circular No.14 of 200 1 had clarified that under Section 32(2), in computing the profits and gains of business or profession for any previous year, deduction of depreciation under Section 32 shall be mandatory. Therefore, the provisions of section 32(2) as amended by Finance Act, 2001 would allow the unabsorbed depreciation allowance available in the A.Y. 1997-98, 1999-2000, 2000-01 and 2001-02 to be carried forward to the succeeding years, and if any unabsorbed depreciation or part thereof could not be set off till the A. Y. 2002-03 then it would be carried forward till the time it is set off against the profits and gains of subsequent years.
38. Therefore, it can be said that, current depreciation is deductible in the first place from the income of the business to which it relates. If such depreciation amount is larger than the amount of the profits of that business, then such excess comes for absorption from the profits and gains from any other business or business, if any, carried on by the assessee. If a balance is left even thereafter, that becomes deductible from out of income from any source under any of the other heads of income during that year. In case there is a still balance left over, it is to be treated as unabsorbed depreciation and it is taken to the next succeeding year. Where there is current depreciation for such succeeding year the unabsorbed depreciation is added to the current depreciation for such succeeding year and is deemed as part thereof. If, however, there is no current depreciation for such succeeding year, the unabsorbed depreciation becomes the depreciation allowance for such succeeding year. We are of the considered opinion that any unabsorbed depreciation available to an assessee on 1st day of April 2002 (A. Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001. And once the Circular No.14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A. Y. 1997-98 upto the A.Y. 2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever.”
Respectfully following the Hon’ble Gujarat High Court in General Motors India (P) Limited (supra), we direct the AO to re-compute the unabsorbed depreciation without any limitation in term of the decision. This issue of the assessee’s appeal is remanded back to the file of the AO and allowed for statistical purposes.
11. The next issue in this appeal of assessee as raised by way of ground No. 6 and 7 with regards to the disallowance of business loss and disallowance of expense for non-deduction of TDS by invoking the provisions 40A(IA) of the Act. For this assessee has raised following ground No. 6 and 7.
“6. Disallowance of set off of business loss of A. Y. 2002-03 unjustified – Rs. 8,927/-
The Id. CIT(A) erred in confirming the action of the Id. AO. in making disallowance of business set off of Rs. 8,927/- for the assessment year 2002-03 without appreciating the facts and circumstances of the case. Hence, disallowance of business set off of Rs. 8,927/- is unjustified and the same may be deleted.
7. Disallowance under section 401afl1al unjustified- Rs. 28,223/-
The Ld. CIT(A) erred in confirming the action of the Id. A.O. in making disallowing of Rs. 28,223/- under section 40(a)(ia) of the Act without appreciating the facts and circumstances of the case. The Appellant, therefore, prays that disallowance of Rs. 28,223/- under section 40(a)(ia) is not at all justified and the same may be deleted.”
12. At the outset, the learned Counsel for the assessee stated that he has instructions from the assessee not to press these two grounds and accordingly, he has not pressed the same. Hence, these are dismissed as not pressed.
13. The next inter connected issues in this appeal of assessee is as regards to the disallowance of interest on bank loan and also making additions under section 41(1) of the Act made by AO and confirmed by CIT(A). For this assessee has raised following ground No. 8, 9 and 10: –
“8. Disallowance under section 43B unjustified – Rs. 19,23,194/-
The Ld. CIT(A) erred in confirming the action of the A.O making disallowance of Rs. 19,23,194/- under section 43B of that without appreciating the facts and circumstances of the TT Appellant prays that the disallowance of Rs. 19,23,194/- under section 43B is unjustified and the same may be deleted.
9. Addition by invoking the provisions of section 41(1) of the Act not justified – Rs. 6,88,237/ –
The Ld. CIT(A) erred in confirming the action of the Ld. A.O. in making addition of Rs. 6,88,237/ – under section 41(1) of the Act without appreciating the facts and circumstances of the case. The Appellant prays that the provision of section 41(l) of the Act is not applicable to the facts of the Appellant’s case. Hence, the addition of Rs. 6,88,237/- under section 4 1(1) of the act is unjustified and the same may be deleted.
10. Addition on account of outstanding liability under section 41(1) of the Act Rs. 3,20,008/-.
The CIT(A) erred in confirming the action of the Ld. A.O. in making addition of Rs.3,20,008/- under section 41(1) without appreciating the fact that there is no cessation of liability of M/s. Agrawal Plastics. Hence, the addition of Rs.3,20,008/- made under section 4 1(1) of the Act and the same may be deleted.”
14. Brief facts relating to as regard to the issue of above ground 8 regarding disallowance of interest of Rs.19,23,194/- are that the AO noted that for AY 2006.07 the assessee claimed interest expenditure of Rs. 76,937/- in the P & L Account but not offered any disallowance under section 43B of the Act and no payment such amount was made during the year. It is verified from the record, the assessee has not disallowed this interest expenses under section 43B of the Act and there is no proof of payment has been furnished. According to him similar are the facts for AY 2007-08 wherein the assessee has claimed Rs. 15,36,006/- out of which Rs. 11,53,110/- is disallowed under section 43B of the Act and the balance amount of Rs. 3,82,896/- added back in the assessment order. This interest expenditure reduced from the total income for AY 2010-11 of Rs. 11,53,110/- on the basis of payment. The assessee has not made any payment during the year but made only settlement with bank and therefore this amount is not allowed and added back to the total income under section 43B of the Act Rs. 11,53,110/-. Similarly, for AY 2008-09 the assessee has claimed interest on term loan of Rs.6,80,506/- and the same is disallowed u/s 43B of the Act amounting to Rs.6,80,506/-. The assessee has not reduced on the payment basis. No disallowance made on this amount. Similarly, for A.Y. 2009-10, the assessee claimed Rs. 16,149/- but the assessee has not been disallowed u/s 43B of the Act. It is verified from the record, the assessee has not disallowed this interest expenses u/s43B of the Act and no proof of payment has been furnished. As regards to A.Y. 2010-I1, interest on term loan of Rs.7,70,084/- was claimed excess interest of Rs.73,685/- by the assessee. As such this amount is clearly inadmissible and accordingly the same is disallowed in computing the total income of the assessee by the AO. The other interest of Rs.6,96,399/- is also not allowable for the simple reason that this represents prior period expenses and is not allowable. Accordingly, same are disallowed. Aggrieved, assessee preferred appeal before CIT(A).
15. The CIT(A) after considering the facts noted that an amount of Rs. 11,53,110/- is the interest expenditure which was converted into loan by the Bank, hence, it was not paid. Hence, such interest expenditure could not allowed. As regards to the disallowance of interest for AY 2007-08, the CIT(A) noted from the details that this amount has been disallowed in the A.Y. 2007-08, and further such interest which has been converted into loan as admitted by the assessee cannot be allowed as expenditure of this year. Hence disallowance made by the Ld. AO is confirmed
As regards to balance amount of Rs.7,70,084/- the contention of the assessee is not tenable because it has admitted that an amount of Rs.73,685/- is excess claim of interest and balance amount of Rs.8,96,399/- is related to prior period expenses. Hence, even on payment basis such expenditure cannot be allowed. Thus, the disallowance of Rs.7,70,084/- is also sustained. Aggrieved, assessee is in second appeal before Tribunal.
16. We have heard the rival contentions and gone though the facts and circumstances of the case. As regards to Ground No. 8 i.e. the disallowance of interest of Rs. 19,23,19/- u/s 43B of the Act, we find that the interest received by the bank on settlement of the outstanding Loan & Cash credit Account of Rs.7,70,084/-. The AO has made addition of Rs. 11,53,110/- considering that the assessee has not made any payment during the year but settled the account with the bank. We have noted the fact that the AO has not appreciated the fact that the assessee has paid the entire amount of Rs.65 lacs received as earnest money from sale of land and factory building to the Shamrao Vithal Co-op Bank Ltd for paying off outstanding dues inclusive of outstanding interest and on receipt of the said amount the Bank has sealed the loan account. Thus, it is not justifiable to say that no payment has been made towards outstanding interest. Further, we find that the interest of Rs. 11,53,110/- is pertaining to the A.Y. 2007-08 which was disallowed in that year and hence, the same cannot be disallowed in this year also. Further, the reliance placed on CBDT circular no. 07/2006 by the learned Counsel for the assessee, we find that the circular very categorically lays down that the amount of unpaid interest, which has been converted by the bank as the loan, is allowable as deduction in the year in which the said loan is In the present case the assessee has repaid the entire amount of interest and loan to the bank in the A.Y. 2010-I1. Thus, the amount of interest of Rs.8,62,448/- which is included in amount of Rs. 11,53,110/- is allowable as the deduction in this assessment year. Accordingly, we allow this claim of the assessee and direct the AO to compute the income accordingly.
17. As regards to the addition of the interest waiver of Rs.6,88,237/- by invoking the provisions of section 41(1) of the Act, on verification of the documents of settlement with Shamrao Vithal Co-operative Bank Ltd., the bank shown waiver of Rs.6,88,237/-. Thus being the interest waived the same is a waiver of receipt within the meaning of section 41(1) of the Act and accordingly added back to the Income by the AO. The CIT(A) also remanded the matter back to the file of AO by observing that even if no expenditure has been claimed in the earlier year it cannot be added in this year u/s 41(1) of the Act. However, if such expenditure is ever being claimed, the A.O. shall be at his liberty to make the addition under section 41(1) of the Act. Aggrieved, assessee preferred appeal before Tribunal.
18. We have heard the rival contentions on this issue and gone through the facts and circumstances of the case. We find that the assessee has not claimed interest of Rs.6,88,237/- in the present assessment year and hence, no disallowance of the same can be made under section 41(1) of the Act. Accordingly, we allow this issue of assessee’s appeal.
19. As regards to the addition on account of outstanding liability of Rs. 3,20,008/- u/s 41(1) of the Act, we find that the assessee has not written off the said liability in the current year, nor Agarwal plastics has waived off the same. Thus, no disallowance is warranted merely because the liability is outstanding since several years. This issue of the assessee’s appeal is also allowed.
20. The next issue in this appeal of assessee is addition on account of outstanding liability under section 41(1) of the Act and re-computation of book profit under section 115JB of the Act on sale of property. For this assessee has raised following ground No. 11: –
“11. Re-computation of book profit under section 1 15JB after including the income from sale of property unjustified Rs 79,37,299/-.
The Ld. CIT(A) erred in confirming the action of Ld. AO in determining the book profit at Rs 79,37,299/- under section 1 15JB of the Act after considering the capital gain on sale of property amounting to Rs 1,43,04,691/- and immovable property of Rs 85,00,000/-. The appellant prays that the addition made to the book profit under section 1 15JB of the Act is unjustified and the same may be deleted.”
21. At the outset, the learned Counsel for the assessee stated that he has instruction from the assessee not to press this ground and accordingly, the same is dismissed as not pressed.
22. In the result, the appeal of assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 25-10-2017.
can transfer between husband and wife of immovable property be treated as gift when sale deed has been executed between husband and wife.