M/S Haryana State Industrial & ... vs Addl. Cit, Panchkula on 16 November, 2017

[Cites 6, Cited by 13]

Income Tax Appellate Tribunal - Chandigarh

M/S Haryana State Industrial & ... vs Addl. Cit, Panchkula on 16 November, 2017

         IN THE INCOME TAX APPELLATE TRIBUNAL
             DIVISION BENCH 'A', CHANDIGARH

       BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
     AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER

                     ITA Nos.184 & 185/Chd/2010
               (Assessment Years : 2005-06 & 2006-07)

                                  ITA No.966/Chd/2010
                              (Assessment Year : 2007-08)

                                  ITA No.827/Chd/2011
                              (Assessment Year : 2008-09)

                                  ITA No.98/Chd/2013
                              (Assessment Year : 2009-10)

                     ITA Nos.728 & 729/Chd/2010
                (Assessment Years : 2010-11 & 2011-12)

                                  ITA No.733/Chd/2014
                              (Assessment Year : 2012-13)

                                                 And
                                  ITA No.791/Chd/2015
                              (Assessment Year : 2013-14)

M/s Haryana State Industrial                     Vs.               The Addl.C.I.T.,
& Infrastructure Dev. Corp. Ltd.,                                  Range Panchkula.
C: 13-14, Sector 6, Panchkula.
PAN: AAACH 4114 R
(Appellant)                                                        (Respondent)

                   Appellant by : Shri A.K. Jindal & Ms.Rattan Kaur
                   Respondent by : Shri Gulshan Rai, CIT DR
                   Date of hearing                           : 13.09.2017
                   Date of Pronouncement                     : 16.11.2017


                                          O RDE R
PER ANNAPURNA GUPTA, A.M.:

A l l t h e a b o v e n i ne a p p e a l s h a v e be e n f i l ed b y t h e s a m e a s s e s s e e a g a i ns t s e p a r a te o r de r s o f t h e L d . Co m m i s s i o n e r o f I n co m e Ta x ( A p pe a l s ) , P a n ch k u l a ( h e r e i n a f te r r e f er r e d t o a s ( ' CI T( A p p e a l s ' ) dated 3 0 .1 1 . 2 00 9 , 3 0 . 1 1. 2 0 0 9 , 3 . 5 . 2 0 1 0, 1 . 7 . 2 0 1 1 , 7 . 1 2 . 20 1 2 , 1 3 . 5 .2 0 1 3 , 1 7 . 5 . 2 0 1 3, 2 5 . 7 .2 0 1 4 a nd 2 2 4 . 8 . 2 0 1 5, r e l ati n g t o a s se s s m e nt y e a r s 2 00 5 - 0 6 , 2 0 0 6 - 0 7 , 2007-08, 2 0 0 8 -0 9 , 2 0 0 9- 1 0 , 20 1 0 - 1 1 , 2 0 1 1 - 12 , 2 0 1 2 -1 3 a n d 2 0 1 3 -1 4 r e sp e c t i v e l y. I t w as c o m m o n g r o u nd b e t w e e n b o t h t h e p a r t i es t h a t t h e i s s u es i n v o l v e d i n a l l th e a p p e a l s was i d e n ti c a l . All the a p pe a l s were, t he r e f or e , h e a rd t o g e t h e r a n d a re b e i n g di s p o s e d o f f b y wa y o f t h i s c o m m o n , c o n s o l i d at e d o rde r .

F o r t h e s a k e o f c o n v e n i e n c e we s h a l l b e d e al i ng w i t h t h e f a c ts i n t h e c a s e o f I TA N o. 1 8 4 / C h d /2 0 1 0 r e l a t i n g t o a s s e s s m e nt y e a r 2 0 0 5 - 0 6 .

I T A N o . 1 84 / C h d/ 2 0 1 0 :

2. G r o u n d o f a p p eal N o . 1 r a i s e d b y t h e a s s e s s e e re ad s a s under:

"1. That the Ld. CIT (A) has erred in law & facts of the case in upholding an addition of Rs. 3,67,81,729/- on account of unclaimed refunds which is highly unjustified & uncalled for."

3. B r i e f f ac t s r e l a t i n g t o t h e i s s u e a r e t h a t t h e a s se s s ee h a d s h o w n a n am o u n t o f R s . 3 , 6 7, 8 1 , 7 2 9 / - a s l i a bi l i t y i n t h e B a l a n c e S h e e t wh i c h , du r i n g a s se s s m e n t p r o c ee di n g s , wa s explained as being r e f u n d s o f a p p l i c a t i o n m o ne y , s e n t t o u n s u c c e s sf u l app l i c a n t s o f p l o t s, w h i c h w a s r e ce i v e d b ac k b y t h e as s e s s ee c o r p o r at i o n due t o n o n- a c c e pta n c e o f t h e s a i d r e f u n d s b y t h e a p p l i c a n ts . Th e a s s e s s e e c l a i m e d t h a t it was in the nature of its liability which had not ceased to e x i s t , s i nc e t h e s a i d r e f u n ds h ad n e i t h e r b e en fo r f e i t e d b y t h e a s s e s se e c or p o r a t i o n, n o r co n s i d e r e d a s n ot p a y a b l e . Th e a s s e s s e e f ur t h e r s u b m i t t e d t h a t t h e a m o un t h a d n o t 3 b e e n w a i v e d o ff b y t h e a p p l i c a nts / a l l o t t ee s a l s o , b u t t h e y w e r e i n f ac t d i sp u t i n g t h e r e f un d s a n d c l ai m i ng t h a t t he p l o t b e a l l o t te d to t h e m . Th e a s s e s s e e , t h e r ef o r e , s u b m i t t e d t h a t t h e l i a b i l i t y h a d n o t c e a se d t o e x i s t a nd t h u s c o u l d n o t b e t r e a t e d a s i ts i n c o m e . Th e A s s e s s i n g O f f i c er r e j e c t e d t h e a s s e s s e e' s co n t e n t i o n s ta t i ng t h a t s i n c e t he a s s e s s e e h a d a l r ea d y a tt em p t e d t o r e f u nd t h e a m ou n t and n o c l ai m w a s m a d e b y t h e p a y e r o f th e s a i d a m o u n t , th e a ss e s s e e h a d become r i c h er by this a m ou n t of un-claimed money o u t s t a n d i n g i n i t s B a l a n c e S h e et . Th e A s s e s s i n g O f f i c er s t a t e d t h a t t h e s a m e t a n t a m ou nt e d t o i n c o m e ac c r u i n g t o t h e a s s es s e e i n th e o r d i na r y c ou rs e o f i t s b u si n e ss . R e l yi n g u p o n t h e j u d gm en t o f t h e Ho n ' b l e A p e x C o u r t i n th e c a s e of C I T V s . T. V . S un d r a m I y en g a r & S o n s L td . ( SC ) 2 2 2 I TR 3 4 4 , t h e A s s e s s i n g O f f i c e r h e l d t h e u n - c l a i m ed l i a b i l i t y to b e i n c o me , i nc l u d i b l e i n t h e ha n d s o f t h e as se s s e e a nd a c c o r d i n gl y m ad e addition of R s . 3 , 6 7 , 81 , 7 2 9/ - to t he i n c o m e o f t h e ass e s s e e .

4. B e f o r e t h e L d. CI T( A p p e a l s ) t h e as s e s s e e d i st i n g ui s h e d t h e c a s e l a w r e l i e d u p o n b y t he A s s e s s i n g O f f i c er p o i n t i n g o u t t h a t i n t h e s a i d c a s e i t w a s t h e s u r p l u s r e m a i n i n g a f t er i s s u a n c e o f re fu n d w h i ch w a s t r e a t e d a s i n co m e o f t h e a s s e s s e e , w h e r e as i n t h e c a se o f t h e a s s e s se e t h er e w a s no s u c h s u r p l u s r em a i n i n g a nd , t he r e f o r e , th e d e c i s i o n o f t h e Hon'ble A pe x Co u r t T. V . S u n dr a m I y e n g ar & Sons Ltd. ( s u p r a ) d i d n o t a p p l y i n t he f a c ts o f t h e p r es e n t c a s e . Th e a s s e s s e e f u r th e r r e i t er a t e d i t s co n t e n t i o n m a de b e f o r e t h e 4 A s s e s s i n g O f fi c e r t h a t t h e l i a b i l i t y o n a c c o u n t o f u n - c l a i m ed r e f u n d s h a d n o t c e a s e d t o e x i s t s i n c e t h e a l l o tt e e s w e r e d i s p u t i n g th e n on - a l l o t m en t o f p l o t t o t h e m a n d i n c a s e t he s a m e i s d i re c t e d t o b e a l l o tt e d th e a m o u n t of ap p l i c a t i on m o n e y w o u l d r eq u i r e t o b e a d j u s t e d . Th e a s s e s s e e a l so c o n t e n d e d th a t t h e r e f u n d s w e re i s s u e d t h ro u gh c h e q u e s w h i c h w e r e v a l i d f o r a p e r i o d o f s i x m o n t h s a f te r w h i c h t h e a m o u n t s w e r e tr a n s f e r r ed b y t h e a s s e s s e e t o u n - c l a i m ed l i a b i l i t y w h i c h be c o m e s b a rr e d by l i m i t a ti o n o n l y a f t e r t h e e x p i r y o f th r e e ye a r s f r o m th e d at e o f i s s u e o f c he q u e . Th e a s s e s s e e al s o p oi n t e d o u t th a t t he p r o c e s s of r e f un d i n g t he a m o u n t w as s t i l l g o i n g on a n d t he a s s e s s ee h a d re f u n d e d an amount of R s .1. 8 6 c r o re s d ur i n g the year a nd R s . 4 . 59 c r o r e s i n t h e s ub s e q u e n t y e a r s. Th u s t h e a ss e s se e p o i n te d o u t t h a t t h e s a i d a m o u n t w a s a r u n n i n g ac c o u n t a n d c o ul d not be t r e a ted as income of the a s s es s e e . Th e L d . CI T( A p p e a l s ) r e j e c t e d al l t h e c o n t e n t i on s o f th e a s s e s s ee a n d u p h el d t he a d d i t i o n m a d e by h o l d i n g a t p a ra 6 . 2 o f i ts order as under:

6.2 On careful consideration of the above facts and arguments, it is found that the arguments of the counsel for the appellant are devoid of any merit and are rejected. The AO has rightly held that the appellant's case is not of cession of liability u/s 41(1) of the I.T.Act and therefore the decision of the Hon'ble Gujarat high Court mentioned above is not applicable. The AO has rightly held that the appellant's case is of business receipts in the ordinary course of business. The decision of the Hon'ble Supreme Court in the case of CIT vs. T.V. Sunderam lyengar is squarely applicable. The AO has rightly held that the appellant has made an attempt to refund the amount by sending the cheques to the applicant. The unclaimed cheques thus represent the business receipts of the appellant which are clearly taxable. As regards, the arguments of the counsel that the unclaimed liability account is a running account to which the unclaimed liabilities are 5 credited and amounts refunded are debited also does not help him since the appellant can claim the amounts refunded out of this account as expenditure of the year in which refund is given. It is held that the addition of Rs.3,67,81,729/- has been rightly made by the AO and the same is upheld. This ground of appeal is rejected.

5. B e f o r e u s L d . Co u n s e l f o r t h e as s e s s e e r e i t er a t ed t he c o n t e n t i on s m a de b e f o r e t h e CI T( A ) , w h i l e t h e L d .D R r e l i ed o n t h e o rd e r o f th e CI T( A ) .

6. W e h a v e he a r d th e c o n t e nt i o n s of b o t h t he p a r ti es . Th e i s s u e i n t h e p r es e n t g r ou n d i s wh e t h e r u n c l ai me d r e f u nd s o f a p p l i c a t i on mo n e y o ut s t a n d i ng i n t h e Bo o k s of A cc o u n t s o f t h e a ss e s s e e ca n b e t r ea t e d as i t s i n c om e .

7. Th e f a c t s w h i c h a r e r e l e va n t t o th e i s s u e a r e t hat the a s s e s s e e i n th e r e g u l a r c o u r s e of c a r r y i n g o n i t s b u s i n e ss r e c e i v e s a p pl i c a ti o n m o n e y f o r a l l o t m e n t o f p l o ts . P l o t s a r e a l l o t t e d i n s o m e c a s e s on l y w h i l e t h e r e st o f t h e a p p l i c a n ts are r e fu n d e d t he i r m o ne y . I n s o m e c a s e s t he r e f u nd s r e m a i n u n cl a i me d b y t h e a p p l i c a n t s w h i ch t he a s s e s s e e r e f l e c t s a s i t s l i a b i l i t y i n t he B al a n c e S he e t . Th e a r g u m e nt o f t h e a s s es s e e f o r d o i n g so i s th a t t h e u n cl a i me d r e f u n d s a r e i t s co n t i n ui ng l i a b i l i t i e s si n ce t h e s a me s h a l l h a v e t o be r e f u n d e d w h e n e ve r a s k e d f o r i n th e f u t u r e o r w i l l h a v e t o be a d j u s t e d ag a i n s t t h e a l l o t me n t of p l o t s i f di r e c te d b y t he Courts in a pp ea l s filed by t he applicants a ga i n s t th e refunds made. Th e specific c o n t e n t i on s m ad e by the a s s e s s e e i n t h i s r e g a r d , br i e f l y s ta t e d , a r e a s u nde r : 6

a) Th e assessee ha s not f o r f ei t ed the said unclaimed re f u nd s and admits the same to be its liability.

b) Th e a p p l i c a n t s t o w h o m t h e am o u n t wa s t o be r e f u n d e d h a v e no t w a i v e d o f f t h e i r c l a i m s.

c) Th e s a i d a m o u n t w a s r u n n i ng a cc o u n t o f th e a s s e s s e e , o u t o f w h i c h re f u n d s we r e b e i n g i s s u e d e v e n i n s u b s e qu e n t yea r s .

d) s o m e o f th e a p pl i c a n t s h ad f i l e d c a s e s i n Co u r t s f o r a l l ot m e n t o f p l o t a n d p e n d i n g d e c i s i on w i th r eg a r d t o w h i c h t h e sa i d r e f u n d s c o ul d n o t b e t r e a te d a s i n c o m e o f t h e ass e s s e e i n a n y cas e .

e) Th e a s s e s s e e h a d n o t t a k e n t h e s a i d a m o u n t t o i ts P r o f i t & L o s s Ac co u n t .

f) Th e decision of the H o n ' bl e Apex Court T. V .

S u n d r a m I y e na r & S o n s L t d . ( s u pr a ) r e l i e d u p on by t h e R e v e n u e i n s u pp o r t o f t h e a d di t i o n m a d e , w a s n o t a p p l i c a b l e i n the f a c t s o f t h e pr e s e n t c as e a s i n t h e s a i d c a s e i t w a s s u r p l u s r e m a i ni n g a f t e r i s s u a nc e o f r e f u n d s w h i c h wa s t r e at e d a s i nc o m e o f t h e a s se s s e e w h i l e i n t h e c as e o f a s se s s e e n o s u r p l us a s s u ch r e m a i n e d a n d t he e n t i r e a m o u n t w a s r e f u nd a b l e .

8. Th e L d . c o u n s e l f o r t h e a s se s s e e , d u r i n g t h e co u rs e o f h e a r i n g b ef o r e us , o n a n u m b e r o f o c c a s i on s , w as a s k e d at b a r t o s u b m i t th e p o l i c y o f t h e a s s e s s e e c o r p o ra t i o n w i t h 7 r e g a r d to f or f e i tu r e o f t h e u n c l ai m e d r ef u n d s . No t h i n g wa s f i l e d o r s u b mi t te d b e f o re u s a nd i t w as r e i te r a te d t h a t i t s l i a b i l i t y t o r e f un d t h e a p p l i ca t i o n m o n e y n e v er c e a s e d t o exist.

9. Th e R e v e n u e , o n t h e o t h e r h a n d , h a s c l a i m e d t h at t h e entire u n cl a i m ed refunds w er e revenue r e ce i pt s of the a s s e s s e e i r r e s pec t i v e o f t h e p e ri o d o f t i me t h e y r e m a i n e d u n c l a i m e d. Th e Revenue has heavily r e l i ed upon the d e c i s i o n o f t h e H o n ' b l e A p e x C o u r t i n t h e ca s e o f T. V . S u n d r a m I y e n g ar & S on s Lt d . ( s u p r a ) i n su p po r t o f i ts c o n t e n t i on . Th e R e v e n ue a l so re l i e d up o n t h e d e c i s i o n of t h e H o n ' b l e D e l hi H i g h C o u r t i n t h e c a s e o f C I T V s . C h i p s o ft Te c h n o l o g y P v t . L t d . 2 1 0 Ta x m a n n . 1 7 3 i n s u pp o r t o f i t s c o n t e n t i on t h a t i t w o u l d b e i l l o g i c a l f o r t h e l i a b i l i t y t o continue to exist f o r ev e r wh i l e t h e as s e s s ee e n j o y s t h e b e n e f i t of t h e a mo u n t r e t ai n e d by i t b y wa y o f l i a bi l i t y .

10. W e h a v e h e a r d b o t h t h e p a r ti e s. W e a r e u n a bl e t o completely a g r ee with the c o nt e n t i o n s of e i t he r of t he parties. Th e R ev e n u e ' s c o nt e n t i o n o f t h e r ef u n ds b e c o m i n g the i n c o me of the a s s es s e e the m o m en t it b e c o m es u n c l a i m e d b y t he a p p l i c an t i s no t a c c e p ta b l e . Th e r e c o u ld be a n u m be r of r e a s on s fo r the r ef u n d s r e m a i n i ng u n c l a i m e d. I t co u l d b e o n ac c ou n t o f t h e a p p l i c a n t s n ot c l a i m i n g th e s am e s i n c e t he y w i s h t o d i sp u t e a n d s e e k a l l o t m e n t o f p l o t i n r e tu r n or i t co u l d b e f o r t h e re a s o n t ha t t h e r e f u nd s d i d n o t r e a c h t h e a pp l i c a n t s f o r a ny r e a s o n o r w a s n o t e n c a she d b y th e a pp l i c a n t s . Th e r e f o re , t h e r e i s 8 always the p o ss i b i l i t y of the unclaimed r e fu nd s being c l a i m e d i n f u t u re o r b e i n g a d j u st e d b y w a y o f a l l o t m e n t of p l o t , i f d i r ec t e d b y c o u r ts . I t c an n o t t h er e f o r e be s a i d th a t t h e m o m e n t t h e r e f u n d s a r e r e t ur n e d a s u n c l a i me d , l i a b i l i t y f o r r e f u n di n g t he s a m e c e a se s to e x i s t , a nd i t be c o m e s t h e i n c o m e o f t h e a ss e s s e e . A t t h i s j u n c t u r e , w e m a y a d d t h at t h e r e l i a n c e pl ac e d b y th e L d . D R o n t he d e c i si o n o f th e H o n ' b l e A p e x C ou r t i n t h e c a s e o f T. V . S u n dr a m I y e n g ar & S o n s L t d . ( s u p ra) i s m i sp l a c e d s i n c e t h e f a c t s a nd d i s p u t e b e f o r e t h e H o n 'b l e A p e x C ou r t i n th a t c a s e wa s e n t ir e l y d i f f e r e n t. I n t ha t c a s e , t h e i ssu e w a s v i s - à - v i s u n c l a i m ed s e c u r i t y de p o s i ts o f c u s t o me r s w h i c h w a s cr e d i t e d t o t he P r o f i t & L o s s A cc o u n t b y t h e a s se s s e e . W h i l e t h e a s s e s s e e, i n t h e s a i d c a s e , c l a i m e d t h a t t h e s a i d d e p o s i t s we r e c a p i t al i n n a t u r e an d th e r e f o r e co u l d no t b e t r e a te d a s i t s i n c o m e even on ce s s a t i o n of liability to r e p a y, the R e v e n ue contended t ha t the character of the i n c om e though o r i g i n a l l y c a p i tal h a d c h a n g ed wi t h t h e e f fl u x o f t i m e a n d h a d b e c o m e re v en u e i n n a t u re . Th e i s s u e , t h e r e fo r e , b e f o re the Hon'ble C ou r t was w h e th er the liability which had c e a s e d t o e x i s t w a s c a pi t a l o r r ev e n u e i n n at u r e , w h i c h t h e H o n ' b l e A p e x C ou r t h e l d a g a i n s t t h e a s s e s s e e h ol d i n g t h at w i t h e f f l ux o f t i m e t h e n a t u r e of t h e l i a b i l i t y h ad c h a n g e d b e c o m i n g r ev e nu e i n n a t u r e an d t h u s i n t h e n a t u r e of i n c o m e o f t he as s e s s e e . I n t h e p r e s e n t c a se , th e i s s u e i s e n t i r e l y di f f e r ent . I n t h e f i r s t p l a c e , t h e a s s e ss e e i n t h e p r e s e n t c a s e ha s n o t c l ai m e d t h at i t s l i a b i l i t y t o r e f u n d th e s h a r e ap p l i c at i on m o n e y h a s c ea s e d t o e x i s t , no r h a s i t 9 c r e d i t e d t h e s am e t o t h e P r o f i t & L o s s A cc o u n t. Th e i s s ue i n t h e p r e s e nt ca s e a l s o i s n o t w h e t h e r t h e sa i d l i a b i l i t y i s c a p i t a l o r r e ve n ue i n n a tu r e . Th e r e f o r e , t h e d ec i s i o n o f t he H o n ' b l e A pe x C ou r t i n t h e c as e o f T. V . S u n d r a m I y en a r & S o n s L t d . ( s u pr a) w i l l n o t a p p l y t o t h e f a c t s o f th e p r e s e nt case.

11. Th e a s s e s s e e ' s co n t e n t i o n t h a t i t s l i a b i l i t y t o r ef u n d d o e s n o t c ea s e t o e x i s t as i t c o n t i n u e s t o re f l e c t i t a s l i a b i l i t y i n t h e Ba l a n c e Sh e e t a nd w o u l d b e l i a b l e t o re f u n d t h e a m o u n t w h en e v e r c l a i m e d i n f u t u r e o r a d j u s t i t a g a i n s t a l l o t m e n t o f a ny p l o t o f l a n d , i s a l s o n o t a c c e p ta b l e . Th e H o n ' b l e D e l h i H i g h C o u r t i n c a se C h i p s o f t Te c hn o l o g y P v t . L t d . ( s u p r a) h a d a n o c c a s i o n t o d e a l w i t h i d e n ti c a l i s s ue w h e r e i n i t h el d t h a t th e v i e w t h a t t h e l i a bi l i t y d o e s n o t c e a s e a s l o n g as i t i s r e f l e c te d i n t h e b o o k s a n d m e r e l a p s e o f t i m e d o e s n o t e f f a c e t h e l i ab i l i t y , i s a n a bs t r a c t a n d t h e o r e t i ca l v i e w , f a r r e mo v e d fro m r e a l i t y . The H o n ' b l e C o u r t h e l d t h a t i t w o u l d b e i l l o gi c a l t o h o l d t h a t a d e b t o r s h o u l d b e gi v e n t h e b e n e fi t o f h i s s h o w i ng t h e a m o u n t o f l i a b i l i t y e v en t ho u g h h e c o u l d no t b e e n t i tl e d i n l a w t o s a y t h a t a c l a i m f o r i t s r e c o v e r y i s t i m e b a r r e d a n d c o n t i n u e s to e n j o y sa i d am o un t . Th e re l e v a nt f i n d i ng s a t p a ra 9 & 1 0 o f t h e o r d e r i n t hi s r e g a r d ar e a s un d e r :

"Two aspects are to be noticed in this context. The first is that the view that liability does not cease as long as it is reflected in the books, and that mere lapse of the time given to the creditor or the workman, to recover the amounts due, does not efface the liability, though it bars the remedy. This view, with respect is an abstract and theoretical one, and does not ground itself in reality. Interpretation of laws, particularly fiscal and commercial legislation is increasingly based on 10 pragmatic realities, which means that even though the law permits the debtor to take all defences, and successfully avoid liability, for abstract juristic purposes, he would be shown as a debtor. In other words, would be illogical to say that a debtor or an employer, holding on to unpaid dues, should be given the benefit of his showing the amount as a liability, even though he would be entitled in law to say that a claim for its recovery is time barred, and continue to enjoy the amount. The second reason why the assesse's contention is unacceptable is because with effect from 1-4-1997 by virtue of Finance Act, 1996 (No.2), an Explanation was added to Section 41 which spells out that "loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof" shall include the remission or cessation of any liability by a unilateral act by the first mentioned person under clause". The expression "include" is significant; Parliament did not use the expression "means". Necessarily, even omission to pay, over a period of time, and the resultant benefit derived by the employer/assesse would therefore qualify as a cessation of liability, albeit by operation of law.

10. The submission of the assesse that no period of limitation is provided for under the Industrial Disputes Act, as a result of which it is exposed to liability at any time, is insubstantial and unpersuasive."

Th e r e f o r e , it is neither a c ce p ta b l e that th e re f u n d becomes the i nc o m e of the a ss e s s e e the mom e n t it is unclaimed n or d o e s i t t o co n t i nu e t o re m a i n t h e l i a b i l i t y of t h e a s s e s s ee f o r ev e r . Th e r e h a s to b e a r e a s o n ab l e p e r i o d o f limitation b e y o nd which the liability f or r e f un d i n g t he a p p l i c a t i o n m o ne y c a n n o t b e s a i d t o s u b s i s t .

12. D u r i n g t h e c o u r se o f h e a r i ng b ef or e u s , L d . c o u nse l f o r t h e a s s e s s ee f a i rl y a d m i t t e d t o a p e r i o d o f t h re e ye a r s , f r o m t h e d a t e of i s s u an c e o f c h eq u e , to b e a r e as o n a b l e p e r i o d of limitation f o r th e l i a b i l i t y t o su b s i s t . W e a l so f i n d t h at e v e n b e fo r e t h e L d . CI T( A p p e a l s ) t h e a s s es s e e h a d c o n t e n de d so, claiming t ha t the r e f un d would b e c om e barred by l i m i t a t i o n a f t e r a p e r i o d o f t h r ee y e a r s f r o m t he d a t e o f i s s u a n c e o f c h eq u e o f r e f un d . Th e L d . c o u n se l f o r t he 11 assessee a g r e ed t h a t t h e l i a b i l i t y s u b s i s ti n g be y o n d t h i s p e r i o d b e t r e a ted a s t h e bu s i n es s i n c o m e o f t he a s s e s s ee h a v i n g b e e n e a rne d i n t h e o r d i n a r y c o u r s e o f b u s i n e s s . Th e L d . c o un s e l f o r as s e s s e e f u r t he r re q u e s t e d f o r e x c lu d i n g th e f o l l o w i ng a m o unt s f r o m t h e af o re s t a t e d u n c l a i me d r e f u nd s b a r r e d b y l i m i ta ti o n :

a) R e f u n d s a g a i n st w h i c h c a s e s ha d b e e n f i l ed i n C o u r t s b y t h e a p p l i c a n ts s e e k i n g a l l o t m e n t o f p l o t s i n s t e a d an d w h i ch w e r e st i l l pe n di n g f o r a d j u d i ca ti o n .

b) R e f u n d s wh i c h h a d b e e n su b s eq u e n t l y ad j u s t ed b y w a y o f a l l ot me n t o f pl o t s .

c) R e f u n d s wh i c h h a d b e e n su b s eq u e n t l y ad j u s t ed b y w a y o f r e f u nds c l a i m e d.

Th e L d . D R a g ree d t o t h e s a m e .

13. I n v i e w o f t he ab o v e t h er e f o r e, w e h o l d t h a t ou t o f t h e o u t s t a n d i n g l i a bi l i t y o n a c c o u nt o f u n - c l a i m e d r e f u n d o f R s . 3 , 6 7 , 81 , 7 2 9 /-, l i a b i l i t i e s wh i ch h a v e b e en o ut s t a n d i n g f o r a p er i o d o f m o r e t h an t h r ee y e a r s , af t e r th e i s s u a n c e of c h e q u e s o f r e f un d , o n l y b e t r ea t e d a s t h e i n co m e o f t h e a s s e s s e e s u b j e ct t o a d j us t m e n t b e i n g m ad e o u t o f t h e m o n a c c o u n t of t h e f ol l o w i n g :

a) Th e r e f u n d s a ga i n s t w h i c h c a se s , f i l e d b y t h e a p p l i c a n ts for allotment of plots, in courts are pending.

b) Th e amounts which have b ee n s u b s e q ue n t l y a d j u s t e d b y w a y o f a l l o tm e n t of p l o t s .

c) Th e amounts which have b ee n s u b s e q ue n t l y a d j u s t e d b y wa y o f re f u n d c l a i m e d / i s su e d e ven a f t e r t h e e x p i r y o f t hr e e y e a rs f r o m th e d a t e t h e y bec a m e d u e t o t he c l a i ma n t s / a p p l i c a n t s.

G r o u n d of a p pea l N o . 1 o f th e a s s e s s e e i s , t h er e f o r e , d i s p o s e d o f f i n ab o v e t e r ms a n d st a n d s p a rt l y a l l o w e d .

14. G r o u n d N o . 2 ( a ) & ( b ) r a i s e d b y t h e a s s e s s e e r e a ds a s under:

2. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding an addition of Rs. 35.46 crores on account of income from Industrial Area Activity which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred under the facts & circumstances of the case in not allowing expenditure incurred on KMP Expressway amounting to Rs. 3.74 crores which is highly unjustified & uncalled for.

15. B r i e f fa c t s r e l e va n t t o t h e i s s u e a r e th a t th e a ss e s s ee w a s i n d u l g i n g i n f i n a n c i n g ac t i v i t i e s a n d t he a c t i v i t y of setting up of i n d u s t r i al e s ta te s . Du r i n g as s e s s m e n t p r o c e e d i ng s , t h e A s s e s s i n g Of f i ce r f o u n d t h at t he r e c e i p t s a n d e x p en s e s fro m t h e a c t i v i t y o f s e t t i n g u p o f i n d u s t ri a l e s t a t e s , w as n o t r e f l e c t e d i n th e P r o f i t & L o s s Ac c o u n t o f the a s s e s s e e. On being c o n f ro n t e d with the same t he a s s e s s e e cl a i m e d t h a t t h i s wa s a ct i v i t y w a s c a r r i ed o u t o n a n o p r o f i t a n d n o l o s s b a s i s a n d i t w a s f o l l o w i n g ca s h b a s i s of a c c o u nt i n g for the sam e and r e fl ec t i n g the s u r p l u s / de f i c i t i n t h e s a m e i n i ts B a l a nc e S he e t a s c u r re n t assets. Th e A s se s s i n g O f f i c er d i d n o t f i n d t h i s m e t h o d , of t r a n s f e r ri n g t h e e n t i r e r e ce i p t s f r o m i n d u st r i a l a c t i v i t y to the B a l a nc e S he e t , as a c o r rec t method of ac c o u n t i n g. 13 F u r t h e r h e a c c e pt e d t h a t t h e d i r ec t c o s t c o m p o n en t r e l a t i ng t o t h i s a ct i v i t y t o w a r d s l a n d a cq u i s i t i o n a n d d ev e l o p m e n t could be c a p i ta l i z e d , but vi s- a - v i s th e i nd i r e c t c o st c o m p o n e n t, h e fo u n d f r o m t h e co s t s h e e t s p re p ar e d b y t h e a s s e s s e e o f c er ta i n i n d u st r i a l ar e a s d e ve l o p e d , t h a t t he y c o m p r i s e d 2 2 % of t h e t o t a l c o l l e ct i o n . Th e A ss e s s i n g O f f i c e r a l s o f o u n d t h a t t h e a c t u a l i n d i r ec t e x p e n s es i n c ur r e d w e re less. He , t h er e fo r e , h e l d t h a t pr o f i t s we r e e ar ne d o n t h e i n d i r e c t c o s t com p o n e n t an d c al c u l a t e d t h e p r of i t e a r n ed d u r i n g t he y e a r o n a c c o u nt o f the s a m e a s u n d e r :

Receipt f or Indirect expenses Total Recoveries 273,39,99,927/-

        Relatable to indirect expenses
        Or for the purpose of
        Admn charges, interest etc.
        (20% of the above)                                                54,67,99,985/-

        Less
        Expenses already incurred in
        Capital Head of Industrial estates                                14,91,69,810/-

        Less
        Expenses already allocated in
        P&L as relatable to Industrial estates                            4,30,42,231/-
                                Sub total                                 19,22,12,041/-

Addition on account of Indirect                                           35,45,87,944
charges received

        Th e A s s e s s i n g O ff i c e r      a d d e d t h e s a m e t o t h e i n c om e o f

t h e a s s e ss e e .

16. B e f o r e th e L d .CI T( A p p e a l s ) t h e as s e s s e e ma d e d et a i l e d s u b m i s s i on s r ep r o d u c e d at pa g e s 8 to 12 of the C I T( A p p e al s ) ' s o rd e r . B r i e f l y s ta t ed , t h e a s s e s s e e ch a l l e n g e d t h e a d d i ti o n m ade f o r t he f o l l o w i ng r e a s o n s:

a) Th a t it had c o n s i s t e n tl y b e en following this m e t h o d i n t h e pa s t , w h i ch h a d b e e n a c c ep t e d by t he 14 D e p a r t m e nt a l s o a n d , t h e r ef o r e , th e r e w a s no r e a so n t o d i s t u r b th e s a me.

b) C a l c u l a ti o n o f su r p l u s / i nc o m e ge n e r a t e d fr o m t he aforesaid ac t i v i t y by the AO was flawed fo r the f o l l o w i ng r e a s ons :

i) Th e A s s e s s i n g O f f i c e r h a d o n l y t a k e n i n t o c o n s i d e r at i o n t he i n d i r e c t e x p en s e s i n c u rr e d at h e a d o ff i c e a n d n o t c o n s i de r e d t h e f i e l d o f f i c e e x p e n s e s f o r r e du c i n g f r o m t h e ch a r g e s c o l l e ct e d o n a c c o un t o f i n d i r e c t e x p e n se s i n c u r r ed o n t he a c t i v i t y.

ii) W h i l e i nt e r e s t c ha r g e s h ad b e e n re c o v e r e d t o b e p a i d o v e r a p e r i o d o f t h r e e y ea r s , i n t e r e st h a d b e e n r e d uc e d f or o n l y o n e y e a r .

iii) None of the pr o j e c t u n d e rt a ke n by the a s s e s s e e w e re c o m p l e t e . Th e r e f or e , n o p r o f i t o r loss could be computed and in any case, no s u r p l u s w a s g ene r a t e d si n c e th e s a m e , i f a n y , w as u t i l i z e d t o w a r ds t h e m a i n te n a n c e o f t h e p r o j e ct s .

iv) Th e s u r p l u s , i f a n y , g e ne r a t e d w a s u s e d t o m e e t e x t ra e x p ens e s o f t he a s s es se e .

Th e L d . C I T( A p p ea l s ) r e j ec t e d a l l th e c o n t e n ti o n s of the a s s e s s e e s t a t i ng t h a t :

a ) Th e a s s e ss e e h a d n o t p r o ve d t h a t i t w a s o p e ra t i ng o n n o p r o f i t n o l o s s b a s i s a nd t ho u g h t h e s a me ma y b e t h e o b j e c t o f t he a s s e s s e e b u t i n c o m e s t i l l h a d t o b e c o m p u t e d o n th e b a s i s o f ac t u a l s t a t e of a f fa i r s an d a s d i r e c t e d b y l a w.

b) E x t r a e x p e n s es i n c u r r e d b y t h e as s e s s e e w e r e n o t i n t h e n a t u re o f i t s b u si n e s s a c t i v i t y b ut w er e a ctu a l l y on account of carrying out the duty of the State G o v e r n m e nt a n d , t h e r e f o re , n o t a l l o w a b l e .

c) Since th e as s es s e e h ad n ot submitted a c tu al c a l c u l a t i o n of re c e i p t a n d e x p en s e s a ft e r t a k i ng i n to a c c o u n t a l l a c t i v i t i e s , t h e p l e a o f f l a w i n c a l c ul a t i on w a s r e j ec t e d .

d) Th a t c o n s i s t e n c y c o u l d b e d i st ur b e d i f w a r ra n t ed b y t h e f ac t s o f t he c a s e .

17. Before us L d. counsel for a s se s s e e re l i e d on the s u b m i s s i on s m ad e b e f o r e t h e C I T( A ) . Ld C o u n se l for the a s s e s s e e al s o r a i s e d a n a l t er n a t e p l e a t h a t th e a s se s s e e h ad c h a n g e d i t s m e th o d o f a c c o u n t i ng i n c o m e f r o m th i s a c t i v i t y to m e r c a nt i l e method f ro m t he Financial y e ar 2 0 1 3 - 1 4, r e l e v a n t t o a s s es s m e n t y e a r 2 0 14 - 1 5 , in order to comply w i t h t h e p r o v i s i o n s o f t h e C o m pa n i e s A c t , a n d th e i n c o m e f r o m t h i s a c t i vi t y , f o r t he p e r i od s i n c e i nc e p t i o n t i l l 3 1 - 03 - 2 0 1 4 , h a d b e e n c o m p u t e d a s p e r t h i s m e t h o d a nd i n c l u d e d i n t h e P r o f i t a n d L o s s A cc o u n t o f t h a t ye a r . Ld . Co u n s e l fo r t h e a s s e s s e e t h er e f o r e s t a t ed t h at s i n c e t h e i n c om e f o r t h e i m p u g n e d ye a r h a d a l r e a dy b e en i n c l u d e d i n A. Y 2 0 1 4 - 1 5 a n d t a x e s p a i d th e r e o n t he r e w as n o r e a so n t o t a x t h e s am e in the impugned year.

18. Ld.DR on the other hand relied on the order of the C I T( A ) .

19. W e h a v e h e a r d t h e l e a r n e d r ep r e s e n t a ti v e s o f b o t h the parties. Th e a d d i t i o n m a d e i n t h e p r e se n t c as e r e l a t es to p r o f i ts e a r ne d from I nd u st r i a l E s ta t e d ev e l o p m e n t a c t i v i t y, w h i ch th e a s s e s se e c l ai m e d w a s b e i n g ca r r i e d o ut o n a no l o ss n o p r o f i t b a s i s , acc o u n t e d f o r o n c a s h b a si s a n d s u r p l u s o r de f i c i t i n t h e r e cei p t o v e r e x p e n ses r e f l e c t e d 16 i n t h e Ba l a n c e S h e e t , w h i l e th e R e v e n ue ne g a t e d t hi s c o n t e n t i on s t a t i n g t h a t p r o f i t wa s a c t u a l l y ea r ne d b y t h e assessee, f r om t h e i n di r e c t c os t c o m p on e n t rec o v e r e d o n a c c o u n t o f t he s a i d a c ti v i t y , wh i c h w a s t h u s l i a b l e t o b e taxed.

20. Th e u n d i s p u t e d fa c t s a re t h at t h e a s s e s se e i s f o l l o w i n g t h e c a s h b as i s f o r a c c o u nt i n g i t s i n c o m e fr o m I n du s t r i al E s t a t e de v e l o pme n t a n d r e f l e ct i n g t h e di f f e re n ce b e t w e en t h e r e c e i p t s a nd e x p e n d i tu r e o n t h i s a c c ou n t i n i t s B a l a nc e Sheet. Th e R ev e n u e , w e fi n d , h a s n o t o b je c te d t o t h e method of a c c ou n t i n g , i . e. c a sh basis, f o l l o we d by the a s s e s s e e . I t s o nl y c o n t e n t i o n i s t h a t t h e a s s e s s e e e a r ns surplus o n a c c ou n t o f t h e s a m e w h i c h s h o u l d be b r o u g ht t o t a x , t h u s r e j ec t i n g a s s e s se e ' s c l a i m t h a t n o p ro f i t o r l o ss w a s d e r i ve d f r om i t .

A s f a r a s t hi s a c t o f t h e Re v en u e i s c o n c e rn ed , o f r e j e c t i n g a s se s s ee ' s c l a i m o f o p e ra t i n g o n a n o p r o f i t n o l o s s b a s i s , w e fi n d no i n f i rm i t y i n the s a m e , f o r t h e re a s o n th a t a s r i g h t l y p o i n te d o u t b y t he CI T( A p p e a l s ) , t he a s s e s s e e h a s n o t su b s t a nti a t e d i ts c l a i m o f o p e r a t i ng o n no p r o f i t no l o s s b a si s , ei t h e r b e f o r e t h e l o w e r a u t h o r i t i e s o r ev e n b e f ore u s . N o b a s i s f o r t h i s c l a i m w a s de m o n s t r a te d b e fo r e u s , b y t h e L d . C o un s e l f o r t h e a s se s s e e. F u r t h e r , w e ar e a l s o i n a g r e e m e n t w i th t h e Ld . CI T( A p pe a l s ) th a t op e r at i n g o f n o p r o f i t n o l os s b as i s m a y b e t h e ob j e c t i v e of t h e a ss e s s e e b ut t h e i n c om e o f th e a s s e ss e e h as t o b e d e t e r mi ne d o n t he b a s i s o f a c t ua l s t a t e o f a f f ai r s a n d a s p e r t h e I n c o m e Ta x 17 Act. Th e c l a i m o f t h e a s s e s s e e , w e f i n d , i s f u r t he r n e g a t e d b y t h e c o nt e n t i o n r a i s e d b e f o re u s d u r i n g t h e c o u r s e o f a r g u m e n t s m ad e, t h a t a l l t h e p ro f i t s a n d l o s se s p e r t a i n i ng t o t h e ac t i v i t y fo r t h e i m p u g n ed y e a r h ad b e e n a c c o u n t e d f o r i n a s s es s m e nt y e a r 2 0 1 4 -1 5 . A c er t i f i ca t e to t h i s e ff e ct w a s a l s o f i l ed be f o r e u s . Th e r e fo r e , t o t h e e x te nt t h a t t h e p r o f i t a n d l o s s on t h e a c c e p t e d ca s h b a s i s o f a c co u n t i n g i s t o b e d e t e rm i n e d a n d c h a r g ed t o ta x , w e u p h ol d the f i n d i n g s o f t h e Ld . CI T( A pp e a l s ) th a t t he su r p l u s s ho u l d be a c t u a l l y c a l c u l a t ed a n d ch a r g e d t o t a x fo r t h e i m p ug n e d yea r .

B u t a t t h e sa m e t i m e , c o n s i de r i n g t h e c o n t e nt i on s o f t h e L d . c o u n s e l f o r a s s e s s e e, t h a t a l l t h e p r o f i ts o r l o s s e s e a r n e d f r o m i n du s t r i a l a c ti v i t y ri g h t u p t o a s s e ss m e n t y e ar 2013-14 have been a c co u n t e d for in the su b s e q u e n t a s s e s s m e nt y e a r i . e . A. Y . 2 01 4 - 15 , u p o n c h a n g e i n m e t h od o f a c c o un t i n g f r om t h e c a s h t o me r c a n t i l e, t o w h i c h e f f ec t a c e r t i f i ca t e f r om the s t a t u to r y auditors of th e a s s e s s ee c o m p a n y w a s a l s o f i l e d b e f o re u s , we a g r e e w i t h t he L d . C o u n s el t h at t h e a d d i t i o n on ac c o u n t of p r o fi t s e a r n e d i n t h e i m pu g n e d ye a r w o ul d o nl y t a n t a m o u nt t o ta x i n g th e same income twice. Th e assessee having admittedly s u b j e c t e d t o t a x p r o f i t o r l o s s fr o m t h e i m p ug ne d a c t i v i t y c a l c u l a t ed on mercantile basis in the a s s e ss m e n t year 2 0 1 4 - 1 5 , th e o n l y i s s u e w hi c h r em a i n s i s vi s - à - vi s t h e y e a r i n w h i ch t he a sse s s e e i s r eq u i r ed t o p a y t a x . Th e H o n 'b l e A p e x C o u rt i n th e c a s e of CI T V s . E x c e l I n d u str i e s L t d. i n Civil A p pe a l No . 5 1 9 5 of 20 11 / 9 1 0 1 of 20 13 9 1 0 0 of 18 2013/125 of 20 1 3 dated 8 . 1 0. 2 0 1 3 , w hi l e s ei z e d with i d e n t i c a l i s s u e, h e l d t h a t a s l on g a s t h e R ev en u e i s n o t d e p r i v e d o f a ny t a x , t h e d i s p ut e r e m a i n s m e r e l y a c a d e m i c a n d , t h er e f o r e, t h e l i ti g a t i on r em a i n s f ru i t l e ss a n d t h e re w a s n o n e e d f or t h e R e v e n u e t o c o n t i n u e w i t h t h e s a m e . Th e r e l e v a n t f i n d i n g s o f t h e H o n' b l e A p e x C o u r t a t p a r a 3 2 o f t h e o rd e r a re a s u n d e r :

"32. Thirdly, the real question concerning us is the year in which the assessee is required to pay tax. There is no dispute that in the subsequent accounting year, the assessee did make imports and did derive benefits under the advance licence and the duty entitlement pass book and paid tax thereon. Therefore, it is not as if the Revenue has been deprived of any tax. We are told that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect. There was, herefore, no need for the Revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers"

21. C o n s i d e r i n g t h e a b o v e a n d i n th e l i g h t o f ce r t if i c a te filed by the a ss e s s e e to this effect f ro m the s t a t u t o ry a u d i t o r s o f t h e c o m p a n y , w e c on s i d e r i t f i t t o r e s t o r e t h e i s s u e t o t h e A sse s s i n g O ff i c e r t o v e r i f y t h e c o rr ec t n e s s o f t h e c l a i m m ad e i n t h e c e r t i f i c a te t h a t t h e i n com e f o r t h e i m p u g n e d y e a r ha d b e e n r e f l e c t ed i n as s e s s m en t y e a r 2 0 14 - 1 5 a n d f u r t h e r to v e r i f y t h a t t h e s a m e h a d b e e n i n c l u d e d i n t h e t a xa b l e i n c om e o f t h e a s s e ss e e f o r t h e i m pu g n e d ye ar a n d d u e t a x e s pa i d t h e r e o n, a n d t h e r e a f t e r d ec i de t h e i s s u e i n a c c o rd a n c e wi t h l a w. W e m a y a d d t ha t t he as s e s s e e b e g i v e n d u e o p p o rt u n i t y of h e a ri ng a n d i s f r e e t o a d d u c e al l e v i d e n c e s i t wi s he s t o r el y u p o n.

I n v i e w o f t h e ab o v e gr o u n d o f a p p e a l No . 2 ra i se d b y t h e a s s e ss e e s tan d s a l l o we d f o r st a t i s t i ca l p u r po se s .

22. G r o u n d N o. 3 r a i se d b y t h e a s s e sse e r e a d s a s u n der :

3. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding the amount of Capital Gain on sale of shares amounting to Rs. 85,73,413/- as Business Income which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred in law & facts in not adjudicating the ground of appeal disputing the finding of A. A. regarding expenditure in relation to investment in shares having been charged to Profit & Loss Account in the absence of any material on record which is highly unjustified, & uncalled for.

23. Th e c h a l l e n g e i n t h e a b o v e g r o un d i s t o t h e t r e at m e n t o f p r o f i t s e ar n ed o n s al e o f s ha r e s a s b u s i ne ss i n c o m e o f t h e a s s e s s e e as a g a i n s t c a pi t a l ga i n s h o w n b y t he a s s e s s e e .

B r i e f fa c t s r e l e va n t t o t h e s a m e a r e th a t th e a ss e s s ee h a d s h o w n p r o f i ts e a r n e d f r o m t he s a l e o f s h a r e s a s c a p i t a l g a i n s a n d c l a i me d e x e m p t i o n fro m p a y m e n t o f t a x o n t h e same. Th e A s se s s i n g O ff i c e r fo u n d t h a t t h e r e w e r e t wo m e t h o d s f o l l o w ed b y t h e a s s e ss e e o f d o i n g i t s f i n a n c i n g business. Fi r st being equity p r o p o r t i on a t e an d second i n v e s t m e nt b a nki n g . Th e A ss e s s i n g O f f i ce r o bs e r ve d t h a t i n both the c a s e s, the a ss e s s e e r e l e a s ed the amount of a d v a n c e a f te r a dj u s t i n g t h e am ou n t o f i n t e re s t ac c r u e d o n s u c h l o a n m e a n i n g t h e r e b y t h a t t h e a s s e s s e e r e ta i n e d t h e e q u i t y o f t h e b orr o w e r a n d s u b s eq u e n t l y so l d i t ba c k t o t h e b o r r o w e r o r i n th e o p e n m a r k e t fi x i n g m i n i mu m ra t e o f s a l e t o b e i n c l u s i v e o f t h e i n t e r es t o f 2 0 % p e r an nu m . Th e A s s e s s i n g O f fi c e r, t h e r ef o r e , h e l d t h a t t h e b a s i c i nt e n t i o n o f h o l d i n g e qu i t y by t h e a s s e ss e e wa s t o e a r n i n t e re s t o n t he 20 l o a n s a d v a n c ed a n d , t h e r e f o re , h e l d t h a t t h e t ra n s a c t i o n could n ot be cl a s s i f i ed as c ap i t a l g ai n . Th e Assessing O f f i c e r he l d t h at i t w a s i n t h e o rd i n a r y c o ur s e o f b u s i n e s s of the a s s e ss e e and re l a t e d to its primary object of f i n a n c i n g a n d wa s , t h e r e fo r e , c l e a r l y b u s i n e s s pr o f i t o f t h e a s s e s s e e . H e , t he r e f o r e , he l d t h e p r o f i t o f R s . 8 5 ,7 3 , 4 1 3 / - to b e t h e b us i n e s s p r o f i t of t h e a s s es s e e .

24. B e f o r e t h e L d . CI T( A p p e a l s ) , t h e a s s e s s e e p l e ad ed t h a t i t w a s p a rt i c i p at i n g i n e q ui t y fo r t h e p a s t 2 0 y e a r s a nd f u n d s f or t h e pu r p o s e w e r e b ei n g s u p pl i e d b y t h e St a t e G o v e r n m e nt b y w a y o f s ha r e c ap i t a l . I t w a s po i n t e d o ut t h a t n o i n t e r e st b e a r i n g f u n d s w e r e u s e d f o r thi s a c t i vi t y . Th e a s s e s s e e a l s o p o i n t e d ou t t h a t w h i l e pu r ch a s i n g t h e e q u i t y o f a n y co m p a n y t h e r e wa s a c o n d i t i o n t h a t s u c h e q u i t y w o u l d n o t b e di s p o s ed o ff b y t h e a s s es s e e b e f o r e t h e p e r i o d o f a t l e a st 3 t o 5 y e ar s . Th u s , t h e a s s e s se e p o i n t ed o u t t h a t i n t e n t i o n w a s n e v e r t o t r a d e i n s h a r es o r t o d o b u s i n e s s b ut t o m a k e l o n g t e r m i n v e s t m e n t, w h i c h w a s t o b e t r e a t e d a s c ap i t a l a s s et . Th e a s s e s s e e re l i e d u p o n t he j u d g m e n t o f t he S p e c i a l B e n c h o f I . T. A . T. i n t he c a s e of P S I D C V s . D CI T r e p o r t e d i n 2 92 I TR 2 6 8 an d o n C i r c u l a r N o . 4 d at e d 1 5. 6. 2 0 0 7 o f t h e C BD T, w h i c h r ef e r re d t o t h e p r i n c i p l es on th e basis of w hi c h it ha s to be d e c i d ed w h e t h e r t he s e ar e c a p i t a l i n v e st m e n t s o r st o c k i n t r a d e. Th e L d . C I T( A p p ea l s ) r e j e ct e d t h e c o n t e n t i on s o f t he a s s e s s ee h o l d i n g t h a t t he d o m i n a n t i n t e nti o n o f t h e a s s e ss e e w a s t o f i n a n c e t he u n i t s a n d h a d m i ni m um p e r c e n t ag e o f r e t u r n on 21 t h e s a m e a n d , t he r e f o r e , i nc o m e ea r n e d w a s i n t h e n a t u r e o f b u s i n e s s i n c om e o f t h e a s s e s s e e. Th e r e l e v a n t f i n d i n g s o f t h e L d . CI T( A p p eal s ) a t pa r a 8 . 2 o f h i s o r d er a r e a s u n d e r :

"8.2 I have carefully considered the facts of the case and submissions of the counsel and also observations and findings of the AO. I do not find any merit in the argument of the counsel and the same are rejected. What is to seen here is the purpose for which the appellant corporation has been set up. The main activity of the appellant corporation is to finance the industrial units and the financing is done either by providing clean loans to the industrial units or by the method of equity participation. In both the methods the dominant intention is to finance the unit. In case of clean loan interest is charged on the money advanced and in the case of equity participation the minimum profit is predetermined since the price of the shares in the buy back arrangement are fixed by including interest element @ 20% per annum. The borrowing unit buys back the shares after 3 to 5 years and pays the predetermined price to the appellant corporation and in case, the market price of the share is higher the appellant can sell the same in the market. The profit earned by the appellant on the buy back of these shares is nothing but interest on the money lent to the industrial units. The dominant intention of the appellant is to finance the units and have minimum percentage of return on the same. Keeping in view the main intention of the appellant of financing the units by way of equity participation it is held to be business activity of the appellant. It is immaterial whether the equity is held by the appellant for a period of 3 to 5 years because generally the finance is for a long duration of time. Even in the case of clean loans the borrowing units retain them for a long period which may be even more than 5 year. Hence, the argument of the counsel that the equity is held for a period of 3 to 5 years and hence is in the shape of long term investment is devoid of any merit. The AO has rightly held that the investment in equity shares by way of equity participation is nothing but business investment of the appellant and the profit earned on sale of these shares on the basis of buy back arrangement is nothing but business income of the appellant. The case laws relied upon by the AO are squarely applicable and the case laws relied upon by the counsel do not help him as discussed by the AO in the assessment order and also for the reason that the appellant has purchased the equity shares of the units by way of equity participation with the dominant intention of extending finance to the borrowing units and hence the case laws are not applicable to the facts of the case. This ground of appeal is rejected."

25. B e f o r e u s , t h e L d . c o un s e l f o r a s s e s se e po i n te d o ut t h a t o r i g i n a l l y th e a s s e s s ee w a s P u n j a b S t a te I nd u s t r i a l & I nf r a s t r uc t u r e D e v e l o p m en t P vt . Ltd. ( PSI D C ) and h ad changed t h e r eaf t e r to H ar y an a S t a te I nf ra s t r u c t u re D e v e l o p m en t C or p o r a t i o n ( H SI DC ) . Th e L d . co u n s e l f o r a s s e s s e e t h er e a ft e r r e i t e r at e d t he c o n t e n t i on m ad e b e f o r e t h e l o w e r a u t h o ri t i e s s t at i n g t ha t t h e i n v e st m e n t i n s h a r e s w a s b y w a y o f c a p i t a l i n ve s t m en t a n d n o t s t o ck - i n - t r a de . Th e L d . c o u n s e l f o r a s s es s e e p oi n t e d o u t t o t h e f a c t t h at e v e r y c ol l a b o r at i o n a g r e e me n t e nt e r e d i nt o b y t he a s s e s s ee corporation w i th a c o l l a b o r a t or , gave an option to the p r o m o t e r s to b uy t h e s h a r e s a t m a r k e t v a l ue o r c o s t p l u s 2 0 % w h i c h e v e r wa s h i g h e r a n d i f t h e p r o m o t e r s d i d n o t b u y i t t h e a s s e s se e co r p o r a t i on c o u l d s e l l i t i n t h e ma r k e t a l s o . Th e L d . c o u n se l f o r as s e s s ee dr e w o u r a t t en t i o n t o t h e r e l e v a n t c l a u s es i n o n e o f t h e c o l l a b o r at i o n agr e e m e n t as under:

" B U Y - B A C K A R RA N G E M E NT : -

2 4 . ( a) A t an y ti me af te r th e C o mp an y g o e s in f or c o mme r c i al p r o d u c ti o n an d / o f i ts s h ar e s ar e l is te d o n s to c k e x c h an g e / OT C E , th e C o r p o r at i o n ma y o f f - l o ad i ts s h ar e - h o l d in g i n th e C o mp an y p ar ti al l y o r f u l l y in s u c h man n e r as i t may d e e m f it. T h e C o l l ab o r a to r wi l l h o we v e r h av e th e p r e -

e mp ti v e r i g h t to b u y th e s h ar e h o l d in g o f th e C o r p o r at io n . S i m i l ar l y, th e C o l l ab o r ato r may al s o h av e a r ig h t to mak e a r e q u e s t to b u y b ac k th e e q u i ty s h ar e - h o l d in g o f th e C o r p o r at i o n as p e r c l au s e 2 4 ( c ) o f th is ag r e e me n t. T h is o p ti o n c an b e e x e r c is e d o n l y o n c e wi th i n th r e e ye ar s o f th e c o mme n c e me n t o f th e c o mme r c i al p r o d u c ti o n b y th e c o mp an y.

(b) Af te r e x p ir y o f th r e e ye ar s f r o m th e d ate o f c o mme n c e me n t o f c o mme r c i al p r o d u c ti o n b y th e C o mp an y o r th e d ate o f f ir s t d i s b u r s e me n t to war d s e q u i ty c ap i t al , wh i c h e v e r is e ar l ie r , th e 23 C o l l ab o r ato r s h al l b e b o u n d to p u r c h as e th e E q u i ty s h ar e - h o l d in g o f th e C o r p o r ati o n in th e C o mp an y . P r o v id e d th a t th e C o r p o r at io n may at i ts d i s c r e ti o n r e ta i n th e s h ar e s ac q u i r e d b y i t th r o u g h o v e r s u b s c r ip ti o n o r r i g h ts is s u e o r b o nu s s h ar e s .

(c) O n b u y b ac k o f sh ar e - h o l d in g o f th e C o r p o r at io n b y th e C o l l ab o r a to r u n d e r su b c l au s e ( b ) , th e p r ic e to b e p a i d s h al l b e h ig h e s t o f th e , ( i) Is s u e p r ic e o f th e s h ar e s p l u s i n te r e s t @ 2 0 % p . a. wi th ye ar l y r e s ts f r o m th e d ate o f f ir s t d i s b u r s e me n t to war d s e q u i ty s h ar e s by th e C o r p o r ati o n under th is ag r e e me n t, O R ( i i) T h e av e r ag e o f th e d ai l y h i g h e s t p r ic e o f th e s h ar e s q u o te d o n an y o f In d i an S to c k E x c h an g e s f or a p e r io d o f t wo mo n th s p r o c e e d in g th e d ate o f p u r c h as e o f sh ar e s h e l d b y th e C o r p o r ati o n as p r o v i d e d in c l au s e ( b ) ab o v e ; O R ( i i i ) A s s e s s e d v al u e o f th e s h ar e s as d e te r mi n e d b y th e A u d i to r s o f th e C o mp an y o n th e b as i s o f n e t wo r th o f th e C o mp an y o n th e d ate o f s al e o f th e s h ar e s .

(d) T h e s al e an d p u r c h as e o f th e s h ar e s b y th e C o l l ab o r ato r p r o v i d e d u n d e r s u b- cl au s e ( a) an d ( b ) , p ay me n t o f pr ic e th e r e f o r an d d e l iv e r y o f s h ar e - s c r ip s an d tr an s f e r d e e d s r e l ati v e th e r e to , s h al l b e c o mp l e te d wi th i n o n e mo n th f r o m th e d u e d a te o r d ate o f o p tio n u n d e r s u b - cl au s e ( a) as th e c as e ma y b e . P r o v id e d th at f ail u r e o f th e C o l l ab o r a to r to p ay f or an d p u r c h as e th e s h ar e s wi th i n o n e mo n th af te r e x e r c is i n g th e o p tio n s h al l b e c o n s tr u e d as h i s c o n s e n t to th e C o r p o r at i o n o f f l o ad i n g th e s e s h ar e s in th e ma r k e t.

(e) In th e e v e n t th e C o l l ab o r ato r f ail s to p u r c h as e th e e q u i ty s h ar e s of th e C o r p o r at i o n in th e C o mp an y as p r o v id e d in c l au s e 2 4 ( b ) ab o v e , th e o p e r at i o n of cl au s e 20 hereof wi l l r e ma i n s u s p e n d e d at th e o p tio n o f th e C o r p o r at io n u n t i l th e e n tir e s u m p ay ab l e b y th e C o l l ab o r a to r f or th e p u r c h as e o f th e s h ar e - h o l d in g s o f th e C o r p o r at io n i n th e C o mp an y i s p ai d o f f i n f ul l an d th e M an ag i n g D ir e c to r b e in g a n o mi n e e o f th e C o l l ab o r ato r s h al l r e s ig n . In s u c h an e v e n t th e C o r p o r at io n s h al l al s o h av e th e option to r e c o mme n d o n e o f i ts n o mi n e e s to b e ap p o in te d as M an ag i n g D ir e c t o r b y th e B o ar d o f D ir e c to r s an d th e s ai d n o mi n e e o f th e C o r p o r at i o n af te r b e in g s o ap p o in te d , s h al l c o n ti n u e to b e th e M an ag i n g 24 D ir e c to r as l o n g as th e o p e r at i o n o f c l au s e 2 0 r e ma i n s s u s p e n d e d .

I mme d i a te l y u p o n th e c o mp l e t i o n o f th e p ay me n t b y th e C o l l ab o r a to r o f th e f ul l a mo u n t p ay ab l e i n r e s p e c t o f p ur c h as e o f s h ar e s , th i s s u b - c l au s e wi l l c e as e to b e o pe r ati v e an d th e M an ag e me n t o f th e C o mp an y wi l l b e c ar r i e d o n as b e f or e b y th e M an ag i n g D ir e c t o r wh o wi l l b e ap p o in te d on th e r e c o mme n d ati o n s of th e C o l l ab o r ato r i n te r ms o f cl au s e 2 0 h e r e of . "

(f) T h e C o r p or at i o n s h al l , in th e e v e n t th e C o l l ab o r ato r f ail s to p u r c h as e th e e q u i ty s h ar e s o f th e C o r p o r at io n i n th e C o mp an y as p r o v id e d in c l au s e 2 4 ( b ) o r to p ay f o r th e m as p r o v id e d in s u b -

c l au s e ( c ) wi th i n th e ti me l i mi t s p e c if ie d in s u b - c l au s e ( d ) ab o v e , b e e n ti tl e d to s e l l i ts s h ar e s i n th e C o mp an y e i t h e r b y p u b l ic au c tio n o r th r o u g h th e r e c o g n iz e d S h ar e B r o k e r s at th e S to c k E x c h an g e wh e r e th e s h ar e s ar e l is te d b y p r iv a te n e g o ti a t io n s at th e r is k an d cost of th e C o l l ab o r ato r .

Th e L d . c o u n s e l f o r a s s e s se e , t h er e f o r e , st a t e d t ha t t he equity p a r t i ci p at i o n by the a ss e s s e e c o r p o r at i o n in the c o l l a b o r at o r co mp a n y w a s n o t a f i n a n c i n g a r r an ge m e n t f or e a r n i n g i n c om e t h e r e f r o m b y w a y o f i n t e r e s t a nd t h u s t he i n v e s t m e nt s c ou l d not be treated as s to ck - i n - t r a de . R e l i a n c e w a s p l ac e d o n t h e d e c i s i o n o f t h e S p e c i a l B e n c h o f the I . T. A . T. in the c a se of Punjab State I n d u s t ri a l C o r p o r a t i o n L t d . V s . D CI T, r e p o rt e d i n 1 0 2 I TD 1. Th e L d . c o u n s e l f o r a s s es s e e a l s o dr e w ou r a t t en t i o n t o th e f a c t t h at u p t o a s s e s s m en t y e a r 2 0 0 5 - 0 6 , th e s a i d i n c o m e h a d a l w a y s b e e n a s s e s se d as c a p i t a l g a i n an d R e v e n u e h a d s o u g h t t o c h a n g e t h e s a me w i t h o u t a n y ba s i s . Th e L d . c o u n s e l f or assessee r el i e d upon the de c i s i o n of th e Hon'ble j u r i s d i c ti o n a l H i g h C o u r t i n t h e c a s e o f CI T V s. H a r y a n a S t a t e I n d u s tr i a l D e v e l o p m en t C o rp o r a t i o n L t d. , 3 36 I TR 6 4 1 in this regard.

26. Th e L d . D R , o n th e o t h e r h an d r el i e d u p o n th e o rd e r o f t h e L d . CI T( A p p eal s ) .

27. W e h a v e h e ar d th e c o n te n t i o ns of b o t h t h e p a r ti es . We h a v e a l s o g o ne t h r o u g h t h e or de r o f t h e S p e c i al B e n c h o f the I . T. A . T. in the c a se of Punjab State I n d u s t ri a l D e v e l o p m en t C or p o r a t i o n Lt d . ( s u p r a ) . O n p e ru s a l o f t h e same we find th a t the a s s es s ee in th e sa i d case w as involved in i de n t i c a l activity of financing i n d u s t r i al undertakings and i d e n ti c a l i s s ue was r a i s ed be f o r e th e B e n c h w h e t he r pr o f i t s e a r ne d f r om s a l e o f s h a r e s w o u l d b e b u s i n e s s i n c om e o r c a p i t a l g a i ns . Th e r e l e v a n t p o r t i o n o f a n n u a l r e p or t o f t h e c o r p o r a ti o n f o r f i n a n c i al y ea r 1 9 9 6 - 9 7 was relied upon t o d e te r m i n e th e n a t u r e o f t he a c t i v i ti e s c a r r i e d o ut b y th e a s s e s s ee a n d w h i c h a r e r ep ro d u c e d a t p a r a 8 2 of t h e o rd e r a s un d e r :

"The following portion of the annual report for financial year 1996-97 will indicate the nature of the activities of the assessee :-

"(3) Investments

(a) The company's Investment, in pursuance of its objects to assist by way of equity participation for the advancement, promotion and development of industry in the state is meant to be held for long-term and as such are valued, at cost.

(b) The profit/loss on sale of shares is being accounted for in the year in which the share scripts alongwith the duly executed transfer deeds are actually delivered to the transferees irrespective of the time at which the consideration for the same has been received.

(c) The corporation makes dis-investment of its shareholdings joint/assisted sector projects and private sector projects as per the provisions contained in the financial collab-

oration agreements and buy-back undertakings respectively executed by the collaborators/Promoters with the corporation.

(d) As per financial collaboration agreement the collaborators have to buy-back the shares at the end of specified period at the highest market price quoted on recognized stock exchange(s) or the book value along with the simple interest at the lending rate at which the financial institution/banks have provided long-term finance to the company, whichever is higher.

However, the terms of standard Financial Collaboration Agreement have been amended w.e.f. 18-10-1996 which provide for buy-back of the Corporation's investments at Highest price quoted on the Stock Exchanges 3 months prior to the date of option or with interest at the rate of which the Corporation provides term loans to the loanees, compounded half yearly, whichever is higher. Hence no provision for depreciation in the value of investment has been made as per the guidelines provided in terms of IDBI circular dated 26-4-1994, 23-6-1994 and 8-5-1996 and 19-2-1997.

(e) The market value of shares in case of quoted shares is calculated on the basis of shares last quoted in a recognized stock exchange on or before 31st March as the case may be. However, in case of shares which are not quoted in stock exchange since long have been started at cost.

(4) Project Promotion Expenses In promotion of projects being undertaken by the corporation, the expenses incurred on such projects during the implementation stages are charged to the revenue of the year in which the payment are made and shown under the head 'Project Survey Expenses'. The recovery of such expenses of the respective projects (excepting the cases of abandoned projects where no recoveries are made) are credited to the head 'Receipts on Account of Projects Matured' in the years of maturity of respective projects. The above policy has been adopted because promotion of projects is a major activity of the corporation. Recovery, if any, made in the subsequent years on account of abandoned projects is credited to the Miscellaneous Income in the year of actual receipt."

Th e issue was t h e r e a f t er d e c i de d in f a v o ur of the a s s e s s e e h o l d i n g t h e pr o f i t s e a rn e d t o b e i n t he n a t u r e o f c a p i t a l ga i n s . Th e r e l e v an t f i n di n g s a t p a ra 1 0 2 & 1 0 3 o f t h e o r d e r i s a s un d e r :

"102. Another common issue involved in the appeals of the Revenue is relating to assessing the profit on sale of shares under the head "Capital gains". The Revenue has raised the ground of appeal in this regard in ground No. 2 in 27 assessment year 1994-95, ground No. 2 in assessment year 1995-96 and ground No. 1 in assessment year 1996-97 and ground No. 1 in assessment year 1997-98.

103. This issue is also covered in favour of the assessee by the order of Tribunal for assessment years 1990-91 to 1992-93 (supra). The operative portion is in para 11 of the order which is hereby adopted and reproduced hereunder:--

"11. We have carefully considered the rival submissions and have gone through the orders of the Assessing Officer as well as the learned Commissioner of Income-tax (Appeals). As per the industrial policy of the Punjab Government, the assessee corporation was to act as a catalyst for establishment of new industrial projects in the State of Punjab, the assessee collaborators oration was to act as a catalyst for establishment of new Industrials Project in the State of Punjab by acting as promoters/collaborators alongwith other industrial entrepreneurs. At the time of the start of the project, the assessee corporation makes investment and when the production in the projects reaches upto a certain level where after the projects become self-sufficient, it disinvests those holdings in that project by selling it to the other promoter with a view to realize funds for investments in other projects. Thus basically the investment in shares of companies which were jointly promoted by the assessee alongwith other industrial undertakings is in the nature of an investment and any profit/gain earned by the assessee on the realization of such an investment is liable to tax under the head 'Capital gains' and this position has all along been accepted even by the departmental authorities upto the assessment year 1989-90. Accordingly we hold that the profit and gain realized by the assessee on account of disinvestment of shares is liable to tax as capital gains. As such the assessee is entitled to deduction under section 48(2)."

Grounds raised by the Revenue are accordingly dismissed."

28. M o r e o v e r on a n ot h e r i s s u e b e f o re t h e B e n c h, w he t h e r t h e d e d u c t i o n u/ s 8 0 M o f t h e A c t o n t h e d i v i d en d e a r n e d was to be d et e r m i n e d a ft e r deducting p ro p o r t i o n at e a d m i n i s t ra t i v e e x p e n s e s o r i n t e re s t e x p e ns e s , i t w a s h e l d t h a t t h e n a t u r e o f h o l d i n g o f t h e s h a r e s w a s i m pe r a t i v e t o d e c i d e t h e i s s u e. Th e m a j o r i t y vi e w o f t h e B e n ch , o n t he n a t u r e o f t h e i n ve s t m e n t , w as t h at t h e a s s e s s e e wa s h o l d i ng s h a r e s a s c a p i t al i n v e s t m e n t. T h e r e l e v a n t f i nd i n g s o f t h e 28 m a j o r i t y vi e w o f t h e B e n c h a t pa r a 4 2 o f t h e or d e r i s as under:

"42. In the present case the assessee was holding shares as a capital investment. The shares were not stock in trade of the assessee. The dividend income earned by the assessee might have come connection with business. But this connection is not sufficient to make dividend income-business income. Shares were held by the assessee as a capital investment. Dividend received by the assessee/company can under no circumstances be held to be business income. It is incidental income received by the assessee on account of holding of a capital investment. It cannot have a character different from the character of shares in the hands of the assessee. Shares were not trading assets."

S i n c e t h e f a c t s i n t h e p r e se n t c as e a r e i de n t i c al to t h a t i n t h e c a se o f P SI DC , t h e i s s u e st a n d s s q u ar e l y co v e r e d b y t h e s a i d d e c i s i o n.

29. Th e R e v e n u e c o n t e n d e d b e fo r e u s t h a t t h e f i nd i n g s w e r e m er e o bs e rv a t i o n s i . e . o b i t or d i c t um . W e f i nd n o me r i t i n t h e s a m e s i nc e o n t h e i s s ue o f t h e n a t u r e o f p r o f i t s e a r n e d t h e I TA T h a s c l e a r l y h e l d t h e s a m e t o b e i n t h e n a t u r e o f c a p i t a l g a i n s . Fu r th e r e v e n o n t he i s s u e o f deduction u/s 80M the f i n d i ng s of t he I TA T that t he p u r c h a s e s of s ha r e s w a s b y w a y o f i n v e s t m en t c a n n o t b e s a i d t o b e a n ob i t e r d i c t u m . An o b i t o r d i c tu m i s a L a t i n p h r a s e m ea n i n g " b y w a y " i . e . a r em a r k i n a j u d g me n t t h a t i s ' s a i d i n pa s s i n g" . A s i s e v i d e n t f r o m t h e a b o v e, t h e s a id w e r e t h e f i nd i n gs o f t h e m a j o ri t y v i e w b a s e d o n th e f a c t s of t h e c a s e w h i c h c a n n o t b e t e r m ed a s i n c i d e n t a l o r p a s s i ng r e m a r k o r o pi n i o n . Th e r e f or e , w e r e j ec t t he c on t e n t i o n of t h e R e v e nu e t h at t h e d e ci s i o n i n t h e c a s e o f P SI D C c a n n o t b e a p p l i ed t o th e f a c t s of t h e p r e se n t c a s e . 29

M o r e o v e r , i t i s n o t d i s p u te d t ha t s i n c e i n ce p t i o n t h e a s s e s s e e h a s bee n c l a i m i n g t he p r o f i t s e a rn e d f ro m s a l e o f s h a r e s a s c a p i t al g a i n s w h i c h h as n e v e r b e e n d i st u r b e d by t h e R e v e n u e. N o c h a n g e i n t h e c i r c u m s t an c e s i n r e s p e c t of t h e i m p u g ne d as s e s s m e n t y e a r h a v e a l s o b e e n b r o u g h t t o our notice. Th e r e f o r e , w e a g r e e w i t h t h e L d . c o u n s e l f o r a s s e s s e e t h a t t he r e w a s n o r e a so n t o d i s t u r b t ha t p o s i t i o n i n t h e i m p u gn e d y e a r . Th e H o n 'b l e A p e x C o ur t i n t h e c a se o f R a d h a S o a m i S a t s a n g Vs . CI T 1 9 3 I TR 3 2 1 ( S C) h e l d t ha t where f u n da m en t a l a s p e ct p e rm e a t i n g t hr o u gh d i f f e r e nt a s s e s s m e nt y e a rs h a s b ee n f o und a s a f a c t on e w a y o r th e o t h e r a n d p a r ti es h a d a l l o w e d t ha t p o s i t i o n t o be s u s t a i n e d b y w a y o f n ot ch a l l e n g i ng t h a t o r d e r , t h en i t wo u l d n o t a t a l l b e a p p r o p r i at e t o p e r m i t t h at p o s i t i o n t o b e c h a l l e n g ed i n s u b s e qu e n t yea r .

30. I n v i e w of t h e s am e , w e h ol d t h at t h e p r o fi t s e ar ne d b y t h e a s s es s e e fr om s a l e o f s h ar e s b e t r ea t e d as ca p i t a l ga i n a n d a d d i t i o n ma d e b y t r e at i n g t h e s a m e a s i n c o m e f r o m b u s i n e s s o f t h e as s e s s e e be d e l et ed .

Ground of a p pe a l N o . 3( a ) raised by the ass e s s e e t h e r e f o r e s t a n ds a l l o w e d .

31. G r o u n d No . 3 ( b ) r a i s e d by t h e a ss e s s e e re l a t e s to t h e i s s u e o f a l l o w a nc e o f e x p e n di t u re a g a i n s t t he p r of i t s e a r n ed f r o m s a l e o f s h ar e s a n d b e i n g c on s e q u e n t i a l t o holding the p r o f i t s f r o m s a l e o f s ha r e s a s b u s i n e s s i n c o me, t h e s a m e b e c o m e s i n f r u c tu o u s i n v i e w o f ou r h o l d i ng t h e ga i n s e a r ned f r o m s a l e o f sh a re s a s c a pi t a l ga i n s .

32. I n t h e r es u l t , t he a p p e a l f i l e d by t h e a s s e s s e e st a n d s p a r t l y a l l o w e d.

I T A N o . 1 85 / C h d/ 2 0 1 0 ( A . Y. 2 0 06 - 0 7 )

33. G r o u n d N o s. 1 an d 2 r a i s e d by t h e a s s e s se e r ea d a s under:

"1. (a) That the Ld. CIT (A) has erred in law & facts of the case in upholding an addition of Rs.9,74,98,671/- on account of un-claimed refunds under the facts & circumstances of the case.

b) That the appellant disputes the addition of Rs.3,67,81,729/- forming part of Rs.9,74,98,681/- which has already been added in the AY 2005-06.

2. That the Ld. CIT (A) is not justified in not accepting the method of accounting consistently being followed by the appellant under the facts & circumstances of the case."

34. It is relevant to observe here that the issues in these grounds are similar to the issue in ground No.1 raised by the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 10 & 13 of our order above shall apply to this case also with equal force. Ground Nos.1 and 2 raised by the assessee are, therefore, partly allowed.

35. G r o u n d N o s . 3, 4 a n d 5 r a i s e d b y t h e a s s e s s e e r ea d a s under:

"3.That the Ld. CIT (A) is not justified in not accepting that the Industrial Area activity is being carried on "No Profit No Loss basis" under the facts & circumstances of the case.

4. a) That the Ld. CIT (A) is not justified in upholding the computation of income from Industrial Area Activity at Rs.32.93 Crores under the facts & circumstances of the case.

b) The appellant disputes the quantum of income computed.

5. that the ld. CIT (A) is not justified in not allowing the deduction for expenditure incurred on KMP Expressway amounting to Rs.277.70 crores under the facts & circumstances of the case."

36. It is relevant to observe here that the issues in these grounds are similar to the issue in ground No.2 raised by the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 20-21 of our order above shall apply to this case also mutatis mutandis. Ground Nos.3, 4 and 5 raised by the assessee therefore stand allowed for statistical purposes.

37. G r o u n d N o. 6 r a i se d b y t h e a s s e sse e r e a d s a s u n der :

"6. a) That the Ld. CIT (A) is not justified in upholding the amount of Capital Gain on sale of shares amounting to Rs. 30,36,995/- as business Income under the facts & circumstances of the case.

b) That the Ld. CIT (A) is not justified in not adjudicating the ground of appeal disputing the finding of A. A. regarding expenditure in relation to investment in shares having been charged to Profit & Loss Account in the absence of any material on record under the facts & circumstances of the case."

38. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.3 raised by the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 27-31 of our order above, shall apply to this case also mutatis mutandis. Ground No.6(a) raised by the assessee stands allowed and ground No.6(b) raised by the assessee is dismissed.

39. G r o u n d o f a p p eal N o . 7 r a i s e d b y t h e a s s e s s e e re ad s a s under:

"7. a) That the Ld. CIT(A) is not justified in upholding dividend on shares amounting to Rs. 2,97,432/- as business income under the facts & circumstances of the case.

b) That the Ld. CIT (A) is not justified in not adjudicating the ground of appeal disputing the finding of A.A. regarding expenditure in relation to investment in shares having been charged to Profit & Loss Account in the absence of any material on record under the facts & circumstances of the case."

40. D u r i n g t h e i mpu g n e d a s s e ss m en t y e a r t h e a s se s s e e h a d e a r n e d d i v i d e n d i n c o m e a mo u n t i n g t o R s . 2,9 7 , 4 3 2 / - . Th e Assessing O f f i c er held that since th e a s s e ss e e corporation had been set up with the main object to establish i n d u s tr i a l e s t a te s a nd to provide fi n a n c e for g r o w t h of i n d u str y i n t he S t a te , t h e s h a r es a c q ui r e d b y i t w e r e c l o s el y r e l a t e d t o i t s bu s i n e s s a c t i vi t y a nd d i v i d e n d i n c o m e e a r ne d th e r e f r o m wa s t hu s t o b e t r e a te d a s i n c o m e from b u s i n e ss . Th e A s s e s s i ng Officer relied upon the d e c i s i o n o f th e H o n ' b l e A p e x Co u r t i n t h e c a se o f Br o o k B o n d I n d i a Lt d . V s . CI T, 1 6 2 I TR 3 7 3 . H e f u r t her h e l d t h a t t h e p r o v i si o n s of s e c t i o n 14 A wo u l d c o m e i nt o p l a y a n d p r o p o r t i on a t e e xp e n d i t u r e a l s o w a s d i s a l l o w e d i n c a s e t h e d i v i d e n d i nc o m e i s h e l d t o b e e xem p t . Th e L d . CI T( A p p e a l s ) u p h e l d t he a d d i ti o n s o m ad e .

41. B e f o r e u s , t h e Ld . c o u n s e l f o r a ss e s s e e s t a t ed t ha t t h e d i v i d e n d i nc o m e h a s b e e n e x e mp t e d f r o m t h e ta x a t i o n by t h e F i n a n ce A c t , 2 0 0 3 w . e .f . 1 . 1 .2 0 0 4 b y v i r t u e of i n s e r t i on o f s e c t i on 1 0 ( 34 ) i n t h e A c t an d , t h e r ef o r e , i t m a d e no d i f f e r e n ce w h e t he r d i v i d e n d i n c om e w a s i n t h e n a t u r e of b u s i n e s s i n c o m e o r o t h e r wi s e an d t h e s a me c ou l d n o t b e s u b j e c t e d t o t a x i n a n y c as e .

42. Th e L d . D R , o n th e o t h e r h an d , su p p o r t e d th e o r de r o f t h e CI T( A p p e a l s) a n d t h e As s e s s i ng O f f i c er .

43. W e h a v e h e ar d th e c o n te n t i o ns of b o t h t h e p a r ti es . We find merit in the c o n t e n ti o n s of the Ld. counsel f or assessee. Th e F i n a n c e A c t , 2 00 3 i n s e rt e d cl a us e ( 3 4 ) t o s e c t i o n 1 0 wh i c h d e a l s w i t h i n c om e w h i c h a r e e xe m p t f r o m t a x a t i o n a nd d o n o t f o r m p a r t o f t h e t o t a l i n co m e a t a l l , e x c l u d i n g t h e i nc o m e b y w a y o f d i v i d e n d f r o m t he p u r v i e w of taxation. At the same time, we find section 115O was inserted in the Act making th e c o m p a n i es d i s t r i b u ti n g d i v i d e n d t o p a y t a x a t a s p e c i f i e d r a t e t h e r eon . Th u s t a x a t i o n of d i v i d e n d c h a n ge d ha n d s f r o m th e re c i p i e n t to t h e p a y e r o f d i vi d e n d b y v i r t u e of t h i s a m e n d me nt b r o u g h t a b o u t i n t h e Ac t . D i v i d e n d o f al l n a t u r e a n d c ol ou r w h e t h e r s o u r c e d f r o m th e b u s i n e s s a c ti v i t i e s o f t h e as s e s s e e or o t h e r w i s e i s n o t t a x a b l e i n th e h an d s o f t h e r e ci p ie n t b u t i s t o b e t a x e d b y th e p a y e r o f d i v i de n d o r i n o t h e r w o r d s , t h e c o m p a n i e s d e c l ar i n g a n d d i st r i bu t i n g d i v i d e n d . I n vi e w of t h e s a m e , t h e r e fo r e , w e c a n n o t a g r e e w i t h t h e co n t e n t i o ns o f t h e R e v e n u e th a t t h e s a i d d i vi d e n d i s t o b e t a x e d i n t h e h a n d s o f t h e as s e s s e e b e i n g i n t h e na t u r e of b u s i n es s income. Th e r e l i a n c e p l a c e d on t h e d e c i s i o n of th e H o n ' bl e A p e x C o u r t i n th e c a s e o f B r o ok B o n d I n di a L td . ( s u p r a ) d o e s n o t a p p l y to t h e p r e s e n t c as e s i n c e i t r e l ate d t o t h e a s s e s s m e nt y e ar 1 9 5 5 - 5 6 a n d 195 6 - 5 7 w he n t h e p o s i t i o n o f law v i s - à- v i s taxation of d i v i d en d was g o v er n ed by t he 34 I n co m e Ta x A c t , 1 9 2 2 w h i c h t a x ed d i v i d e n d i n t he h a n d s o f t h e r e c i pi e n t .

E v e n o th e r w i se w e h a v e a l re a d y h e l d t h a t t h e i n c o m e e a r n e d f r o m s a l e o f s h a r e s b e t r e a t e d a s c a pi t a l g a i n s , h o l d i n g t h e a c t i v i t y o f t h e a s s e ss e e a s i n v e s t m en t a n d n o t t r a d i n g i n s h a re s , t h e r e f o re , th e d i v i d e n d i n co m e e a r n ed f r o m t h e s h ar e s c a n n o t b e s ai d to b e f r o m b u s i n es s a c t i v i t y o f t h e a ss e s s e e.

H o w e v e r s i n ce t he d i v i d e n d i n c ome i s e x e m p t f r o m t a x , t h e p r ov i s i o ns o f s e c t i on 1 4A d i sa l l o w i n g e x p en s es i n c u rr e d f o r e a r n i n g t h e sa m e , a r e at t r a c te d . F o r t h e l i m i ted p u r p o se o f a p p l y i ng t h e p r o v i s i o ns o f s e c t i o n 1 4A , t he i s s u e i s r e s t o r e d b a c k t o t h e f i l e o f t h e AO, w i t h a d i r e ct i o n t o d e ci d e the issue in a c c o r d a n ce w i th law after giving due o p p o r t u n i t y o f he a r i n g t o t h e as se s s e e .

44. I n v i e w o f th e sa m e , t h e a d d i t i on m a d e t o t h e in c o m e o f t h e a s s e s se e on a c c o u n t o f d i v i d e n d i n c o m e i s , t h e r e f o r e, deleted. And th e i s s ue of de t e r m i n i ng t he e x p e n s es d i s a l l o w ab l e a s p e r s e ct i o n 1 4 A i s r e s t or e d to t h e f i l e o f the A s s e s s i n g O f f i ce r.

G r o u n d o f a p pe a l N o . 7 r a i s e d b y t h e a s s e s s e e i s , t h e r e f o r e s t a n ds a d j u d i c a te d a s ab o v e .

45. G r o u n d o f a p p eal N o . 8 r a i s e d b y t h e a s s e s s e e re ad s a s under:

"8. That the Ld. CIT (A) is not justified in upholding that the investment of Rs.231.44 crores is not for business purpose under the facts & circumstances of the case."

46. B r i e f f a c t s re l e va n t t o t h e i s s u e a r e t h a t t h e A s se s s i ng O f f i c e r h a d m e nt i o n e d i n t h e as s e s s m e n t o r de r t h a t t h e assessee has paid R s. 2 3 1 . 4 4 crores t o wa r ds Kundli- M a n e s a r - Pa l w a l E x p r e s s w a y a nd t h e e x p e nd i t ur e i s n o t d i r e c t l y r e l a t ab l e t o t h e b us i n e s s o f t h e as s e s s e e s i n c e i t i s n o t i n c i d e n t a l to c a r r y i n g o ut t h e b a s i c a c ti v i ti e s o f t h e assessee. Th e as s e s s e e i s de v e l op i n g i n d u st r i a l es t a t e s a n d financing i n d u st r i a l a c t i vi t y an d is not i n vo l v e d in c o n s t r u c ti o n of express w a y s. Th e Assessing Officer o b s e r v e d t h a t on t h e o n e h a n d t h e as s e s s ee ha d r a i se d interest b e a r i ng loans on which i n t e r es t a mo u n t i n g to R s . 7 , 9 6 , 23 , 4 3 3 /- h a d b e e n p a i d a n d , o n t h e o t h e r h a n d , n o n b u s i n e s s e xp e n d i t u r e a m o un t i n g t o R s . 23 1. 4 4 c r o re s has been i n c ur r e d . Th e Assessing O f f i ce r , t h e r e f o r e, d i s a l l o we d i n t e re s t e x p e n d i t u r e @ 1 0 % o n t h e e x p e n d i t u re o f R s . 2 31 . 4 4 c r or e s b e i ng f o r n o n b u s i n e ss p u rp o se s . S i n ce , the d i s a l l o w a n ce worked out to more than the interest e x p e n d i t ur e t h e A s s e s s i n g O ff i ce r d i s a l l o we d wh o l e o f t h e interest e x p en di t u r e a m o u n t i ng to R s . 7 , 9 6 , 23 , 4 3 3 / - b y r e l y i n g o n d e c i si o n o f t h e H o n ' b l e P u n j a b & H a r y a n a H i g h C o u r t i n t h e c ase o f A b h i s h e k i nd u s t r y ' 28 6 I TR 1 .

47. Th e L d . C I T( A ) he l d t h e i n v e s tme n t s t o b e f o r n o n - b u s i n e s s p u rp o se b u t a t t h e s am e t i m e a g r e e d w i t h t h e a s s e s s e e s a rg u me n t t h a t i n t h e c a s e o f s u f f i c i e nc y o f o w n interest f re e fu n d s no disallowance of i n ter e s t was w a r r a n t e d . H e th e r e f o r e d i r e ct ed t h e A ss e s s i n g O f f i c e r t o 36 e x a m i n e t h e f u nd f l o w p o s i t i on o f t h e a s s e s s e e a n d m a ke d i s a l l o w an c e onl y to the ex t en t borrowed f un d s were u t i l i z e d f o r ma k i n g t h e i nv e s t m ent .

48. Th e a s s e s s e e i n t h e p r es e n t g r o un d h a s c h a l l e n g ed t he f i n d i n g o f t h e C I T( A ) t h at t h e i n v e s t m e nt s w e re f o r n o n - b u s i n e s s p u r p o se .

49. No a r g u m e nt s were a d v a n ce d d u r i n g the co u rs e of h e a r i n g be f o r e us b y t h e L d . C o uns e l f o r t h e a s se ss e e .

G r o u n d N o. 8 t h er e f o r e st a n d s di sm i s s e d .

50. The appeal of the assessee therefore stands partly allowed.

I T A N o . 9 66 / C h d/ 2 0 1 0 ( A .Y . 2 0 07 - 0 8 )

51. Ground No.1 raised by the assessee reads as under:

"1. That the Ld. CIT (A) has erred in law & facts of the case in upholding an addition of Rs.2,22,66,591/- on account of unclaimed refunds which is highly unjustified & uncalled for."

52. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.1 raised by the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 10-13 of the order above shall apply to this case also mutatis mutandis. Ground No.1 raised by the assessee stands partly allowed.

53. Ground No.2 raised by the assessee reads as under:

" 2. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding an addition of Rs.118.79 crores on 37 account of income from Industrial Area Activity which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred under the facts & circumstances of the case in not allowing expenditure incurred on KMP Expressway amounting to Rs.360.87 crores & Delhi Metro to Gurgaon amounting to Rs.40 crores which is highly unjustified & uncalled for."

54. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.2 raised by the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 20-21 of the order above shall apply to this case also mutatis mutandis. Ground No.2 raised by the assessee is allowed for statistical purposes.

55. Ground No.3 raised by the assessee reads as under:

"3. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding the amount of Capital Gain on sale of shares amounting to Rs.1,70,86,676/- as Business Income which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred in law & facts in not adjudicating the ground of appeal disputing the finding of A. A. regarding expenditure in relation to investment in shares having been charged to Profit & Loss Account in the absence of any material on record which is highly unjustified, & uncalled for."

56. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.3 raised by the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 27-31 of the order above shall apply to this case also mutatis mutandis. Ground No.3(a) raised by the assessee is allowed and ground No.3(b) is dismissed.

57. Ground No.4 raised by the assessee reads as under: 38

"4. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding the dividend on shares amounting to Rs.2,48,224/- as business income which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred in law & facts in not adjudicating the ground of appeal disputing the finding of A. A. regarding expenditure in relation to investment in shares having been charged to Profit & Loss Account in the absence of any material on record which is highly unjustified, & uncalled for."

58. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.7 raised by the assessee in ITA No.185/Chd/2010 and the findings given in ITA No.185/Chd/2010 at para 43-44 of the order above shall apply to this case also mutatis mutandis. Ground No.4(a) & (b) raised by the assessee is allowed.

59. Ground No.5 raised by the assessee reads as under:

"5. That the Ld. CIT (A) has erred in law & facts of the case in upholding that the investment of Rs.360.87 crores is not for business purpose which is highly unjustified & uncalled for."

60. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.8 raised by the assessee in ITA No.185/Chd/2010 and the findings given in ITA No.185/Chd/2010 at para 49 of the order above shall apply to this case also mutatis mutandis. Ground No.5 raised by the assessee is therefore dismissed .

The appeal of the assessee is partly allowed. I T A N o . 8 27 / C h d/ 2 0 1 1 ( A . Y. 2 0 08 - 0 9 )

61. Ground No.1 raised by the assessee reads as under: 39

"1. That the Ld. CIT (A) has erred in law & facts of the case in upholding an addition of Rs.2,63,53,622/- on account of unclaimed refunds which is highly unjustified & uncalled for."

62. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.1 raised by the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 10-13 of our order above shall apply to this case also mutatis mutandis. Ground No.1 raised by the assessee is partly allowed.

63. Ground No.2 raised by the assessee reads as under:

"2. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding an addition of Rs.254.80 crores on account of income from Industrial Area Activity which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred under the facts & circumstances of the case in not allowing expenditure incurred on KMP Expressway amounting to Rs.21.10 crores & Delhi Metro to Gurgaon amounting to Rs.40 crores which is highly unjustified & uncalled for."

64. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.2 raised by the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 20-21 of our order above shall apply to this case also mutatis mutandis. Ground No.2(a) & (b) raised by the assessee is allowed for statistical purposes.

65. Ground No.3 raised by the assessee reads as under:

"3. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding the amount of Capital Gain on sale of shares amounting to Rs.1,51,12,884/- as Business Income which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred in law & facts in not adjudicating the ground of appeal disputing the finding of A. 40 A. regarding expenditure in relation to investment in shares having been charged to Profit & Loss Account in the absence of any material on record which is highly unjustified, & uncalled for."

66. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.3 raised by the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 27-31 of our order above shall apply to this case also mutatis mutandis. Ground No.3(a) by the assessee is allowed and ground No.3(b) raised by the assessee is dismissed.

67. Ground No.4 raised by the assessee reads as under:

"4. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding the dividend on shares amounting to Rs.4,33,381/- as business income which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred in law & facts in not adjudicating the ground of appeal disputing the finding of A. A. regarding expenditure in relation to investment in shares having been charged to Profit & Loss Account in the absence of any material on record which is highly unjustified, & uncalled for."

68. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.7 raised by the assessee in ITA No.185/Chd/2010 and the findings given in ITA No.185/Chd/2010 at para 43-44 of our order above shall apply to this case also mutatis mutandis. Ground No.4(a) & (b) raised by the assessee is allowed.

69. Ground No.5 raised by the assessee reads as under

"5. That the Ld. CIT (A) has erred in law & facts of the case in upholding that the investment of Rs.22.22 crores is not for business purpose which is highly unjustified & uncalled for."

70. It is relevant to observe here that the issue in this 41 ground is similar to the issue in ground No.8 raised by the assessee in ITA No.185/Chd/2010 and the findings given in ITA No.185/Chd/2010 at para 49 of the order above shall apply to this case also mutatis mutandis. Ground No.5 raised by the assessee is dismissed.

The appeal of the assessee is partly allowed. I T A N o . 9 8/ C h d /2 0 1 3 ( A . Y . 2 0 0 9 -1 0 )

71. Ground No.1 raised by the assessee reads as under:

"1. That the Ld. CIT (A) has erred in law & facts of the case in upholding an addition of Rs.3,20,11,625/- on account of unclaimed refunds which is highly unjustified & uncalled for."

72. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.1 raised by the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 10-13 of our order above shall apply to this case also mutatis mutandis. Ground No.1 raised by the assessee is partly allowed.

73. Ground No.2 raised by the assessee reads as under:

"2. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding an addition of Rs.152.55 crores on account of income from Industrial Area Activity which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred under the facts & circumstances of the case in not allowing expenditure incurred on KMP Expressway amounting to Rs.76.62 crores & Delhi Metro to Gurgaon amounting to Rs.18.13 crores which is highly unjustified & uncalled for."

74. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.2 raised by the assessee in ITA No.184/Chd/2010 and the findings 42 given in ITA No.184/Chd/2010 at para 20-21 of our order above shall apply to this case also mutatis mutandis. Ground No.2(a) & (b) raised by the assessee is allowed for statistical purposes.

75. Ground No.3 raised by the assessee reads as under:

"3. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding the amount of Capital Gain on sale of shares amounting to Rs.22,000/- as Business Income which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred in law & facts in not adjudicating the ground of appeal disputing the finding of A. A. regarding expenditure in relation to investment in shares having been charged to Profit & Loss Account in the absence of any material on record which is highly unjustified, & uncalled for."

76. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.3 raised by the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 27-31 of our order above shall apply to this case also mutatis mutandis. Ground No.3(a) by the assessee is allowed and ground No.3(b) raised by the assessee is dismissed.

77. Ground No.4 raised by the assessee reads as under:

"4. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding the dividend on shares amounting to Rs.4,44,910/- as business income which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred in law & facts in not adjudicating the ground of appeal disputing the finding of A. A. regarding expenditure in relation to investment in shares having been charged to Profit & Loss Account in the absence of any material on record which is highly unjustified, & uncalled for."

78. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.7 raised by 43 the assessee in ITA No.185/Chd/2010 and the findings given in ITA No.185/Chd/2010 at para 43-44 of our order above shall apply to this case also mutatis mutandis. Ground No.4(a) & (b) raised by the assessee is allowed.

The appeal of the assessee is partly allowed. I T A N o . 7 28 / C h d/ 2 0 1 3 ( A . Y. 2 0 10 - 1 1 )

79. Ground No.1 raised by the assessee reads as under:

"1. That the Ld. CIT (A) has erred in law & facts of the case in upholding an addition of Rs.17,98,598/- on account of unclaimed refunds which is highly unjustified & uncalled for."

80. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.1 raised by the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 10-13 of our order above shall apply to this case also mutatis mutandis. Ground No.1 raised by the assessee is partly allowed.

81. Ground No.2 raised by the assessee reads as under:

"2. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding an addition of Rs.180.17 crores on account of income from Industrial Area Activity which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred under the facts & circumstances of the case in not allowing expenditure incurred on KMP Expressway amounting to Rs.81.99 crores & Delhi Metro to Gurgaon amounting to Rs.17 crores which is highly unjustified & uncalled for."

82. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.2 raised by the assessee in ITA No.184/Chd/2010 and the findings 44 given in ITA No.184/Chd/2010 at para 20-21 of our order above shall apply to this case also mutatis mutandis. Ground No.2(a) & (b) raised by the assessee is allowed for statistical purposes.

83. Ground No.3 raised by the assessee reads as under:

"3. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding the dividend on shares amounting to Rs.3,26,060/- as business income which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred in law & facts in not adjudicating the ground of appeal disputing the finding of A. A. regarding expenditure in relation to investment in shares having been charged to Profit & Loss Account in the absence of any material on record which is highly unjustified, & uncalled for."

84. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.7 raised by the assessee in ITA No.185/Chd/2010 and the findings given in ITA No.185/Chd/2010 at para 43-44 of our order above shall apply to this case also mutatis mutandis. Ground No.3(a) & (b) raised by the assessee is allowed.

The appeal of the assessee is partly allowed. I T A N o . 7 29 / C h d/ 2 0 1 3 ( A . Y. 2 0 11 - 1 2 )

85. Ground Nos.1 raised by the assessee read as under:

"1. That the Ld. CIT (A) has erred in law & facts of the case in upholding an addition of Rs.1,58,98,296/- on account of unclaimed refunds under the facts & circumstances of the case.

86. It is relevant to observe here that the issues in these grounds are similar to the issue in ground No.1 raised by the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 10-13 of our order 45 above shall apply to this case also mutatis mutandis. Ground Nos.1 raised by the assessee are partly allowed.

87. Ground Nos.2 (a) & (b) raised by the assessee read as under:

"2. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding an addition of Rs.136.42 crores on account of income from Industrial Area Activity which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred under the facts & circumstances of the case in not allowing expenditure incurred on KMP Expressway amounting to Rs.16.87 crores & Delhi Metro to Gurgaon amounting to Rs.70 lacs which is highly unjustified & uncalled for."

88. It is relevant to observe here that the issues in these grounds are similar to the issue in ground No.2 raised by the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 20-21 of our order above shall apply to this case also with equal force. Ground Nos.2(a) & (b) raised by the assessee are partly allowed.

89. Ground No.3(a) & (b) raised by the assessee reads as under:

"3. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding the amount of Capital Gain on sale of shares amounting to Rs.1,32,38,997/- as Business Income which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred in law & facts of the case in not adjudicating the ground of appeal disputing the finding of A. A. regarding expenditure in relation to investment in shares having been charged to Profit & Loss Account in the absence of any material on record which is highly unjustified & uncalled for."

90. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.3 raised by 46 the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 27-31 of our order above shall apply to this case also mutatis mutandis. Ground No.3 (a) raised by the assessee is allowed and ground No.3(b) raised by the assessee is dismissed.

The appeal of the assessee is partly allowed. I T A N o . 7 33 / C h d/ 2 0 1 4 ( A . Y. 2 0 12 - 1 3 )

91. Ground No.1 raised by the assessee reads as under:

"1. That the Ld. CIT (A) has erred in law & facts of the case in upholding an addition of Rs.18,38,67,254/- on account of unclaimed refunds which is highly unjustified & uncalled for."

92. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.1 raised by the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 10-13 of our order above shall apply to this case also mutatis mutandis. Ground No.1 raised by the assessee is partly allowed.

93. Ground No.2 raised by the assessee reads as under:

"2. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding an addition of Rs.35.13 crores on account of income from Industrial Area Activity which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred under the facts & circumstances of the case in not allowing expenditure incurred on KMP Expressway amounting to Rs.25.81 crores & Delhi Metro to Faridabad amounting to Rs.25 crores which is highly unjustified & uncalled for."

94. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.2 raised by the assessee in ITA No.184/Chd/2010 and the findings 47 given in ITA No.184/Chd/2010 at para 20-21 of our order above shall apply to this case also mutatis mutandis. Ground No.2(a) & (b) raised by the assessee is allowed for statistical purposes.

95. Ground No.3 raised by the assessee reads as under:

"3. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding the dividend on shares amounting to Rs.32,25,160/- as Business Income which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred in law & facts in not adjudicating the ground of appeal disputing the finding of A. A. regarding expenditure in relation to investment in shares having been charged to Profit & Loss Account in the absence of any material on record which is highly unjustified, & uncalled for."

96. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.3 raised by the assessee in ITA No.185/Chd/2010 and the findings given in ITA No.185/Chd/2010 at para 43-44 of our order above shall apply to this case also mutatis mutandis. Ground No.3(a) raised by the assessee is allowed and ground No.3(b) raised by the assessee is dismissed.

The appeal of the assessee is partly allowed. I T A N o . 7 91 / C h d/ 2 0 1 5 ( A . Y. 2 0 13 - 1 4 )

97. Ground No.1 raised by the assessee reads as under:

"1. That the Ld. CIT (A) has erred in law & facts of the case in upholding an addition of Rs.21,17,93,427/- on account of unclaimed refunds which is highly unjustified & uncalled for."

98. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.1 raised by the assessee in ITA No.184/Chd/2010 and the findings 48 given in ITA No.184/Chd/2010 at para 10-13 of our order above shall apply to this case also mutatis mutandis. Ground No.1 raised by the assessee is partly allowed.

99. Ground No.2 raised by the assessee reads as under:

"2. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding an addition of Rs.104.14 crores on account of income from Industrial Area Activity which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred under the facts & circumstances of the case in not allowing expenditure incurred on KMP Expressway amounting to Rs.15.20 crores which is highly unjustified & uncalled for."

100. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.2 raised by the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 20-21 of our order above shall apply to this case also mutatis mutandis. Ground No.2(a) & (b) raised by the assessee is allowed for statistical purposes.

101. Ground No.3 raised by the assessee reads as under:

"3. a) That the Ld. CIT (A) has erred in law & facts of the case in upholding the dividend profit on shares amounting to Rs.11,66,138/- as Business Income against the capital loss of Rs.3,69,22,532/- which is highly unjustified & uncalled for.

b) That the Ld. CIT (A) has erred in law & facts in not adjudicating the ground of appeal disputing the finding of A. A. regarding expenditure in relation to investment in shares having been charged to Profit & Loss Account in the absence of any material on record which is highly unjustified, & uncalled for."

102. It is relevant to observe here that the issue in this ground is similar to the issue in ground No.3 raised by the assessee in ITA No.184/Chd/2010 and the findings given in ITA No.184/Chd/2010 at para 27-31 of our order 49 above shall apply to this case also mutatis mutandis. Ground No.3(a) raised by the assessee is allowed and ground No.3(b) raised by the assessee is dismissed.

The appeal of the assessee is partly allowed.

103. I n t h e r e s ul t , al l t h e a p p e a l s f i l e d b y t h e a s s e s se e a r e p a r t l y a l l o w e d.

O r d e r p r on o u n c ed i n t h e o p e n cou r t .

              Sd/-                                                        Sd/-

  (SANJAY GARG)                                             (ANNAPURNA GUPTA)
JUDICIAL MEMBER                                            ACCOUNTANT MEMBER

Dated : 16 t h November, 2017
*Rati*
Copy to:
  1.     The Appellant
  2.     The Respondent
  3.     The CIT(A)
  4.     The CIT
  5.     The DR
                                                 Assistant Registrar,
                                                 ITAT, Chandigarh

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Income Tax Appellate Tribunal - Chandigarh

M/S Haryana State Industrial & ... vs Addl. Cit, Panchkula on 16 November, 2017