The Revenue Tax Appellate Tribunal (ITAT), Bangalore upheld the revision judgment made by Section 263 of the Income Tax Act of 1961 and determined that the income from Joint Development Agreements (JDA) is considered commercial income.
Before issuing the aforementioned notice according to Section 133C, the Income Tax Officer questioned the appellant, M/s. ETA Star Infopark asked the appellant to provide copies of the Joint Development Agreement, pertinent Powers of Attorneys issued in the Developer’s favor, and copies of the Partnership Deed for his review. The appellant responded by providing all such papers.
After concluding that the appellant had engaged in neither business activity nor generated any income from it during the A.Y. 2015–16, the AO requested permission from the Principal Commissioner of Income-tax to change the limited scrutiny into complete scrutiny and deny the general and establishment expenses that the appellant had claimed as a deduction in the Return.
The Pr. CIT approved the conversion of the assessment proceedings into complete scrutiny for disallowing the general and administrative expenses claimed by the appellant as a deduction in the return after reviewing the appellant’s records and concluding that the appellant had neither engaged in any business activities nor earned any income from the business.
The assessee’s attorney, Annamalai, argued that the PCIT’s invocation of section 263 of the Act was only a change of opinion and that he was not authorized to differ from his predecessor of equal rank in concluding that the appellant engaged in commercial activity by entering into a JDA dated 28 March 2011 with a Developer and proposing to receive proceeds from sales on an annual basis, which would qualify the appellant’s activity as a venture in the course of business.
The Revenue’s attorney, Dr. It was reported by Manjunath Karkihalli that The A.O. It is incorrect and harmful to the interests of revenue, as defined by explanation 2 of section 263 of the Act, that the receipts were taxed as long-term capital gains in the assessment order. As a result, the Act’s Section 263 notice was published to modify the assessment order.
According to the bench made up of Chandra Poojari, an accountant, and Beena Pillai, a judge, “There was a proper examination of the issue disputed by PCIT by AO at the stage of assessment and the PCIT cannot find fault with the action of the AO in accepting the claim of the assessee that income arose out of the JDA to be treated as business income instead of Long term capital gain offered by assessee.”