Search Results For: capital gains


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DATE: February 6, 2020 (Date of pronouncement)
DATE: February 22, 2020 (Date of publication)
AY: 2011-12
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CITATION:
S. 2(47)/45: A reduction of capital results in an "extinguishment of rights" in the shares and constitutes a "transfer‟. The fact that the percentage of shareholding remains unchanged even after the reduction is irrelevant. The loss arising from the cancellation of shares is entitled to indexation and is allowable as a long-term capital loss (Bennett Coleman 133 ITD 1 (Mum)(SB) distinguished, all imp verdicts referred)

The ld DR vehemently argued that the percentage of shareholding remains the same because reduction of shares had happened for all shareholders. We find that the ld DR relied on para 24 of the judgement of Special Bench of Mumbai Tribunal in 133 ITD 1 supra to support his proposition. In this regard, we hold that the percentage of shareholding has got no bearing for chargeability of capital gains under the Act. We further find that the provisions of section 55(2)(v) of the Act were applied in the Mumbai Special Bench decision also in para 28 thereon. We find that in the case before us, the provisions of section 55(2)(v) of the Act will have no application at all and if the assessee is not given the benefit, it will never get it and none of the clauses of section 55(2)(v) of the Act would be applicable to the assessee in the instant case. Hence reliance placed on para 28 of the judgement of Special Bench of Mumbai Tribunal does not advance the case of the revenue

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DATE: November 18, 2019 (Date of pronouncement)
DATE: January 18, 2020 (Date of publication)
AY: 1999-00
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CITATION:
Capital Gains from Family Arrangements: A family settlement which is a settlement amongst family members in the context of their 'preexisting right' is not a "transfer". Such a settlement only defines a preexisting joint interest as a separate interest. However, if there is no preexisting right, the family arrangement constitutes a "transfer". Merely because dispute involved some family members and such dispute is ultimately settled by filing consent terms, the same cannot be styled as a family arrangement or family settlement so as to hold that the consideration received as a result of such settlement, does not constitute capital gain (all imp verdicts referred)

The settlement between the Appellant and the said two persons can hardly be described as a family settlement. The settlement may be enforceable inter-parties now that the same is incorporated in the consent terms, based upon a consent decree may have been issued. However such settlement, cannot be called as a family settlement or family arrangement, as is understood in the case of Kale and others (supra) or in the case of Sachin Ambulkar (supra). Merely because dispute involved some family members and such dispute is ultimately settled by filing consent terms, the same cannot be styled as a family arrangement or family settlement and on such basis, it cannot be held that the consideration received as a result of such settlement, does not constitute capital gain.

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DATE: January 10, 2020 (Date of pronouncement)
DATE: January 18, 2020 (Date of publication)
AY: 2013-14
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CITATION:
S. 54F: The words "in India" cannot be read into section 54F when Parliament in its legislative wisdom has deliberately not used the words. The assessee is entitled to exemption under section 54F of the Act though he has acquired house property in a foreign country. The amendment to s. 54F by the Finance Act, 2014 w.e.f. 2015 is applicable only prospectively (all imp verdicts considered)

Unless there is an ambiguity, it would not be open to the Court to depart from the normal rule of construction which is that the intention of the legislature should be primarily to gather from the words which are used. It is only when the words used are ambiguous that they would stand to be examined and considered on surrounding circumstances and constitutionally proposed practices

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DATE: September 5, 2019 (Date of pronouncement)
DATE: October 5, 2019 (Date of publication)
AY: 2010-11
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CITATION:
S. 48 Capital Gains: The payment towards discharge of outstanding loan liability out of the sale proceeds of mortgaged property is a mere application of income and not a diversion of sale proceeds by overriding title. The assessee cannot claim such application as deduction for the purpose of computing Capital Gain in terms of s. 48 of the Act. The legal position prevailing prior to SARFAESI Act is also germane even after the enactment of SARFAESI Act

I thus agree with the view taken by the learned Judicial Member that the consideration from sale of property to the extent of principal component of loan adjusted by the bank cannot be treated as ‘diversion of income by overriding title’ and was thus not deductible from the total consideration accrued to the assessee from sale of property. In my considered opinion, so far as the instant dispute is concerned, the legal position prevailing prior to SARFAESI Act is also germane even after the enactment of SARFAESI Act

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DATE: April 1, 2019 (Date of pronouncement)
DATE: April 30, 2019 (Date of publication)
AY: 2013-14
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CITATION:
S. 50C Capital Gains: Though s. 50C is a deeming provision and the AO is obliged to compute the capital gains by taking the valuation arrived at by the DVO in place of the actual consideration received by the assessee, the assessee is entitled to challenge the correctness of the DVO's valuation before the CIT(A) and the Tribunal. The DVO has to be given an opportunity of hearing

It is sufficient, for our purposes, to take note of the fact that the provisions of Section 23A(1)(i) of the Wealth Tax Act, 1957, “shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act”. Section 23A(1)(i) of the Wealth Tax Act provides that “Any person……. objecting to any order of the Valuation Officer under section 35 having the effect of enhancing the valuation of any asset or refusing to allow the claim made by the assessee under the said section ……………may appeal to the Commissioner (Appeals) against the assessment or order, as the case may be, in the prescribed form and verified in the prescribed manner …”. In effect thus, by the virtue of Section 23A(1)(i) being incorporated, with necessary modifications, in Section 50C, the correctness of a DVO’s report can indeed be challenged. It is, however, also important to note that the provisions of Section 23A(6) of the Wealth Tax Act shall, with necessary modifications, also apply in the present context- as has been provided in Section 50C(2) itself

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DATE: March 12, 2019 (Date of pronouncement)
DATE: April 13, 2019 (Date of publication)
AY: 2008-09
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CITATION:
S. 50C Capital Gains: The assessee cannot avoid the impact of s. 50C by claiming that his s. 54EC investment is large enough to cover the deemed consideration based on stamp duty valuation. Such interpretation renders s. 50C redundant

The deeming fiction under section 50C of the Act, must be given its full effect and the Court should not allow to boggle the mind while giving full effect to such fiction. We are not opposing the proposition canvassed by the Counsel of the Assessee that deeming fiction must be applied in relation to the situation for which it is created. However, while giving full effect to the deeming fiction contained under section 50C of the Act for the purpose of computation of the capital gain under section 48, for which section 50C is specifically enacted, the automatic fallout thereof would be that the computation of the assessee’s capital gain and consequently the computation of exemption under section 54EC, shall have to be worked out on the basis of substituted deemed sale consideration of transfer of capital asset in terms of section 50C of the Act

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DATE: March 26, 2019 (Date of pronouncement)
DATE: April 3, 2019 (Date of publication)
AY: 2010-11
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CITATION:
S. 45(4): If new partners come into the partnership and bring cash by way of capital contribution and the retiring partners take cash and retire, the retiring partners are not relinquishing their interest in the immovable property. What they relinquish is their share in the partnership. As there is no transfer of a capital asset, no capital gains or profit can arise & s. 45(4) has no application (A. N. Naik 265 ITR 346 (Bom) distinguished, Dynamic Enterprises 359 ITR 83 (Karn) [FB] followed)

The property belongs to the partnership firm. It did not belong to the partners. The partners only had a share in the partnership asset. When the five partners came into the partnership and brought cash by way of capital contribution to the extent of their contribution, they were entitled to the proportionate share in the interest in the partnership firm. When the retiring partners took cash and retired, they were not relinquishing their interest in the immovable property. What they relinquished is their share in the partnership. Therefore, there is no transfer of a capital asset, as such, no capital gains or profit arises in the facts of this case. In that view of the matter, Section 45(4) has no application to the facts of this case

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DATE: April 3, 2019 (Date of pronouncement)
DATE: April 3, 2019 (Date of publication)
AY: 2006-07, 2007-08
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CITATION:
S. 45(4): The revaluation of asset being land held by the partnership firm which results into enhancement of value of asset and this enhanced amount credited in capital account of partners and when a retiring partner takes amount in his capital account including enhanced value of asset, it does not give rise to Capital Gain under section 45(4) r.w. Section 2(14) of the Income-tax Act

The partnership firm continued to exist even after the retirement of Smt. Hemlata Shetty and Shri Sudhakar Shetty from the partnership. There was only a reconstitution of partnership firm on their retirement without there being any dissolution and the land properly acquired by the partnership firm continued to be owned by the said firm even after reconstitution without any extinguishment of rights in favour of the retiring partners. The retiring partners did not acquire any right in the said property and what they got on retirement was only the money equivalent to their share of revaluation surplus (enhanced portion of the asset revalued) which was credited to their capital accounts. There was thus no transfer of capital asset by way of distribution of capital asset either on dissolution or otherwise within the meaning of section 45(4) read with section 2(14) of the Act.

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DATE: March 8, 2019 (Date of pronouncement)
DATE: March 16, 2019 (Date of publication)
AY: 2011-12
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CITATION:
S. 50C Capital Gains: The adoption of stamp valuation as the sale consideration is not justified in absence of any evidence that the sale consideration was more than the value shown in the agreement. The AO has not brought on record that the property under sale was not was under various encumbrances and the assessee was having the absolute marketable title of the said property (All judgements considered)

The value adopted for the purpose of payment of stamp duty is not disputed by the assessee. The assessing officer has not brought on record that the property under sale was not was under various encumbrances and the assessee was having the absolute marketable title of the said property. No material is brought on record by assessing officer that the assessee has received much more consideration than shown in the MOI. The assessing officer treated the stamp valuation rate as the value of consideration, despite the facts that the assessee throughout the proceedings contended that the assessee was neither having possessing of the impugned piece of land nor having marketable title. The assessee offered the said piece of land on the basis ‘as is where is’. These vital facts were ignored by the lower authorities

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DATE: February 22, 2019 (Date of pronouncement)
DATE: February 27, 2019 (Date of publication)
AY: 2012-13
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CITATION:
S. 28(iv)/ 56(2)(viia)/ 47(vii): S. 56(2)(viia) is an anti-abuse provision which applies only to cases of bogus capital building and money laundering. It does not apply to an amalgamation where shares are allotted at alleged undervaluation. Increase in general reserves due to recording of assets of amalgamating company at FMV not give rise to any real income to the assessee. It is capital in nature. Amendment to s. 47(vii) by FA 2012 is clarificatory & retrospective

The question, therefore, before us is, Whether the provisions of section 47(vii) as amended by Finance Act 2012 is retrospective in nature ? It is a fact that existing provision of section 47(vii) was not possible to comply with when amalgamating company is the 100% subsidiary of the amalgamated company. This is, in fact, was a defect in Section 47(vii) prior to the amendment. The amendment was made to cure this defect. Therefore, the decisions relied upon by the Learned Counsel for the Assessee above squarely apply to this case as the provisions of section 47(vii) prior to the amendment if read clause-(a) thereof, was unworkable and could not have applied in case, where amalgamating company is the owner of 100% shares of the amalgamating company