Search Results For: 28


G. S. Homes & Hotels P. Ltd vs. CIT (Supreme Court)

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DATE: August 9, 2016 (Date of pronouncement)
DATE: September 21, 2016 (Date of publication)
AY: 1996-97
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CITATION:
Refundable deposits received by a housing company for allotment of flats and future maintenance is business income. However, share capital received for allotment of flats is a capital receipt and not income. The principles of mutuality does not apply to such transactions

The Karnataka High Court held, following Shree Nirmal Commercial vs. CIT 193 ITR 694 (Bom) and 213 ITR 361 (FB), that share capital and refundable deposits received by a housing company from its shareholders in consideration of allotting area to them is assessable as business profits. It was also held that the principles of mutuality are not applicable. It was also held that deposits received from the shareholders for future maintenance is assessable as business income. On appeal to the Supreme Court HELD

Posted in All Judgements, Supreme Court

Aerens Developers and Engineers Ltd vs. ACIT (ITAT Delhi)

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DATE: August 12, 2016 (Date of pronouncement)
DATE: September 2, 2016 (Date of publication)
AY: 2007-08
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Compensation for breach of promise to provide land to the assessee is not compensation for loss of profits but is for injury caused to the profit making apparatus. Such compensation is a capital receipt not chargeable to tax

The injury was caused to the profit making apparatus as the land which was profit making apparatus for the assessee was not supplied by JMA Buildcom (P) Ltd. as per the agreement entered into between the assessee and associates, and JMA Buildcom (P) Ltd. Appreciating the same, compensation was awarded in the arbitration proceedings initiated against JMA Buildcom.(P) Ltd. In other words, the basis of award remained the lost profit due to non-supply of the land i.e. profit making apparatus and not on loss of profit. We thus find that the only inference can be drawn is that the compensation received by way of reward due to non-supply of land by JMA Buildcom (P) Ltd. under the agreement was capital receipt

Posted in All Judgements, Tribunal

Rayala Corporation Pvt. Ltd vs. ACIT (Supreme Court)

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DATE: August 11, 2016 (Date of pronouncement)
DATE: August 17, 2016 (Date of publication)
AY: -
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S. 28: Income from letting of property on rent by an assessee engaged in the business of letting is assessable as "business profits" u/s 28 and not as "Income from house property" u/s 22

The issue involved in these appeals is no more res integra as this Court has decided in the case of Chennai Properties and Investments Ltd. v. Commissioner of Income Tax [2015] 373 ITR 673 (SC) that if an assessee is having his house property and by way of business he is giving the property on rent and if he is receiving rent from the said property as his business income, the said income, even if in the nature of rent, should be treated as “Business Income” because the assessee is having a business of renting his property and the rent which he receives is in the nature of his business income

Posted in All Judgements, Supreme Court

ACIT vs. M/s Dattani Development (ITAT Mumbai)

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DATE: July 27, 2016 (Date of pronouncement)
DATE: August 10, 2016 (Date of publication)
AY: 2007-08
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S. 50C: Land purchased by a builder with the knowledge that there are encumbrances on it and development is not feasible is a “capital asset” and not “stock-in-trade”. The gains on transfer of such land is assessable as capital gains and not as business profits. S. 50C applies to development agreements if the effect of the development agreement read with the conveyance deed is that the entire land with ownership rights are transferred

Section 50C of the Act is clearly applicable even to the sale of development rights in the land as was held in the decisions relied upon by the learned DR as detailed above , more-so we have already held that in-fact the assessee has not only sold development rights in the land but the assessee sold the entire land with ownership rights in the land if the development agreement are read in conjunction with deed of confirmation / conveyance executed by the assessee which are placed in paper book filed with the Tribunal. Thus, the land which was sold during the previous year by the assessee, thus keeping in view our above discussions in the light of facts and circumstances of the case, was a capital asset within the provisions of Section 2(14) of the Act and the valuation of the land as per stamp duty valuation authorities as per section 50C of the Act was rightly adopted by the AO as full value of consideration

Posted in All Judgements, Tribunal

CIT vs. CitiBank N.A. (Supreme Court)

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DATE: August 12, 2008 (Date of pronouncement)
DATE: July 6, 2016 (Date of publication)
AY: -
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Interest paid for broken period should not be considered as part of the purchase price, but should be allowed as revenue expenditure in the year of purchase of securities. American Express vs. CIT 258 ITR 601 (Bom) affirmed, Vijaya Bank 187 ITR 541 (SC) distinguished

It was argued on behalf of the Revenue, that in view of the judgment in Vijaya Bank Ltd.’s case [1991] 187 ITR 541 (SC), even if the securities were treated as part of the trading assets, the income therefrom had to be assessed under section 18 of the Act and not under section 28 of the Act as income from securities can only come within section 18 and not under section 28. We do not find any merit in this argument. Firstly, as stated above, Vijaya Bank Ltd.’s case [1991] 187 ITR 541 (SC) has no application to the facts of this case. Secondly, in the present case, the Tribunal has found that the securities were held as trading assets. Thirdly, it has been held by the Supreme Court in the subsequent decision reported in the case of CIT v. Cocanada Radhaswami Bank Ltd. [1965] 57 ITR 306, that income from securities can also come under section 28 as income from business. This judgment is very important. It analyses the judgment of the Supreme Court in United Commercial Bank Ltd.’s case [1957] 32 ITR 688, which has been followed by the Supreme Court in Vijaya Bank Ltd.’s case [1991] 187 ITR 541. It is true that once an income falls under section 18, it cannot come under section 28. However, as laid down by the Supreme Court in Cocanada Radhaswami Bank Ltd.’s case [1965] 57 ITR 306, income from securities treated as trading assets can come under section 28. In the present case, the Department has treated income from securities under section 28.

Posted in All Judgements, Supreme Court

Pine Tree Finserve Pvt. Ltd vs. CIT (Bombay High Court)

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DATE: February 22, 2016 (Date of pronouncement)
DATE: April 20, 2016 (Date of publication)
AY: 2008-09
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Mere non-introduction of interest-bearing funds is not sufficient to conclude that gains from sale of shares are not business income

There are various factors such as frequency, volume, entry in the books of accounts, nature of funds used, holding period etc. which are relevant in deciding the true nature of transactions and no single factor is conclusive. Thus, mere non-introduction of interest bearing funds will not alone determine the nature of the transactions. The impugned order, after analyzing the statement of capital gains which were available before it, came to the conclusion that most of the shares have been sold within 30 days of its purchase and upheld the order of the CIT(A)

Posted in All Judgements, High Court

DCIT vs. Mahender Kumar Bader (ITAT Jaipur)

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DATE: March 18, 2016 (Date of pronouncement)
DATE: April 18, 2016 (Date of publication)
AY: 2008-09
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In view of CBDT Circular No. 6/2016 dated 29.02.2016, if assessee has consistently shown shares as an “investment” and offered gains as capital gains, AO is not entitle to urge that the same constitutes “stock-in-trade” and assess gains as business profits on grounds that there were substantial and frequent transactions and motive was to earn profit and holding period of such shares was very short

Before us the moot question which is required to be decided is whether the income earned by the assessee on account of share is required to be treated as business income or required to be treated as short term capital gain. After the matter was heard on 11.02.2016, the CBDT came out with the Circular No. 6/2016 dated 29.02.2016 in the following manner. In view of the circular, we have clearly noticed that the issue raised in this appeal stands fully covered by the Circular issued by the CBDT. Since the assessee has treated the securities as investment and not as stock in trade in all the years, therefore, in view of the CBDT Circular, the revenue is not permitted to take a contrary view in the present year and claimed that the security is stock in trade and, therefore, the profit/gain caused to the assessee be treated as business income. In our view, there is no merit in the contention of the revenue and is deserves to be dismissed in view of the circular.

Posted in All Judgements, Tribunal

Multi Act Realty Enterprises Pvt. Ltd vs. ACIT (ITAT Mumbai)

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DATE: August 28, 2016 (Date of pronouncement)
DATE: February 15, 2016 (Date of publication)
AY: 2008-09
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There is a distinction betwen "setting up" and "commencement" of a business. A business is "set up" and expenditure is deductible even if assessee has no customers and no income

The assessee has already purchased residential flat for the purpose of resale/lease, and therefore assessee was apparently ready to do its business. Under these circumstances, it can be said that the business is set up by the assessee during the year under consideration. For the deductibility of expenses incurred after this stage, earning of the business income is not a mandatory condition under the law. The assessee may not have been successful in getting customers or earning the business income, but if the assessee has done requisite preparations and if the assessee can be said to be in a position to cater to its customers, then it can be said that business is set up and it would amount to carrying on the business and accordingly the expenses would stand allowable to the assessee, irrespective of the fact whether actually assessee got any customer and earned any business income during the year or not

Posted in All Judgements, Tribunal

Hema Hiren Dand vs. JCIT (ITAT Mumbai)

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DATE: February 18, 2015 (Date of pronouncement)
DATE: November 23, 2015 (Date of publication)
AY: 2008-09
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The object of introduction of Securities Transaction Tax (STT) was to end litigation on the issue of whether profit earned from delivery based sale of shares is capital gains or business profit. Merely because the assessee liquidates its investment within a short span of time, which had given better overall earning to the assessee, would not lead to the conclusion that the assessee had no intention to keep on the funds as investor in equity shares, but was actually intended to trade in shares

The idea behind introduction of security transaction tax is to end the litigation on the issue, whether the profit earned from delivery based sale of shares is capital gains for business profit. Thus, w.e.f. 01.10.2004; on the share transactions subjected to STT; concessional tax rate of 10% (which has been increased to 15% from AY 2009-10) are applicable in respect of STCG whereas no tax is chargeable in respect of LTCG. It is also noted that the CBDT vide its Circular no.4/2007, dated 15.06.2007 has also recognized possibility of two portfolios, i.e. one ‘Investment portfolio’ comprising of securities which are to be treated as capital assets and the other ‘Trading portfolio’ comprising of stock in trade which are to be treated as trading assets. In view of these facts, profit arose on shares in respect of delivery based transaction are liable to be taxed as capital gain and not as business income.

Posted in All Judgements, Tribunal

CIT vs. Datta Mahendra Shah (Bombay High Court)

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DATE: September 9, 2015 (Date of pronouncement)
DATE: September 16, 2015 (Date of publication)
AY: 2008-08
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Circumstances in which gains from sale of shares can be assessed as short-term capital gains and not as business profits explained

On consideration of the above facts, the CIT (A) and Tribunal rightly concluded that compliance on the part of the assessee in terms of Instruction No.1827 dated 31 August 1989 issued by the Central Board of Direct Taxes laying down the tests for distinguishing the shares held in stock-in-trade and shares held as an investment, the shares held by the assessee was investment and held the income to be treated as short term capital gains

Posted in All Judgements, High Court