Search Results For: 45


Chheda Housing Development Corporation vs. ACIT (ITAT Mumbai)

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DATE: May 29, 2019 (Date of pronouncement)
DATE: July 6, 2019 (Date of publication)
AY: 2012-13
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Capital vs. Revenue Receipt: Damages received for breach of development agreement are capital in nature & not chargeable to tax. The only right that accrues to the assessee who complains of breach is right to file a suit for recovery of damages from the defaulting party. A breach of contract does not give rise to any debt. A right to recover damages is not assignable because it is not a chose-in-action. Such a mere 'right to sue' is neither a capital asset u/s 2(14) nor is it capable of being transferred & is therefore not chargeable under u/s 45 of the Act (All imp judgements referred)

Despite the definition of the expression capital asset in the widest possible terms in section 2(14), a right to a capital asset must fall within the expression ‘property of any kind’ and must not fall within the exceptions. Section 6 of the Transfer of Property Act which uses the expression ‘property of any kind’ in the context of transferability makes an exception in the case of mere right to sue. The decisions there under make it abundantly clear that the right to sue for damages is not an actionable claim. It cannot be assigned and its transfer is opposed to public policy. As such it will not be quite correct to say that such a right constituted capital asset which in turn has to be an interest in ‘property of any kind.’

Ashish Tandon vs. ACIT (ITAT Ahmedabad)

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DATE: February 8, 2019 (Date of pronouncement)
DATE: March 23, 2019 (Date of publication)
AY: 2013-14
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Non-taxable capital receipt vs. Business Profits: Test of human probabilities has to be applied to decide whether what is apparent is real. Tax authorities are not required to put on blinkers while looking at documents. They are entitled to look into the surrounding circumstances to find out the reality. The agreement has to make commercial sense. The plea that "coining of concept" is a valuable right worth Rs. 10 cr is too naive & beyond human probabilities to merit judicial acceptance

“Coining of” the concept was in the course of the employment of the assessee, and, therefore, the plea that it belonged to the assessee, in his individual capacity, is too naïve to meet any judicial approval. In any case, there is no material on record to demonstrate that this coining of concept is such a valuable asset that it could fetch Rs 10 crores of consideration on a standalone basis, and, if that was so, it is simply beyond the human probabilities that such a valuable right could be given to someone for 7 years for commercial exploitation and development, with no strings attached, and without even finalizing as to how the fruits of such commercial exploitation will be shared by that person with the owner of this concept.

PCIT vs. Hardik Bharat Patel (Bombay High Court)

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DATE: November 19, 2019 (Date of pronouncement)
DATE: February 9, 2019 (Date of publication)
AY: 2008-09
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CITATION:
Capital Gains vs. Business Profits: As per CBDT Circular No. 6 of 2016 dated 29.2.2016 gains on shares held for more than 12 months are treated as long-term capital gains and not as business profits. The fact that the amount invested in shares were out of borrowed funds and there were frequent and voluminous transactions is irrelevant

our attention is drawn to Circular No. 6 of 2016 dated 29.2.2016 issued by the Central Board of Direct Taxes (CBDT). This circular issued with regard to the issue of taxability of surplus on sale of shares and securities, – whether as capital gain or business income in case of long term holdings of shares and securities i.e in excess of 12 months. It has clarified therein that with a view to reduce litigation and uncertainty in the matter of taxibility, as long term capital gains or business income – the assess has an option to treat the income from sale of listed shares and securities as income arising under the head ‘Long Term Capital Gains’, them the same shall be accepted by the assessing officer

Rajkumar B. Agarwal vs. DCIT (ITAT Pune)

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DATE: February 4, 2019 (Date of pronouncement)
DATE: February 2, 2019 (Date of publication)
AY: 2004-05, 2005-06 & 2006-07
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CITATION:
Bogus Capital Gains From Penny Stocks: The assessee completed paper-trail by producing contract notes for purchase and sale of shares. of PIL. Mere furnishing of contract notes etc does not inspire any confidence in the light of facts. Test of human probability should be applied and apparent should be ignored to unearth the harsh reality (Sumati Dayal 214 ITR 801 (SC) & Durga Prasad More 82 ITR 540 (SC) applied)



The entire position which thus emerges is that PIL is a penny stock company, which fact got established from enquiries conducted by BSE and SEBI. Not only the DSP shares and Securities Ltd. and Galaxy Broking Ltd. were fined for manipulating the prices of shares of PIL, even the broker from whom the assessee allegedly purchased the shares was suspended and debarred from acting as a broker by SEBI and further the broker to whom such shares were sold, was also warned by SEBI for manipulating the prices of different shares during the relevant period. There is doubt that the assessee completed paper-trail by producing contract notes for the purchase and sale of shares of PIL. In our considered opinion, mere furnishing of contract notes etc. and more specifically when seen in the background of the above noted facts, does not inspire any confidence and cannot be a ground to delete an addition, which is otherwise made on the solid bedrock of detailed enquiries

Pankaj Agarwal & Sons (HUF) vs. ITO (ITAT Chennai)

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DATE: December 6, 2018 (Date of pronouncement)
DATE: February 2, 2019 (Date of publication)
AY: 2014-15
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CITATION:
Bogus Capital Gains From Penny Stocks: Plea that opportunity to cross-examine the witness was not given & investigation report was not furnished is not relevant if assessee unable to successfully controvert findings of the AO and such argument was never made before the lower authorities

The company in which the assessees had purchased the equity shares had no creditability and no prudent investor would make such investment. The motive of the price manipulation is only to bring out their black money as legitimately earned Long Term Capital Gain for which exemption U/s.10(38) of the Act is available

PCIT vs. Vembu Vaidyanathan (Bombay High Court)

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DATE: January 22, 2019 (Date of pronouncement)
DATE: January 28, 2019 (Date of publication)
AY: 2009-10
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CITATION:
S. 45 Capital Gains: The allottee gets title to property on issue of allotment letter. The payment of installments is only a follow­-up action. Taking delivery of possession is only a formality. Accordingly, the date of allotment is the date on which the purchaser of a residential unit can be stated to have acquired the property (CBDT Circulars applied)

It was noted that such allotment is final unless it is cancelled or the allottee withdraw from the scheme and such allotment would be cancelled only under exceptional circumstances. It was noted that the allottee gets title to the property on the issue of allotment letter and the payment of installments was only a follow­up action and taking the delivery of possession is only a formality

CIT vs. Viksit Engineering Ltd (Bombay High Court)

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DATE: November 26, 2018 (Date of pronouncement)
DATE: January 5, 2019 (Date of publication)
AY: 2008-09
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CITATION:
Capital Gains vs. Business Profits: Merely holding shares for a short period will not convert capital gain into business income. This would be contrary to be legislative mandate which itself provides that investment held for less than 12 months is to be termed as short term capital gain. If the assessee has two portfolios, one for "Investment" and other for "Trading" and if the investments are out of own funds and not borrowed funds, the gains have to be assessed as STCG

Thus two port-folios one for “Investment” and other for “Trading”. Besides for the earlier years the Revenue accepted the claim of short term capital gain. Thus the income has to be taxed as short term capital gain. We are of the view that respondent holding the shares for a short period, will not convert the capital gain into business income. This would be contrary to be legislative mandate which itself provides that when the investment is held for less than 12 months, it is to be termed as short term capital gain

DCIT vs. Rakesh Saraogi & Sons (HUF) (ITAT Raipur)

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DATE: April 16, 2018 (Date of pronouncement)
DATE: December 8, 2018 (Date of publication)
AY: 2004-05
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CITATION:
S. 10(38) Bogus Capital Gains Penny Stocks: Assuming brokers may have done manipulation, assessee cannot be held liable when the entire transaction is done through banking channels duly recorded in Demat accounts with Govt depository and traded on stock exchange Nothing on record to suggest assessee gave cash and purchased cheque from broker (Sanjay Bimalchand Jain (Bom HC) distinguished)

There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account

Ramprasad Agarwal vs. ITO (ITAT Mumbai)

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DATE: November 30, 2018 (Date of pronouncement)
DATE: December 7, 2018 (Date of publication)
AY: 2013-14, 2014-15
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CITATION:
S. 10(38) Bogus capital gains from penny stocks: If the holding of shares is D-mat account cannot be disputed then the transaction cannot be held as bogus. The AO has also not disputed the sale of shares from the D-mat account of the assessee and the sale consideration was directly credited to the bank account of the assessee. Once the assessee produced all relevant evidence to substantiate the transaction of purchase, dematerialization and sale of shares then, in the absence of any contrary material brought on record the same cannot be held as bogus transaction merely on the basis of statement of one Anil Agrawal recorded by the Investigation Wing, Kolkata wherein there is a general statement of providing bogus long term capital gain transaction to the clients without stating anything about the transaction of allotment of shares by the company to the assessee

The assessee has produced the D-mat account and therefore, as on 18.06.2012 the assessee was holding 3,50,000 equity shares of M/s Rutron International Ltd. in D-mat account. This fact of holding the shares in the D-mat account as on 18.06.2012 cannot be disputed. Further, the Assessing Officer has not even disputed the existence of the D-mat account and shares credited in the D-mat account of the assessee. Therefore, once, the holding of shares is D-mat account cannot be disputed then the transaction cannot be held as bogus. The AO has not disputed the sale of shares from the D-mat account of the assessee and the sale consideration was directly credited to the bank account of the assessee

Jupiter Capital Pvt. Ltd vs. ACIT (ITAT Bangalore)

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DATE: November 29, 2018 (Date of pronouncement)
DATE: December 7, 2018 (Date of publication)
AY: 2014-15
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CITATION:
S. 2(47) Transfer: The reduction of share capital of a company by way of reducing the face value of each share from Rs. 1,000 to Rs. 500 amounts to "extinguishment of rights" and is a "transfer" u/s 2(47) of the Act. The assessee is eligible to claim a capital loss therefrom (Kartikeya V. Sarabhai vs. CIT 228 ITR 163 (SC) & other judgements followed)

Sec. 2(47) which is an inclusive definition, inter alia, provides that relinquishment of an asset or extinguishment of any right there in amounts to a transfer of a capital asset. While, it is no doubt true that the appellant continues to remain a shareholder of the company even with the reduction of a share capital but it is not possible to accept the contention that there has been no extinguishment of any part of his right as a shareholder qua the company. It is not necessary that for a capital gain to arise that there must be a sale of a capital asset. Sale is only one of the modes of transfer envisaged by s. 2(47) of the Act. Relinquishment of the asset or the extinguishment of any right in it, which may not amount to sale, can also be considered as a transfer and any profit or gain which arises from the transfer of a capital asset is liable to be taxed under s. 45 of the Act

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