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DATE: September 30, 2016 (Date of pronouncement)
DATE: October 8, 2016 (Date of publication)
AY: 2008-09
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CITATION:
S. 50C: The proviso to s. 50C inserted by the Finance Act 2016 w.e.f. 01.04.2017 to provide that the stamp duty valuation of property on the date of execution of the agreement to sell should be adopted instead of the valuation on the date of execution of the sale deed is curative and intended to remove an undue hardship to the assessee and an apparent incongruity. It should accordingly be given retrospective effect from 1st April 2003, i.e. the date effective from which s. 50C was introduced

The Proviso to Section 50C inserted by the Finance Act 2016, with effect from 1st April 2017, on the recommendation of the Income Tax Simplification Committee (Easwar Committee) recognizes the genuine and intended hardship in the cases in which the date of agreement to sell is prior to the date of sale and introduces welcome amendments to the statue to take the remedial measures. However, this brings no relief to the assessee as the amendment is introduced only with prospective effect from 1st April 2017. There cannot be any dispute that this amendment in the scheme of Section 50C has been made to remove an incongruity, resulting in undue hardship to the assessee, as is evident from the observation in Easwar Committee report to the effect that “The (then prevailing) provisions of section 50C do not provide any relief where the seller has entered into an agreement to sell the asset much before the actual date of transfer of the immovable property and the sale consideration has been fixed in such agreement” recognizing the incongruity that the date agreement of sell has been ignored in the statute even though it was crucial as it was at this point of time that the sale consideration is finalized. The incongruity in the statute was glaring and undue hardship not in dispute

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DATE: August 26, 2016 (Date of pronouncement)
DATE: September 20, 2016 (Date of publication)
AY: 2002-03
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CITATION:
Entire law on whether consideration for alienation of rights under a "Call Option agreement" for shares is taxable as "capital gains" or as "income from other sources" in the context of the India-Singapore DTAA explained

In common parlance, a call option is reckoned as a contract in which the holder (buyer) has the right (but not an obligation) to buy a specified quantity of a security/shares at a specified price (strike price) within a fixed period of time. For the writer (seller) of a call option, it represents an obligation to sell the underlying security at the strike price if the option is exercised. The call option writer is paid a premium for taking on the risk associated with the obligation. Here in the present case, there is very peculiar agreement/ arrangement, where the strike price has been mentioned as US $ 1 and the fixed period of time for exercising the call option has been fixed for 150 years. This factum itself means that the call option in the shares have been given for perpetuity. Not only that, an irrevocable power of attorney has also been executed in favour of the ING Bank in respect of all the shares in PHIL confirming that, assessee will not at any time purport to revoke the same, which inter-alia shows that assessee has alienated a substantive and valuable rights as an owner of the shares in perpetuity, albeit without dejure alienating the shares itself

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DATE: August 16, 2016 (Date of pronouncement)
DATE: September 9, 2016 (Date of publication)
AY: 1996-97
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CITATION:
S. 54F(4): Failure to deposit the amount of consideration not utilized towards the purchase of new flat in the specified bank account before the due date of filing return of Income u/s 139(1) is fatal to the claim for exemption. The fact that the entire amount has been paid to the developer/builder before the last date to file the ROI is irrelevant. Contrary view in K. Ramchandra Rao 277 CTR 0522 (Kar) is sub-silentio and is not good law

The sale of capital asset took place on 29th April, 1995 for a consideration of Rs.85.33 lakhs. The agreement for purchase of construction of flat for consideration of Rs.69.90 lakhs was entered into by the appellant on 16th July, 1996. An amount of Rs.35 lakhs were utilized by the Appellant in purchase of flat before the return of income was filed on 4th November, 1996 under Section 139 of the Act. However, the mandate under sub Section (4) of Section 54F of the Act is that the amount not utilized towards the purchase of the flat has to be deposited before the due date of filing return of Income under Section 139(1) of the Act in the specified bank account. In this case admittedly the entire amount of capital gains on sale of asset which is not utilized has not been deposited in a specified bank account before due date of filing of return under Section 139(1) of the Act. Therefore where the amounts of capital gains is utilized before filing of the return of income in purchase / construction of a residential house, then the benefit of exemption under Section 54F of the Act is available. Before us it is an undisputed position that except Rs.35 lakhs, the balance of the amounts subject to capital gains tax has not been utilized before date of furnishing of return of income i.e. 4th November, 1996 under Section 139 of the Act. Therefore, on plain interpretation of Section 54F of the Act, it appears that the impugned order of the Tribunal cannot be faulted

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DATE: August 10, 2016 (Date of pronouncement)
DATE: September 5, 2016 (Date of publication)
AY: 2009-10
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CITATION:
Capital Gains: Mere fact that the assessee is shown as a co-owner of the property does not mean that the capital gains are partly assessable in her hands if the facts show that the other co-owner bought the property from his own funds and showed it as his sole property in the balance sheet

Revenue has also not been able to controvert the factual finding rendered by the learned CIT(A), after examining documents and copies of bank statements, etc. placed before him, that even though the assessee is shown as the co-owner of the said property, the source of funds for investment in purchase of the said property is by the assessee’s husband and that the property was reflected in his Balance Sheet from the period relevant to A.Y. 2005-06 (i.e. 31.03.2005) till its sale, after which the STCG arising thereon was admittedly disclosed by the assessee’s husband in his return of income

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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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CITATION:
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

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DATE: July 27, 2016 (Date of pronouncement)
DATE: August 5, 2016 (Date of publication)
AY: 2010-11
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CITATION:
S. 50C: Valuation is a matter of estimation and some degree of difference is bound to be there. If the difference between the stamp duty valuation and the declared sale consideration is less than 10%, addition u/s 50C should not be made

Valuation is always a matter of estimation where some degree of difference is bound to occur. The difference between the valuation adopted by the Stamp Valuation Authority and declared by the assessee is less than 10%

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DATE: June 29, 2016 (Date of pronouncement)
DATE: July 12, 2016 (Date of publication)
AY: 1989-90
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CITATION:
S. 2(42A)/ 45: An agreement to purchase property merely creates a right to seek specific performance. The asset cannot be considered to be "held" from the date of the agreement so as to constitute long-term capital gains

Consequent to the vendor not honouring the agreement dated 18th May, 1980, all that the appellant had was a right to seek specific performance which he sought to enforce by filing the suit. The appellant did not have possession of the said land. It is only on the Consent Terms being filed in Court that the appellant got ownership and possession

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DATE: May 27, 2016 (Date of pronouncement)
DATE: June 16, 2016 (Date of publication)
AY: 2005-06
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CITATION:
S. 68: Long-term capital gains arising from transfer of penny stocks cannot be treated as bogus merely because SEBI has initiating an inquiry with regard to the Company & the broker if the shares are purchased from the exchange, payment is by cheque and delivery of shares is taken & given

Assessee has made investment in shares which was purchased on the floor of stock exchange and not from M/s Basant Periwal and Co. Against purchases payment has been made by account payee cheque, delivery of shares were taken, contract of sale was also complete as per the Contract Act, therefore, the assessee is not concerned with any way of the broker. Nowhere the AO has alleged that the transaction by the assessee with these particular broker or share was bogus, merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transaction, insofar as assessee is not concerned with the activity of the broker and have no control over the same

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DATE: September 7, 2011 (Date of pronouncement)
DATE: June 13, 2016 (Date of publication)
AY: 2001-02
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CITATION:
S. 10(38)/ 69: Fact that a small amount invested in "penny" stocks gave rise to huge capital gains in a short period does not mean that the transaction is "bogus" if the documentation and evidences cannot be faulted

The explanations of the assessee seems to have been rejected by the assessing authority more on the ground of presumption than on factual ground. The presumption is so compelling that comparatively a small amount of investment made by the assessee during the previous year period relevant to the assessment years 1999- 2000 and 2000-01 have grown into a very sizable amount ultimately yielding a fabulous sum of Rs. 1,41,08,484 which was used by the assessee for the purchase of the flat at Colaba. The sequence of the events and ultimate realization of money is quite amazing. That itself is a provocation for the Assessing Officer to jump into a conclusion that the transactions were bogus. But, whatever it may be, an assessment has to be completed on the basis of records and materials available before the assessing authority. Personal knowledge and excitement on events, should not lead the Assessing Officer to a state of affairs where salient evidences are over-looked. In the present case, howsoever unbelievable it might be, every transaction of the assessee has been accounted, documented and supported. Even the evidences collected from the concerned parties have been ultimately turned in favour of the assessee. Therefore, it is, very difficult to brush aside the contentions of the assessee that he had purchased shares and he had sold shares and ultimately he had purchased a flat utilizing the sale proceeds of those shares

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DATE: April 27, 2016 (Date of pronouncement)
DATE: June 13, 2016 (Date of publication)
AY: 2005-06
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CITATION:
S. 10(38)/ 68: Long-term capital gains on sale of "penny" stocks cannot be treated as bogus & unexplained cash credit if the documentation is in order & there is no allegation of manipulation by SEBI or the BSE. Denial of right of cross-examination is a fatal flaw which renders the assessment order a nullity

There is no evidence on record to show that any action or enquiry was carried out either by the SEBI or BSE in respect of the alleged manipulation or propping up of the price rate movement of the ‘said shares’ of Shukun Constructions Ltd., as has been assessed by the AO. The shares of Shukun Constructions Ltd. is listed on BSE and that the sale transaction of the ‘said shares’ by the assessee is at the rate quoted on the date of sale has been confirmed both by BSE and the concerned stock broker M/s. Khambatta Securities Ltd. It is strange that the AO has made the addition under section 68 of the Act treating the entire sale proceeds of the ‘said shares’ received by the assessee through regular banking channels from stock broker registered with SEBI, M/s. Khambatta Securities Ltd., which facts have been confirmed by the said stock broker. In our considered view, the assessee has discharged the onus required under section 68 of the Act as she has established the identity of the payer, source of funds received on sale of the same shares and the genuineness of the transaction

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