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DATE: April 28, 2016 (Date of pronouncement)
DATE: June 4, 2016 (Date of publication)
AY: 1993-94, 1994-95
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CITATION:
Entire law on concept of "revenue receipt", "capital receipt" and "casual income" explained in the context of taxability of compensation received for cancellation of a sale deed of immovable property. If the AO claims that the receipt is a capital gain, he cannot change his stand to contend that it is a revenue receipt

The sum of Rs.20 lakhs received by the Assessees was in the context of the cancellation of the sale certificate and the sale deed executed in their favour in relation to an immovable property and neither Assessee was dealing in immovable property as part of his business. While it could if at all be said to be in the nature of a capital receipt, what is relevant for the present case is that the Revenue has been unable to make out a case for treating the said receipt as of a casual and non-recurring nature that could be brought to tax under Section 10(3) read with Section 56 of the Act. Following the decision in Cadell Weaving Mill (supra), there can be no manner of doubt that what is in the nature of capital receipt, cannot be sought to be brought to tax by resorting to Section 10(3) read with Section 56 of the Act

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DATE: May 13, 2016 (Date of pronouncement)
DATE: May 16, 2016 (Date of publication)
AY: 2010-11
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CITATION:
S. 50C/ 54F: In allowing exemption u/s 54F, the deemed consideration u/s 50C has to be taken into consideration and it cannot be restricted to the consideration mentioned in the sale deed

The ultimate object and purpose of section 50C of the I.T. Act is to see that the undisclosed income of capital gains received by the assessee should be taxed and that the law should not encourage and permit the assessee to peg down the market value at their whims and fancy to avoid tax, but when the capital gain is assessed on notional basis, whatever amount is invested in the new residential house within the prescribed period under section 54 of the I.T. Act, the entire amount invested, should get benefit of deduction irrespective of the fact that the funds from other sources are utilised for new residential house

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Posted on by shreesh
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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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CITATION:
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)

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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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CITATION:
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.

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Posted on by shreesh
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DATE: March 29, 2016 (Date of pronouncement)
DATE: April 13, 2016 (Date of publication)
AY: 2007-08
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CITATION:
S. 45/ 48: Deferred consideration dependent on a contingency does not accrue unless the contingency has occurred and is not liable to capital gains tax in year of transfer

The contention of the Revenue that the impugned order is seeking to tax the amount on receipt basis by not having brought it to tax in the subject assessment year, is not correct. This for the reason, that the amounts to be received as deferred consideration under the agreement could not be subjected to tax in the assessment year 2006-07 as the same has not accrued during the year. As pointed out above, accrual would be a right to receive the amount and the assessee alongwith its co-owners have not under the agreement dated 25th January, 2006 obtained a right to receive Rs.20 crores or any specified part thereof in the subject assessment year. In the above view there could be no occasion to bring the maximum amount of Rs. 20 crores, which could be received as deferred consideration to tax in the subject assessment year as it had not accrued to the assessee.

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Posted on by Dhaval Shah
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DATE: March 16, 2016 (Date of pronouncement)
DATE: April 13, 2016 (Date of publication)
AY: 2010-11
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CITATION:
S. 50C does not apply to transfer of leasehold rights in land

Section 50C of the Act provides that if the consideration received or accruing is less than the value adopted or assessed or assessable by the stamp valuation authority of the State Government for such transfer then the value so adopted or assessed or assessable shall be deemed to be the full value of consideration and the capital gains will be computed accordingly. The phraseology of section 50C of the Act clearly provides that it would apply only to “a capital asset, being land or building or both”. The moot question before us is as to whether such expression would cover the transfer of a capital asset being leasehold rights in land or building. There cannot be a dispute to the proposition that the expression land by itself cannot include within its fold leasehold right in land also. Of-course, leasehold right in land is also a capital asset and we find no fault with this stand of the Revenue. So however, every kind of a ‘capital asset’ is not covered within the scope of section 50C of the Act for the purposes of ascertaining the full value of consideration. Infact, the heading of section itself provides that it is “Special provision for full value of consideration in certain cases”. Therefore, there is a significance to the expression “a capital asset, being land or building or both” contained in section 50C of the Act. The significance is that only capital asset being land or building or both are covered within the scope of section 50C of the Act, and not all kinds of capital assets

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Posted on by itatbar
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DATE: May 8, 2015 (Date of pronouncement)
DATE: April 10, 2016 (Date of publication)
AY: 2005-06
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CITATION:
S. 48: Interest on borrowed money utilized for acquiring shares can be capitalized as cost of acquisition

Interest payable on moneys borrowed for acquisition of shares should be added to the cost of acquisition of shares for the purpose of computing capital gains (Macintosh Finance Estates Ltd vs. ACIT (2007) 12 S0T 324 (Mum) (Trib) not followed, CIT vs. Trishul Investments Ltd (2008) 305 ITR 434 (Mad) (HC) followed)

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Posted on by editor
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DATE: February 29, 2016 (Date of pronouncement)
DATE: March 7, 2016 (Date of publication)
AY: 2005-06
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CITATION:
Entire law on difference between premium (salami) paid to acquire a lease and rent paid to use a lease explained in the context of whether a lease results in a transfer u.s 2(47)

By its nature the salami being a non-recurring payment -made by a tenant to the landlord at the inception of the grant of the lease has a/ways been regarded as a receipt of a capital nature in the hands of the landlord. The finding that had been recorded by the Tribunal was that this payment was made to the assessee by the tenants for getting them accepted as tenants. In other words, it was by way of a premium or salami that these payments were received by the assessee as a consideration for granting monthly tenancies to the tenants. Obviously, it was a non-recurring payment made by the tenants to the assessee for the purpose of getting the monthly tenancy. Every payment by way of a salami or a premium need not necessarily be held to be of a capital nature or on capital account, but since prima facie that is the nature of such payment it is for the department to establish facts which would go to show that such payment was in the – nature of income and not on capital account

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DATE: August 28, 2015 (Date of pronouncement)
DATE: February 15, 2016 (Date of publication)
AY: 2005-06
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CITATION:
S. 54EC: The period of "6 months" available for making investment means 6 calendar months & not 180 days. Payment by cheque dates back to date of presentation & not date of encashment

For purposes of section 54EC, as held by the Special Bench of Ahmedabad bench in the case of Alkaben B. Patel (2014) 148 ITD 31 (Ahd) and M/s. Crucible Trading Co. Pvt. Ltd. in ITA No.5994/Mum/2013 dated 25.02.2015 “6 months” have been interpreted and it is held that the same would mean 6 calendar months and not 180 days. As held by the Supreme Court in CIT vs. Ogale Glass Works Ltd. (1954) 25 ITR 529 (SC), in the case of cheques not having been dishonored but having been encashed, the payment related back to the date of the receipt of the cheques and in law the dates of payments were the dates of the delivery of the cheques

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DATE: January 11, 2016 (Date of pronouncement)
DATE: January 26, 2016 (Date of publication)
AY: -
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CITATION:
Transfer of shares of an Indian Co by a Mauritius entity to a Singapore entity due to group reorganization is not a scheme for avoidance of tax. The capital gains are exempt under India-Mauritius DTAA. Treaty shopping is permissible. A ROI u/s 139(1) need not be filed if income is exempt from tax

Dow IMEA Group was dismantled in 2010 and that is how the need for realignment of the group arose whereby DAS entity was to be shifted from an entity which falls under Europe region to an entity which would fall in the Asia-Pacific region. This was to be done with a view to achieve better control. Singapore is one of the upcoming countries in Asia-Pacific region in the opinion of the applicant and therefore, the Dow group contemplated to shift the share holding of DAS India from Mauritius to Singapore. All this exercise is also more than 5 years old from the date of the last acquisition of the shares. Thus, it cannot be said that the proposed transfer of shares was amounting to a scheme to avoid payment of taxes in India. It was clearly for the business considerations. We, therefore, reject the contention of the Revenue that this amounting to a scheme to avoid payment of taxes in India. We accept the contention raised by the applicant about its not having a PE in India

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