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2015 (12) TMI 1616 - AT - Income TaxTax on the ‘capital gain’ on a ‘transfer’ - transfer of an Agricultural land to non- agriculturists - Held that:- Entire amount of sale consideration was refunded and original documents with respect to this property were also received back by the assessee. The perusal of the above clearly shows that transfer was illegal in the eyes of law from the very beginning and therefore, it can be clearly said that the transfer was void ab initio. No legal rights had accrued to the parties on execution of sale deed, as the same was void ab initio in the eyes of law. No transfer of the impugned land had taken place, and therefore, no amount of ‘capital gain’ was taxable as per law. Under the given facts, we should keep in mind the concept of ‘Real Income’ theory. According to this theory, an assessee can be made to pay tax only and to the extent of income actually earned by him, and not beyond that. In the facts before us, the accepted factual and legal position is that no valid transfer (of the impugned land) had taken place as per law, and therefore, no question can arise of earning of ‘capital gain’ and taxing the same under the income tax law. It is further noted by us that it is settled law that an assessee can resile from its return if it is found at any later stage that the income offered therein was not taxable in accordance with law. Immediate reference can be made on the judgment of in the case of Bharat General Reinsurance(1970 (12) TMI 5 - DELHI High Court), which was subsequently approved in the case of Rampur Distillery and Chemical Co Ltd vs CIT (1990 (11) TMI 3 - SUPREME Court ) - Decided in favour of assessee Claim of long term loss in respect of investment in shares disallowed - Held that:- We agree with the view taken by the lower authorities that a loss or gain can arise u/s 45 of the Income Tax Act 1961 only from “transfer” of a capital asset, effected in the previous year. Since, no transfer of the aforesaid shares was effected during the previous year, therefore, no claim of loss could have been allowed to the assessee, as per law. The contention of the Ld. Counsel that provision for decline in value of investment has been made because of mandatory requirement of Accounting Standard-13, is also not sustainable for the reason that accounting entries are not determinative for the taxability or otherwise of the transactions of the assessee. It is settled law that taxability of the transactions of the assessee has to be determined in view of the provisions of the Income Tax Act, and not on the basis of entries made in the books of accounts by the assessee. Therefore, keeping in view all the facts and circumstances of the case, we find that the said loss was not allowable - Decided against assessee
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