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2017 (2) TMI 1193 - AT - Income TaxDisallowance of capital gains - additions u/s 68 - Held that:- To bring any sum to tax u/s 68, a sum has to be credited, for such sum it is well settled law that in order to discharge the onus, the assessee must prove the identity of the creditor, capacity of the creditor and genuineness of the transaction. In the given case, the AO has brought to tax the capital gain, which is not the sum credited in the books of the assessee, secondly, the assessee has already brought on record the identity of the parties and capacities of the parties. With regard to genuineness of the transaction, assessee has brought on record the transactions as investment in another company i.e. M/s SRGEPL. All these shares were recorded in the books of account as investment. AO has not brought on record anything to suggest any suspicion on the commercial transaction in this case. The payments were made through banking channel and received sale proceeds were also through bank. When the bench asked the AR to submit the receipt of sale proceeds in the bank, the AR had submitted a copy of the bank statement and ledger copy of transactions by letter dated 29/12/2016 and it proves the genuineness of the transactions. Thus on both counts, i.e. commercial decision of the assessee as well as genuineness of the transaction, we hold that the AO was wrong in treating this transaction as ‘income from other sources’ and making disallowance u/s 68 of the Act, instead of capital gains as offered by the assessee. We have no hesitation to uphold the findings of the CIT(A) on this issue and accordingly dismiss the ground raised by the revenue. - Decided in favour of assessee Disallowance of salaries and recruitment expenditure - non setup of business - Held that:- The assessee has set up its business the moment it had acquired the property on lease to run the business with effect from 01/04/2007 and started recruiting the people for the suitable positions, in our view, the assessee has already set up its business and any expenditure in the nature of establishment, administrative, etc. are admissible business expenditure. Considering the nature of expenditure incurred by the assessee during the year we are inclined to agree with the findings of the CIT(A) and accordingly we uphold the order of the CIT(A) in deleting the disallowance made by the AO and dismiss the ground raised by the revenue. Treatment to interest received - as capital receipt or revenue receipt - Held that:- We are in agreement with the findings of the CIT(A). the case laws relied upon by the assessee are prior to set up of the business and are earned during construction period. Whereas in the given case, assessee had already set up the business and on one hand claiming expenditure as revenue and on the other another hand claiming the income as capital in nature cannot be accepted. Therefore, the CO raised by the assessee is hereby rejected.
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