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2018 (6) TMI 956 - AT - Income TaxLong term capital loss - allotment of land - acquisition of right, title and interest acquired - builder failed to hand over the possession - Liquidated Damages received as compensation for loss of source of income - assessee in terms of cancellation of MOU relinquished its right, title and interest in the constructed area - AO treated ₹ 10 crs as Short Term Capital Gain while AO did not allow Long Term Capital Loss. - Held that:- As per the terms and conditions of the MEMORANDUM OF UNDERSTANDING, a right in the immovable property to be constructed has been created in favour of the assessee when the assessee has made payment of ₹ 40 crores and the specific area is allotted to the assessee vide letter dt 3.4.2007 - Right to acquire immovable property is a capital asset - Right in immovable property is a capital asset u/s 2(14) - the liquidated damages in our view is inextricably connected with the consideration received by the assessee for relinquishment of his right in the capital asset created by the allotment letter dt 3.4.2007 - thus we held that right as a capital asset created by MOU duly registered and the allotment letter, within the meaning of section 2(14) therefore when this right got relinquished the consideration received thereof will be consideration for transfer of capital asset as relinquishment falls within the definition of 'transfer' u/s 2(47) and is, therefore, chargeable to tax u/s 45 as capita gain. The capital gain has to be computed in accordance with the provisions of section 48 - The full value of consideration has to be taken to be ₹ 50 crores received by the assessee for relinquishment of right in the capital asset. The cost of acquisition of right in the capital asset in this case is ₹ 40 cr. We therefore set aside order of CIT(A) on both the issues and direct AO to recompute LTCG/Loss by reducing from total consideration of ₹ 50 cr the indexed cost of acquisition amounting to ₹ 40 cr in accordance with the provisions of section 48. MAT - Book adjustments u/s 115JB - Held that:- book profit disclosed by the assessee company in audited P & L a/c for impugned assessment year cannot be altered by adding back Capital Reserve. - AO directed for not to take the sum of ₹ 10 crores as part of the book profit by rewriting the audited P&L a/c of the assessee company. Disallowance u/s 35D in respect of share issue expenses and preliminary expenses - Held that:- assessee claims that these expenses were incurred after the commencement of the business in connection with the extension of its business of industrial undertaking. Since all these expenses are incurred in the formation of the company and extension of the business, the assessee claims l/5th of such expenditure every year and accordingly on the basis of the claims made in the earlier year, l/5th of said expenditure were claimed during the impugned assessment year - assessee is covered by the decision of this Tribunal in the case of Fine Jewellery Manufacturing Ltd v DCIT [2013 (11) TMI 897 - ITAT MUMBAI] - thus we allow claim of the assessee made u/s 35D - Decided in favor of assessee
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