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2015 (7) TMI 287 - ITAT KOLKATA

2015 (7) TMI 287 - ITAT KOLKATA - TMI - Profit from sale of flat - treated as income from capital gain OR business income - Held that:- In the present case the assessee held the plot of land as capital asset and all along had been declaring as capital asset and had no intention to convert into stock in trade. In the agreement for developing the property the assessee is shown as the owner. As per the agreement the assessee is parting with part of the land and in lieu thereof, he has received 49.2 .....

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eering Pvt. Ltd. and the AO further observed that one of the shareholder of the assessee company was holding more than 10% shares in the lender company had reserves and surplus in its balance sheet - CIT(A) deleted the addition - Held that:- As per section 2(22)(e) of the I.T.Act the payment must be to a person who is a registered share holder. The word "share-holder" existed in section 2(22)(e) and has been interpreted to mean a registered shareholder. In the present case it is true that Mr.S.N .....

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lender and not in the hands of the person other than the shareholders. Therefore the AO is not justified in treating the same as deemed dividend in the hands of the assessee. We find no infirmity in the order of the ld. CIT(A), who has rightly allowed the claim of assessee. - Decided against revenue.

Treatment to loss as bogus - CIT(A) allowed assessee claim - Held that:- As a matter of fact the AO doubted the integrity of the broker or the manner in which the broker operation as per .....

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o not doubted the genuineness of the documents placed on record by the assessee. AO's observation and conclusion are merely based on the information given by the Calcutta Stock Exchange and submissions made by the company representative. Therefore on such basis no disallowance can be made and accordingly we find no infirmity in the order of ld. CIT(A), who has rightly allowed the claim of assessee - Decided in favour of assessee. - ITA Nos. 626,627 & 1536/Kol/2011, CO No. 71/Kol/2011 - Dated:- 2 .....

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als are identical and therefore all the appeals are being taken together by this consolidated order. 2. The Revenue has raised the following grounds of appeal for A.Yr.2004-05 as under :- "(i). That under the facts and circumstances of the case the Ld.CIT(A) has erred in law as well as in facts in holding that the profit from sale of flat is to be treated as income from capital gain instead of business income. (ii) That under the facts and circumstances of the case the Ld.CIT(A) has erred i .....

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leting the disallowance made by the AO of the alleged claim of loss of the assessee company in trading of penny stock. (ii) That under the facts and circumstances of the case the Ld.CIT(A) has erred in law as well as in facts in holding that the profit from sale of flat is to be treated as income from capital gain instead of business income. (iii) That under the facts and circumstances of the case the Ld.CIT(A) has erred in law as well as in facts in deleting the addition made u/s 2(22)(e) of th .....

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ain instead of business income. (ii) That the Department craves leave to amend, alter or delete any of the grounds mentioned above or to add a new ground if required." 2.3. The ld. Counsel for the assessee has withdrawn the Cross Objection and did not press the same. Accordingly the same is dismissed as not pressed/withdrawn. 3. First of all we take up the revenue's appeal in ITA No.626/Kol/2011 for A.Yr.2004-05. 3.1. As regards ground no.1 the brief facts of the case are that the asses .....

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elopment agreement the assessee was entitled to 49.29% of the total FAR (Floor Area Ratio) together with 49.29% undivided share in the land comprised in the building to be constructed and also in the common area and installation attributable to 49.29% in the said building. The possession of the land was handed over to the said developer on 28.9.1996 as per the terms of reference of such Development Agreement dt. 28.1.1994. The asssessee had shown capital gain of ₹ 5,06,280/- on sale of fix .....

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g and after that (b) The AO has drawn reference to treatment of rent for Assessment Years 2003-04, 04-05 and 06-07; (c) The AO has further compared the area of the unsold flat given on rent than that appearing in the books for AY 2006-07; (d) Other observations of the AO included - (i) the car parking space not considered for derived the rate of per square foot, (ii) Value of land not been considered for computing LTCG (iii) nature of expenses incurred which as per the AO construed to be buildin .....

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ould have been computed then it would have been made as per the valuation of Registering Authority as per section 50C; (iii) The AO had made certain other observations like that of - (a) liquidated damages, (b) car parking space being not considered, (c) Cost of building in the Accounts included the cost of land at Sankrail, (d) flat and other areas have been demarcated between the developer and the assessee, (e) purchase of additional 6073 sq ft by developer; (f) nondisclosure of 777 sq ft area .....

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ion was completed ". The AR has made a detailed submission and has rebutted the allegations/observations of the AO. The learned AR has also relied upon a number of judicial pronouncements. The necessary agreement was also placed on record and was duly explained. 3.3. Before the ld.CIT(A)the assessee made the submissions and explanations which were accepted vide para-7 of his order. The ld. CIT(A) allowed the claim of assessee and directed the AO to compute the income from sale of part of as .....

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h the land and in lieu thereof was entitled to 59% of the constructed area without carrying out any task itself towards the development. The assessee was neither under any obligation to incur any expenditure towards construction of the land nor he carried out any work for construction of the building at any point of time. In terms of the agreement between the assessee and M/s. TRAL the assessee vacated the possession in favour of M/s.TRAL and the said developer of the property was in full posses .....

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evelopment of a building on the said property. As per the development agreement the assessee was entitled 59% of the total FAR together with 59% undivided share in the land comprised in the building to be constructed and also in the common area and installation attributable to 59% (which ratio was modified to 49.29% through later amendment to the agreement) in the said building. The constructed area received by the assessee was in lieu of the land, which was all along been held by the assessee a .....

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g this land in the year 1936 and had constructed thereon a factory for Ayurvedic products. b) The company has held this asset as a fixed asset and has been consistently disclosing the same as such in its balance sheet. c) There is no conversion of the capital asset by its owner into stock-in-trade and Sec.45(2) of the Act is not attracted. d) In the agreement for developing the property, the assessee is shown as the owner and it is also recorded that the assesee does not have the requisite exper .....

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mstances in the case of ACIT vs M/s.Shree Dhootapapheswar Ltd. (supra). In the present case also the assessee held the plot of land as capital asset and all along had been declaring as capital asset and had no intention to convert into stock in trade. In the agreement for developing the property the assessee is shown as the owner. As per the agreement the assessee is parting with part of the land and in lieu thereof, he has received 49.29% of the constructed area without carrying out any task to .....

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issed 6. As regards ground no.2 of the revenue the brief facts of the case are that the assessee had taken loan from M/s.Rungta Engineering Pvt. Ltd. and the AO further observed that one of the shareholder of the assessee company was holding more than 10% shares in the lender company had reserves and surplus in its balance sheet. Accordingly AO treated the amount of loan to the extent of reserves of the lender company as deemed dividend u/s 2(22)(e) of the IT Act. 6.1. The ld. CIT(A) after consi .....

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ld. CIT(A) and order of ld. CIT(A). 8. We have heard the rival contentions and perused the facts of the case. As per section 2(22)(e) of the I.T.Act the payment must be to a person who is a registered share holder. The word "share-holder" existed in section 2(22)(e) and has been interpreted to mean a registered shareholder. In the present case it is true that Mr.S.N.Rungta, a shareholder is having more than 20% share in the assessee company and also 10% share in M/s.Rungta Engineering .....

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the hands of the assessee. We find no infirmity in the order of the ld. CIT(A), who has rightly allowed the claim of assessee. Thus ground no.2 of the revenue is dismissed. 9. Ground No.3, being general in nature does not require any adjudication. 10. Now we take up appeal of the revenue in ITA No.627/Kol/2011 for A.Yr.2006- 07. 10.1. As regards ground no.2 the brief facts of the case are identical to the facts as in ground no.1 for A.yr.2004-05 decided by us herein above. Therefore our order he .....

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e case. Accordingly ground No.3 of the revenue is dismissed. 12. We take up ground no.1 of the revenue. The brief facts of the case are that the AO treated the loss of ₹ 25,30,396/- as bogus which in fact deleted after considering the explanation of the assessee by the ld. CIT(A) vide para 5.1. to 5.5. 13. The ld. DR relied upon the order of AO while the ld. Counsel for the assessee relied upon the submissions made before ld. CIT(A) and order of ld. CIT(A). 14. We have heard the rival cont .....

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.002 and 0.001 for the financial year ended 31.3.05 and 31.3.06 respectively (c) The company was suspended from trading from 5.12.05 to 3.10.2006 and (d) The company had been incurring loss of the years ended 31.3.2004, 31.3.2005 and 31.3.2006 respectively. The AO had gathered certain information from Calcutta Stock Exchange Association Limited by issue of notice u/s 133(6) and as result of such verification made observations which are discussed briefly as below : (i) The name of the Broker was .....

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time by SEBI which was subsequently revoked; (v) The AO had further mentioned the price of the shares of M/s. Sharang Vinyog Ltd from April 2005 till December 2005 and had observed that such price varied between ₹ 258 [28.4.2005] to as less as ₹ 45/- [2.12.2005]. In reply to summon issued by the AO u/s 131, one of the Directors of M/s.Ahilya Commercial Pvt. Ltd. appeared before the AO and his statement was recorded. From the examination of the Director the AO drew following conclusi .....

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td to facilitate matching of transactions and creation of volume; (c) Through matched and cross deal there has been significant rise in the share prices; (d) From the recorded statement it is clear that both the broker and the company whose shares were traded by the assessee were for some time suspended by the SEBI; Accordingly, the AO has held that by this means the broker had purchased and sold the scripts of M/s. Sharang Vinyog Ltd and jacked up the prices of such shares ranging from ₹ .....

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