TMI Blog2015 (10) TMI 944X X X X Extracts X X X X X X X X Extracts X X X X ..... is dismissed. - Decided in favour of assessee. Indexation of share application money - CIT(A) rejected the claim of the assessee for indexation of share application money on the ground that no right has been created whatsoever in the land - Held that:- Respectfully following the decision in the case of Blue Star Ltd (2007 (3) TMI 290 - ITAT BOMBAY-J) and in absence of any contrary material brought to our notice we hold that the assessee is entitled to indexation benefit on the share application money introduced in M/s. Shristi Hotels Pvt. Ltd. We accordingly set aside the order of the CIT(A) on this issue and direct the AO to allow the benefit of indexation on the share application money and determine the long term capital gain in accordance with law after giving due opportunity of bearing heard to the assessee. - Decided in favour of assessee. Benefit of indexation being share capital denied - Ld.CIT(A) while holding that the assessee could have taken such benefit, however, denied the same on the ground that no shares were transferred, therefore, the assessee is not entitled to benefit of indexation - Held that:- We find the Ld.CIT(A) was not justified on this issue. We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O during the course of assessment proceedings observed from the details of short term capital gain and long term capital gain filed by the assessee that the assessee is engaged in sale and purchase of shares and other securities throughout the year. Such volume of sale and purchase was also very high. From the various details furnished by the assessee, he observed that the long term capital gain and short term capital gain declared by the assessee for the preceding and succeeding two years are as under: Asst. Year Long term capital gain (in Rs.) Short term capital gain (in Rs.) Purchase Sale LTCG Shown (Claimed Exempt) Purchase Sale STCG shown 2006-07 29,00,931 56,45,456 25,44,113 17,10,470 19,58,514 2,48,044 2007-08 9,01,095 25,87,468 16,86,373 42,16,697 41,47,022 (-)69,675 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll in quantity and value. The assessee has not dealt in huge quantities and values which are done by a businessman. The assessee transacted in shares mainly to minimize/spread investment risk. There was no intention of making profit booking or making quick gains. The shares were always valued at cost. There was never any lowering down exercise to value the shares at less than the cost at any time. It was submitted that the assessee is a real investor and earns dividend from over 58 companies and mutual funds to the tune of ₹ 1.86 lakhs. It was submitted that if a person has two portfolios then CBDT Circular will apply. Since the assessee has only one activity, therefore, he has got only one portfolio. Relying on various decisions it was argued that the capital gain shown by the assessee should be accepted. 4. Based on the arguments advanced by the assessee, the Ld.CIT(A) directed the AO not to treat the long term capital gain and short term capital gain declared by the assessee as business income . The relevant observation of the Ld.CIT(A) at para 25 of the order reads as under : 25. After carefully considering the reply of the appellant as well as facts of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that merely because there is consistency, frequency and volume in transaction of shares, the same cannot be treated as business income. The intention of the assessee at the time of purchase of such shares/securities are to be seen. Since the assessee in the instant case has made purchases and sold the shares supported by actual deliveries through the Demat account and since there has not been a single transaction of short sale during the entire year, therefore, we are of the considered opinion that the income from such gain cannot be treated as business income . This view of ours is supported by plethora of decisions of the Coordinate Benches of the Tribunal and different High Courts. In this view of the matter we do not find any infirmity in the order of the CIT(A) on this issue. Accordingly, the same is upheld and the ground raised by the Revenue is dismissed. ITA No.1551/PN/2012 (By Assessee) : 7. Facts of the case, in brief, are that the assessee alongwith his business associates named Ashwin Bhogilal Shah and Subhash Bhikchand Chuttar entered into Memorandum of Understanding (MOU) on 21st May, 1998 with Srishti Developers Pvt. Ltd. represented by its Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carefully considered the facts of the case as well as reply of the appellant. Before deciding the various issues taken in the ground by the appellant, it is imperative to ascertain the nature of receipt. As per settlement agreement dated 27/05/2005, the appellant has received ₹ 49.36 lacs for settlement of following rights as per clause 3(a) of the Settlement Agreement which reads as under: (3)(a) All claims of Executants- No,2 to 5 against the Executant No,1 and/or Executant No.6 and for the said land and/or the money so far paid and/or returns thereof have been settled fully and finally . (b) Except the amount receivable by the Executants-No.2 to 5 as enumerated in the annexure, the Executants-No.2 to 5 are not entitled to any other money or other claims whatsoever. (c) All other objections relating to transaction by and between the Executant No.1 and Executants No.2 to 6 relating to the said land raised by Executants-No.2 to 5 stand withdrawn unconditionally . 11. Thereafter, the payment was made on the basis of Annexure 'A' and 'B' of the Settlement Agreement which reads as under: ANNEXURE 'A' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 10 lacs being share application money, it is seen that by virtue of share application money, no right has been created whatsoever in the land. The appellant exercised right in the land by virtue of his share holding in M/s.SHPL and not by virtue of share application money. The appellant could have taken benefit of indexation in respect of ₹ 100/-being share capital in M/s.SHPL but since no shares were transferred, the, same was denied by the Assessing Officer. Share application money was refundable amount and therefore, the same cannot be considered for benefit of indexation. 15. The appellant has taken the issue of interest on deposit amounting to ₹ 13,00,828/- in revised ground No.(2). As per appellant, the amount of ₹ 49,36,000/- consists of ₹ 13,00,828/- being unpaid interest on deposit made to M/s.Shristi Developers Pvt. Ltd. which has been offered for taxation in various years including current year the same should be excluded from total amount of ₹ 49,36,000/-. 16. This ground is bereft of any merit. The appellant claims that interest amounting to ₹ 13,00,828/- was outstanding on the date of settlement and this amount was als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement agreement dated 27/05/2007 from Karandikar group. The learned CIT(A) and A.O. erred in not appreciating that the said amount of ₹ 13,00,828/- is being doubly taxed, once from time to time in earlier years and again in A. Y. 2008-09. 4. The appellant craves, leave to add / modify / delete all or any of the grounds of appeal. 10. Ground of appeal No.1 by the assessee relates to indexation of share application money of ₹ 10,00,000/- and share capital of ₹ 100/-. 11. After hearing both sides we find the Ld.CIT(A) rejected the claim of the assessee for indexation of share application money on the ground that no right has been created whatsoever in the land. The assessee exercised right in the land by virtue of his shareholding in M/s. Shrishti Hotels Pvt. Ltd., and not by virtue of share application money. Further, such share application money was refundable amount and therefore the same cannot be considered for benefit of indexation. It is the submission of the Ld. Counsel for the assessee that indexation benefit on the share application money introduced by the assessee into M/s. Shrishti Hotels Pvt. Ltd. should be granted. For the above proposition, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt liable to tax as capital gains provided the requisites of section 45 are satisfied. 22. Section 45 provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income-tax under the head 'Capital gains' and shall be deemed to be the income of the previous year in which the transfer took place. It is not the case of the assessee that the requisites of section 45 for taxing the impugned sum as capital gains are not fulfilled. The right to subscribe to the share capital is a valuable right and so is the right to be involved in the affairs of joint venture under the joint venture agreement. Such right is a capital asset within the meaning of section 2(14) of the Income-tax Act, which defines capital asset as meaning property of any kind held by an assessee, whether or not connected with his business or profession. Therefore the subject-matter of impugned transfer falls well within the ambit of 'capital asset' as defined in section 2(14) of the Income-tax Act. Loss or extinction of right to subscribe to the share capital and to be involved in the affairs of joint venture fall within the meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring heard to the assessee. We hold and direct accordingly. Ground of appeal No.1 by the assessee is accordingly allowed. 12. So far as the issue relating to benefit of indexation in respect of ₹ 100/- being share capital in M/s. SHPL is concerned, we find the Ld.CIT(A) while holding that the assessee could have taken such benefit, however, denied the same on the ground that no shares were transferred, therefore, the assessee is not entitled to benefit of indexation. We find the Ld.CIT(A) was not justified on this issue. We have already held in the preceding paragraphs that assessee is entitled to benefit of indexation on account of share application money. Following the same reasonings we hold that the assessee is entitled to benefit of indexation in respect of ₹ 100/- being share capital money in M/s. SHPL. Ground of appeal No.1 is accordingly allowed. 13. Ground of appeal No.2 was not pressed by the assessee for which the Ld. Counsel for the Departmental Representative has no objection. Accordingly, the same is dismissed. 14. In Ground of appeal No.3 the assessee has challenged the order of the CIT(A) in not considering the grievance of the assessee that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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