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Sh. Arun Kirpal Versus ACIT, Circle-32 (1) , New Delhi

2017 (5) TMI 914 - ITAT DELHI

Addition of long term capital gains - sale of shares - can full value consideration on sale of shares be substituted by the fair market value of the shares as on date of sale? - Held that:- In the instant case, the Assessing Officer has not been able to point out whether the assessee received any amount more than the consideration shown in the return of income or any amount accrued more than such consideration shown in the return of income. In such circumstances we hold that the full value consi .....

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of @20% of repairs, telephone expenses and depreciation on car etc. - addition on the ground that personal expenditure could not be ruled out - Held that:- Before the Ld. CIT-A the assessee failed to substantiate its claim that expenses incurred were wholly and exclusively for the purpose of business. The Ld. CIT-A observed that the assessee had not claimed to have maintained details of phone calls made and log book of the cars and in view of those facts personal use could not be ruled out. In o .....

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e assessee is directed against order dated 10/02/2014 of the Ld. Commissioner of Income Tax(Appeals)-19, New Delhi, (in short the CIT-A ) for assessment year 2008-09, raising following grounds of appeal: That on the facts and in the circumstances of the case:- 1.a That the Ld. CIT(Appeal) erred both in facts and in law while sustaining addition of long term capital gains of ₹ 6,06,424/- arising on sale of shares of M/s. Dera Farmindale Private Limited made by the Assessing Officer. 1.b Tha .....

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all or any ground of appeal either before or at the time of hearing of the appeal. 2. The facts in brief of the case are that the assessee, an individual, was engaged in the business of trading of eatable items like chicken, bakery products etc. through a proprietary concern, namely, M/s. Dera farms. During the year, the assessee also sold shares of a unlisted company. For the year under consideration, the assessee filed return of income on 13/03/2009, declaring total income of ₹ 14,45,53 .....

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expenses under the head profit and gains of business/profession. The Ld. Commissioner of Income-tax (Appeals) upheld the additions/disallowances made by the Assessing Officer. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 3. In ground No. 1, the assessee is aggrieved with the addition of long-term capital gain of ₹ 6,06,424/-. The facts in respect of the addition are that during the year, the assessee sold 4900 shares of M/s. Dera Farmind .....

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s @ ₹ 270 per shares Rs Rs.13,23,000 Calculation of F.M.V. of shares of Dera Farmindale (P) Ltd. Particulars Book Value (Rs.) Fair Market Value (Rs.) Cost of Agriculture Land at Rajgarh 4,98,400 8,50,000 Building under construction 9,38,245 Mutual Fund 16,00,000 8,50,000 Bank Balance 3,15,000 3,15,000 20,15,000 Fair Market Value of 7500 Equity Shares 268.67 Per Share Fair Market Value of one Equity Share Rounded off (Rs.) 270.00 Per share 3.1 The assessee further submitted that expenses sh .....

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said expenses on construction were undertaken in 2002 on the ground that the site development expenses as appearing under the head miscellaneous expenditure in the balance sheet as on 31/03/2006 was ₹ 11,51,280/- which was further reduced for written off at ₹ 9,90,828/- after adjustment of dividend amount. He further stated that no evidence in support that said building under construction was not having any market value, was filed by the assessee. The Assessing Officer took the book .....

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support of its arguments. In view of the observations, of the Ld. CIT-A upheld the finding of the Assessing Officer. 4. Before us, the Ld. counsel of the assessee submitted that according to the provisions of capital gains during relevant period, for computing capital gain on transfer of shares, the cost of acquisition of shares and expenditure incurred in connection with transfer of such shares, was required to be deducted from the full value consideration received or accrued as a result of tr .....

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and, the Ld. Senior DR, supported the orders of the lower authorities. 6. We have heard the rival submissions and perused the relevant material on record. In the facts of the instant case, the issue in dispute before us is that for computing the capital gain on sale of shares, can full value consideration on sale of shares be substituted by the fair market value of the shares as on date of sale. Section 45(1) of the Act provides that any profit gains arising from the transfer of a capital asset .....

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provisions manifest that the starting point of computation of the capital gain is the full value of consideration received or accruing. The expression cannot be understood to mean a notional consideration or a consideration, which has not actually been received or accrued to the assessee. To replace the full value consideration with the fair market value, the Act has been amended by finance Act 2017 w.e.f. 01/04/2018 by introducing section 50CA of the Act, which reads as under: Special provisio .....

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sfer. Explanation.-For the purposes of this section, "quoted share" means the share quoted on any recognised stock exchange with regularity from time to time, where the quotation of such share is based on current transaction made in the ordinary course of business. 7. The above Section 50CA was not in operation during relevant period and it is operative only from 01.04.2018. 8. We find that the issue in dispute has been discussed at length in the order of the Tribunal (supra) and it ha .....

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tax Act, 1922. Section 12-B(2) of the erstwhile Income-tax Act is pari materia to sec. 48 of the present Act with which we are dealing. The following observations of the Apex Court are worthy of notice as under: For the reasons already stated, we are of the opinion that the expression full value of the consideration cannot be construed as the market-value but as the price bargained" for by the parties to the sale. The dictionary meaning of the word full is whole or entire, or complete (Shor .....

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esent the full value. The expression full value means the whole price without any deduction whatsoever and it cannot refer to the adequacy or inadequacy of the price bargained for. Nor has it any necessary reference to the market value of the capital asset which is the subject-matter of the transfer. 7. To the similar effect is the judgment of the Supreme Court in the case of CIT vs. Gillanders Arbuthnot & Co. ( 87 ITR 407 ). Here also, the Apex Court explained the meaning of the expression .....

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, for the purposes of computing capital gain is contrary to law. 9. In the instant case, the Assessing Officer has not been able to point out whether the assessee received any amount more than the consideration shown in the return of income or any amount accrued more than such consideration shown in the return of income. In such circumstances, respectfully following the decision of the coordinate bench of the Tribunal (supra), we hold that the full value consideration received by the assessee an .....

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