TMI Blog2019 (1) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... d is a manufacturer and exporter of garments. 3. Ground No.1 raised by the Revenue challenging the action of the CIT(A) in deleting the addition made on account of Long Term Capital Gain as against the income from other sources held by the AO. 4. According to AO, the assessee earned profit of ₹ 49,85,861/- on sales of shares and booked the same as other income . The same has been shown as Long Term Capital Gain in the computation of total income and sought set off against forwarded Long Term Capital loss. 5. The AO treated the said profit as income from other sources and denied set off against the forwarded loss by the reasons as under: a. The Auditor had qualified In the Tax Audit Report that the investments were held in the name of the Director of the Company. b. The investments transacted in the course of the year were held in the demat account of the Director. The AO also concluded that the contract notes would be in the name of the Director. c. As the Company and the Director are distinct and separate entities, the transactions made by the Director cannot be treated as those of the Company. d. According to the Ld. AO, the property/Capital as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The appellant also enclosed copy, of company's audited a/cs for the immediate preceding A.Y. 2003-04, and pointed out that in the Investment schedule for year ended 31.3.2003, the auditor had Similarly qualified the fact that quoted equity shares were held as investments in the name of one of the Directors. According to the Ld. A.Rs, the note in the earlier year was thus identically worded as in the A.Y. 2004- 05. f. It was submitted that even in the earlier year's balance sheet, investments made in shares which were held In the Director's demat etc were disclosed in the assessee's balance sheet as its Investment since the funds required for making investments were expended out of Company's own resources. A copy of the Assessment Order for A.Y. 2003-04 was also enclosed to bring to notice that In the immediate preceding year the Ld. AO did not draw the inference that the shares transacted through the Director's demat a/c did not belong to Company, even while the shares were transacted through the director's demat etc, it was not held by the AO that the shares,' belonged to Director. On the contrary, it was argued the losses incurred by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e name of wife of Sri A K Roy ,but entire investment in the flat purchased was provided by the assessee. The assessee's wife was only a house maker and had no independent sources of income. In the A.Y. 1981~82 the said flat was sold but no income was disclosed in the hands of the assessee i.e. the husband. On these facts the AO took the view that since the money invested in the flat was entirely provided by the husband and the flat was also occupied by the assessee then whatever gain or income was 'derived from the flat after 1973 was the income of the assessee l.e. husband. It will thus be noted that the High court considered the substance of the transaction and found that husband was the real owner of the property even though legal title to the flat was in the name of his wife. According to High Court the income actually belonged to the person who had provided the resources for purchase of the property and mere legal title was not sufficient for deciding the issue of taxability in the hands of the real owner. i. It was argued by the Ld.A.Rs. for the appellant-company that if one applies the ratio laid down in this decision then it will be noted that funds requir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only in the assessment of the Director and could not be brought to tax under the residuary head head in someone else's assessment merely on the ground that the income was accounted in the assessee's books. It was therefore finally argued that the Ld. AO's findings were thus contradictory and cannot be sustained. It was submitted that the ld.AO be directed to assess to ₹ 49,85,861/- as capital gains, and' be further directed to allow its set off against brought forward from earlier years under the head capital gains. 7. The CIT(A) considering the submissions of the assessee, deleted the addition and directed the AO to assess the said sum as capital gain and allowed set off against the forwarded loss. The relevant portion of which is reproduced herein below:- 3. I have carefully examined the facts of the case, and find that there is no dispute that the demat account of the Director of the Company was utilized' for routing the transactions in shares made by the appellant-company. I have also examined the copy of the assessment order for the immediate preceding assessment year 2003- 04, passed by the Ld AO u/s 143(3) of the Income Tax Act dated 31.03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lent citation [2001]252 ITR 468 (Calcutta) 170 CTR 187(Calcutta)] date of .. With such a view of the matter, I find that the action of the Ld.AO cannot be sustained, and the Change of Head of Income is restored in favour of the appellant assessee. Consequently, the Ld. AO is directed to assess the impugned amount of ₹ 49,85,861/- as capital Gains only. As a corollary, the Ld .AO is also further directed to examine and allow the claim of set-off made by the appellant against the brought-forward losses from earlier years under the head Capital Gains. Grounds 1 to 4 accordingly stand allowed in favour of the assessee-appellant. 8. Before us, the Ld.DR submits that, the assessee did not produce relevant evidence i.e. auditor note, contract note, order and referred to page no.3 of AO and CIT(A) accepted the submissions of the assessee and given relief. The Ld.DR relied on the order of the AO. 9. Ld.AR submits that the assessee has no demat account on its own and it has become compulsory to have own demat account for companies from 2010 onwards. The assessee admits that it was a mistake to transact in the demat account of its Directors and it was rectified ..... X X X X Extracts X X X X X X X X Extracts X X X X
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