Category: Tribunal News: Part A-Domestic Taxation

50 Riya Gupta vs. DCIT

[2024] 113 ITR(T) 1 (Kol – Trib.)

ITA NO. 46 (KOL.) OF 2024

A.Y.: 2014-15

DATED: 6^th June, 2024

Sec. 70

Long-term capital loss arising from sale of quoted equity shares with STT paid was eligible to be set-off against long-term capital gain earned from sale of unquoted shares, in view of specific provisions of sections 2(14), 10(38), 45, 47 and 48.

FACTS

The assessee filed return of income on 31^st July, 2014 declaring total income of ₹18,31,980/. -During the assessment proceedings, the AO called for various information from the assessee which were supplied and replied by the assessee. The AO passed the order making various additions including the addition of ₹47,90,616/- resulting on non-allowance of set off of loss from sale of equity shares on recognised stock exchange with STT paid against the profit on sale of unquoted equity shares. The AO rejected the said action on the ground that the long-term capital gain on sale of quoted shares is exempt u/s 10(38) of the Act and similarly the loss incurred was also not liable to be set off against the other taxable income.

Aggrieved by the assessment order, the assessee filed an appeal before CIT(A). The CIT(A) dismissed the appeal of the assessee by upholding the order of the AO on this issue on the same reasoning. Aggrieved by the order, the assessee filed an appeal before the ITAT.

HELD

The undisputed facts were that during the year, the assessee had earned long term capital gain of ₹50,00,000/- from sale of unquoted shares of M/s IRC Infra and Reality Pvt. Ltd. and also incurred long term capital loss of ₹47,90,616/- from sale of quoted equity shares which was executed on the recognized stock exchange and STT was duly paid. The issue for adjudication was whether the long term capital loss suffered on sale of equity shares can be set off against the long term capital gain earned by the assessee on sale of unquoted equity shares or not.

The ITAT, after perusing provisions of section 2(14), 45, 47 and 48, observed that nowhere any exclusion or exception has been provided to the long-term capital gain resulting from sale of equity shares. The ITAT observed that it’s only the long term capital gain resulting from sale of shares / securities which was granted exemption u/s 10(38) subject to the fulfillment of certain conditions and not the entire source which was excluded from the aforesaid sections.
The ITAT relied on the following Judgments –

• Hon’ble Kolkata High Court in the case of Royal Calcutta Turf Club vs. CIT [1983] 144 ITR 709/12 Taxman 133
• United Investments vs. ACIT TS-379-ITAT- 2019 —Kolkata Tribunal
• Raptakos Brett & Co. Ltd. vs. DCIT (69 SOT 383) —Kolkata Tribunal

In the result, the appeal of the assessee was allowed for the above-mentioned issue.

EDITORIAL COMMENT

The decision of Hon’ble Apex Court in the case of CIT vs. Harprasad& Co. (P.) Ltd.[1975] 99 ITR 118 is distinguished on the ground that the principle laid down by the Hon’ble Apex Court that income includes negative income can be applied only when the entire source of income falls within the charging provision of Act but where the source of income is otherwise chargeable to tax but only a specific kind of income derived from such source is granted exemption, then in such case, the proposition that the term income includes loss would not be applicable. In other words, where only one of the streams of income from a source is granted exemption by the legislature upon fulfillment of specified conditions then the concept of income includes loss would not be applicable.

BCAJ Admin

49 Meda Raja KishorRaghuramy Reddy

[2024] 113ITR(T)258 (Panaji – Trib.)

ITA NO. 127 (PANJ.) OF 2022

A.Y.: 2014-14

DATE: 28^th February, 2024

Commissioner (Appeals) has to decide appeal on merits by passing a speaking order and does not have any power to dismiss appeal for non-prosecution.

FACTS

The assessee had filed return of income electronically on 29^th November, 2014 declaring total income of ₹37,60,840/-.The assessee’s case was selected for scrutiny proceedings. The assessee had failed to comply with the notices issued by the AO. The AO passed an ex-parte assessment order making the following additions:

• ₹6,22,72,638/- under section 68 of the Act as unproved creditors
• ₹39,62,472/- under section 69 of the Act
• ₹5,78,850/- on account of difference in Form 26AS and return of income.

On appeal before CIT(A), the CIT(A) in a cryptic manner dismissed the appeal of the assessee.

Aggrieved by the Order, the assessee preferred an appeal before the ITAT.

HELD

DELAY IN FILING APPEAL

There was a delay of 1330 days in filing the appeal which included the period of Covid Pandemic.

Considering the principle of substantial justice, respectfully following the Hon’ble Supreme Court in the case of Gupta Emerald Mines (P.) Ltd. vs. Pr. CIT [2023] 156 taxmann.com 198 (SC) [25-09-2023] and Hon’ble Jurisdictional High Court in the case of Hindalco Industries Ltd vs. Pr. CIT Writ Petition No. 569 of 2023/ [2024] 158 taxmann.com 485, the ITAT condoned the delay in filling the appeal.

MERITS OF THE CASE

The ITAT observed that the assessee had filed written submission dated 14^th August, 2017 containing following documents — Copy of confirmation of Accounts, Copy of Ledgers, Identity and Address proof of Creditors, cash books, bills, vouchers, bank statements, affidavits etc. The ITAT further observed that Form 35 which is form of appeal for filing appeal before CIT(A) was enclosed with application for admission of additional evidence under rule 46A.

The ITAT further observed the following fall outs in the assessment proceedings —

• It was possible for AO to collect information directly from renowned companies — Jaypee cement Bangalore & JSW Steel [Sundry creditors of the assessee] u/s 133(6) or 131 of the Act.
• Some of the creditors appeared in the balance sheet from earlier years – under section 68 the amount which was credited during the year only can be added.
• Assessee had shown Interest income on FD of ₹1,98,487/- and the AO had merely added ₹40,063/- without discussing what was total interest as per Form 26AS statement
• Fixed Deposit in Ratnakar Bank Account Number 3158 appeared in the balance sheet of the Assessee — the AO had worked out corresponding FD in the Ratnakar Bank at ₹507,087/- without actually calling the details from the Ratnakar Bank.
• The AO made an addition of ₹31,700/- as receipt from Gammon India Ltd based on 26AS statement — exact amount and exact name appeared in the Balance Sheet – the AO could have called for information u/s 133(6) of the Act from Gammon India Ltd.

The ITAT held that though the assessee had failed to comply with the notices issued by AO, the AO also failed to carry out necessary investigations and to understand the facts in totality.

The ITAT held that the CIT(A) has discretion to admit the Additional evidence, if there was sufficient cause which prevented the assessee from filling the documents during the assessment proceedings. The discretion had to be used in judicious manner and one must be able to reason out. In this case the CIT(A) had not passed a speaking order for rejecting the additional evidence. The CIT(A) had failed to follow the procedure laid down in Rule 46A.

The ITAT also held that the CIT(A) had not adjudicated each and every ground raised by the Assessee on merits. The ITAT followed the Hon’ble Jurisdictional High Court in the case of Pr. CIT (Central) vs. Premkumar Arjundas Luthra (HUF) [2016] 69 taxmann.com 407 wherein it was held that CIT(A) has to decide the appeal on merits and CIT(A) does not have any power to dismiss appeal for non-prosecution.

The ITAT set aside the order of the CIT(A) for de novo adjudication after giving opportunity to the assessee. In the result, the appeal of the assessee was allowed for statistical purpose.

BCAJ Admin

48 American Express (India) P. Ltd. vs. PCIT

(2024) 165 taxmann.com 91 (Del Trib)

ITA No.: 2468(Delhi) of 2023

A.Y.: 2016-17

Dated: 30^th August, 2024

Ss. 263, 80G

Where the view taken by the AO that the assessee was eligible for deduction under section 80G for CSR expenses was approved by various decisions of Tribunal, PCIT could not invoke revisional jurisdiction under section 263 on the ground that the order of AO was erroneous.

FACTS

The assessee had incurred expenditure amounting to ₹5,20,00,000 under section 135 of the Companies Act 2013 dealing with Corporate Social Responsibility (CSR). It voluntarily disallowed the same in the computation of income; however, it claimed benefit of deduction under section 80G to the extent of ₹3,21,43,427.

During the assessment proceedings, after examining the assessee’s claim of deduction under section 80G, the Assessing Officer allowed the said deduction. PCIT initiated revision proceedings under section 263 on the ground that claim of deduction under section 80G for CSR expenses was not allowable to the assessee.

Aggrieved by order of PCIT, the assessee filed an appeal before ITAT.

HELD

The Tribunal observed that:

(a) In the past, the Tribunal has considered this issue in various cases and consistently held that though CSR expenses which are mandatory under section 135 of the Companies Act are not allowable as deduction under section 37(1), if any part of CSR contribution is otherwise eligible for deduction under Chapter VI-A, there is no bar on the companies to claim the same as deduction under section 80G.

(b) Merely because the PCIT does not agree with the view taken by the AO, the assessment order does not become erroneous. The view taken by the AO in allowing deduction under section 80G for CSR expenses was approved by various decisions of the Tribunal.

(c) The satisfaction of twin conditions set out in section 263, namely, the order is (i) erroneous; and (ii) prejudicial to the interest of Revenue is sine qua non for exercising revisional jurisdiction. If any of the said conditions are not satisfied, the revisional jurisdictional under section 263 cannot be invoked.

It noted that this view was also supported by coordinate bench in JMS Mining P Ltd. v. PCIT, (2021) 130 taxmann.com 118 (KolTrib).

Accordingly, the Tribunal allowed the appeal of the assessee and quashed the revisional order passed by PCIT.

BCAJ Admin

47 Gurukul Shikshan Sansthan vs. CIT

(2024) 165 taxmann.com 369(JaipurTrib)

ITA No.: 482(Jpr) of 2024

A.Ys.: 2022-23 to 2024-25

Dated: 3^rd July, 2024

S. 12AB –Registration under section 12AB could be denied to a trust if it had not complied with the applicable State public trusts law.

FACTS

CIT(E) rejected the assessee-trust’s application for registration under section 12AB dated 26^th September, 2023 on the ground that it was not registered under the Rajasthan Public Trusts Act, 1959, genuineness of the activities of the assessee could not be verified due to non-compliance, and that the assessee had filed incomplete Form No. 10AB.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

Before the Tribunal, the assessee filed a request for adjournment stating that the assessee-trust had applied for a certificate under the Rajasthan Public Trusts Act, 1959 and was awaiting such certificate.

Rejecting the adjournment request, the Tribunal, vide an ex-parte order, observed that:

(a) As admitted in the adjournment request, as on the date of application for registration, that is, 26^th September, 2023, the assessee was not registered under the Rajasthan Public Trusts Act although such registration was mandated under section 17 of the said Act.

(b) Section 12AB(1) mandates that all the applicable laws shall be followed and if any applicable law is not followed by the assessee, then it is not eligible for registration.

Following the decision of Supreme Court in New Noble Educational Society vs. CCIT, (2022) 448 ITR 594 (SC), the Tribunal held that since the assessee had not followed provisions of Rajasthan Public Trusts Act, it was not eligible for registration under section 12AB.

Additionally, the Tribunal observed that since the assessee had neither submitted the details called by CIT nor filed any document before the Tribunal to prove genuineness of its activities, it was not eligible for registration under section 12AB also on this ground.

BCAJ Admin

46 ITO vs. Petroleum Trust

(2024) 165 taxmann.com 504 (MumTrib)

ITA No.: 2694(Mum) of 2024; C.O. No. 133 (Mum) of 2024

A.Y.: 2021-22

Dated: 2^nd August, 2024

S. 161

A determinate trust with sole beneficiary was liable to be taxed at same rate as applicable to its beneficiary.

FACTS

The assessee was a discretionary trust, which held investments mainly for its beneficiary, RIIHL. RIIHL, being a limited company, opted to be taxed under the new tax regime under section 115BAA by filing Form 10-IC claiming to be taxed @ 22 per cent (+surcharge / cess). The assessee-trust, being a representative assessee under section 161, claimed to be taxed at same rate applicable to its beneficiary in its return of income. The tax department disagreed with this position.

CIT(A) accepted the status of the assessee as a representative assessee under section 161 and held that since the assessee is a determinate trust with RIIHL as its sole and 100 per cent beneficiary and settlor and since RIIHL has opted to be taxed under the new tax regime @22 per cent, the assessee-trust was also liable to be taxed at the same rate.

Aggrieved, the tax department filed an appeal before the ITAT. The assessee also filed cross objections in support of order of CIT(A).

HELD

Noting language of section 161(1) and following the decision of Bombay High Court in Mrs. Amy F. Cama vs. CIT,(1999) 237 ITR 82 (Bom), the Tribunal held that the tax shall be levied upon and recovered from a representative assessee in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him, which meant that the assessee-trust will be subject to same rate of tax as applicable to the person represented by it, that is, RIIHL which was taxed @ 22 per cent under section 115BAA.

BCAJ Admin

45 AlagappaMuthiah HUF vs. DCIT

ITA No. 775/Bang./2024&954/Bang./2024

AY: 2017-18

Date of Order: 12^th August, 2024

Sections: 45, 48

I : Capital gains is taxable in the year in which possession of constructed premises was received by the assessee and not in the earlier year when occupancy certificate was granted.

II : The cost of construction given by the developer which is not supported by any particulars cannot be taken as full value of consideration. Section 50D of the Act, would be applicable and accordingly, the full value of consideration should be computed on the basis of guideline value of land or building that is transferred / received on development.

FACTS I

The assessee HUF along with Alagappa Annamalai HUF were co-owners of land in respect of which they entered into two development agreements dated 10^th February, 2011. Under these Development agreements the properties belonging to these two persons were being developed into both residential as well as commercial units. These two persons were allotted the entire commercial unit and 6 apartment units in the residential units.

In the course of a search conducted in the case of Sri Alagappa Annamalai on 4^th July, 2019, a sworn statement was recorded from Sri Alagappa Annamalai as to why the capital gain in respect of transaction of entering into development agreement has not been offered for tax in AY 2017-18. In response, it was submitted that capital gain has been offered in the year in which possession of constructed premises has been received. This was done in absence of information about occupancy certificate and cost of construction. Similar statement was recorded in the case of assessee on 5^th July, 2019 under section 131. Thereafter, both the assessee and Alagappa Annamalai retracted their respective statements and stated that the possession of the properties was received by them after development on 8^th May, 2017 and accordingly the liability to capital gains arose for the assessment year 2018-19 and not for the assessment year 2017-18 as admitted in their earlier statements. Accordingly, they stated that they would be offering capital gains for the assessment year 2018-19 on the above basis in course of assessment proceedings after receipt of notice.

The assessee, accordingly, filed returns in response to notice u/s.153C of the Act offering capital gains by adopting the value determined by the registered valuer. In the assessment proceedings, the A.O. held that the liability to capital gains arises for the assessment year 2017-18 as occupancy certificate was received on 1^st February, 2017 for commercial portion and 17^th March, 2017 for residential portion. On the other-hand both these persons contended that the liability to capital gains arose for the assessment year 2018-19 on receipt of possession vide letter dated 8^th May, 2017 when simultaneous with receiving possession they have returned the deposits. The AO was of the view that the letter of possession was manipulated in collusion with the builder.

HELD I

The Tribunal observed that reason for taxing the capital gain as income of assessment year 2017-18 is that the occupancy certificate was received on 17^th March, 2017. On behalf of the assessee,it was contended that section 45(5A) has been introduced w.e.f. 1.4.2018 and therefore the same does not apply to the present case. Section 45(5A) applies w.e.f. AY 2018-19 and not AY 2017-18. The Tribunal noted that section 45(5A) cannot be applied retrospectively and also that the possession has been received vide letter dated 8^th May, 2017. It held that the parties to the transfer of impugned property mutually agreed to hand over the delivery of the possession vide the said letter and it is to be accepted as true unless it is proved otherwise.There is no basis for the allegation made by the AO that the letter of possession is manipulated in collusion with the builder.The Tribunal, relying upon the decision of the co-ordinate bench in the case of N A Haris in ITA No.988/Bang/2018 dated 15^th February, 2021 held that the capital gain arising pursuant to development agreement dated 10^th February, 2011 is to be taxed in AY 2018-19 and not AY 2017-18 as held by the AO.

FACTS II

The assessee in the retraction letter had informed the AO that it had engaged a registered Valuer to determine the value of the property received by it after development and the said value was –

Commercial portion: ₹82,26,36,541

Residential portion: ₹6,89,11,624

—————————————————————————

                        Total: ₹89,15,48,165

===========================================

The assessee computed the capital gains by adopting the above stated value. In the assessment order, the A.O. varied the computation of capital gains by adopting the full value of consideration at ₹120,03,46,357/- based on the details furnished by the Developer vide letter dated 7^th January, 2022. While doing so the A.O. has taken the cost of construction reported by the Developer of ₹4,597 per sft for the commercial portion and ₹3,750 per sft. for the residential portion.

The assessee disputed the cost of construction before the CIT(A). The CIT(A) observed that except for one unsigned sheet, the Developer had not furnished any bills or documents in support of the cost claimed to be incurred by the Developer. The DVO had without giving any reasons stated that the valuation as done by the Registered Valuer is understated.

Before CIT(A), reliance was placed on the decision of the Hon’ble Karnataka High Court in the case of Shankar Vittal Motor Company in ITA 653/2016 dated 1^st December, 2021 as well as the decision of the jurisdictional High Court in the case of Smt. Sarojini M. Kushe in ITA 475/2016 dated 1st December, 2021. In the aforesaid cases it has been held that the cost of construction given by the developer which is not supported by any particulars cannot be taken as full value of consideration. The Hon’ble High Court has held that section 50D of the Act, would be applicable and accordingly, the full value of consideration should be computed on the basis of guideline value of land or building that is transferred / received on development.

The CIT(A) determined the full value of consideration for transfer of the undivided interest land to the developer at ₹93,80,19,968/- as against ₹120,03,46,357/- taken by the Assessing Officer. The CIT [A] has noticed that the appellant has transferred 1,94,368sft. of land to the developer. The said land has been valued at ₹4,826 per sft. after deriving the same by reducing the guideline value of the building from the guideline value of the super built-up area. This is because the super built-up area includes both undivided interest in land as well as the built-up area. In this manner the learned CIT[A] has held that the deemed value of consideration for the transfer of the undivided share of land in the project pertaining to the developer share was ₹93,80,19,968/-

HELD II

The method adopted by AO for determining the consideration of the impugned transfer of property is not correct. There is no basis for inclusion of cost of land, finance cost and administrative cost for determining the consideration received by the landlord. The Tribunal held that the most appropriate judgment to be followed is the decision of Karnataka High Court in Shankar Vittal Motor Company in ITA 653/2016 dated 1^st December, 2021. It held that no fault can be found with the decision of the CIT(A) which has been rendered by following the ratio of the decision of the Karnataka High Court Shankar Vittal Motor Company in ITA 653/2016 dated 1^st December, 2021 as also the decision of the Smt. Sarojini M. Kushe in ITA No.475 of 2016 dated 15^th December, 2021. The Tribunal dismissed this ground of appeal of the revenue.

BCAJ Admin

44 PasupatiAcrylon Ltd. vs. ACIT

TS-696-ITAT-2024(DEL)

ITA No. 1773/Delhi/2024

AY: 2019-20

Date of Order: 19^th September, 2024

Sections: 37, 143(1)

Section 143(1) mandates only processing the return of income to vouch for the arithmetical error, detect the incorrect claim of expenses, losses, verify and cross check the claim made in the audit report, claim of deductions, cross verify the income declared in form 26AS or form 16A etc. and the Revenue is not allowed to go beyond that.

Claim not made in the return of income, which has been processed, and time for filing revised return has expired can be made only before the administrative officers or the Board and not in an appeal.

FACTS

For the year under consideration, the assessee filed its return of income declaring therein a total income of ₹28,98,24,424. The CPC processed the return of income and passed an intimation accepting the return of income as filed by the assessee.

Assessee filed an appeal to the CIT(A) raising a ground that the assessee failed to make a claim of certain business expenditures in the return filed by it, which was duly processed u/s 143(1) of the Act. The CIT(A) held that the claim of business expenses u/s 37 after processing the return of income seems an afterthought. He opined that the assessee can easily file the revised return of income if there is any discrepancy in the original return of income before the due date, which the assessee failed to do so. The due date for filing the revised return of income was 30^th November, 2020. The contention of the assessee cannot be accepted by simply writing a letter to the concerned authority for allowing the business expenses which was not claimed in the return of income. The CIT(A) relied on the decision of Supreme Court in the case of Goetze (India) Ltd, wherein the issue was well-settled, any deduction stating that the assessee can revise the return of income within due date for raising any new claim which was not claimed in the original return of income. Accordingly, he dismissed the appeal.

Aggrieved, the assessee preferred an appeal to the Tribunal.

HELD

All the case law relied by the assessee are relating the fresh claim made by the assessee in the regular assessment proceedings, not in the case of preliminary assessment u/s 143(1) of the Act. The mandate of the preliminary assessment u/s 143(1) of the Act is different, it is only to process the return of income to vouch for the arithmetical error, detect the incorrect claim of expenses, losses, verify and cross check the claim made in the audit report, claim of deductions, cross verify the income declared in form 26AS or form 16A etc. The AO is not allowed to go beyond the above mandate given under section 143(1) of the Act.

The Tribunal noted that the asssessee filed the return of income in which it did not make certain claims which, according to the assessee, are genuine. The return was processed accepting the return of income as filed. The time allowed for filing revised return of income having elapsed the assessee found filing an appeal to be an easy option.

The Tribunal considered the possibilities available to make the fresh claim in case the assessee fails to make the claim in the original return of income. These, according to the Tribunal, are:

i. By filing revised return of income (not possible in this case as the limitation period already elapsed);

ii. Claim in the regular assessment, in case the return is selected for scrutiny. (in this case, not selected, the avenue to go in appeal also ruled out);

iii. The assessee can proceed by filing revision application u/s 264 of the Act before the jurisdictional commissioner. The application has to be filed within one year from the date of passing of the relevant impugned order;

iv. The assessee may file an application u/s 119(2)(b) of the Act before the Board. The board may find it desirable or expedient so to do for avoiding genuine hardship to admit an application or claim for any exemption, deduction, refund or any other relief under the Act. The important thing is that there is no limitation period attached to it. The assessee can approach any time when it has genuine claim.

The Tribunal was of the view that the assessee filed the present appeal before it without there being any grievance in preliminary or intimation order in which the Assessing Officer accepted the return of income filed by the assessee. It held that, the assessee may have two types of fresh claim, which may be genuine claim which is traceable from the return filed by the assessee, which can be claimed by the assessee, the other type is debatable issues which may be claimed only upon making proper verification and assessment, this will lead to discretion of the relevant authorities including the Board. It held that the remedy for the fresh claim is not with any appellate authority and the remedy lies only with the administrative officers or with the board. In case the board rejects the application, the remedy available only in the writ proceedings. The Tribunal dismissed the appeal filed by the assessee.

BCAJ Admin

43 Standard Chartered Bank (Singapore) Limited vs. DCIT

TS-615-ITAT-2024(Mum)

Assessment Year: 2021-22

Date of Order: 14^th August, 2024

Sections: 234B, 234C

For failure on the part of the payer to deduct TDS, the assessee cannot be penalised by levy of interest under section 234C.

FACTS

The assessee, a company incorporated in Singapore, registered as a Category I Foreign Portfolio Investor (FPI) with SEBI made investments in debt securities and equity shares in India. The assessee filed return of income for the year under consideration on 15^th March, declaring a total income of ₹75,66,62,391. The return of income filed by the assessee was processed under section 143(1) and a demand of ₹47,13,33,940 was raised as a result of TDS credit not been granted and interest under section 234B and 234C being levied.

During the year under consideration, the assessee had received interest on commercial papers and non-convertible debentures amounting to ₹62,10,11,200 and ₹13,68,16,712 respectively which was subject to deduction of tax at source @ 20 per cent. The Assessee had also received interest on government securities which was subject to deduction of tax at source @ 5 per cent. On some part of income received from commercial papers, non-convertible debentures and government securities the payers did not deduct tax at source, though they were liable to deduct tax at source under section 196D and 194LD of the Act. Pursuant to the failure of the payer to deduct tax at source the assessee was required to discharge tax liability by way of advance tax at the time of receipt of such interest income from commercial papers, NCDs and government securities. The assessee did pay the full tax on interest receipts as advance tax.

Levy of interest under section 234B was subsequently rectified but the levy of interest under section 234C at ₹51,75,514 stood.

Aggrieved, the assessee preferred an appeal to the CIT(A) who dismissed the appeal filed by the assessee.

Aggrieved, the assessee preferred an appeal to the Tribunal where, on behalf of the assessee, reliance was placed on following decisions –

i) Goldman Sachs Investment (Mauritius) Ltd. vs. DCIT [(2021) 187 ITD 184 (Mum.-Trib.)];

ii) CIT vs. Madras Fertilisers Ltd. [149 ITR 703 (Mad. HC)].

HELD

The Tribunal observed that it is an undisputed fact that on some part of interest received by the assessee on commercial papers, NCDs and Government Securities, payers have faulted in not deducting tax at source. It was observed that for the fault of the payer, the assessee cannot be held responsible. The Tribunal held that in its understanding of the law, for failure on the part of the assessee to deduct tax at source under sections 196D and 194LD of the Act, the assessee cannot be penalised by levy of interest under section 234C. The Tribunal observed that the assessee has diligently discharged its full tax liability by paying entire advance tax on interest income.

Having examined the provisions of section 234C of the Act, the Tribunal held that it can be seen that advance tax is reduced by any tax deductible or collectible which means that the legislators have taken care of liability of the payer to deduct tax at source on payments and to that extent, assessee is not required to pay any advance tax. In the present case, since the payers faulted in deducting tax at source and assessee discharged its liability by paying full tax, the assessee cannot be levied with interest under section 234C of the Act for the fault of the payers. For this proposition, the Tribunal drew support from the decision of the Bombay High Court in Director of Income-tax (International Tax) v. Ngc Network Asia LLC [(2009) 313 ITR 187 (Bom. HC)] where the court held that when a duty is cast on the payer to deduct and pay tax at source, on payer’s default to do so, no interest under section 234B can be imposed on the payee assessee.

The Tribunal held that it is not a case of deferment of advance tax on income as envisaged in section 234C of the Act. The Tribunal directed the AO to delete the interest levied under section 234C.

The Tribunal allowed the appeal filed by the assessee.

BCAJ Admin

42 RamdasSitaramPatil vs. ACIT

TS-618-ITAT-2024(PUN)

ITA No. 621/Pune/2022

AY: 2016-17

Date of Order: 7^th August, 2024

Sections: 54 and 54F

Deduction under Sections 54 and 54F can be claimed simultaneously qua investment in the same new asset.

The covenants in the sale deed executed and registered are conclusive in the absence of any evidence to the contrary.

The crucial date for the purpose of determination of date of purchase for the purpose of section 54 is the date when the possession and control of the property is given to the purchaser’s hands.

FACTS

The appellant, an individual, filed his Return of Income for the A.Y. 2016-17 on 7^th March, 2017 declaring a total income of ₹96,55,810/-. The assessment was completed by the Assessing Officer (AO) vide order dated 28^th December, 2018 passed u/s.143(3) of the Act at a total income of ₹2,59,13,610/-. While doing so, the AO disallowed the claim for deduction of income u/s.54F of ₹98,97,654/- and deduction u/s.54 of ₹63,60,146/-.

During the year under consideration, on 9^th February, 2016, the assessee entered into a joint development agreement for a consideration of ₹25,00,000 and 7 constructed flats. On 1^st November, 2015, he entered into an unregistered agreement to sell a residential flat in Kolhapur for a consideration of ₹80,00,000. The assessee purchased a bungalow at Kolhapur, whose possession was taken on  31st March, 2015, for a consideration of ₹3,06,00,000, of which ₹1,30,00,000 was paid during the period from 20^th May, 2014 to 2^nd December, 2014 and ₹90,00,000 was paid in cash in 2014 as per MOU dated 19^th May, 2014.

In view of the fact that the possession of the bungalow purchased was received on 31^st March, 2015, the assessee claimed deduction under sections 54 and 54F against the long term capital gains arising on two transfers effected by him. The said claim was denied by the AO by holding that (1) deduction u/s.54/54F cannot be claimed simultaneously in respect of the same asset; and (2) payment for purchase of new house was made prior to one year before the sale of the original asset.

Aggrieved, the assessee preferred an appeal to the CIT(A) who vide impugned order confirmed the action of the AO in disallowing the claim for deduction u/s.54/54F by holding that the possession agreement dated 31^st March, 2015 is a fabricated document in view of the statement made by him u/s.132(4) of the Act on 19^th December, 2014 that the new residential property is in his possession.

Aggrieved, the assessee preferred an appeal to the Tribunal.

HELD

The Tribunal observed that the solitary issue in the present appeal revolves around the entitlement of assessee for deduction u/s.54/54F of the Act. It noted that admittedly, the sale consideration was paid prior to the one year before the sale of original asset. The Tribunal held that there is no bar under law to claim deduction simultaneously u/s. 54 and u/s.54F in respect of the same asset. It observed that the crucial fact which needs to be determined in the present case is the date of purchase of the new residential property.

The Tribunal held that it is settled position of law that the crucial date for the purpose of determination is when the property is purchased for the purpose of section 54 and the date when the possession and control of the property is given to the purchaser’s hands.

The Tribunal applying the principle laid down by the Andhra Pradesh High Court in case of CIT vs. Shahzada Begum [(1988) 173 ITR 397] and also the decision of Hon’ble Bombay High Court in the case of CIT vs. Dr. Laxmichand Narpal Nagda (deceased) [211 ITR 804] and observing that in the present case, the recital of the sale deed clearly says that possession of the property was taken on 31^st March, 2015 which is within the period of one year before the date of sale of the original asset. The Tribunal held that the covenants in the sale deed executed and registered are conclusive in the absence of any evidence to the contrary; the finding of the CIT(A) that it is a fabricated document is a mere bald allegation and cannot be sustained in the eyes of law; the appellant is entitled for deduction us/.54/54F as claimed.

BCAJ Admin

34. ITO vs. Babita Gupta

[2022] 100 ITR(T) 252 (Delhi – Trib.)

ITA No.: 5313 (Delhi) of 2019

A.Y.: 2014–15

Date of Order: 18th October, 2022

Section 54B — Where assessee claimed capital gains arising on sale of agricultural land as exempted u/s 54B on purchase of another agricultural land, since the assessee had furnished all sales documents viz., agreement to sell and purchase, receipt, possession letter, GPA and affidavit, along with a copy of the return filed by the land owner, from whom new land was purchased, wherein she had declared capital gains arising from the sale of its land to assessee, the benefit of exemption u/s 54B was allowable.

FACTS

In the course of assessment proceedings, the AO noticed that the assessee had sold agricultural land measuring 8 bighas situated in the Revenue Estate of Bakkarvala Village, Delhi for a consideration of ₹8,76,56,250 and claimed long-term capital gain of ₹8,48,80,881 as deduction u/s 54B of the Act. The assessee submitted the documentary evidences such as the copy of the agreement to sell, to purchase the agricultural land in the year 2000, copy of General Power of Attorney, copy of possession letter, affidavit of Shri Kali Ram Ganga Bishan (HUF) in proof of purchase of land by the assessee and copy of sale deed, dated 7th November, 2013, executed in the name of Pearls Life Style Developers (P) Ltd [Old Agricultural Land] and copy of the sale deed, dated 15th November, 2013, for the purchase of new agricultural land from Smt. Sumitra Devi Gupta, copy of General Power of Attorney, copy of possession letter, affidavit of Smt. Sumitra Devi Gupta in proof of purchase of land by the assessee[New Agricultural Land].

The AO while completing the assessment u/s 143(3) of the Act accepted the first transaction i.e., the sale of Old Agricultural land as genuine and fulfilled all the criteria and the second transaction i.e., the purchase of New Agricultural Land was not accepted on the ground that this transaction was made through General Power of Attorney only to claim deduction u/s 54B of the Act.

Aggrieved by the order of AO, the assessee filed an appeal before CIT(A). The CIT(A) considering the submissions of the assessee, the evidence furnished before him and following the decision of the Hon’ble Delhi High Court in the case of CIT vs. Ram Gopal [2015] 55 taxmann.com 536/230 Taxman 205/372 ITR 498 allowed deduction u/s 54B of the Act as claimed by the assessee.

Aggrieved by the order of CIT(A), the revenue filed a further appeal before the Tribunal.

HELD

The ITAT observed that the assessee immediately upon receiving the payments (through the banking channel) on account of sale consideration in respect of old agricultural land the assessee had invested the whole of the sale consideration received in respect of her old agricultural land towards the purchase of new agricultural land. Since the assessee had purchased the new agricultural land by investing the whole of the sale consideration in respect of the old agricultural land within the next few days, she had become eligible and entitled to claim the deduction / exemption u/s 54B of the Act, and accordingly, the assessee had claimed the deduction / exemption u/s 54B in her ITR filed for A.Y. 2014–15, which was denied by the AO.

The Tribunal observed that the AO accepted the transactions pertaining to old agricultural land and disbelieved the transaction of purchase of agricultural land from Smt. Sumitra Devi Gupta made by the assessee during the assessment year under consideration for the reason that there was no mutation in the Revenue Records and the purchaser of the property, Smt. Sumitra Devi Gupta, did not respond to the notice issued u/s 133(6) of the Act.

The ITAT further observed that in the course of appellate proceedings, the assessee had furnished the Return of Income filed by Smt. Sumitra Devi Gupta from whom the land was purchased by assessee, wherein the capital gain was declared by Smt. Sumitra Devi Gupta in her return of income for the A.Y. 2014–15.

The ITAT relied on the decision of the Delhi High Court in the case of Ram Gopal (supra) wherein it was observed that the Hon’ble Supreme Court’s decision in the case of Suraj Lamp & Industries (P) Ltd (340 ITR 1 SC) is of no consequence because the Hon’ble Apex Court had dealt with whether a sale or transfer based upon confirming a GPA amounted to sale / conveyance but the Hon’ble Apex Court did not consider and had no occasion to deal with section 2(14) and section 2(47) of the Act in the context of a claim of acquisition of rights of property and interest in a capital asset for the purpose of Income-tax Act, 1961. Applying the principles of this decision, the ITAT held that there was no infirmity in the order passed by the CIT(A) in allowing the exemption claimed u/s 54B of the Act as claimed by the assessee.

In the result, the appeal filed by the revenue was dismissed.

BCAJ Admin

33. DSG Papers (P) Ltd vs. ACIT/DCIT

[2022] 99 ITR(T) 241 (Chandigarh – Trib.)

ITA No.: 82 to 86 (Chd.) of 2022

A.Ys.: 2013–14 to 2017–18

Date of Order: 29th July, 2022

Section 4 — Where pursuant to search upon assessee-company, an addition was made merely on the basis of statements recorded of ex-employees and where no incriminating material was recovered from premises of assessee, impugned addition made without giving assessee opportunity to cross-examine said ex-employees and dealers was unjustified. The department had failed to follow the cardinal principle of providing adequate opportunity for rebuttal of evidence being sought to be relied upon.

FACTS

The assessee-company was engaged in the business of manufacturing paper and paper products. For the A.Y. 2013–14, the assessee company’s case was selected for scrutiny proceedings u/s 143(3) and was completed on 20th March, 2016, at the returned income. Subsequently, the PCIT, Patiala set aside the assessment order and directed the Assessing Officer (AO) to pass a fresh assessment order vide order u/s 263, dated 31st August, 2017. The assessment subsequent to the revisionary proceedings was completed on 26th December, 2018, wherein the income of the assessee company as per the original assessment order passed u/s 143(3) on 20th March, 2016, was confirmed.

Meanwhile, there was a search and seizure operation on 5th August, 2016, on the business premises of the assessee-company, and the search was also conducted on Shri Sanjay Dhawan, an ex-president of the assessee company as well as three-four dealers of the assessee company and some ex-employees of the assessee company. During the course of the search at the residential premises of Shri Sanjay Dhawan, parallel invoices of goods manufactured and sold by the assessee-company were allegedly recovered. The evidence of undervaluation of sales was allegedly in the form of statements of third parties recorded u/s 14 of the Central Excise Act, 1944. There was also allegedly evidence of unaccounted sales and undervaluation of accounted sales made to third parties in the form of e-mail communication between the assessee-company and third parties. The information was passed on by the Intelligence Wing of GST to the Income-tax Department that the assessee-company had been allegedly suppressing its turnover by way of not accounting for the sales by under-invoicing the sales. Relying upon the said information and the said statements, the AO had initiated the reassessment proceedings u/s 147.

During the course of reassessment proceedings, the assessee-company had specifically requested to cross-examine the persons on whose statements the AO had relied. However, the AO brushed aside the request of the assessee for the opportunity to cross-examine these persons by simply observing that since the assessee had no explanation to offer, there was no requirement for giving any such opportunity. The AO proceeded to reject the books of account maintained by the assessee-company u/s 145(3) of the Act and, thereafter, proceeded to complete the assessment after making an addition of ₹31,40,021 on account of additional net profit by applying the net profit rate of 4.42 per cent. The alleged undisclosed sales for the year were computed at ₹3,62,60,331.

Aggrieved, the assessee-company filed an appeal before CIT(A). The CIT(A) upheld the action of the AO in rejecting the books of account but gave partial relief with respect to additional net profit by holding that the average net profit rate of 3.64 per cent was to be applied rather than 4.42 per cent.

Aggrieved, the assessee-company filed an appeal before the ITAT.

HELD

The ITAT had observed that it was an undisputed fact that during the course of search proceedings conducted by the Central Excise Authorities, neither at the premises of the assessee-company nor from any other premises, any other evidence with regard to undisclosed sales was found except for the invoices recovered from the residence of Shri Sanjay Dhawan and the impugned additions on account of the undisclosed / additional net profit on alleged unaccounted sales have been made only on the basis of invoices recovered from the residence of Shri Sanjay Dhawan.

The ITAT also observed that it was an undisputed fact that the assessee-company had specifically requested the AO to provide an opportunity to it to cross-examine these persons but such an opportunity was not granted. The ITAT further observed the following:

i. the assessee–company had demonstrated with ample evidence that Shri Sanjay Dhawan was a disgruntled employee of the company whose intentions were to put the assessee-company into unnecessary financial trouble and litigation,

ii. that the allegation that the unrecorded goods were being transported by vehicles owned by the assessee-company is incorrect in as much as it was physically impossible for the same vehicle to have delivered goods at two different stations within a short span of time on the same day, when time is required not only for movement of goods from one station to another but time is also required for loading and unloading of goods,

iii. that the statement of one of the ex-employees was in contradiction to the statement of Shri Sanjay Dhawan and the Income-tax authorities had relied on both, which does not hold good.

The ITAT observed that the denial of cross-examination by the Income-tax authorities has a significant bearing on the final outcome of this batch of appeals for the simple reason that the AO has relied upon those statements which had been recorded at the back of the assessee and the assessee was not given any opportunity to effectively rebut. The department had failed to follow the cardinal principle of providing adequate opportunity for rebuttal of evidence being sought to be relied upon. The ITAT had relied on the following decisions:

i. Andaman Timber Industries vs. CCE [2015] 62 taxmann.com 3/52 GST 355 (SC),

ii. CIT vs. Rajesh Kumar [2008] 172 Taxman 74/306 ITR 27 (Delhi.),

iii. CIT vs. Dharam Pal Prem Chand Ltd [2008] 167 Taxman 168 / [2007] 295 ITR 105 (Delhi HC),

iv. Prakash Chand Nahta vs. CIT [2008] 170 Taxman 520 / 301 ITR 134 (Madhya Pradesh HC).

The ITAT held that in the absence of such cross-examination having been allowed to the assessee-company and also in view of no incriminating material having been recovered from any of the premises searched; coupled with the fact that the assessee-company had filed an FIR against Shri Sanjay Dhawan and the statement of ex-employee itself stated that the parallel invoices used to be destroyed after the delivery of the consignments, the Income-tax authorities should not have placed complete reliance without any corroborative evidence on such statements.

In the result, the appeal filed by the assessee-company was allowed.

BCAJ Admin

32. Vishnu DattatrayaPonkshe vs. CPC

ITA No.: 1570/Mum./2023

A.Y.: 2017–18

Date of Order: 29th August, 2023

Sections: 44AD, 44ADA

Income from the business of consultancy qua stamp duty and registration would not be liable for taxation u/s 44ADA. The action of the assessee in offering profits of such business u/s 44AD was upheld.

FACTS

The Assessee e-filed its return of income declaring income, u/s 44AD of the Act, @8 per cent on receipts of ₹8,30,800 from the business of consultancy qua stamp duty and registration. The amount of ₹8,30,800 included the receipt of ₹4,81,280 on which TDS was deducted u/s 194J of the Act (fees for professional and technical services), and therefore, the AO / CPC added the income @50 per cent u/s 44 ADA of the Act, which resulted in making the addition of ₹2,40,640.

Aggrieved, the Assessee preferred an appeal to CIT(A), who by taking into consideration that all the deductors are big corporates and deducted tax u/s 194J of the Act, construed that the receipts of ₹4,81,280 related to professional and technical services and are covered u/s 44ADA of the Act and, therefore, taxable @50 per cent. The Commissioner ultimately computed the total income of the Assessee to the tune of ₹2,68,640 (₹2,40,640 + ₹27,982 @8 per cent of ₹3,49,500) and restricted the income of ₹3,49,500 u/s 139(1) of the Act to the tune of ₹2,68,602 only.

HELD

The Tribunal observed that the amount of ₹4,81,280 on which TDS was deducted u/s 194J of the Act, in fact, is part of the total receipt of ₹8,30,800 on which the Assessee has declared income @8 per cent u/s 44AD. However, both the authorities below applied the provisions of section 44ADA of the Act, which deals with persons carrying on legal, medical, engineering or architectural profession or profession of accountancy, technical consultancy or interior decoration or any other profession as is notified by the Board in the official gazette. The Tribunal noted that, admittedly, the Assessee is just a 10th/matriculation passed and does not have any qualification to act as a legal, medical, engineering or architectural professional or professional accountancy or technical consultancy of interior decoration or any other profession as is notified by the Board in the official gazette, as prescribed u/s 44AA of the Act.

The Tribunal held that the Assessee’s case does not fall under the provisions of section 44ADA of the Act. It deleted the addition of R2,40,640 sustained by the Commissioner.

BCAJ Admin

31. ND’s Art World Pvt Ltd vs. ACIT

ITA No.: 6850/Mum./2019

A.Y.: 2016–17

Date of Order: 23rd August, 2023

Sections: 56(2)(viib), Rule 11UA

Where valuation, as done by a registered valuer, vide a valuation report furnished by the assessee is rejected, the AO should refer the valuation to Departmental Valuation Officer (DVO).

FACTS

The assessee, a company engaged in the business of art direction, set construction, studio and equipment hire, filed its return of income on 17th October, 2016, declaring a total income of ₹8,41,17,500. The Assessing Officer (AO) vide order passed u/s 143(3) of the Act determined the total income at ₹23,68,86,730 by making various additions / disallowances.

During the year under consideration, the assessee had issued 1,780 shares of a face value of ₹10 at a premium of ₹98,280 per share. On perusal of the financials called for, the AO noticed that the assessee had in the financial year relevant to A.Y. 2015–16 revalued upwards the assets held by the assessee and had created a revaluation reserve. The immovable assets in the balance sheet pertained to land situated at Karjat along with the other assets, buildings, sets, etc., which were shown at WDV. Should the assessee while computing the book value of the assets for determining the fair market value of the shares consider the book value or should it be a revalued amount which is not reduced by the upward revaluation of the assets. The AO held that the assessee has increased the value of the assets in the previous year by creating an upward revaluation, and as a result, has determined the higher price per share. The AO stated that the valuer had not considered the prevailing stamp duty value at the time of the valuation of the land and building of the assessee and had not specified as to what methodology or reference was made to substantiate the value of the assets. According to the AO, the valuer has merely arrived at the market value of the land at ₹6,500 per square feet without considering the value of the land, current market price and various other criteria and has also not made a comparable analysis of nearby land sold during that period. The AO stated that the valuer has not justified the charging of an additional premium in his report and has merely increased the value of the sets and buildings which are depreciable assets, the value of which does not increase over a period of time. A similar observation was made by the AO on the value of the vehicles, plant and machinery, office equipment, etc., which are properties subject to depreciation. The AO held that the assessee has failed to substantiate the increase in the value. The AO further stated that the Rule 11UA specifies that the revaluation of the assets is not to be considered for the calculation of the share premium.

The AO calculated the fair market value of the shares after removing the revaluation value of the assets and arrived at the share price of ₹17,815 per share as against the assessee’s determination of the value per share amounting to ₹80,465. He made an addition to the difference of share premium of ₹80,465 per share aggregating to ₹14,33,27,700 u/s 56(2)(viib) of the Act on the grounds that the premium value under Rule 11UA cannot be taken using the revaluation of the assets, thereby recomputing the premium value at ₹17,815 per share as against the assessee’s valuation of ₹98,280 per share.

Aggrieved, the assessee preferred an appeal to the CIT(A) who confirmed the action of the AO.

Aggrieved, the assessee preferred an appeal to the Tribunal where it was contended, on behalf of the assessee, that theassessee would not be covered u/s 56(2)(viib) of the Act for the reason that the shares were transferred only amongst the family members of the assessee, and the assessee is a company. So then how can it have relatives? And even otherwise, neither the AO nor the CIT(A) has referred the matter to the DVO for the purpose of determining the valuation of the assets. It was submitted that Rule 11UA does not mention that the revaluation reserve is to be reduced and that only Rule 11UAA inserted w.e.f. 1st April, 2018, lays down the Rules for valuation and that Rule 11UAA was not applicable to the assessee for the impugned year. Reliance was placed on the decision of the coordinate bench in the case of DCIT vs. Pali Fabrics Pvt. Ltd. [2019] 110 taxmann.com 310 (Mum)(Trib).

HELD

The Tribunal noted that the DR contended that AO had challenged the validity of the valuation report and that the AO is entitled with the power of the valuer and can determine the value himself. Without prejudice, he stated that this issue may be remanded to the file of the AO for determining the valuation after referring the same to the DVO. The DR relied on the decision of the Delhi Tribunal in the case of Agro Portfolio Pvt Ltd vs. ITO [(2018) 94 taxmann.com 112 (Del Trib)].

The Tribunal observed that the difference of share premium was added u/s 56(2)(viib) of the Act since the AO has rejected the valuation determined by the assessee as per the valuation report submitted by the assessee vide letter, dated 13th December, 2018. The AO further has failed to accept the valuation report of the assessee for the reason that the valuer has not adopted any methodology or reference for the purpose of calculation of the land value without considering the factors such as value of the land as per stamp authority, land market price, location factors and the value at which the neighbouring lands were sold during that period, etc. It is observed from the said fact that the AO has not referred the said matter for valuation to the DVO while he has merely rejected the valuation report submitted by the assessee. The Tribunal found it pertinent to point out that the lower authorities have failed to exercise the option of referring the matter to the DVO for the purpose of valuation of the assets which are very much within the purview of the jurisdiction of the lower authorities.

The Tribunal considered it fit to remand this issue back to the file of the AO for the purpose of valuation of the assets by referring the same to the DVO and to consider the said issue in light of the valuation report of the DVO.

BCAJ Admin

30. DCIT vs. Smt. Aruna Chandhok

ITA No.: 387/Del./2021

A.Y.: 2015–16

Date of Order: 5th September, 2023

Sections: 56(2)(vii)(c)

Provisions of section 56(2)(vii)(c) are not applicable on receipt of bonus shares / bonus units.

FACTS

The assessee, an individual, filed her return of income for the A.Y. 2015–16 on 16th October, 2015, declaring income under the head salary, house property, capital gains and other sources.

In the course of assessment proceedings, the Assessing Officer (AO) noticed that the assessee had, during the previous year relevant to the assessment year under consideration, received bonus shares and bonus units from Tech Mahindra Ltd. and JM Arbitrage Advantage Fund – Bonus options. The assessee was given a show cause as to why the value of these bonus shares and bonus units should not be added u/s 56(2)(vii)(c) of the Act. The assessee submitted that the provisions of section 56(2)(vii)(c) are not applicable to bonus shares / bonus units as these are received on capitalisation of profits. The value of the shares would remain the same, and there would be no increase in the wealth of the shareholders on account of bonus shares and his percentage of holding the shares in the company remains constant. Pursuant to bonus shares and bonus units, the share / unit gets divided in the same proportion for all the shareholders. There would be no receipt of any property by the shareholder and what is received is only split shares out of her own holding. Reliance was placed on the decision of the Supreme Court in the case of CIT vs. General Insurance Corporation Ltd [286 ITR 232 (SC)], which held that the issuance of bonus shares by a company does not result in any inflow of fresh funds and nothing comes to the shareholders. It was also submitted that the market price of any share after the bonus issue gets reduced almost in proportion to the bonus issue, and hence, there would be no increase in the market value of shares held by the assessee pursuant to the bonus issue. The overall wealth of a shareholder post-bonus or pre-bonus remains the same. Hence, the assessee received no additional benefit or income on the allotment of bonus shares, because it is only a split of his total rights in the wealth of a company, which remains the same even after the bonus issue.

The AO did not accept the contentions made by the assessee and taxed ₹36,10,63,656 u/s 56(2)(vii)(c) of the Act.

Aggrieved, the assessee preferred an appeal to CIT(A) who distinguished the decisions relied upon by the AO and relied on the decision of the Delhi Tribunal, dated 27th January, 2017, in the case of Meenu Satija vs. PCIT. The CIT(A) held that the AO had misread the judgment of the Bangalore Bench of the Tribunal in the case of Dr Rajan Pai.

Aggrieved, revenue preferred an appeal to the Tribunal.

HELD
The Tribunal held that bonus shares are issued on capitalisation of existing reserves of the company. It noted that the AO had not disputed that the overall wealth of the shareholder post-bonus or pre-bonus remains the same. Having held so, the Tribunal observed that it was wrong on the part of the AO to invoke section 56(2)(vii)(c) on the grounds that there is a double benefit derived by the assessee due to the bonus shares. The Tribunal noted that the issue is covered by the ratio of the decision of the Karnataka High Court in the case of PCIT vs. Dr. Ranjan Pai in ITA No. 501 of 2016, dated 15th December, 2020. The Tribunal held that the CIT(A) had rightly appreciated the contentions of the assessee.

The Tribunal not finding any infirmity in the order of the CIT(A) dismissed the grounds of appeal filed by the revenue and upheld the relief granted by the CIT(A) to the assessee.

BCAJ Admin