9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (8) TMI 854 - AT - Income TaxIncome from sale of property - business income or capital income - Held that - In the absence of any facts indicating that the assessee has converted capital asset into stock in trade during the relevant A.Y or during some any other earlier financial period it has to be held that same fact continue to A.Y 2009-10. It is relevant to note that the AO has not raised any objection and has not disputed the sale price and cost including indexation and only dispute for our consideration was with regard to head of income under which it is taxable. On the basis of foregoing discussion, we are inclined to hold that in the totality of the facts and circumstances of the case as noted and observed above, the treatment given by the assessee to the property from its acquisition to sale i.e. during the period when the property was within the assessee it is amply clear that the assessee shown the said property as investment in capital asset and the AO could not establish that it was ever held as stock in trade or one point of time during the period of acquisition it was converted from capital asset to stock in trade. In this situation, we decline to accept and approve the conclusion of the AO to treat the income from sale of said property as business income. Per contra, we are of the considered opinion that the finding and conclusion of the ld. CIT(A) in the impugned first appellate order are quite justified, correct and sustainable and we are unable to see any perversity, ambiguity or any other valid reason to interfere with the same and thus we uphold and confirm the same. Consequently ground of the Revenue being devoid of merits is dismissed. Transaction of sale of shares - Held that - Transaction of sale of shares had actually taken place with Shri Lalit Jain and he actually paid consideration of ₹ 79 lakhs through two account payee cheques. It is also very clear that after purchase of these shares, that the shares were actually transferred in the name of the buyer Shri Lalit Jain on 29.3.2009 and also that the shares were physically received by the buyer immediately after such sale and that reason to make investments including distinctive number of shares had been admitted by the buyer Shri Lalit Jain in his statement. On the basis of foregoing discussion, we are of the considered view that the assessee could very well substantiate the fats indicating the genuineness of the transaction by submitting all relevant facts and documents showing that the assessee actually sold these shares against consideration of ₹ 79 lakhs and the same was paid by the buyer through two account payee cheques and shares were physically handed over to the buyer and the same were transferred in the name of the buyer on 29.3.2011. Per contra, the AO failed to demonstrate and establish that the assessee had given financial support in the form of interest free loans to Shri Lalit Jain for the purchase of shares to the effect the paper or sham transaction with an intention to reduce tax liability. Furthermore, the allegation of the AO, that the assessee repurchased these shares in the next financial period, has no legs to stand in the absence of any further enquiry from the allotter companies viz PFL and KFL regarding status of share holders pertinent to these shares by the AO and the fact was also fairly accepted by the ld. DR during arguments. Hence above noted allegations levelled against the assessee, by the AO, were rightly demolished by the ld. CIT(A) and his conclusion in this regard is valid and sustainable. We are unable to see any valid reason to interfere with the conclusion of the ld. CIT(A) in this regard on this issue and thus we uphold the same. Accordingly, Ground No. 2 of the revenue being devoid of merits is dismissed. Allowable deduction u/s 36(1)(vii) - Held that - AO made disallowance and addition by taking a hyper approach whereas the ld. CIT(A) after considering the entire facts and circumstances of the case and the nature of transaction held that the bad debts arose from inter corporate deposit is allowable deduction u/s 36(1)(vii) of the Act and the rider created by the Legislature u/s 36(2)(i) does not come into play in the facts and circumstances of the case as the assessee advanced interest bearing loan to VHEL Industries under normal course of business which was actually inter corporate deposits. Accordingly, we are unable to see any valid reason to interfere with the conclusion arrived at by the ld. CIT(A) on this issue.Ground No. 3 of the Revenue being devoid of merits is also dismissed
Issues Involved:
1. Taxability of income from the sale of property as Capital Gains vs. Business Income. 2. Allowability of Long Term Capital Loss (LTCL) claimed by the assessee. 3. Deductibility of Bad Debt claimed by the assessee. Detailed Analysis: 1. Taxability of Income from Sale of Property: The primary issue was whether the income from the sale of property should be taxed under "Capital Gains" or "Business Income." The Revenue argued that the property was part of the assessee's business activities, citing multiple agreements and the intention to develop the property. Conversely, the assessee maintained that the property was held as an investment, consistently shown as a fixed asset in its books. The Tribunal noted that the property was treated as a fixed asset in the assessee's books and not as stock-in-trade. The AO's conclusion that the income should be treated as business income was not supported by evidence showing a change in the property's character from investment to stock-in-trade. The Tribunal upheld the CIT(A)'s decision, treating the income as Capital Gains, emphasizing the consistency in the property's treatment in the assessee's books and the Wealth Tax proceedings, where it was considered a capital asset. 2. Allowability of Long Term Capital Loss: The second issue concerned the assessee's claim of LTCL from the sale of shares to a related person, which the AO deemed a "Colourable Transaction" intended to reduce tax liability. The AO argued that the shares were sold at a significantly lower price without actual transfer, and the transaction was a sham. The Tribunal found that the shares were indeed transferred to the buyer, Shri Lalit Jain, and the sale was recorded in the books. The Tribunal dismissed the AO's allegations of a colourable device, noting that the shares were physically delivered and transferred in the buyer's name. The Tribunal upheld the CIT(A)'s decision, allowing the LTCL claim. 3. Deductibility of Bad Debt: The third issue was whether the bad debt claimed by the assessee was allowable. The AO disallowed the claim, arguing that the debt did not arise from the assessee's money-lending business, and thus, was not deductible under Section 36(1)(vii) of the Income Tax Act. The Tribunal noted that the debt arose from inter-corporate deposits (ICDs) and that the interest income from these deposits had been offered for taxation in earlier years. Citing the decision in CIT Vs. Tulip Star Hotels Ltd., the Tribunal held that ICDs could be treated as debts, and their write-off as bad debts was allowable. The Tribunal upheld the CIT(A)'s decision, allowing the bad debt claim. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all three issues: 1. The income from the sale of property was taxable as Capital Gains. 2. The LTCL claim was valid and allowable. 3. The bad debt claim was allowable under Section 36(1)(vii) of the Income Tax Act.
|
