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2021 (11) TMI 803 - AT - Income TaxDeemed dividend u/s 2(22)(e) - transaction of money received from the company - HELD THAT - We notice from the records submitted before us indicate that the assessee was having regular transactions with the company and paid advances to the company in the earlier assessment year and this year assessee has entered into transactions like sale of plot to the above said company and also intend to give office space on rent, even though the MOU submitted by the assessee are unsigned, the transactions declared by the assessee in the previous assessment year clearly indicates that assessee has already taken ₹ 12,25,000 as rental advance in the previous year. Since it is a continuous transaction and we notice that still assessee to receive ₹ 12,64,000 from the company against the advance paid during the previous assessment year, in our opinion, we do not see any reason to treat the current year transaction as deemed dividend. In the present case, we notice that irrespective of the reserves and surplus balance outstanding in the company, the assessee was dealing with the company by paying advances/deposit to the company. Further we notice that the assessing officer has proceeded to treat the difference between the closing balance and the opening balance as the deemed dividend. In order to make the addition under the head deemed dividend, the Assessing Officer should investigate each transaction of money received from the company and the make the addition accordingly. Therefore, we do not see any reason to sustain addition made by the Assessing Officer. Accordingly, we direct the Assessing Officer to delete the addition made under the head deemed dividend under section 2(22)(e) - Decided in favour of assessee. Correct head of income - Gain on sale of shares - capital gain or business income - assessee declares income from sale of shares as capital gains and also deals in derivative transactions while AO treated the transactions carried on by the assessee as business transaction- HELD THAT - Assessee had shares held for more than 12 months and we are in agreement with the assessee that assessee can have choice of treating the income under the head capital gains as per the circular No. 6 above 2016 dated 29 February 2016 and also in our opinion that statements submitted by the assessee needs verification, therefore we find it appropriate to remit this issue back to the file of assessing officer to verify the claim of the assessee and accordingly treat the income declared by the assessee under the head capital gains to those portfolios which was held by the assessee as investment. Short-term capital gain and derivative transactions, as held in the case of Ghopal Purohit 2010 (1) TMI 7 - BOMBAY HIGH COURT the assessee is allowed to maintain its business transaction/portfolio management under 2 categories one held as stock in trade and another held for investment - we direct the assessing officer to complete the assessment based on the ratio of above decision. Accordingly ground No.2, 3 and 4 are allowed for statistical purpose. Exemption as profit on sale of agricultural land - new claim under section 54B - HELD THAT - We notice that assessee has claimed deduction under section 54B first time before Ld CIT(A) and Ld CIT(A) rejected the claim of the assessee without going into the documents submitted by the assessee and he rejected the claim based on the information available on record. We re in agreement with the assessee that assessee can claim the deduction/exemption anytime during the appellate proceedings. Since assessee is making a fresh claim and it is found that assessee is legally eligible to claim the same. In order to verify the claim of the assessee, we are remitting this issue back to the file of AO and we are directing the assessing officer to verify the relevant documents and submissions made by the assessee and in case it is found that assessee is eligible to claim deduction then it may be allowed as per law. With the above direction, we are allowing the ground raised by the assessee for statistical purpose.
Issues Involved:
1. Deemed dividend. 2. Income from share trading. 3. Income from speculative transactions. 4. Exemption claimed under section 54B of the Income Tax Act, 1961. Detailed Analysis: 1. Deemed Dividend: During the assessment proceedings, the Assessing Officer (AO) observed a credit balance of ?12,95,528/- from M/s. Vogue Property Developers Pvt. Ltd., where the assessee held a 50% shareholding. The AO treated the difference between the closing balance of ?31,61,000 and the opening balance of ?20,64,000 as a loan taken by the assessee, thus classifying ?10,97,000 as deemed dividend. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this addition, deeming the documents submitted by the assessee as an afterthought to hide the transactions as deemed dividend. However, the Tribunal observed that the transactions were regular business dealings involving rental advances and sale of plots, not for personal benefit or indirect dividend. The Tribunal directed the AO to delete the addition made under the head deemed dividend under section 2(22)(e) of the Act. 2. Income from Share Trading: The AO treated the transactions carried out by the assessee as business transactions due to the high volume and frequency of share trading, rejecting the claim that the income should be charged under the head "income from capital gains." The CIT(A) agreed with the AO, citing the high volume and frequency of transactions, low holding period, and use of borrowed funds. The Tribunal, however, noted that the assessee consistently declared income from shares based on the period of holding and maintained separate portfolios for investment and trading. Referring to the CBDT circular and the case of CIT vs. Gopal Purohit, the Tribunal remitted the issue back to the AO to verify the claim of the assessee and treat the income under the head capital gains for portfolios held as investment. 3. Income from Speculative Transactions: Similar to the share trading issue, the Tribunal directed the AO to verify the assessee's claim and follow the principles laid down in the case of CIT vs. Gopal Purohit, allowing the assessee to maintain separate portfolios for investment and trading. The Tribunal noted that the assessee could treat delivery-based transactions as investment transactions and the profits therefrom as capital gains. 4. Exemption Claimed Under Section 54B: The AO denied the exemption claimed by the assessee on the sale of agricultural land, as the land was situated within 3 km of municipal limits and no agricultural activity was performed for the last 10 years. The CIT(A) also rejected the new claim under section 54B, as the assessee had not carried out agricultural activities himself and did not declare any agricultural income. The Tribunal allowed the assessee to claim the deduction under section 54B during appellate proceedings and remitted the issue back to the AO to verify the relevant documents and submissions. If found eligible, the AO was directed to allow the deduction as per law. Conclusion: The appeal filed by the assessee was allowed for statistical purposes, with directions to the AO to verify the claims and treat the income and deductions accordingly. The Tribunal emphasized the importance of consistent treatment of income and the assessee's right to claim deductions during appellate proceedings.
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