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2021 (12) TMI 209 - HC - Income TaxFluctuation loss disallowance - whether ITAT erred in law in upholding the order of CIT(A) in allowing fluctuation loss without having ascertained the purpose for loan ? - whether ITAT erred allowing spared over of upfront fees in absence of any enabling legal sanction under Income Tax Act, 1961? - HELD THAT - The substantial questions of law (a) and (c) have been answered against the appellant revenue in the respondent assessee s own case 2021 (12) TMI 105 - CALCUTTA HIGH COURT . Capital asset u/s 50 - HELD THAT - As decided in favour of the respondent/assessee by following the decision of the Hon ble High Court of Bombay in Commissioner of Income Tax versus ACE Builders (P) Ltd. 2005 (3) TMI 36 - BOMBAY HIGH COURT . The said decision was noted with approval in the case of Commissioner of Income Tax, Panji versus V.S. Dempo Company Limited 2016 (10) TMI 62 - SUPREME COURT - Substantial question no.(b) is also answered against the revenue.
Issues involved:
1. Appeal against order passed by Income Tax Appellate Tribunal for assessment year 2006-07. 2. Consideration of fluctuation loss without ascertaining loan purpose. 3. Non-consideration of deeming provisions of Section 50 of Income Tax Act. 4. Allowing spared over of upfront fees without legal sanction. 5. Capital gain versus business profit on sale of factory land. Detailed Analysis: 1. Appeal against Tribunal's Order: The High Court heard arguments from both parties regarding the appeal filed under Section 260A of the Income Tax Act against the order passed by the Income Tax Appellate Tribunal for assessment year 2006-07. The revenue raised multiple questions of law for consideration, including the treatment of fluctuation loss, deeming provisions of Section 50, and the legality of allowing spared upfront fees. 2. Fluctuation Loss and Loan Purpose: The Court noted that the Tribunal had already addressed similar issues in the respondent assessee's case, where it upheld the order of the CIT(A) regarding the fluctuation loss and loan purpose. The Tribunal found that the liability was contingent and had not crystallized, thus not allowing it as a deduction in the total income computation. 3. Deeming Provisions of Section 50: Regarding the deeming provisions of Section 50, the Tribunal considered precedents and relevant case law to support its decision in favor of the respondent assessee. The Tribunal's findings aligned with the decision of the High Court of Bombay in a similar case, emphasizing that the special provision of Section 50 for computing capital gains does not affect exemptions provided under other sections like Section 54E. 4. Upfront Fees without Legal Sanction: The Tribunal also ruled in favor of the respondent assessee regarding the allowance of spared upfront fees without specific legal sanction under the Income Tax Act. The Tribunal extensively discussed the facts and affirmed the view taken by the CIT(A), concluding that no substantial question of law arose for consideration. 5. Capital Gain on Sale of Factory Land: Lastly, the issue of determining whether the sale of factory land resulted in capital gain or business profit was addressed. The Tribunal examined the factual position, considered relevant legal precedents, and upheld the decision of the CIT(A) that the sale gave rise to capital gain. The Tribunal's approach was found to be justified, with no errors identified in its analysis of the matter. In conclusion, the High Court dismissed the appeal, answering substantial questions of law against the revenue based on the detailed analysis provided for each issue raised in the appeal. The decision was consistent with previous judgments and legal interpretations, ensuring a comprehensive review of the relevant aspects of the case.
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