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2022 (12) TMI 1159 - AT - Income TaxLong term capital gain - sub-tenancy right was held for more than 3 years as required by section 2(29B) - assessee claimed to have surrendered such sub-tenancy right and received a sum as consideration vide Memorandum of Understanding (MOU) - AO held that the assessee was not having any kind of sub-tenancy right and the long-term capital gain declared in the return was just a managed capital gain to claim exemption u/s. 54F, accordingly, Ld. AO rejected the claim of long-term capital gain and assessed the income as income from other sources - HELD THAT - MOU clearly provides complete details of Rs. 5,00,00,000/- paid by owners to all parties including Rs. 3,25,00,000/- paid to the assessee. AR has also demonstrated that the assessee has received the sum of Rs. 3,25,00,000/- through banking channel in ICICI Bank. AR has pointed out that the fact of filing reply by the owner, Shri Dipesh Khandelwal, in response to the notice u/s. 133(6) issued by Ld. AO, as recorded in the assessment-order is not very credible because the Ld. AO has neither supplied a copy of the reply to the assessee nor narrated the contents of reply in the assessment-order. Even during hearing before us, Ld. DR has not been able to rebut or defend this submission of Ld. AR. We also find merit in the submission of Ld. AR that FMG is an existent-company and the Ld. AO could have made enquiry from FMG but the same was not made - revenue has allowed deduction of Rs. 5,00,00,000/- in the assessment of owner, Shri Dipesh Khandelwal, which proves, without saying anything more, that the revenue authorities have accepted the factum of receipt by assessee from the said owner. Lastly, we also find merit in the contention of Ld. AR that revenue authorities have doubted the receipt of Rs. 3,25,00,000/- in the case of this assessee only. But they have not taken any adverse view in the assessments of other co-tenants who have received remaining consideration of Rs. 1,75,00,000/-, out of total payment of Rs. 5,00,00,000 to all co-tenants. We agree to Ld. AR's submission that the authorities cannot reject transaction in the hands of assessee while accepting it in the hands of other co-tenants. We are persuaded to hold that the assessee had a sub-tenancy right in the property and upon surrender thereof, the assessee received a sum which was rightly offered as long-term capital gain in terms of section 45(1), 48, 55(2) and 2(29B) of the Income-tax Act, 1961. AO was wrong in rejecting the claim of long-term capital gain and assessing the same as income from other sources. We do not find any infirmity in the order of Ld. CIT(A) who has, after mindful consideration, reversed the action of Ld. AO and allowed claim of assessee. Accordingly, we dismiss Ground No. 1 and 2 of the Revenue. Exemption u/s. 54F - HELD THAT - No strength in the findings of AO and the contentions raised by Ld. DR. After a careful consideration, we are in agreement with the submission of AR that the Ld. CIT(A) has carefully dealt with facts, figures, evidences and legal position at length and rightly concluded that the assessee was entitled to exemption u/s. 54F. We do not find any infirmity in the action of Ld. CIT(A). Therefore, we uphold his action and dismiss the Ground No. 3 of Revenue. Addition on account of shares-transactions - HELD THAT - The assessee has also filed a copy of Account with Aditya Birla Money Ltd. for the previous year 2014-15 relevant to the assessment-year 2015-16 to the lower authorities and the same is also placed in the Paper-Book, which is duly sealed and signed by broker and clearly demonstrates that no single transaction was done during the year by assessee and the opening balance B/F as on 01.04.2015 is carried forward as such as closing balance on 31.03.2015. Thus, the evidences placed by the assessee clearly demonstrate that no transaction had been done. During hearing, Ld. DR is not able to controvert these submissions of assessee. In this view of matter, we are inclined to agree with Ld. CIT(A) that the assessee has not done any transaction of shares as alleged by Ld. AO. Therefore, the Ld. CIT(A) has rightly deleted addition and we uphold his action. Ground No. 4 of the Revenue is thus dismissed. Disallowance of interest expenditure u/s. 57(iii) - HELD THAT - The assessee has filed evidences in the form of (i) Ledger A/c of Interest Expenditure which shows date-wise party-wise interest-payments; (ii) Ledger A/c of BEPL which shows the loans given to BEPL from time to time on which interest has been received; and also (iii) a detailed Statement showing a co-relation of the amounts borrowed from different persons and investment made in BEPL - By means of these clinching evidences on record, the assessee has sufficiently proved that the interest expenditure has been incurred to earn interest-receipt disclosed in the return. On test-check of these evidences, we are satisfied with the explanation given by the assessee. Therefore, the assessee deserves deduction of interest expenditure, which the Ld. AO has wrongly disallowed but the Ld. CIT(A) has rightly allowed. Accordingly, we dismiss Ground No. 5 of the Revenue as well. Allowability of long-term capital loss from sale of shares - HELD THAT - AO has not denied the authenticity of these statutory documents, but he had simply formed a view about bogus claim on the footing that the buyer is a relative of assessee and substantial portion of the consideration had been received after 2 years of sale. We observe that the company was a loss making company and the buyer was also sister of assessee, therefore there is a justification in the deferred receipt of consideration by the assessee. We also agree with the observations of Ld. CIT(A) that even otherwise such trivial considerations should not be a basis to deny the transaction, which has a statutory backing, supported by statutory documents and acted upon by parties. We observe that the Ld. AO has treated the loss claimed by assessee as bogus on mere suspicion and assumption as against the various documentary evidences. It is an accepted law that suspicion and presumption, how so ever strong, cannot be a basis for drawing any conclusion. Therefore, considering the documentary evidences on record in support of assessee's claim which could not have been disputed by Ld. AO, we do not find any merit in the action of Ld. AO.
Issues Involved:
1. Deletion of addition of Rs. 3,25,00,000/- as income from other sources. 2. Treatment of Rs. 3,25,00,000/- as income from long-term capital gain. 3. Allowance of exemption of Rs. 2,32,13,084/- under Section 54F. 4. Deletion of addition of Rs. 7,66,500/- on account of share transactions. 5. Deletion of addition of Rs. 8,48,892/- on disallowance of interest expenditure under Section 57(iii). 6. Allowance of long-term capital loss of Rs. 80,23,177/- on account of sale of shares. Detailed Analysis: 1. Deletion of Addition of Rs. 3,25,00,000/- as Income from Other Sources: The revenue challenged the deletion of Rs. 3,25,00,000/- by the CIT(A), which the AO had treated as income from other sources. The assessee claimed this amount as long-term capital gain from the surrender of sub-tenancy rights in a commercial property. The AO argued that the assessee was not a tenant and had no sub-tenancy rights, thus treating the amount as income from other sources. The CIT(A) accepted the assessee's claim, citing various documentary evidence, including a Memorandum of Understanding (MOU) and historical tenancy documents. The Tribunal upheld the CIT(A)'s decision, noting that the AO's doubts about the sub-tenancy rights were dispelled by the MOU and other documents, and the transaction was genuine. 2. Treatment of Rs. 3,25,00,000/- as Income from Long-Term Capital Gain: The assessee argued that the Rs. 3,25,00,000/- received for surrendering sub-tenancy rights should be treated as long-term capital gain. The AO rejected this claim, asserting that the assessee had no sub-tenancy rights. The CIT(A) reversed the AO's decision, supporting the assessee's claim with evidence of long-term possession and the MOU. The Tribunal agreed with the CIT(A), confirming that the amount received was for the surrender of sub-tenancy rights and should be treated as long-term capital gain. 3. Allowance of Exemption of Rs. 2,32,13,084/- under Section 54F: The AO disallowed the exemption claimed by the assessee under Section 54F, arguing that the long-term capital gain itself was not valid and that the property purchase was a colorable device. The CIT(A) allowed the exemption for Rs. 2,32,13,484/-, based on documentary evidence of the purchase and construction expenses. The Tribunal upheld this decision, noting that the assessee had provided sufficient evidence of the investment in the residential property and the exemption was rightly allowed. 4. Deletion of Addition of Rs. 7,66,500/- on Account of Share Transactions: The AO added Rs. 7,66,500/- to the assessee's income, based on information from the Income Tax Department's database, which the assessee denied. The CIT(A) deleted the addition, finding no evidence of such transactions in the assessee's accounts. The Tribunal agreed with the CIT(A), noting that the AO failed to provide any independent verification of the alleged transactions. 5. Deletion of Addition of Rs. 8,48,892/- on Disallowance of Interest Expenditure under Section 57(iii): The AO disallowed interest expenditure claimed by the assessee, arguing that the assessee failed to prove the borrowed funds were used to earn income. The CIT(A) allowed the deduction, noting that the assessee provided evidence of the interest expenditure and its connection to the interest income earned. The Tribunal upheld the CIT(A)'s decision, finding the evidence provided by the assessee sufficient to justify the deduction. 6. Allowance of Long-Term Capital Loss of Rs. 80,23,177/- on Account of Sale of Shares: The AO disallowed the long-term capital loss claimed by the assessee, arguing that the share transactions were not genuine. The CIT(A) allowed the claim, supported by documentary evidence of the share transfer and payment. The Tribunal agreed with the CIT(A), noting that the transactions were supported by statutory documents and the AO's disallowance was based on suspicion rather than evidence. Conclusion: The Tribunal upheld the CIT(A)'s decisions on all grounds, dismissing the revenue's appeal and confirming the assessee's claims regarding long-term capital gain, Section 54F exemption, share transactions, interest expenditure, and capital loss.
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