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2017 (11) TMI 383 - AT - Income TaxDisallowance of business loss - treating the income derived by the assessee from Portfolio Management Services (PMS) transaction as short term capital gain - Held that - Undisputedly, the assessee has invested an amount of ₹ 5 crore in the mutual fund which is managed by ICICI Prudential Assets Management Co. Pvt. Ltd. The amount received from the assessee towards mutual fund, in turn, was invested in various scrips of companies listed in the stock exchange to maximize the gain to the assessee. Thus, from the aforesaid fact, it is evident that the intention of the assessee was for the purpose of investment and not trading. That being the case, the Assessing Officer was justified in assessing the gain derived from sale of securities as short term capital gain. Merely because the assessee has invested a huge sum of ₹ 5 crore it cannot be treated as a business activity of the assessee. As far as allowability of PMS cost and other expenditure, the learned Counsel appearing for the assessee fairly submitted that the issue has been decided against the assessee by virtue of decision of the Tribunal, Mumbai Bench, in Capt. Animesh Chandra Batra (2016 (5) TMI 155 - ITAT MUMBAI). In view of the aforesaid, we uphold the order of the learned Commissioner (Appeals) by dismissing the ground no.2 raised by the assessee. Computing long term capital gain on sale of Salt Pan Land - sale of development rights - year of taxability - Held that - The amount of ₹ 50 crore having neither been received by the assessee nor accrued in the financial year relevant to the assessment year under dispute, it cannot be considered as a part of sale consideration for computing capital gain in the impugned assessment year. The Assessing Officer is free to proceed in accordance with law if and when such income arises. With the aforesaid observation, ground no.3, is allowed. Adoption the cost of property shown by the assessee as per the report of the registered value - Held that - It is manifest from the assessment order that the Assessing Officer being of the view that cost of acquisition shown by the assessee on the basis of registered valuer s report is more than FMV had made a reference to the DVO for determining the FMV of the capital asset transferred by the assessee. As held by the Hon ble Jurisdictional High Court in Pooja Prints (2014 (1) TMI 764 - BOMBAY HIGH COURT), as per the existing provisions of section 55A(a), which was applicable to the relevant assessment year, a reference can be made to the DVO only if the value declared by the assessee in the opinion of the Assessing Officer is less than its fair market value. The situation is reverse. The Assessing Officer made a reference to the DVO under section 55A(a) having entertained an opinion that the value adopted by the assessee is more than the FMV. Respectfully following the decision of Hon ble Jurisdictional High Court (supra), we uphold the order of the learned Commissioner (Appeals) on this issue. Grounds raised are dismissed.
Issues Involved:
1. Disallowance of business loss and treatment of Portfolio Management Services (PMS) income as short-term capital gain. 2. Addition of ?50 crore while computing long-term capital gain on the sale of Salt Pan Land. 3. Adoption of the cost of property shown by the assessee as per the report of the registered valuer. Issue-wise Detailed Analysis: 1. Disallowance of Business Loss and Treatment of PMS Income as Short-term Capital Gain The assessee challenged the disallowance of a business loss of ?4,15,973 and the treatment of income derived from PMS transactions as short-term capital gain. The Assessing Officer (AO) observed that the assessee invested ?5 crore in ICICI Prudential PMS but did not show any gain or loss from this investment in the income computation. Upon obtaining necessary information, the AO found a deficit of ?3,58,789 and a net gain of ?14,41,964 from the sale of securities. The AO treated this gain as capital gain, not as a business activity, and disallowed PMS expenditure based on a Tribunal decision. The Commissioner (Appeals) upheld the AO's decision. The Tribunal also upheld this view, noting that the investment was for the purpose of investment and not trading, thus dismissing the ground raised by the assessee. 2. Addition of ?50 Crore While Computing Long-term Capital Gain on Sale of Salt Pan Land The AO noticed that the assessee had offered ?162,73,59,506 as short-term capital gain on the sale of property, including development rights on 500 acres of Salt Pan Land sold to Shapoorji Pallonji And Company Ltd. for ?521 crore. The AO found that the assessee reduced ?50 crore from the sale consideration due to CRZ regulations, arguing that this amount was contingent on future permissions for development. The AO, however, included the ?50 crore in the capital gain computation, which was upheld by the Commissioner (Appeals). The Tribunal, after examining the sale agreement, concluded that the ?50 crore was contingent upon the release of land from CRZ regulations, which had not occurred. Therefore, the Tribunal held that the ?50 crore could not be included in the capital gain computation, as the assessee had neither received nor accrued this amount. This ground was allowed in favor of the assessee. 3. Adoption of Cost of Property Shown by the Assessee as Per the Report of the Registered Valuer The Revenue contested the Commissioner (Appeals)'s decision to adopt the cost of property as per the registered valuer's report. The AO had referred the valuation to the District Valuation Office (DVO) under section 55A(a) of the Act, as he believed the value shown by the assessee was more than the fair market value (FMV). The DVO valued the property at ?23,14,33,000. The Commissioner (Appeals) relied on the Hon'ble Jurisdictional High Court's decision in CIT v/s Pooja Prints, which held that under section 55A(a), a reference to the DVO could only be made if the value declared by the assessee was less than the FMV. Since the AO's reference was based on the value being more than FMV, the Tribunal upheld the Commissioner (Appeals)'s decision, dismissing the Revenue's ground. Conclusion: - Assessee’s Appeal: Partly allowed. - Revenue’s Appeal: Dismissed.
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