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2020 (3) TMI 504 - HC - Income TaxCapital gain u/s 45 - transfer of capital asset u/s 2(47) - whether assessee have not acquired any right to receive income under the JDA? - HELD THAT - In the light of the ratio laid down in Balbir Singh Maini's case 2017 (10) TMI 323 - SUPREME COURT as affirmed in the Judgment in Seshasayee Steels' case 2019 (12) TMI 702 - SUPREME COURT the questions as to the transfer exigible to tax with reference to Section 2 47 v of the Income Tax Act, 1961 read with Section 53-A of the Transfer of Property Act, 1882, is remanded to the Assessing Officer for fresh consideration and adjudication and the Assessing Officer shall complete the said exercise in accordance with law as expeditiously as possible.
Issues Involved:
1. Reopening of assessment under Section 147 of the Income Tax Act, 1961. 2. Taxability of transactions under Section 2(47)(v) of the Income Tax Act, 1961, read with Section 53-A of the Transfer of Property Act, 1882. 3. Application of judicial precedents to the case. 4. Disallowance of expenditure towards brand promotion and advertisement. Analysis: Issue 1: Reopening of assessment under Section 147 of the Income Tax Act, 1961: The appellant/assessee Company filed a return of income for the Assessment Year 2007-08, admitting total income. However, the assessment was reopened under Section 147 of the IT Act due to a reason to believe that income had escaped assessment. The Appellate Authority partly allowed the appeal, leading to further appeals before the Income Tax Appellate Tribunal (ITAT). The ITAT upheld the action of the Assessing Officer, stating that due to non-disclosure of Capital Gain, the income chargeable to tax had escaped assessment. The ITAT found a transfer under Section 2(47)(v) of the IT Act in the Assessment Year 2007-08. The appellant challenged the legality of the order, leading to the present Tax Case Appeals. Issue 2: Taxability of transactions under Section 2(47)(v) of the Income Tax Act, 1961, read with Section 53-A of the Transfer of Property Act, 1882: The main contention was regarding the transfer of Long Term Capital Gains concerning a Joint Venture Agreement. The Appellate Authority considered possession given in part performance of a contract as triggering liability for Capital Gains tax. The ITAT found a transfer under Section 2(47)(v) of the IT Act, remanding the case for fresh consideration of Capital Gain computation. The appellant relied on judicial precedents to argue that income from Capital Gain of a transaction that never materialized should not be taxed. Issue 3: Application of judicial precedents to the case: The appellant cited the judgment in Commissioner of Income Tax v. Balbir Singh Maini, where the Supreme Court held that income from Capital Gain of a transaction that did not materialize is hypothetical income and should not be taxed. The appellant argued that they did not acquire any right to receive income from the transaction. The Court considered the applicability of this precedent and remanded the case for fresh consideration by the Assessing Officer. Issue 4: Disallowance of expenditure towards brand promotion and advertisement: The Tax Case Appeals also involved a challenge regarding the disallowance of expenditure towards brand promotion and advertisement. However, this issue was not pressed by the appellant during the proceedings. In conclusion, the High Court of Madras disposed of the Tax Case Appeals based on the principles laid down in the Balbir Singh Maini case and remanded the matter to the Assessing Officer for fresh consideration and adjudication in accordance with the law.
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