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TMI Blog2015 (6) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2008-09, the assessee filed return of income on 20.03.2009 declaring total income of Rs. 5,26,470/-. The said return of income was processed under the provisions of section 143(1) of the Income tax Act, 1961 (hereinafter the Act). Subsequently, the case was selected for scrutiny assessment. During the course of assessment proceedings, the assessee filed certain details from which the AO noticed receipt of loan from the company in which he has substantial interest, namely M/s. Fashion Exim Pvt. Ltd., a closely held company. The AO on perusal of the ledger account of the assessee with M/s. Fashion Exim Pvt. Ltd., noticed that a sum of Rs. 70,52,240/- was received by the assessee in the form of loan or advance from the said company. On not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y with the terms of margin money as stipulated as conditions of the credit limit sanction, the arrangement was with the said director in the interest of the company and the funds were kept in FDRs to earn more interest. In view of the above, there is no advance is given in terms of section 2(22)(e) of the I.T Act, 1961". 2.1 The above explanation had been rejected by the AO relying on certain judicial precedents quoted vide para 5.3 of the assessment order and brought to tax a sum of Rs. 70,52,240/- as deemed dividend u/s.2(22)(e) of the Act. Further, the AO while computing the capital gains arising out of development of property devolved upon the assessee by virtue of will dated 20.8.1987 which has been probated by 3rd Additional Distric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Apex Court in the case of CIT Vs. Mukundray K. Shah [290 ITR 433 (SC)]. 3. On the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in directing to allow indexation from 1981 in which the previous owners first held the asset without appreciating the fact that the assessee became the owner of property after the death of his father Late Kashi Prasad Kataruka on 29.12.1988. 4. On the facts and in the circumstances of the case and in law, the Learned CIT(A) has failed to appreciate the fact that the Explanation (iii) to Section 48 clearly states that the Cost Inflation Index shall be adopted from the first year in which the asset was held by the assessee. 5. On the facts and in the circumstances of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing the appeal filed by the assessee . 6. We have heard the rival parties, perused the material available on record. We are of the considered opinion that there is no dispute about the legal proposition advanced by the ld. AR that when the amounts were advanced by the company for its business purposes, the provisions of sec.2(22)(e) cannot be applied. But we find no material in support of such legal proposition. The assessee has not filed copies of sanction letter/s of credit facility to the company nor the copies of the fixed deposit receipts. Therefore, it is not clear whether these fixed deposits were really made for business purposes of the company. If the lien on fixed deposit held in the name of the assessee was marked in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cquired the property. 7.1 Ld. CIT(A) allowed the claim of the assessee placing reliance in the case of DCIT vs. Manjula J. Shah (318 ITR 417) . We find that the said decision of the Special Bench of the Tribunal was affirmed by the Hon'ble Bombay High Court vide (2012) 204 Taxman 691/[2011] 16 taxmann.com 42(Bombay) .Vide para 17 to 18 of the judgment it was held as under:- "17. We see no merit in the above contention. As rightly contended by Mr. Rai, learned counsel for the assessee, the indexed cost of acquisition has to be determined with reference to the cost inflation index for the first year in which the capital asset was 'held by the assessee'. Since the expression 'held by the assessee' is not defined under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act, the assessee is deemed to have held the asset from 29/1/993 and deemed to have incurred the cost of acquisition and accordingly made liable for the long term capital gains tax. Therefore, when the legislature by introducing the deeming fiction seeks to tax the gains arising on transfer of a capital asset acquired under a gift or Will and the capital gains under Section 48 of the Act has to be computed by applying the deemed fiction, it is not possible to accept the contention of revenue that the fiction contained in Explanation 1(i)(b) to Section 2(42A) of the Act cannot be applied in determining the indexed cost of acquisition under Section 48 of the Act." 7.2 Respectfully following the decision of the Hon'ble Jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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