9911796707
TMI Blog2008 (12) TMI 759X X X X Extracts X X X X X X X X Extracts X X X X ..... zing that the Income Tax Act does not permit taxation of hypothetical income. The Commissioner concluded that the addition of notional interest as business income was deleted, and the mode of set off for short term capital gain was also discussed. Mode of set off for short term capital gain: The CIT found that the Act did not prescribe a specific mode of set off for short term capital gain, allowing the assessee to choose the most beneficial option. It was noted that the assessee's option should favor them and not the revenue, as per established legal principles. The CIT concluded in favor of the assessee, stating that the disallowance had been made on presumption. High Court found no illegality or irregularity in the order passed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oans. The assessee had applied its own funds in granting interest free advance to a body corporate of which the assessee was a promoter. On these facts, I fully agree with the A/R s submissions that the Assessing Officer has brought to tax notional or hypothetical income. The Supreme Court in catena of cases has held that the subject matter of tax is always income which should be real income and not hypothetical income. The Income Tax Act does not permit taxation of hypothetical or opportunity income and what is subject matter of tax is read income, irrespective of the fact whether an entry is made in the books of accounts or not. This is the ratio laid down in the case of Godhra Electricity Co. Ltd. vs. CIT (225 ITR 746). The Income Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res where security transaction tax was paid and income was eligible for concessional rate of tax under section 111A. Rangamatee order 3. The assessee also suffered short term capital loss of ₹ 7,17,660/- in transactions in shares involving payment of security transaction tax. In the impugned order the A.O. computed the capital gain in the following manner without discussing any reasons for adopting such mode of computation. Calculation of income/loss from capital gain Short term capital loss with STT (-) 7,17,660/- Short tern capital gain with STT 2,27,564/- Net short term capital loss with STT (-) 4,90,096/- Short term capital gain without STT 7,29,584/- Net short term capital gain 2,39,488/- Less Brokerage 5,914/- Taxable short term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. It is settled proposition of law that when a provision of the Act gives option to the assessee, such option should be exercised which will favour the assessee and not the revenue. The A/R for the assessee was well justified in relying on the decision of the Calcutta High Court and the Circular of the Board dated 7.7.1955 since the principles laid down therein appeared to be fully applicable. 6. The Commissioner of Income Tax (Appeals) therefore came to the conclusion in favour of the asessee. He further came to the conclusion that the disallowance has been made on presumption. 7. In these circumstances, the order passed by the Commissioner of Income Tax and subsequent thereto, the Commissioner of Income Tax (Appeals) had already c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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