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TMI Blog2024 (9) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... pened a demat account in its own name in spite of the fact that based on an agreement between the parties. Transactions of sale and purchase of shares were recorded in the regular books of accounts on day today basis. Such books of accounts are audited and accepted by the Department both in SGS Infratech Ltd. as well as assessee. On these facts, the views of the AO or CIT(A) cannot be accepted and are reversed. Addition was made by the AO without any sound legal basis and the facts supported the case of the assessee. The additions made are hereby deleted. Disallowance on account of various expenses - Disallowance is that the transaction of sale and purchase of shares trading business was held to be bogus by the learned AO - HELD THAT:- Since we have already held that the arrangement of sale and purchase of shares is not bogus and therefore we have no hesitation in allowing this ground of appeal to the assessee, the addition is hereby directed to be deleted. Addition on account of income of house property - HELD THAT:- We are of the opinion that for the purposes of computing the income from house property u/s 22 of the Income Tax Act, the ALV is required to be computed at per sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions placed on record. Thus, the addition so made should be deleted. iv) The appellant craves the leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing. 2. The facts in brief as noted from the orders of the authorities below are that the assessee company e-filed its Return of Income on 30.09.2016 declaring a total income of Rs. 10,64,26,790/-. On being put to scrutiny, the Assessing Officer called for various details along with the supporting documents as noted by the Assessing Officer. The assessee is in the business of real estate and has also earned income from interest etc. The Assessing Officer made various additions and determined the taxable income at Rs. 13,41,23,530/-. The learned CIT(A) has allowed partial relief on account of miscellaneous expenses such as salaries to staff and the income declared under the head House Property and has upheld the balance additions made by the Assessing Officer. Hence this appeal by the assessee. 3. Both the parties have been heard. 4. The learned Authorised Representative Mr. Pradeep Dinodia appearing on behalf of the assessee has filed Short Synopsis as well as a detaile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer also observed that apart from this year the assessee is having no shares transaction in any other year and the loss claimed to have been incurred by the assessee is only to reduce its tax liability. It was further observed that since the transaction done by the SGS Infratech Ltd. cannot be differentiated from the transaction as done by assessee company in its own name, it is, in the views of Assessing Officer only a fiction created by the assessee and assessee had no intention of buying or selling any shares and it is a case of buying of loss. Yet another reason given by the learned Assessing Officer that no prudent business entity would indulge into such activities of doing transaction on behalf of some other company without any remuneration. In other words, there was no remuneration which the SGS Infratech Ltd. or the other company would get. It was also alleged by the Assessing Officer that the agreement between the assessee and SGS Infratech Ltd., which admittedly is an associate company of the assessee, was not notarized. 9. Thereafter the learned Assessing Officer referred to the judgement of McDowell Co Ltd. Vs CTO 154 ITR 148 (SC) and held that the transaction of incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t rejected the books of accounts either of the assessee or that of the SGS Infratech Ltd. Therefore, making the final payment on account of loss incurred before the end of financial year cannot be adversely viewed especially when transactions of purchase and sale of shares have been recorded on day today basis in the regular books of accounts maintained by the assessee and SGS Infratech Ltd. 14. The learned Authorised Representative has further submitted that Assessing Officer s contention that no prudent person does such type of transaction unless he gets some compensation is also misleading. It is noted from agreement between parties, 10% of the profit was to go to SGS Infratech Ltd. or the other company and therefore it was not as if these services of buying and sale of shares was being conducted by SGS Infratech Ltd. for no consideration. It is a different matter that at the end of the day there were losses and nothing came to be shared by SGS Infratech Ltd. 15. It has also been submitted by the learned Authorised Representative that so far as SGS Infratech Ltd. it had incurred a loss of Rs. 11.54 Crores from the sale and purchase of shares. By referring to the Assessment Order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Synopsis filed. 17. Finally the Authorised Representative submitted that Assessing Officer s action of making addition on this account is not maintainable and has urged upon the Bench to delete the same. 18. The learned DR appearing on behalf of the Department has relied upon the Orders of authorities below. 19. It has been submitted by the learned DR that the Assessing Officer has thoroughly examined this transaction and has arrived a valid conclusion that it was a case of buying of loss and not the actual sale and purchase transaction of shares. It has been submitted that nothing stopped the assessee from opening a demat account in its own name he read out paras 3.2 and 3.3 of Assessment Order in support of his arguments. 20. On a query from the Bench to this effect, it has been submitted that the assessee has not done sale and purchase transaction of shares and this is the only year in which this transaction is claimed to have happened. The Authorised Representative of the assessee submitted that assessee just wanted to explore this business but did not succeed in the first year itself. 21. As a rejoinder to the learned DR submissions, the learned Authorised Representative submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment Order are in the nature of doubts and suspicion and the opinion of the Assessing Officer as to how such transactions are normally structured. We are inclined to accept the contentions that a bonafide business arrangement between the sister concerns for which an agreement was signed between the parties, which agreement has not been treated as a shell or bogus even by the Assessing Officer or the CIT(A), does not convert the genuine transaction into bogus transaction as has been done by authorities below. It is not the case of the Assessing Officer or CIT(A) that losses have not been incurred. On the contrary losses incurred by SGS Infratech Ltd. have been assessed. Only such part of losses, which SGS Infratech Ltd. incurred on behalf of assessee and recovered from assessee have been added in the hands of assessee by holding that assessee should have opened a demat account in its own name in spite of the fact that based on an agreement between the parties. Transactions of sale and purchase of shares were recorded in the regular books of accounts on day today basis. Such books of accounts are audited and accepted by the Department both in SGS Infratech Ltd. as well as assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expense is as to whether the expense has been incurred wholly and exclusively for the purposes of business of the assessee. Admittedly the assessee was engaged in the business of hospitality and trading of shares for which expenses are required to be allowed. 27. The learned DR on the contrary relied upon the order of the authorities below and has submitted that the approach of the Assessing Officer as upheld by the learned CIT(A) is correct because the assessee does not deserve any allowance and there was no need to incur such expenses. 28. We have heard the rival contentions, perused the Assessment Order as well as CIT(A) s Order on this issue. In our views, the sole reason for the Assessing Officer to make the disallowance is that the transaction of sale and purchase of shares trading business was held to be bogus by the learned Assessing Officer. Since we have already held that the arrangement of sale and purchase of shares is not bogus and therefore we have no hesitation in allowing this ground of appeal to the assessee, The addition of Rs. 1,04,16,353/- is hereby directed to be deleted. 29. Last Ground of Appeal raised by the assessee is the addition of Rs. 1,17,200/- on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned DR relied upon the orders of authorities below. 33. We are of the opinion that for the purposes of computing the income from house property u/s 22 of the Income Tax Act, the ALV is required to be computed at per section 23. Section 23 is a deeming provision and taxes are required to be paid by an assessee if it is found to be the owner of such property. Admittedly, the assessee is owner of such property although for the part of the year. The provisions of section 23(2) have two sub-clauses (a) and (b). Admittedly clause (b) of section 23(2) is not attracted on the facts of the assessee s case. As far as clause (a) is concerned, the same can be invoked only if the assessee as an owner is in occupancy of such property for his own residence. It is not the case of the assesse that the property was kept for its own residence and the assessee claims that the same was held for sale. Property held for sale cannot be treated as occupied for one s own residence. 34. Upon these facts and upon the aforesaid interpretation of provisions of law on this issue, we are of the opinion that no interference in the order of learned CIT(A) is called for and the order of the learned CIT(A) on thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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