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TMI Blog2025 (2) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... es not have any relevance. Thus, assessee has shown how shares are acquired by her i.e., by gift from his son, to whom she has sold those shares to Mr. Suresh Galani, details of transfers also shown endorsed on the share certificates, consideration has also passed through, the share price of the company at which those shares are sold is also fair. No reason to sustain the appellate of the ld. CIT (A) that long term capital gain earned by the assessee is unexplained credit chargeable to tax u/s 68 - Assessee has correctly offered long term capital on the sale of shares to Mr. Suresh Galani. Accordingly Ground no 1 of appeal is allowed. Deduction u/s 54F - In case of PCIT V Vembu Vaidyanathan [2019 (1) TMI 1361 - BOMBAY HIGH COURT] has held that even 'letter of allotment' also satisfies the requirement of section 54F is allowable The assessee has acquired 60 % of the existing property. The decision of Honourable Supreme court in the case of Suraj Lamp Industries [2011 (10) TMI 8 - SUPREME COURT] also cannot apply to the fact of the case as assessee has not entered into any sale deed and has not registered it. Assessee deserves the benefit of section 54F of The Act. Deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n sale of shares by denying the appellant's claim of exemption under section 54F of the income tax act 1961 four Rs. 29,357,775/- on account of the acquisition of new residential house (on the ownership). iii. On the facts and in the circumstances of the case the learned AO has erred in disallowing expense of Rs. 75,000/- on account of stamp duty paid on sale of shares. The learned CIT - A faceless Centre failed to adjudicate this ground. 3. Brief facts of the case shows that assessee is a non-resident Indian and has filed her return of income on 30/8/2015 declaring the total income of Rs. 251,250/-. 4. During the year, on 11/12/2014 assessee received a gift of 28,750 shares of one private limited company namely M/s Beam Developers Private Limited from her son Mr. Vijay Pamnani, which is 12.5% of the total equity capital of that Company. Assessee has entered into the deed of gift on 6/12/2014 on a nonjudicial stamp of Rs. 100/-. These shares were originally subscribed to by Mr. Vijay Pamnani , son of the assessee, who held those shares as a promoter and director of the company. During the year, the assessee entered into transaction of transfer of these 28,750 shares of the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e property which originally belongs to his husband for a consideration of Rs. 3 crores. The AO found that this document is not registered and therefore the AO asked to produce the purchase agreement, share certificate from the society, change in the percentage of share certificate after purchases and whether any no objection certificate was obtained from the society for sale of the property. The assessee submitted on 15/20/2017 documents for purchase however with respect to the other queries of the society, assessee submitted that as the society has not at all been formed therefore all these details are not available. The AO rejected the contention of the assessee because the property is Flat No 803, Khandelwal Friends coop Housing society Limited therefore according to AO assessee is giving incorrect reply. The AO was of the view that in view of section 17 of the registration act a person is considered lawful owner of the property only after property is registered in her name, and it is mandatory to register the document for transfer of the property. Therefore, AO stated that it is doubtful that the husband book capital gain/ loss on sale of property to his wife it is further avoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered the capital gain earned by the assessee as fictitious because there is an astronomical rise in the price of those shares as transacted by the assessee. According to him the gift of 28,750 shares from the sun to the mother (assessee) is having value of Rs. 287,500 as on 11/12/2014 [ Rs 10/- per share] but on 27/2/2015 the assessee transferred those shares to Mr. Suresh Galani for Rs. 3 crores [ Rs 1043/- per share] . Thus, the value of the shares transferred by the assessee is fictitious. He looked at the annual accounts of the company and found that it has two directors and has an authorized share capital of Rs. 23 lakhs . According to him, the net worth of the company is Rs. 13,21,02,820/- only and earning per share of the company was only Rs. 27.38 per share. He also noted that the company has (1) no activity as construction and development of building is concerned as there is no inventory , (2) there is no addition to the fixed assets and depreciation claimed is minimal, (3) major income of the company is from rent received of Rs. 10,147,375/-. He also questioned that the son of the assessee has given gift to the assessee and assessee has sold shares to another promote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, Donee. On this basis, the assessee computed the long-term capital gain on transfer of the shares. With the consideration received, the assessee acquired 60% shares in the residential property owned by assessee's husband. He submits that assessee has executed gift deed on stamp paper of Rs. 100/-. As the assessee has acquired the right to acquire 60% of the property from husband in a residential house property, the assessee claimed deduction under section 54F of the act. The assessee satisfies all the conditions of the computation of long-term capital gain as well as deduction under section 54F of the act. He referred to the computation of capital gain placed at page number 12 of the paper book in the computation of total income. He submits that the date of acquisition is considered as 24/8/2006 wherein the shares were acquired by Son of the assessee, and same were transferred on 6/2/2015 to the other promoter director of the company. Assessee has incurred an expenditure on stamp duty of Rs. 75,000/- which is also claimed as deduction from the capital gain. The consideration received of Rs. 3 crores are paid to the husband of the assessee for acquiring 60% of the righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax return of the buyer of the shares who has also disclosed acquisition of those shares. He further referred to the reply dated 29/11/2017 justifying the claim of deduction under section 54F. In the end he submits that the issue is squarely covered in favour of the assessee by the decision of the coordinate bench in ITA number 4150/Del/2018 of Mrs. Swati Oberoi [page No 117-126 of the Paper book] and also the decision of the honourable Bombay High Court in 413 ITR 248 in case of Vembu Vaidhyanathan to show that despite the non- registration of the sale deed the assessee is entitled to deduction under section 54F of the act of the property being 60% share were acquired in a residential house owned by the husband of the assessee. He also submitted a chart wherein the findings of the ld. AO, ld. CIT (A) with the remarks of the assessee. 9. The learned departmental representative vehemently supported the order of the learned CIT - A. He submits that the learned CIT - A has not made any enhancement to the income of the assessee but has merely classified the long-term capital gain as unexplained income of the assessee chargeable to tax under section 68 of the income tax act and therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... convey any title and does not create any interest in any immovable property. In this case the assessee has acquired 60% of the rights in the residential house property owned by the husband and therefore it perfectly satisfies the condition of section 54F of the act. He submits that the decision of the honourable Supreme Court was not with respect to the claim of deduction under section 54F of the act and the decision of the honourable Bombay High Court in case of a Vembu Vaidhyanathan clearly covers the issue. 11. We have carefully considered the rival contention and perused the orders of the lower authorities. We have also considered the paper book filed by the assessee as well as the various judicial precedents cited before us by the parties. Issue before us is whether the assessee is entitled to the claim of deduction under section 54F of the act on acquiring 60% share in the residential property already held by her husband out of consideration on sale of shares of a private limited company which were gifted to assessee by her son , resulting into a long-term capital gain. 12. Fact shows that the son of the assessee, namely Mr. Vijay Pamnani acquired 28,750 shares of one compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We find that the price of the taken by the assessee as cost of acquisition is only Rs 10/- per share and sale of shares by the assessee is at Rs 1043/- per share. This is so because the shares were allotted to the son of The Assessee Mr. Vijay Pamnani on 24/08/2006 at face value. These shares were gifted to assessee by Mr. Vijay Pamnani to her mother i.e. Assessee on 11/12/2014. Therefore, the price of shares should have been compared by ld. CIT (A) as of 11/12/2014 with the price of the shares on 06/02/2015. Firstly, he did not arrive at any price on 11/12/2014. The dl CIT (A) wrongly compared the price of Rs 10/- which was cost in the hands of the assessee by virtue of section 49(1) of The Act. There cannot be any difference in the price on 11/12/2/14 [ date on which share were gifted by son to the assessee] and on 6/2/2015 [ date on which shares are sold by assessee] because both falls in the same accounting year and does not have any material events affecting prices between these dates. Thus, the finding of the ld. CIT (A) is incorrect that there is a rise in the price of the shares of company is fictious. 14. Secondly CIT (A) held that the company does not have any business a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit chargeable to tax u/s 68 of the act . Therefore, Assessee has correctly offered long term capital on the sale of shares to Mr. Suresh Galani. Accordingly Ground no 1 of appeal is allowed. 20. Now coming to second Ground of appeal on claim of assessee u/s 54F of the Act. Assessee has received consideration of Rs 3 Crores on sale of shares on which long term capital gain of Rs 2,93,57,775/- was computed. Assessee entered into a Deed of Transfer on 1/03/2015 with her husband Mr. Jetha Nand Berumal Pamnani , who is owner of flat no 803 , Khandelwal Friends Coop Housing Society Limited, whereby assessee acquired 60 % share in that flat by payment of Rs 3,00,000/- to her husband. This sum is claimed as purchase of house property by assessee and claimed deduction u/s 54F of the Act. Assessee paid Rs 2,97,00,000/- and deducted tax of Rs 3,00,000/- . As per sr No 5 of the Deed of Transfer, Seller agreed to execute all the deed which are required to be executed by him for transfer of right in the property in the name of the assessee. Undeniably , no sale deed was executed. But there is an agreement between the parties that seller has agreed to transfer his rights to the assessee alo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. In view of this Ground no 2 of the appeal is allowed and ld. AO is directed to grant benefit of section 54F of the act. 23. Ground no 3 is with respect to deduction of Rs 75,000/- of stamp duty on sale of shares while computing capital gains. In fact, the relevant from NO SH 4 are furnished before us where in it is found that stamp duty is paid by the assessee when she transferred shares to Mr. Suresh Galani. We have not been explained why the Transferor assessee would pay stamp duty when the buyer is Mr. Suresh Galani . If it is so, under which section this deduction is allowable. If the stamp duty is paid by the assessee on the Gift of shares received, then obviously it become the cost of acquisition of those shares and assessee is eligible for deduction of the same. ON verification of the form of stamp duty paid of Rs 75,000/- , it is paid on 5/2/2015 where the shares are transferred by the assessee on 06/02/2015. As there is no clarity on which transaction assessee has paid stamp duty of Rs 75,000/-, we restore Ground no 3 back to the file of the ld. AO with direction to the assessee to substantiate this claim before ld. AO more so for the reason that none of the lower aut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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