9911796707
TMI Blog1977 (7) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... 00. According to the assessee, the total cost of construction was Rs. 42,00,000 and the expenditure in connection with the sale was Rs. 31,978. On the basis of these figures, the assessee declared a capital loss amounting to Rs. 31,31,978. The ITO observed that the purchaser of the property was the Vijay Mahal Hotal (P) Ltd. of which the assessee was the Chairman and the only other shareholders were his wife, his younger brother and his Private Secretary, and the transferee was thus" directly as well as indirectly connected with the assessee". He also held that the sale of the property at such a reduced price was clearly done with the assessee'. object of avoidance or reduction of the tax liability under s. 45. Hence, invoking the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market value. His findings in this regard were Inter alia expressed by him in the following terms: "....................... the purpose of construction of the building was to have pleasure resort in the sea on an island away from the mainland. The place is away from the mainland by more than three miles from the nearest Railway Station. The situation of the building is such that it cannot be reached except by ferry to island also there is no alternate mode of conveyance except bullock-cart to reach building. Under these circumstances of the fact, the commercial utility of the building is not such that it can give rise to higher amount of price. That was the circumstance for which no higher price could have been received by the appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thing more has been received than the consideration shown in the statement." 5. Shri K.R. Srinivasan, the learned departmental representative, strongly contended that the AAC was not justified in holding that the provisions of s. 52(1) were inapplicable to the facts of the case. He submitted that both the requisite conditions, namely, the close relationship between the parties to the transaction and the object of tax-avoidance were clearly established in the present case. Without prejudice, he also submitted that even if the addition could not be sustained with reference to s. 52(1), it was certainly sustainable under s. 52(2). The learned representative of the assessee intervened at that stage to point out that, as the ITO had not relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than what was stated in the deed and hence, on the ratio of the decision of the Bombay High Court in Babubhai M. Sanghvi vs. CIT(1) the provisions of the s. 52(1) were not attracted to the facts of the case. Without prejudice the learned representative also submitted that the ratio of the said decision would equally apply even if the addition was to be considered as having been made under s. 52(2). He also referred to the circulars issued by the C.B. D.T., by way of follow-up of the Finance Minister's speck in Parliament, that s. 52 was not intended to be applied to Bona fide transactions. The learned Departmental Representative in his reply, pointed out that the circulars had been withdrawn by the time the assessment was made. 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tmental representative's plea that the addition may be sustained as one made under s. 52(2), we are of the opinion that the objection which has been raised by the learned representative of the assessee is well taken. The criteria for the application of the two sub-s. of s.52 are distinctly different. The requirements for the application of sub-s. (1) are : close relationship and object of avoidance or reduction of tax liability under s.45. The criterion for s. 52(2) on the other hand is a difference of not less than 15 per cent between the fair market value of the capital asset and the full value of the consideration declared by the assessee. When the criteria to be applied are thus so entirely different, we are included to agree with the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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