TaxTMI 
TaxTMI 
2015 (10) TMI 944
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.... the AO during the course of assessment proceedings observed from the details of short term capital gain and long term capital gain filed by the assessee that the assessee is engaged in sale and purchase of shares and other securities throughout the year. Such volume of sale and purchase was also very high. From the various details furnished by the assessee, he observed that the long term capital gain and short term capital gain declared by the assessee for the preceding and succeeding two years are as under: Asst. Year Long term capital gain (in Rs.) Short term capital gain (in Rs.) Purchase Sale LTCG Shown (Claimed Exempt) Purchase Sale STCG shown 2006-07 29,00,931 56,45,456 25,44,113 17,10,470 19,58,514 2,48,044 2007-08 9,01,095 25,87,468 16,86,373 42,16,697 41,47,022 (-)69,675 2008-09 8,68,924 32,77,275 23,13,343 85,02,368 88,08,921 3,06,553 2009-10 1,45,676 3,14,434 1,68,758 1,66,82,960 1,67,42,879 59,919 2010-11 28,33,207 26,53,853 (-) 1,79, 354 1,16,02,085 1,20,39,342 4,37,257 He, therefore, asked the assessee to....
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....hen CBDT Circular will apply. Since the assessee has only one activity, therefore, he has got only one portfolio. Relying on various decisions it was argued that the capital gain shown by the assessee should be accepted. 4. Based on the arguments advanced by the assessee, the Ld.CIT(A) directed the AO not to treat the long term capital gain and short term capital gain declared by the assessee as 'business income'. The relevant observation of the Ld.CIT(A) at para 25 of the order reads as under : "25. After carefully considering the reply of the appellant as well as facts of the case, it is seen that the Assessing Officer has based his finding merely on the basis of frequency and volume of transactions without verifying the transactions in detail. It is seen that the appellant has not done trading in shares in the past too as in all the years gain on shares has been taxed as capital gain. Yes, it is true that the appellant has shown substantial gain in purchase and sale of transactions but the same cannot justify treating the same as business income unless business motive, its treatment in books, borrowing money for the same etc. are brought on record to substantiate the claim....
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....upported by plethora of decisions of the Coordinate Benches of the Tribunal and different High Courts. In this view of the matter we do not find any infirmity in the order of the CIT(A) on this issue. Accordingly, the same is upheld and the ground raised by the Revenue is dismissed. ITA No.1551/PN/2012 (By Assessee) : 7. Facts of the case, in brief, are that the assessee alongwith his business associates named Ashwin Bhogilal Shah and Subhash Bhikchand Chuttar entered into Memorandum of Understanding (MOU) on 21st May, 1998 with Srishti Developers Pvt. Ltd. represented by its Directors Shriram Dattatray Karandikar and Shri Madhumad Trimbank Pethe for development of land bearing Survey No.50/l/(P), 51, Hissa No.l & Hissa No.2 at Village Tungarli, within the limits of Lonvala Municipal Council. This land, which was in possession of Karandikar Group, was mortgaged to Suvarnra Sahakari Bank. The MOU was signed for development of the said land into a Hotel/Resort for which a separate company known as Shristi Hotels Pvt.Ltd.(SHPL) was formed. The assessee and his associates invested Rs. 53,00,000/- on various dates as per MOU as part of equity contribution in the company which was ....
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....the Executants-No.2 to 5 as enumerated in the annexure, the Executants-No.2 to 5 are not entitled to any other money or other claims whatsoever. (c) All other objections relating to transaction by and between the Executant No.1 and Executants No.2 to 6 relating to the said land raised by Executants-No.2 to 5 stand withdrawn unconditionally". 11. Thereafter, the payment was made on the basis of Annexure 'A' and 'B' of the Settlement Agreement which reads as under: ANNEXURE 'A' Amounts outstanding to Executant Nos. 2 to 5 from Executant No.l (Amount Rs. in Lakhs) Particulars Ashwin Shah Mrs. Harshida A Shah S.B. Chuttar (HUF) Shyam B Jain Share Application money with Srishti Hotels 4.00 4.50 4.50 10.00 Deposit with Srishti Developers Pvt. Ltd. - - - 8.66 Total 4.00 4.50 4.50 18.66 ANNEXURE 'B' AMOUNTS SETTLED & TO BE PAID IN THE FOLLOWING MANNER (Amount Rs. in Lakhs) Mr.Shyam B Jain 49.36 Mr. Ashwin Shah 34.46 Mrs. Harshida A Shah 10.54 Mr. Subhash B. Chuttar 5.64 TOTAL 100 12. Thus, from the....
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....ment Agreement reproduced above, shows that no such amount was outstanding. In any case, the Annexure does not refer to settlement in respect of interest on deposits. Therefore, request as per revised ground No.2 cannot be entertained. 17. In Ground No.3 (revised), the appellant has the grievance that the Ld. Assessing Officer has erred in treating Rs. 8,66,000/- representing deposit as consideration for transfer of rights in SHPL. 18. This issue has been decided while adjudicating ground No.1 wherein LTCG was calculated at Rs. 30,70,000/- after deducting share application money of Rs. 10,00,000/- and deposit of Rs. 8,66,000/-. 19. To sum up, Ground No.l is partly allowed with direction to the Assessing Officer to adopt LTCG at Rs. 30,70,000/- as calculated above. 20. Ground No.2 is regarding claim of indexation benefit in respect share application money of Rs. 10,00,000/- is dismissed." 9. Aggrieved with such order of the CIT(A) the assessee is in appeal before us with the following grounds as per revised grounds of appeal : "1. The learned CIT(A)-V, Pune and the learned AO erred in law and on facts in not appreciating that vide Settlement Agreement dated 27/05/2....
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....ench of the Tribunal in the case of Blue Star Ltd. (Supra) has held that benefit of indexed cost of acquisition can be granted to share application money. The relevant observation of the Tribunal from para 21 to 24 of the order reads as under : "21. We have heard the parties. In Gammon India (P.) Ltd. v. CIT (supra), the Bombay High Court has held that if the payment is received in the ordinary course of the business of the assessee for loss of stock-in-trade, it is revenue receipt, and if, on the other hand, the payment is received towards compensation for extinction or sterilization, partly or fully, of a profit-earning. source, such receipt, not being in the ordinary course of assessees' business is a capital receipt. In the case before-us, the assessee had entered into a joint venture agreement with HP by which the assessee was given the right to subscribe to the extent of 20 per cent of the paid-up capital of the joint venture, namely, HPIL. The joint venture agreement also contained a non-compete clause, which prohibited the assessee from carrying on a business in competition with the joint venture. The assessee paid a sum of Rs. 2,73,20,000 as share application money ....
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....t year under appeal through the MOU. Thus, the profits or game arising from the transfer of impugned capital asset effected in the previous year relevant to the assessment year under appeal are chargeable to tax under the head 'Capital gains' under section 45. 23. Section 48 provides for the mode of computation of capital gains. It provides that the income chargeable under the head 'Capital gains' shall be computed, by deducting from the full value of the consideration received or accruing as a result of transfer of the capital asset the expenditure inclined wholly and exclusively in connection with such transfer and the cost of acquisition of the asset and the cost of any improvement thereto. In the case before us, the cost of acquisition is the amount paid as share application money and the sale consideration is the amount which has been received on termination or extinction "of assessee's right to subscribe to the share capital. The prayer of the assessee that it should be allowed the benefit of indexed cost of acquisition, therefore merits consideration. In this view of the matter, we direct the Assessing Officer to tax the impugned amount as long-term ca....