TaxTMI 
TaxTMI 
2015 (10) TMI 2314
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....r Future and Options of Rs. 88,22,204/-. 3. The first ground of appeal relating to disallowance under section 54 of the Act. The assessee sold his house property located at New Door No.12, Old Door No. 117, Kodambakkam High Road, Nungambakkam, Chennai - 34, for a sum of Rs. 4,77,00,000/- during the financial year 2006-07. The assessee is 50% co-owner of the property. Hence, the assessee's share of consideration is Rs. 2,38,50,000/-. Before the Assessing Officer, the assessee claimed deduction of Rs. 99,00,000/- under section 54 of the Act on account of purchase of a new residential house within two years from the date of sale of the original asset. The Assessing Officer, in his order, observed that the assessee could not get the property registered in his name within the period of two years from the date of sale of the original asset and hence the assessee was not eligible for deduction under section 54 of the Act. Accordingly, the Assessing Officer disallowed the claim of the assessee under section 54 of the Act. 4. On appeal before the ld. CIT(Appeals), it was submitted that out of sale proceeds of original property sold, the assessee has purchased a new residential propert....
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....ate of sale agreement i.e. on 30.07.2007 itself and started enjoying the property. During the financial years 2008-09 and 2009-10, the assessee let out the said property and received annual rentals of Rs. 78,000/- and the same were also offered to tax under the head income for house property, in the returns of income filed for A.Ys. 2009-10 and 2010-11. These facts can be verified from the returns of income filed by the assessee for the respective years. These details clearly establishes that the assessee received the property and continuously enjoying it. What is required u/s.54 of the Act is the investment of the sale proceeds in the new residential house within the stipulated time of two years (for purchase) or three years (in case of construction) from the date of sale of the original asset. Purchase is with reference to an existing house. When an existing house is transferred in favour of the assessee by its owner, the same amounts purchase. The word transfer is defined in the IT Act and sec. 2(47) of the Act, which is as under: Sec.2 (47) "transfer", in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishm....
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....ng judicial pronouncements: i) R. Kalanidhi Vs. !TO (2010) (122 ITD 388)(Chennai): Whether when possession was handed over and total consideration was also agreed upon by parties and vendee was allowed to enjoy and entertain property for purpose for which it was taken over, then transaction had fulfilled conditions required under section 53A of Transfer of Property Act, 1882, and, therefore, it was covered under definition of 'transfer' under section 2(47)(v) - Held, yes ii) CIT v. R.L Sood 245 ITR 727 (Delhi) Section 54 of the Income-Tax Act, 1961 - Capital gains - Profits on sale of property used for residence - Assessment year 1982-83 - Whether on payment of substantial amount in terms of purchase agreement within four days of sale of his old house, *assessee acquired substantial domain over new residential flat within specified period, it could be said that assessee complied with requirements of section 54 - Held, yes - Whether merely because builder failed to hand over possession of flat within - specified period, assessee could be denied benefit of benevolent provision of section 54 - Held, no iii) Balraj v. CIT (254 ITR 22)(Del): Section 54 of....
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....he Act. 8. We have heard both sides, perused the materials on record and gone through the orders of authorities below. In this case, the assessee sold residential property during the financial year 2006-07 and thereafter entered into an agreement for purchase of new house dated 31.03.2007 for a consideration of Rs. 99,00,000/-. The assessee has paid Rs. 15,00,000/- on 30.07.2007 and subsequently on 25.02.2011, Rs. 50,00,000/- was also paid. The ld. CIT(Appeals) has observed that when the assessee has paid an advance of Rs. 15,00,000/- on 30.07.2007, the seller had handed over the property to the possession of the assessee as a part of the agreement. Therefore, it is amount to part performance of the said agreement and, the assessee has deemed to have purchased the residential house as on 30.07.2007. In this context, it is necessary to examine section 54 of the Act and relevant portion of the statue is extracted as under: 54. Profit on sale of property used for residence. Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset , being ....
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....itted necessary evidence for trading in future and options transactions and hence disallowed the claim of losses of Rs. 88,22,204/-. During the course of assessment proceedings, the assessee has submitted a detailed note before the Assessing Officer, which is reproduced as under: "Claim of loss in share transaction (future and option) On verification of profit and loss account, the assessee has claimed a loss of Rs. 88,22,204/- in share transaction (future and option segment). The authorized representative had submitted the following document in support for the loss claimed. (i) Contract note issued by Anugrah Stock and Broking Pvt. Ltd. (ii) Calculation sheet of capital loss. On verification of the same, the following discrepancies are noted: (i) In the contract note, the assessee name was mentioned as Prakash A Bohra (ii) There is no PAN, address mentioned in contract note. (iii) In future and option contract note, as per procedure the date mentioned is the last Thursday of every month. In the contract note submitted by assessee it was mentioned as December 2006, which is not the procedure generally followed. (iv) The loss due to future and option transact....
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....er copy of my reflecting our transactions." 10. On appeal, it was submitted before the ld. CIT(Appeals) that the assessee had entered into 'future & option' transaction during the financial year 2006-07 through the authorized broker and all the purchase and sales of 'Future & Options' transactions are through M/s. Anugrah Stock & Broking Pvt. Ltd., a licensed broker and all the contract notes obtained from the broker were also submitted before the Assessing Officer. With regard to the discrepancy in the name, the assessee has obtained a clarification from the broker and submitted that due to error in the database, the name was mentioned in the contract note as Prakash A. Bohra instead of "Prakash Chand Bohra" and also submitted that all the transactions are genuine and the losses claimed by the assessee should be allowed as regular losses. The ld. CIT(Appeals), after considering the submissions of the assessee, accepted the claim of the assessee and relevant portion of the order is extracted as under: "I have considered the above submissions of the assessee. The assessee has dealt with the 'Future & Options' transactions through M/s. Anugrah Stock & Broking Pvt. Ltd.,....
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....ead. Though the above losses in 'Future & Options' are debited in the P & L account, the assessee considered the same as capital loss while computing the taxable income of the year in his computation of taxable income sheet. The Assessing Officer, as discussed above, rejected the assessee's claim of capital loss on account of transactions in 'Future & Options', but considered the same as trading loss. However, the Assessing Officer has not allowed the said "trading loss" in 'Future & Options' while computing the taxable income by allowing the set off against the other incomes of other heads. Even if the losses in 'Future & Options' are to be treated as trading losses, the same amounts to business losses, and not speculation losses, as contained under the provisions of sec.43(5)(d) of the Act w.e.f. 01.04.2006. The relevant provisions are - Definitions of certain terms relevant to income from profits and gains of business or profession. Sec.43 .............. (5) "speculative transaction" means a transaction in which a contract for the purchase or sale of any commodity, including stocks and* shares, is periodically or ultimately settled otherwi....
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....e, the losses claimed in 'future & Options' is allowable for set off against the assessee's income of Rs. 2,28,244/- under the head 'business', and/or Rs. 1,20,91,656/ - under the head 'capital gains'. In other words, if the above loss of Rs. 88,22,204/- are to be treated as losses under the head 'income from capital gains', the same is allowable for set off against the long term capital gains resulting from the sale of the house property. On the other hand, if the losses are to be treated as trading losses in 'Future & Options', as held by the Assessing Officer, the same is also allowable for set off, not only against the income under the head 'business income', but also under any head during the year (including the head "capital gains". Thus, in either case, the losses from "Future & Options" of Rs. 88,22,204/- are eligible for set off against the capital gains income derived from the sale of the house property, under the head 'income from capital gains'. Therefore, the assessee's claim of set off losses of Rs. 88,22,204/- from 'Future & Options', against the long term capital gains income derived from sal....
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....s mentioned as Prakash A. Bohra instead of Prakash Chand Bohra. For that, M/s. Anugrah Stock & Broking Pvt. Ltd., the licensed broker has given an explanation that there is a mistake in the database and it is only a typographical error and categorically clarified that the transactions belong to the assessee only. The ld. CIT(Appeals) has observed that the entire payments for the purchase of 'Future & Options' transactions have been paid by the assessee only from his bank account and the address mentioned in the contract notes is the address of the assessee only. Moreover, nonmention of PAN in the contract notes cannot be a reason for rejection of the claim of the assessee. In our opinion, the assessee has discharged the onus cast upon him and it is the duty of the Assessing Officer to prove that the assessee's transactions are not genuine. The Assessing Officer has only wrote a letter to the National Stock Exchange asking to provide details regarding the total volume of transaction done during the period 01.04.2006 to 31.03.2007 by Prakash Chand Bohra and what was the outcome of the transaction (profit and loss) and volume of the said transaction. "The NSE gave reply by stating tha....
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....so allowable for set off, not only against the income under the head 'business income', but also under any head during the year (including the head "capital gains"). Thus, in either case, the losses from "Future & Options" of Rs. 88,22,204/- are eligible for set off against the capital gains income derived from the sale of the house property, under the head 'income from capital gains'. Accordingly, the ld. CIT(Appeals) directed the Assessing Office to allow assessee's claim of set off of losses of Rs. 88,22,204/- from Future & Options against the long term capital gains income derived from sale of house property. The ld. CIT(Appeals) has further observed that the assessee is eligible for set off irrespective of head of income under which the losses of Future & Options transactions are to be determined, i.e. whether under the head 'business or under the head 'capital gains'. 16. From the above observations of the ld. CIT(Appeals) with regard to allowability of claim of the assessee, the ld. CIT(Appeals) gave a categorical finding that the transactions in Future & Options are not to be considered as speculation losses w.e.f. 01.04.2006 consequent to the Finance Act....