TaxTMI 
TaxTMI 
2017 (6) TMI 521
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.... such property would be treated as business income or it would be income from capital gains. This issue arises in respect of all the three assessment years. The second point, which arises in relation to the assessment years 2004-05 and 2006-07 is on the aspect of treatment of certain loans obtained by the assessee from another incorporated company, Rungta Engineering Co. Pvt. Ltd. Both the assessee and the said engineering company at the material time had a common shareholder, S.N. Rungta. He held more than 20% equity share capital in the assessee and also more than 10% equity share capital in Rungta Engineering Company. In this perspective, the Revenue wants to treat certain sums reflected in the books of the assessee as loan from Rungta Engineering as "deemed dividend" under Section 2(22)(e) of the Income Tax Act, 1961. The third point arises for the assessment year 2006-07, and relates to treatment of loss of Rs. 25,30,396/- arising from purchase and sale of shares suffered by the assessee in the corresponding financial year over trading in shares of one M/S. Sharang Viniyog Ltd. In the assessment order, such loss has been referred to as loss on "Penny Stock". The assessing offi....
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....pression property in corporate name of the assessee, Rungta Properties Pvt. Ltd. and its Memorandum of Association. One of the objects of the assessee contained in the Memorandum of Association indicates that the assessee could engage in development of immovable property. Mr. Chaudhury has defended the assessment orders in which the assessing officer had found the transactions to be adventure in the nature of trade and directed treating the profit therefrom as taxable business income. He has referred to the judgement of the Supreme court in the case of G. Venkataswami Naidu & Co. vs- Commissioner of Income Tax [(1959) 35 ITR 594] a decision which the assessee has also relied on in support of his submissions on this point. Mr. Chaudhury has further argued that no wealth tax was paid in respect of the property, from which factor he wants us to deduce that the same was to be treated as stock-in-trade. He has stressed on the fact that the property had undergone substantial change. We find from the decision of the Tribunal in connection with appeal of the Revenue for the assessment year 2004-05 that the assessee had shown capital gains of Rs. 5,06,280/- on sale of fixed assets but the a....
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....ay furnish relevant data for determining the character of the transaction. (iii) What is the nature of the commodity purchased and resold and in what quantity was it purchased and resold? If the commodity purchased is generally the subject matter of trade, and if it is purchased in very large quantities, it would tend to eliminate the possibility of investment for personal use, possession or enjoyment. (iv) Did the purchaser by any act subsequent to the purchase improve the quality of the commodity purchased and thereby made it more readily resalable? What were the incidents associated with the purchase and resale? Were they similar to the operations usually associated with trade or business? Are the transactions of purchase and sale repeated? (v) In regard to the purchase of the commodity and its subsequent possession by the purchaser, does the element of pride of possession come into the picture? A person may purchase a piece of art, hold it for some time and if a profitable offer is received may sell it. During the time that the purchaser had its possession he may be able to claim pride of possession and aesthetic satisfaction; and if such a claim is upheld that would be a facto....
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....would raise a strong presumption that the transaction is an adventure in the nature of trade. Even so, the presumption is not conclusive; and it is conceivable that, on considering all the facts and circumstances in the case, the court may, despite the said initial intention, be inclined to hold that the transaction was not an adventure in the nature of trade." (6) The other authorities on which Mr. Khaitan has relied on are:- (i) CIT vs. P.K.N. Co. Ltd. (1966) 60 ITR 375 (SC); (ii) An unreported judgement dated 17th November, 2015 of the High court of Delhi in ITA 299/03 [Shanti Banerjee (deceased) vs. Deputy CIT]; (iii) CIT vs. Razia Sulaiman (ITA No. 412 of 2007) decided by the Karnataka High Court on 19th October 2011. (iv) CIT vs. Sohan Khan (2008) 304 ITR 194 (Raj); (v) CIT vs. Mohakampur Ice and cold Storage (2006) 281 ITR 354 (ALL). (vi) CIT vs. R.V. Gupta (2002) 258 ITR 261 (Del); In addition, Mr. Khaitan has brought to our attention an order dated 30th March, 2009 of the ITAT Bench "I" Mumbai in ITA No. 721/M/05 and ITA No. 4630/M/05 (CIT vs. Dhootapapeshwar Ltd), which the Tribunal had relied upon in its decisio....
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....same reasoning, reference to property in corporate name of the assessee cannot make the assessee a property development company. The Tribunal as well as the Commissioner of Income Tax have concurrently found that gain of the assessee from the transactions of sale of flats did not constitute adventure in the nature of trade. The orders of the assessing officer on the same point for the two other assessment years were also dismissed by the Commissioner and the Tribunal. We do not find any perversity in such finding and hence confirm such finding. (8) The next point on which argument has been advanced before us is on deemed dividend. The factual basis of in this appeal in relation to "deemed dividend" originates from a sum of Rs. 22,09,808/- which was shown in the books of the assessee for the financial year 2003-04 as loan advanced to Rungta Engineering Company Private Limited. The engineering company had paid Rs. 25,00,000 within the same financial year to the assessee. At the end of the same financial year, there was a debit balance so far as the engineering company is concerned in the books of the assessee. In this appeal, however, we are concerned with a sum of Rs. 2,37,450/- ....
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....nt by a company by way of advance or loan to a shareholder (holding not less than 10% shares); or (ii) to any concern in which such shareholder is a member, or (iii) any payment on behalf of or for the individual benefit of any such shareholder. He has also cited before us the analysis of this provision made in the case of Universal Medicare Pvt. Ltd. (supra) and has contended, referring to his own break-up analysis made in respect of the above referred provision that both in the second and third situations payment is deemed to have been made to the shareholder, though in the second situation payment is made to a concern of which such shareholder is a member and in the third case, the payment is made either on behalf of or for the individual benefit of a shareholder. From this analysis, Mr. Khaitan wants us to hold that the payment in this case is to be treated as payment to the shareholder, if at all. When payment has been made to anyone which comes within the second and third categories such payment shall be deemed to have been made to the shareholder and the payment shall take the character of "deemed dividend". The person liable in such situations would be the sharehol....