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2024 (11) TMI 644
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....order of assessment had been passed on 29.12.2006 after hearing the authorised representative of the assessee. Though brief, the assessing authority notes inter alia the claim of the assessee of short term capital loss and the verification carried out in that regard, that culminated in a minor addition. 3. The assessment order also contains a note making reference to an agreement between the seller and the purchaser that the seller/its affiliates shall not indulge in certain activities without the express prior written approval of the purchaser. The assessing authority states that subject to approval being granted by his superiors, the assessment for previous assessment year i.e., A.Y.2003-04 will be reopened for consideration of certain additions. 4. On perusal of the assessment records, the Commissioner of Income Tax (CIT) was of the view that the assessment was erroneous and prejudicial to the interests of the revenue and hence issued a show cause notice dated 24.09.2008 invoking the provisions of Section 263 of the Act. The proposal contained in the show cause notice dated 24.09.2008 for revision of assessment was based on the following aspects: 1. The agreed ren....
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.... that such investment was supported by a Circular of the CBDT No.359 dated 10.05.1983 and the decisions of the ITAT. Overriding the explanations tendered, the CIT passed an order dated 27.01.2009, adverse to the respondent. 10. He proceeded on the basis that the investments in bonds had been made prior to the date of transfer and since the source of investments was from redemption of certain securities and not the advances received in connection with transfer, it was not entitled to exemption under Section 54EC. He distinguished the Circular that had been relied upon stating that that Circular had been issued in the context of Section 54E and not Section 54EC. 11. In addition, he stated that even assuming that the said Circular was applicable the fact remained that the investment had been made out of redemption of certain other securities and not out of the earnest money or advances in relation to the transfer. The Commissioner was thus of the view that the assessee had not established a nexus between the amounts invested in the bonds and the advances, particularly since the balance in the bank account immediately preceding the credit of the redemption from securities was onl....
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....ucha v. Deputy Commissioner of Income-tax, Circle 2, Pune [(2012) 28 taxmann.com 274 (Bom.)] 3.Commissioner of Income-tax v. Sunbeam Auto Ltd. [(2010) 189 Taxman 436 (Delhi)] 4.Commissioner of Income-tax v. Future Corporate Resources Ltd. [(2021) 132 taxmann.com 173 (Bombay)] 5.Virtusa Consulting Services (P.) Ltd. v. Deputy Commissioner of Income Tax, Chennai [(2021) 128 taxmann.com 22 (Madras)] 6.Malabar Industrial Co. Ltd. v. Commissioner of Income-tax [(2000) 109 Taxman 66 (SC)] 7.Jeevan Investment & Finance (P.) Ltd. v. Commissioner of Income Tax, City-1, Mumbai [(2017) 88 taxmann.com 552 (Bombay)] 17. We have heard the rival contentions and had perused the case records. The assessee had circulated a copy of the agreement of sale which is part of the record and which is the subject matter of interpretation by the authorities. The relevant clauses are as follows: 1.6 'Completion' shall mean the completion of the sale and purchase in accordance with Clause 5 of this Agreement. 1.7 'Completion Date' shall mean the date on which the Completion occurs, as specified in Clause 4.3(b) of this Agreem....
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....ions Precedent and fulfillment of all Further Obligations Payment to be made to Escrow Account with the Escrow Agent and released to the Sellers on the fulfillment of all the Condition s Precedent and Further Obligation s to the sole satisfaction of the Purchaser and released to Sellers upon the expiry of 9 months from the date of the Agreement to Sell. 3.00 3.00 Total 10.25 0.75 13.00 24.00 19. This schedule reveals clearly that the date of receipt of advances is contemporaneous with the execution of the sale agreement that is dated 02.01.2003. The investments have been made only thereafter and hence it is clear that the source for the investments are the advances received from the purchasers. The respondent has also explained that the advances were initially deposited in mutual funds and the maturity amounts had been credited to its bank account from out of which the investment in bonds had been made. 20. The mere fact that the advances had been deposited in mutual funds would not, in our view, militate against the claim under Section 54EC as the investments in bonds had been made from out of the proceeds of th....
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....eement entered into with M/s Orchid Chemicals & Pharmaceuticals Ltd." 22. A perusal of the above notice informs us that the claim of capital gains has not escaped the attention of the assessing officer. Necessary documents including the agreement have been called for and an explanation has been sought from the assessee that has been duly tendered. 23. The next argument of the revenue is that Section 54EC requires the investments to be made only subsequent to the date of transfer. In this regard, the respondent has relied upon a Circular issued in the context of Section 54E. The Circular reads thus: CIRCULAR : NO. 359 [F.NO. 207/8/82-IT(A-II)] SECTION 54F OF THE INCOME-TAX ACT, 1961 - CAPITAL GAINS - EXEMPTION OF, IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE - ASSESSEE INVESTING EARNEST MONEY IN SPECIFIED ASSETS BEFORE DATE OF TRANSFER - WHETHER AMOUNT SO INVESTED QUALIFIES FOR EXEMPTION CIRCULAR : NO. 359 [F.NO. 207/8/82-IT(A-II)], DATED 10- 5-1983 1. Section 54E provides for exemption of long-term capital gains if the net consideration is invested by the assessee in specified assets within a period of six months after the date of such transf....
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....transfer of a long-term capital asset, being land or building or both, the capital asset so transferred being hereafter in this section referred to as the original asset and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,- (a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45; 25. Section 54 and the provisions thereafter, from Section 54A to Section 54 GB, provide for an exemption from the levy of capital gains in various stipulated circumstances. Section 54E states that the capital gain arising on the transfer of a capital asset prior to 01.04.1992, is not to be charged in certain cases. Similarly, Section EA and EB, applicable in the event of the transfer of a long-term capital asset before 01.04.2000, grants an exempts from capital gain if the gain is invested in specified securities in the mann....
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....le when compared with the present. The substantial questions of law in that case were as follows: "1. Whether in the facts and circumstance of the case, the Appellate Tribunal was right in coming to the conclusion that even though the vacant possession of the property was handed over only on 25.03.2004 the capital gains will arise for the assessment year 2003-2004 and not for the assessment year 2004-2005? 2. Whether in the facts and circumstances of the case the Appellate Tribunal was right in coming to the conclusion that the part of the sale consideration was received on 21.12.2002 hence the capital gains will arise only for the assessment year 2003-2004 and not for the assessment year 2004-05? 3. Whether in the facts and circumstances of the case the Appellate Tribunal was right in coming to the conclusion that the sale consideration was received on 21.12.2002 and the property was handed over on the same day even though the possession of the property was handed over only on 25.03.2004?" 32. R.Krishnaswamy had entered into a sale agreement on 07.12.1999 and had received advance from the company. The remaining consideration had been received on 21.12....