TaxTMI 
TaxTMI 
TaxTMI 
2018 (2) TMI 2127
X X X X Extracts X X X X
X X X X Extracts X X X X
....ication of the respective appeals. 2. The Grounds of appeal raised by the Revenue in both the appeals are the same except for the quantum. Therefore, both the appeals were heard together and are disposed of by this common and consolidated order. For the sake of clarity and ready reference, the grounds of appeal in the case of Alpha Villas (P) Ltd are reproduced hereunder: "1. In the facts and circumstances of case and in law, the learned CIT(A) erred in deleting the addition of Rs. 14,99,99,760/- made u/s 68 of the Income Tax Act, 1961. 2. In the facts and circumstances of case and in law, the learned CIT(A) erred in holding the surplus of Rs. 17,74,29,315/- on sale of land as capital gains as against the same held as profits and gains from business by the Assessing Officer. 3. In the facts and circumstances of case and in law, the learned CIT(A) erred in directing the Assessing Officer to set of loss of Rs. 82,54,651/- on sale of shares against the profit on sale of land held by him as capital gains rejecting the decision of the Assessing Officer that the same cannot be set off against profits and gains from business and even otherwise the same cannot be set off as it repre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion at the time of purchase, the cost of acquisition was arrived by each of the assessees at Rs. 3,50,70,685. 6. The AO observed that the assessee is in the business of real estate and therefore, profit on the sale of land is assessable under the head "Income from business" and not under the head "capital gain". Therefore, show cause notices were issued to the assessees. The assessees, vide letters dated 8.11.2010, explained that the land was reflected as a fixed asset in their returns of income filed for the A.Ys 2006-07 and 2007-08 as it was the intention of the assessees to hold it for a long period of time, but due to unprecedented boom in real estate market in Hyderabad and surrounding areas, the lands were offered to be purchased at a good price and hence the assessee's have sold the same and the profit arising from such a transaction has correctly been offered as "capital gain" and not as "business income". The AO, however, observed that the object of the assessee companies was to deal in real estate business and therefore, the sale of land for profit within a period of 7 months is nothing but business transaction and the income should be treated as business income. He the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by the assessee for 19 months as against the AO's observation that it was held only for a period for 7 months. Thus, he held that the land is a capital asset in the hands of the assessee and therefore, directed the AO to accept the computation of short term capital gains admitted by the assessee. Aggrieved by the relief granted by the CIT (A), the Revenue is in appeal before us. 10. The learned DR strongly relied upon the order of the AO and submitted that the assessee being in the business of real estate, has purchased land from M/s. Matrix Laboratories Ltd and immediately thereafter within a short span of seven months, has sold the same for a huge margin and hence it has rightly been treated as business income by the A.O. 11. The learned Counsel for the assessee, on the other hand, drew our attention to the contentions of the assessee that the land was purchased during the year 2005 by payment of the entire sale consideration and taking over of the possession of the property. It is submitted that only the registration of the sale deed has taken place in 2006. He also drew our attention to the recitals in the sale deed about the payment of the total consideration and handing ov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....demnified from all the losses, costs, expenses, damages and whatever may be the vendee shall be put into reason of any defect in the title of the said land hereby conveyed". 13. From the above recitals, it appears that in terms of section 2(47)(v) of the Act, the transfer has taken place. Further, from the copy of the balance sheet as on 31.3.2006 at page 35 of the paper book, the gross block of fixed assets is shown at Rs. 2,51,85,185 which is the sale consideration paid for purchase of the property. From the copies of wealth tax returns for the A.Y 2006-07 & 2007-08 at pages 55 to 59 and 60 to 64 respectively, it is seen that the assessee has shown this asset as a taxable asset. From the balance sheet for the relevant A.Y, the asset as on 31.03.2007 is shown at Rs. 30,070,685 and as on 31.3.2008 at Nil. There is no schedule for the fixed assets. Further, from the order of ITAT in ITA No. 2123/Hyd/2011 in the case of Mylan Laboratories (formerly known as Matrix Laboratories Ltd), it is seen that the Tribunal has considered the issue of application of section 50C to the sale of the above property and another property by Matrix to the assessee's herein for the A.Y 2007-08 and at Pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....id not interfere with the order on the reason that proceedings for AY. 2006-07 were pending. The order of AO in the reassessment proceedings indicate that AO did not reduce the capital gains offered in this year. This indicates that the action of assessee in offering Short Term Capital Gain was accepted. (e) Even though, the provisions of Section 50C was amended to clarify that the SRO value as on date of agreement of sale has to be considered that need not be considered here as AO on facts accepted capital gain in AY. 2006-07 itself. 18.3 For the reasons stated above, the action of AO in bringing to tax the difference alone cannot be approved. Accordingly, the addition made is set aside. Grounds are allowed". 14. Thus, the vendor M/s. Matrix Laboratories had offered the STCG on the basis of receipt of sale consideration and handing over of the possession in the financial year 2005-06 in the A.Y 2006-07, but the AO had brought it to tax in A.Y 2007-08 on the ground that the property was registered on 24.08.2006 relevant to the A.Y 2007-08. The Tribunal has clearly accepted that there was transfer of the property in A.Y 2005-06 relevant to A.Y 2006-07. From all the above facts,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s on sale of shares cannot be considered as speculative loss and is to be set off from the short term capital gain. Thus, grounds of appeal No.2 & 3 are dismissed. 18. As regards Ground No. 1, brief facts are that the AO observed that there was increase in share capital of the assessee by Rs. 3,49,16,662 and has received the premium of Rs. 14,58,33,100. The assessee was asked to prove the genuineness of the same and the assessee furnished the required details. On perusal of the details furnished by the assessee, the AO observed that the assessee has received an amount of Rs. 14,99,99,760 from one M/s. Corner Stone Properties & Invest. Pvt. Ltd towards allotment of 4,16,666 shares of the company @ Rs. 360/per share (i.e. with a premium of Rs. 350/- per share of Rs. 10/-) on 03.03.2008 whereas just two days prior thereto i.e on 01.03.2008 Rs. 30,75,000/- shares of the company were allotted to one of the Director Mr. N. Prakash at the rate of Rs. 10/- per share i.e. without any premium. The issue of genuineness of the fresh share capital received with huge premium was examined by the Addl. CIT u/s 144A of the Act and it was held that the receipt of premium from M/s. Corner Stone Prop....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nvestment is the sale proceeds from customers and surplus fund from its cancellation of FDRs. The AO observed from the books of account of WPPL for the financial year 2006-07 and 2007-08, that it was in heavy need of funds for its operations for financial year 2007-08 and had secured loans. The correspondence between the WPPL and CPIPL was also furnished before the A.O by Mr. B. Subhash of WPPL on 29.11.2010. From the sequence of events, the AO observed that the WPPL had evinced interest in acquiring 50% stake in CPIPL at Rs. 60 crores and had also stated that its operational team and supervisory team would participate in the project at Bangalore, but the CPIPL did not agree for participation of the operational team and management team from WPPL from the day-to-day, but agreed for a periodical overview. He observed that on 26.06.2007 WPPL agreed to the proposal of CPIPL without any due diligence and has paid money to CPIPL which was immediately invested in the assessee companies. He observed that the CPIPL did not inform WPPL, the names of the companies in which investments were going to be made nor had WPPL asked for the names but were informed orally, only at a later stage. Obser....