----- Forwarded Message -----
From: Kapil Goel <advocatekapilgoel@gmail.com>
To: CA.KAPIL GOEL <kapilnkgoelandco@gmail.com>
Sent: Friday, 23 August 2013 7:05 AM
Subject: [Gzb_CA Group -CA. VINAY MITTAL] Allahabad high court on Long term vs Short term (period of holding) capital gains computation (conversion from lease hold to free hold period includible); Cash Agricultural income genuineness cannot be doubted on suspicion (year to year : no separate evidence; secondary evidence ok like audited& unqualified books; previous year asst. orders); ; MADRAS High court detailed principles succinctly laid down for repairs allowability section 31; Delhi high court what is "used for commercial purposes"
From: Kapil Goel <advocatekapilgoel@gmail.com>
To: CA.KAPIL GOEL <kapilnkgoelandco@gmail.com>
Sent: Friday, 23 August 2013 7:05 AM
Subject: [Gzb_CA Group -CA. VINAY MITTAL] Allahabad high court on Long term vs Short term (period of holding) capital gains computation (conversion from lease hold to free hold period includible); Cash Agricultural income genuineness cannot be doubted on suspicion (year to year : no separate evidence; secondary evidence ok like audited& unqualified books; previous year asst. orders); ; MADRAS High court detailed principles succinctly laid down for repairs allowability section 31; Delhi high court what is "used for commercial purposes"
Included in this update:
a) Allahabad high court short term vs long term debate (conversion from lease hold to free hold period to be considered for short term/long term period computation)
b) Allahabad high court agricultural income (evidence: primary vs secondary) not required in every year where in earlier years same land has been assessed for agricultural income;
c) Madras high court detailed principles when repairs current and when non current (u/s 31)
d) Delhi high court on phrase "used for commercial purposes"
AFR
Court No. - 32
Case :- INCOME TAX APPEAL No. - 56 of 2013
Appellant :- The Commissioner Of Income Tax Alld.
Respondent :- Smt. Rama Rani Kalia
1. We have heard Sri Dhananjay Awasthi for the appellant. Sri Shubham Agrawal appears for the respondent-assessee.
2. This Income Tax Appeal under Section 260-A of the Income Tax Act 1961 (the Act) is directed against the order dated 31.10.2012, passed by the Income Tax Appellate Tribunal, Allahabad Bench, Allahabad in I.T.A. No. 95/Alld/2011, relating to Assessment Year 2004-05. The department-appellant has framed the following substantial questions of law, for consideration:-
"1. Whether ITAT has erred in law in upholding the order of CIT (A) without taking into account the fact that after conversion to free hold superior rights accrued to the assessee?
2. Whether the ITAT was justified in law in dismissing the appeal of the revenue without taking into account the fact that, the difference of period of between date of free hold and date of sale is only three days therefore short-term capital gains are to be levied
. The AO found that the assessee had purchased the property on 7.7.1984, for Rs.46,000/-. A copy of agreement was filed on record. The assessee had thereafter applied for free hold rights, which was granted by the Collector, Allahabad on 29.03.2004, on payment of Rs.1,34,567/. She sold the property on 31.03.2004, for Rs.20,00,000/- including the amount paid for free hold. Rs. 4,60,000/- was paid as stamp duty on the sale deed executed declaring the value of the property at Rs.46,05,840/-. The assessee filed a copy of certificate regarding investment of Rs.16,00.000/-, which was deposited in Long Term Capital Gain account, within six months from the date of sale i.e. 24.09.2004.
6. The AO found that since the property was acquired by converting the lease hold right into free hold right on 29.03.2004, and was sold within three days on 31.03.2004, capital gain would amount to short-term capital gain. He added the short term capital gain of Rs.17,30,866/- towards the income of the assessee. The AO worked out Capital Gain u/s 50 C of the Act at Rs.26,05,840/-, which was the difference between the total sale consideration as per stamp authority and net sale consideration of the property, and thus worked out total Capital Gain of Rs.43,36,706/-, and assessed the total income of the assessee at Rs.44,07,140/-.
9. In the appeal filed by the revenue, the Income Tax Appellate Tribunal held that it was a case of long term capital gain, as the assessee was owner of the property, even prior to conversion. 11. The difference between the 'short-term capital' asset and 'long-term capital asset' is the period over which the property has been held by the assessee and not the nature of tittle over the property. The lessee of the property has rights as owner of the property subject to covenants of the lease, for all purposes. He may, subject to covenants of the lease deed, transfer the lease hold rights of the property with the consent of the lessor. The conversion of the rights of the lessee in the property from having lease hold right into free hold is only by way of improvement of her rights over the property, which she enjoyed. It would not have any effect on the taxability of gain from such property, which is related to the period over which the property is held. If the period is less than 36 months, the gain arising from such transfer would be of short-term capital gain.
12. In the present case, the property was held by the assessee as a lessee since 1984, and the same was transferred on 31.03.2004, after the lease hold rights were converted into free hold rights on the same property which was in her possession, in her favour on 29.03.2004. The conversion was by way of improvement of title, which would not have any effect on the taxability of profits as short term capital gain.
13. There is no error of law in the order of the Tribunal. The question Nos. 1 and 2, framed in the appeal, are thus decided in favour of the assessee and against the department.
Court No. - 32
Case :- INCOME TAX APPEAL No. - 56 of 2013
Appellant :- The Commissioner Of Income Tax Alld.
Respondent :- Smt. Rama Rani Kalia
1. We have heard Sri Dhananjay Awasthi for the appellant. Sri Shubham Agrawal appears for the respondent-assessee.
2. This Income Tax Appeal under Section 260-A of the Income Tax Act 1961 (the Act) is directed against the order dated 31.10.2012, passed by the Income Tax Appellate Tribunal, Allahabad Bench, Allahabad in I.T.A. No. 95/Alld/2011, relating to Assessment Year 2004-05. The department-appellant has framed the following substantial questions of law, for consideration:-
"1. Whether ITAT has erred in law in upholding the order of CIT (A) without taking into account the fact that after conversion to free hold superior rights accrued to the assessee?
2. Whether the ITAT was justified in law in dismissing the appeal of the revenue without taking into account the fact that, the difference of period of between date of free hold and date of sale is only three days therefore short-term capital gains are to be levied
. The AO found that the assessee had purchased the property on 7.7.1984, for Rs.46,000/-. A copy of agreement was filed on record. The assessee had thereafter applied for free hold rights, which was granted by the Collector, Allahabad on 29.03.2004, on payment of Rs.1,34,567/. She sold the property on 31.03.2004, for Rs.20,00,000/- including the amount paid for free hold. Rs. 4,60,000/- was paid as stamp duty on the sale deed executed declaring the value of the property at Rs.46,05,840/-. The assessee filed a copy of certificate regarding investment of Rs.16,00.000/-, which was deposited in Long Term Capital Gain account, within six months from the date of sale i.e. 24.09.2004.
6. The AO found that since the property was acquired by converting the lease hold right into free hold right on 29.03.2004, and was sold within three days on 31.03.2004, capital gain would amount to short-term capital gain. He added the short term capital gain of Rs.17,30,866/- towards the income of the assessee. The AO worked out Capital Gain u/s 50 C of the Act at Rs.26,05,840/-, which was the difference between the total sale consideration as per stamp authority and net sale consideration of the property, and thus worked out total Capital Gain of Rs.43,36,706/-, and assessed the total income of the assessee at Rs.44,07,140/-.
9. In the appeal filed by the revenue, the Income Tax Appellate Tribunal held that it was a case of long term capital gain, as the assessee was owner of the property, even prior to conversion. 11. The difference between the 'short-term capital' asset and 'long-term capital asset' is the period over which the property has been held by the assessee and not the nature of tittle over the property. The lessee of the property has rights as owner of the property subject to covenants of the lease, for all purposes. He may, subject to covenants of the lease deed, transfer the lease hold rights of the property with the consent of the lessor. The conversion of the rights of the lessee in the property from having lease hold right into free hold is only by way of improvement of her rights over the property, which she enjoyed. It would not have any effect on the taxability of gain from such property, which is related to the period over which the property is held. If the period is less than 36 months, the gain arising from such transfer would be of short-term capital gain.
12. In the present case, the property was held by the assessee as a lessee since 1984, and the same was transferred on 31.03.2004, after the lease hold rights were converted into free hold rights on the same property which was in her possession, in her favour on 29.03.2004. The conversion was by way of improvement of title, which would not have any effect on the taxability of profits as short term capital gain.
13. There is no error of law in the order of the Tribunal. The question Nos. 1 and 2, framed in the appeal, are thus decided in favour of the assessee and against the department.
?Court No. - 32
Case :- INCOME TAX APPEAL No. - 106 of 2011
Appellant :- Commissioner Of Income Tax
Respondent :- Landmark Innovation Pvt.Ltd
3.� The revenue has raised the following substantial questions of law, for consideration:-
"1. Whether the ITAT was legally correct in confirming the decision of the first appellate authority deleting the addition of Rs.41,08,724/- (i.e. 39,55,924 + 1,52,799/-) made u/s 68 of I.T. Act, 1961 and directing the AO to assess the income of Rs.41,08,724/- as agricultural income ignoring the fact that no primary record of agricultural activities was available with the assessee to substantiate the agricultural income ?
2. Considering the ratio of decisions given by Hon'ble Apex Court in the case of CIT Vs. R. Venkata Swamy Naidu (1956) 29 ITR 529 (SC) whether the Hon'ble ITAT was justified in holding the alleged agricultural income genuine, although the assessee could not produce proper material no prove that it had earned any agricultural income during the year under consideration ? ? 6.� The CIT (A) considered the question of addition of Rs.41,08,724/- by AO under Section 68 of the Act and have recorded findings� that if in the previous years the agricultural income from the same land on which agricultural crops were� produced by the appellant was accepted,� he could not have recorded findings that� in the present assessment year in question, the income could not be treated as agricultural income for want of proof of records� of fertilizer and chemicals� and expenditures incurred on tube-well boring, construction of store house, levelling of field etc. The ITAT has confirmed the findings recorded by CIT (A). Even if each assessment year is treated to be a separate unit, the findings in respect of previous years based on the record of title and possession of agricultural land, and the evidence led for� proving that� agricultural operations� were carried out and crops were produced could not be disbelieved in the subsequent year, for want of primary evidence. The assessee was not required to submit proof of agricultural operations every year, in the absence of any material, which may suggest that the agricultural operations were stopped or was not carried out in the relevant period. There was no evidence to establish that� the assessee has sold the agricultural land or that the assessee had stooped the agricultural operations.� Further, the CIT (A) and ITAT have recorded findings that the assessee as a Private Company was maintaining regular books of accounts� as required under the Companies Act, which were also audited� and accepted in the AGM of the Company. The entries in the books were not proved to be bogus.� There is nothing under the Income-tax Act� debarring the assessee from selling agricultural produce in cash, and thus� additions based only on suspicion could not be sustained.
7.� The findings recorded by the CIT (A) and ITAT are question of facts, which do not require interference, nor any substantial questions of law arises, for consideration in the appeal by the Court.
8.� The Income Tax Appeal is dismissed.
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 24.07.2013 Coram
The Honourable Mrs.Justice CHITRA VENKATARAMAN and The Honourable Ms.Justice K.B.K.VASUKI M/s.Super Spinning Mills Ltd
9. The question as to whether the expenditure incurred on replacement of machinery is revenue or capital expenditure, particularly in the nature of replacements of parts, thus rests on the nature of expenditure incurred, vis-a-vis the benefit that the assessee derives. The ratio deductible from the decisions referred to above are:
(i) To decide the applicability of Section 31(i), the test is not whether the expenditure is revenue or capital in nature, but whether the expenditure is "current repairs". The basic test is to find out whether expenditure is incurred to "preserve and maintain" an already existing asset and the expenditure must not be to bring a new asset into existence or to obtain a new advantage vide [2007] 293 ITR 201 (SC) (Commissioner of Income Tax Vs. Saravana Spinning Mills P. Ltd.)
(ii) Under Section 31(i), the deduction admissible is only for current repairs. Therefore, the question as to whether the expenditure incurred by the assessee conceptually is revenue or capital in nature is not relevant for deciding the question whether such expenditure comes within the etymological meaning of the expression "current repairs". In other words, even if the expenditure is revenue in nature, it may not fall in the connotation of "current repairs" [2007] 293 ITR 201 (SC) (Commissioner of Income Tax Vs. Saravana Spinning Mills P. Ltd.)
(iii) A new asset or new/different advantage cannot amount to `current repairs'. - 2009-TIOL-86-SC-II (CIT Vs. Sri Mangayarkarasi Mills P. Limited)
(iv) Repair implies existence of a part of the machine which has malfunctioned, thereby requiring repair to that machinery, plant etc. Replacement cannot be a current repair, for, "replacement" and "current repair" do not go hand in hand . If one is to hold otherwise, it would only make Section 31(i) wholly redundant and absurd. Thus, replacement expenditure cannot be said to be `current repairs' vide [2007] 293 ITR 201 (SC) (Commissioner of Income Tax Vs. Saravana Spinning Mills P. Ltd.) and 2009-TIOL-86-SC-II (CIT Vs. Sri Mangayarkarasi Mills P. Limited)
(v) Expenditure is deductible under section 37 only if it (a) is not deductible under sections 30-36, (b) is of a revenue nature, (c) is incurred during the current accounting year and (d) is incurred wholly and exclusively for the purpose of the business. - 2009-TIOL-86-SC-II (CIT Vs. Sri Mangayarkarasi Mills P. Limited);
(vi) Expenditure is of a capital nature when it amounts to an enduring advantage for the business and repair is different from bringing a new asset for the business. Further, bringing into existence a new asset or an enduring benefit for the assessee amounts to capital expenditure vide Lakshmiji Sugar Mills (P) Co. v. CIT (AIR 1972 SC 159) referred in 2009-TIOL-86-SC-II (CIT Vs. Sri Mangayarkarasi Mills P. Limited).
(vii) Therefore, whether an expenditure is revenue or capital in nature would depend on the facts of each case. - [2007] 293 ITR 201 (SC) (Commissioner of Income Tax Vs. Saravana Spinning Mills P. Ltd.)
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on : 03rd July, 2013
Judgment pronounced on: 11th July, 2013 JAY PEE VENTURES LTD The question that arises for consideration in the present appeal is whether the aircraft owned by the Assessee and used for its business would be exempt
from wealth tax?" The learned counsel for the Revenue submitted that
the Assessee was neither in the business of commercially operating the aircrafts for hire nor was holding the same as stock in trade but was using the
said aircrafts for the purposes of transportation/travel of its directors and executives and as such the same were not being used for commercial purposes and were not exempt from wealth tax. We find no merit in the submission of the Learned Counsel for the Revenue. The term "commercial purposes" has not been defined by the Wealth Tax Act - 1957. The words "used by the Assessee for commercial purposes" have to be understood to mean used by the Assessee for the purposes connected with its business. When the Assessee uses the aircrafts in connection with its business as distinct from using it for personal purposes or non-business purposes, the use of the aircraft would be a use for commercial purposes and would be thus exempt from the purview of wealth tax The use of an aircraft for commercial purposes does
not necessarily entail hiring to third parties, ferrying of passengers or leasing of the aircrafts for consideration. The intention of the legislature while creating the
exception by using the expression "used by the Assessee for commercial purposes" was not to restrict the meaning of the words "commercial purposes" to
running the same on hire or as stock in trade. The use of an aircraft by the executives or directors of a company for the purposes connected with its
business would amount to use by the Assessee for commercial purposes.
__._,_.___
No comments:
Post a Comment