Tuesday, October 20, 2015

[aaykarbhavan] Judgments and Infomration [5 Attachments]





CIT vs. B. S. Shantakumari (Karnataka High Court)

COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS: , ,
COUNSEL:
DATE: July 13, 2015 (Date of pronouncement)
DATE: October 20, 2015 (Date of publication)
AY: 2009-10
FILE: Click here to download the file in pdf format
CITATION:
S. 54F is a beneficial provision & must be interpreted liberally. It does not require that the construction of the new residential house has to be completed, and the house be habitable, within 3 years of the transfer of the old asset. It is sufficient if the funds are invested in the new house property within the time limit
Immediately after sale of the property on 06.10.2008, the assessee purchased another residential plot on 13.10.2008 and on 02.06.2010 she obtained approval of the building plan from the local authority and commenced the construction. However, it was not completed within 3 years i.e., on or before 05.10.2011. The assessing officer rejected the claim of the assessee for deduction u/s 54F towards the benefit of Long Term capital gain only on the ground that the construction has not been completed. The assessee produced photographs of the residential building which was under construction to demonstrate and establish that the consideration received on transfer has been invested by her in purchasing the residential plot and it is under construction. The CIT(A) amd Tribunal followed the principles enunciated while interpreting Section 54F of the Act in Commissioner of Income Tax Vs Sambandam Udaykumar reported in (2012) 81 CCH 0151 whereunder it came to be held that said provision has to be construed liberally for achieving the purpose for which it was incorporated, allowed the appeal of assessee. On appeal by the department to the High Court HELD dismissing the appeal:
Section 54F of the Act is a beneficial provision which promotes for construction of residential house. Such provision has to be construed liberally for achieving the purpose for which it is incorporated in the statute. The intention of the legislature, as could be discerned from the reading of the provision, would clearly indicate that it was to encourage investments in the acquisition of a residential plot and completion of construction of a residential house in the plot so acquired. A bare perusal of said provision does not even remotely suggest that it intends to convey that such construction should be completed in all respects in three (3) years and/or make it habitable. The essence of said provision is to ensure that assessee who received capital gains would invest same by constructing a residential house and once it is established that consideration so received on transfer of his Long Term capital asset has invested in constructing a residential house, it would satisfy the ingredients of Section 54F If the assessee is able to establish that he had invested the entire net consideration within the stipulated period, it would meet the requirement of Section 54F and as such, assessee would be entitled to get the benefit of Section 54F of the Act. Though such construction of building may not be complete in all respect "that by itself would not disentitle the assessee to the benefit flowing from Section 54F" (Commissioner of Income Tax Vs Sambandam Udaykumar reported in (2012) 81 CCH 0151, CIT Vs Sardarmal Kothari (2008) 302 ITR 286 (SLP dismissed in CC No.3953-3954/2009 on 06.04.2009).

Related Judgements

  1. S. Uma Devi vs. CIT (ITAT Hyderabad) 
    If the assessee has invested the money in construction of residential house, merely because the construction was not complete in all respects and it was not in a fit condition to be occupied within the period stipulated, that would not disentitle the assessee from claiming the benefit under section…
  2. CIT vs. Sambandam Udaykumar (Karnataka High Court) 
    S. 54F is a beneficial provision for promoting the construction of residential house & requires to be construed liberally for achieving that purpose. The intention of the Legislature was to encourage investments in the acquisition of a residential house and completion of construction or occupation is not the requirement…
  3. Pradeep Kumar Chowdhry vs. DCIT (ITAT Hyderabad) 
    A flat which is newly constructed by a builder on behalf of the assessee is in no way different from a house constructed. Section 54F being a beneficial provision has to be interpreted so as to give the benefit of residential unit viz., flat instead of house in the…
  4. CIT vs. V. R. Karpagam (Madras High Court) 
    The above-said amendment to Section 54F of the Income Tax Act, which will come into effect only from 01.04.2015, makes it very clear that the benefit of Section 54F of the Income Tax Act will be applicable to constructed, one…Read more ›
  5. Hasmukh N. Gala vs. ITO (ITAT Mumbai) 
    The word 'purchase' used in Section 54 of the Act should be interpreted pragmatically. The intention behind Section 54 was to give relief to a person who had transferred his residential house and had purchased another residential house within two years of transfer or had purchased a residential house…

CIT vs. B. S. Shantakumari (Karnataka High Court)

by editor
The essence of s. 54F is to ensure that assessee who received capital gains would invest same by constructing a residential house and once it is established that consideration so received on transfer of his Long Term capital asset has invested in constructing a residential house, it would satisfy the ingredients of Section 54F If the assessee is able to establish that he had invested the entire net consideration within the stipulated period, it would meet the requirement of Section 54F and as such, assessee would be entitled to get the benefit of Section 54F of the Act

CIT vs. Pritam Das Narang (Delhi High Court)

COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL:
DATE: October 16, 2015 (Date of pronouncement)
DATE: October 20, 2015 (Date of publication)
AY: 2008-09
FILE: Click here to download the file in pdf format
CITATION:
S. 17(3)(iii): Amount received by prospective employee for loss of employment offer is a capital receipt and is neither taxable as "salary" or as "other sources"
The assessee entered into an Employment Agreement with ACEE Enterprises ('ACEE') pursuant to which he was to be employed as Chief Executive Officer ('CEO') and the employment was to commence from 1st July, 2007. Either party at its option could terminate the employment by giving six months' notice to the other party in writing. In case the notice period was less than six months, then compensation equivalent to the shortfall of the notice period was payable by the party concerned. ACEE wrote a letter to the Assessee informing him that there was a "sudden change in business plan of the Company vis-a-vis foraying into new financial ventures" and that "the company is extremely disappointed to convey that it shall not be able to take you on board from 1st July, 2007 as per employment contract." ACEE promised to reconsider the Assessee's services "as and when its operation starts". The second letter was dated 15th May 2007 which was the Assessee's response to ACEE that the news was a "big financial loss personally" since there were "many other opportunities available to me". The Assessee stated that since he had opted for ACEE he did not consider "other lucrative opportunities available to me". Since it was not clear when ACEE was going to start its new venture, the Assessee proposed that "your company must consider something for financial loss incurred by me not available other opportunities. I propose that you must give me at least one year compensation offered to me by your company to cover up the financial loss incurred by me". On 25th August 2007, ACEE informed the Assessee that "as a mark of goodwill/gesture" it was pleased to announce a payment of Rs.1,95,00,000 to the Assessee subject to income tax compliances as "a one-time payment to you for non-commencement of employment as proposed." The assessee claimed that the said sum was a capital receipt. However, the AO assessed it as salary under Section 17 (3) (iii) of the Act. This was reversed by the CIT(A) and the Tribunal. On appeal by the department to the High Court HELD dismissing the appeal:
(i) The Court is unable to accept the interpretation sought to be placed on the plain language of Section 17(3)(iii) of the Act by the Revenue. The words "from any person" occurring therein have to be read together with the following words in sub-clause (A): "before his joining any employment with that person". In other words, Section 17(3)(iii)(A) pre-supposes the existence of an employment, i.e., a relationship of employee and employer between the Assessee and the person who makes the payment of "any amount" in terms of Section 17(3)(iii) of the Act. Likewise, Section 17(3)(iii)(B) also pre-supposes the existence of the relationship of employer and employee between the person who makes the payment of the amount and the Assessee. It envisages the amount being received by the Assessee "after cessation of his employment". Therefore, the words in Section 17(3)(iii) cannot be read disjunctively to overlook the essential facet of the provision,
viz., the existence of 'employment' i.e. a relationship of employer and employee between the person who makes the payment of the amount and the Assessee. The Court accordingly concurs that this was a case where there was no commencement of the employment and that the offer by ACEE to the Assessee was withdrawn even prior to the commencement of such employment. The amount received by the Assessee was a capital receipt and could not be taxed under the head 'profits in lieu of salary'.
(ii) The other plea of the Revenue that the said amount should be taxed under some other head of income, including 'income from other sources', is also unsustainable. The decision of this Court in CIT v. Rani Shankar Mishra (2010) 320 ITR 542 (Del) (supra) held in similar circumstances that where an amount was received by a prospective employee 'as compensation for denial of employment,' such amount was not in the nature of profits in lieu of salary. It was a capital receipt that could not be taxed as income under any other head.

Related Judgements

  1. CIT vs. Dimension Apparels Ltd (Delhi High Court) 
    (i) Section 481 of the Companies Act provides for dissolution of the company. The Company Judge in the High Court can order dissolution of a company on the grounds stated therein. The effect of the dissolution is that the company…Read more ›
  2. CIT vs. C. Jaichander (Madras High Court) 
    (i) On a plain reading of Section 54EC(1) of the Act it is clear that it restricts the time limit for the period of investment after the property has been sold to six months. There is no cap on the…Read more ›
  3. CIT vs. Jaydev H. Raja (Bombay High Court) 
    The total salary received by the assessee in India was Rs.77.00 lakhs on which the tax payable at the maximum rate of 44.8% comes to Rs.35.00 lakhs. Since the assessee under the Tax Equalization Policy was entitled to get reimbursement of the tax payable on the amount of Rs.77.00…
  4. Anil Bhansali vs. ITO (ITAT Hyderabad) 
    Without ascertaining how much of the SOTP is attributable to services rendered in India, the entire amount cannot be made taxable only because the money was received in India. Therefore, we are of the view that the assessee having residential status of 'not ordinarily resident', only that portion of…
  5. CIT vs. M/s SMSL-UANRCL (JV) (Bombay High Court) 
    The ITAT has as a matter of fact found that the assessee/ joint venture did not execute the contract work and the said work was done by one of its constituents namely SMS Infrastructure Limited. It is also found that the receipts for the said project work are reflected…

CIT vs. Pritam Das Narang (Delhi High Court)

by editor
In other words, Section 17(3)(iii)(A) pre-supposes the existence of an employment, i.e., a relationship of employee and employer between the Assessee and the person who makes the payment of "any amount" in terms of Section 17(3)(iii) of the Act. Likewise, Section 17(3)(iii)(B) also pre-supposes the existence of the relationship of employer and employee between the person who makes the payment of the amount and the Assessee. It envisages the amount being received by the Assessee "after cessation of his employment". Therefore, the words in Section 17(3)(iii) cannot be read disjunctively to overlook the essential facet of the provision,
viz., the existence of 'employment' i.e. a relationship of employer and employee between the person who makes the payment of the amount and the Assessee

DCIT vs. G. K. K. Capital Markets (P) Ltd. (ITAT Kolkata)

COURT:
CORAM: ,
SECTION(S): ,
GENRE:
CATCH WORDS: ,
COUNSEL:
DATE: October 14, 2015 (Date of pronouncement)
DATE: October 20, 2015 (Date of publication)
AY: 2008-09
FILE: Click here to download the file in pdf format
CITATION:
S. 14A Rule 8D does not apply to shares held as stock-in-trade. AO cannot apply Rule 8D to make a disallowance without showing how the assessee's disallowance is wrong
(i) The AO has not examined the accounts of the assessee and there is no satisfaction recorded by the AO about the correctness of the claim of the assessee and without the same he invoked Rule 8D of the Rules. While rejecting the claim of the assessee with regard to expenditure or no expenditure, as the case may be, in relation to exempted income, the AO has to indicate cogent reasons for the same. From the facts of the present case it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at ½% of the total value. Even otherwise, on merits also the assessee had made disallowance itself for an amount of Rs.37,28,966/- and filed computation of disallowance as per rule 8D of the Rules. The AO could not find any fault in the computation of disallowance made by assessee (CIT Vs. R.E.I. Agro Ltd. in GA 3022 of 2013, ITAT 161 of 2013 dated 23.12.2013, wherein the order of Tribunal in DCIT Vs. R.E.I. Agro Ltd. of ITA No. 1811/Kol/2012 for AY 2009-10 dated 14.05.2013 was confirmed followed);
(ii) The assessee does not have any investment and all the shares are held as stock in trade. Once, the assessee has kept the shares as stock in trade, the rule 8D of the Rules will not apply.

Related Judgements

  1. DCIT vs. Gulshan Investment Co Ltd (ITAT Kolkata) 
    Though s. 14A applies to shares held as stock-in-trade, Rule 8D (2)(ii) & (iii) cannot apply if the shares are held as stock-in-trade because one of the variables on the basis of which disallowance under rules 8D(2)(ii) & (iii) is to be computed is the value of "investments, income…
  2. DCIT vs. Baljit Securities Private Limited (ITAT Kolkata) 
    (i) Both trading of shares and derivative transactions are not coming under the purview of Section 43(5) of the Act which provides definition of "speculative transaction" exclusively for purposes of section 28 to 41 of the Act. Again, the fact…Read more ›
  3. REI Agro Ltd vs. DCIT (ITAT Kolkata) 
    Rule 8D(2)(ii) is a computation provided in respect of expenditure incurred by way of interest which is not directly attributable to any particular income or receipt. This clearly means that interest expenditure which is directly relatable to any particular income or receipt is not to be considered under rule…
  4. DCIT vs. Ashish Jhunjhunwala (ITAT Kolkata) 
    The AO has not brought on record anything which proves that there is any expenditure incurred towards earning of dividend income. The AO has not examined the accounts of the assessee and there is no satisfaction recorded by the AO about the correctness of the claim of the assessee…
  5. Interglobe Enterprises Ltd vs. DCIT (ITAT Delhi) 
    The assessee had made significant investments in the shares of subsidiary companies which are definitely not for the purpose of earning exempt income. Strategic investment has to be excluded for the purpose of arriving at disallowance under Rule 8D(iii). The…Read more ›

DCIT vs. G. K. K. Capital Markets (P) Ltd. (ITAT Kolkata)

by editor
The AO has not examined the accounts of the assessee and there is no satisfaction recorded by the AO about the correctness of the claim of the assessee and without the same he invoked Rule 8D of the Rules. While rejecting the claim of the assessee with regard to expenditure or no expenditure, as the case may be, in relation to exempted income, the AO has to indicate cogent reasons for the same. From the facts of the present case it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at ½% of the total value


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Posted by: Dipak Shah <djshah1944@yahoo.com>


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