Capital Gains Word "Held" for computing period of holding in short term and long term explained at length by Delhi high court in case of Frick India; Kolkatta ITAT on reopening for accommodation entry on general and vague "survey" statement/disclosure which is non specific held bad in law; Duty of subordinate court to apply special bench ITAT in Merilyn as per AP high court decision highlighted by Mumbai ITAT in Amit Naresh Sinha case; Capital receipt non taxable : discharging supplier from sale of equipment and related receipt;
Kapil Goel
IN THE HIGH COURT OF DELHI AT NEW DELHI Date of decision: 2nd September, 2014 + ITA 146/2002
FRICK INDIA LTD.
We would like to elucidate and explain the expression, “held by the assessee” in some detail. General words should normally receive plain and ordinary construction but this principle is subject to the context in which the words are used as the words reflect the intention of the Legislature. The words have to be construed and interpreted to effectuate the object and purpose of the provision, when they are capable of multiple meanings or are ambiguous. Isolated reading of words can on occasions negate the very purpose. Lord Diplock had referred to the term, “business” as an „etymological chameleon‟, which suits its meaning to the context in which it is found. The background, therefore, has to be given due regard and not to be ignored, to avoid absurdities. This principle is applicable when we interpret the word, “held” in Section 2(42A) of the Act, for the said word is capable of divergent and different connotations and understanding. 11. The word, „held‟ as used in Section 2(42A) of the Act is with reference to a capital asset and the term, „capital asset‟ is not confined and restricted to ownership of a property or an asset. Capital assets can consist of rights other than ownership right in an asset, like leasehold rights, allotment rights, etc. The sequitur, therefore, is that the word „held‟ or „hold‟ is not synonymous with right over the asset as an owner and has to be given a broader and wider meaning. In Black‟s Law Dictionary, Sixth Edition, the word „hold‟ has been given a variety of meanings under nine different headings. As per clause 8, the word „hold‟ means to possesss or occupy, to be in possession and would also include to keep, retain and maintain possession or authority over an asset. 12. The word „held‟ thus can be interpreted to embrace the idea of actual possession of the assessee. In Budhan Singh versus Babi Bux, AIR 1970 SC 1880 (at page 1884) the word „held‟ was interpreted to mean “lawfully held, to possess by legal title”. The term „legal title‟ here not only includes ownership, but also title or right of a tenant, which will mean actual possession of the land and a right to hold the same and claim possession thereof as a tenant (we are not examining rights of a rank trespasser in the present decision and we express no opinion in that regard). 13. The Tribunal in our opinion has rightly relied upon the decision of the Punjab and Haryana High Court in CIT versus Ved Prakash & Sons (HUF), (1994) 207 ITR 148 (P&H)… The said decision was followed by the Punjab and Haryana High Court subsequently in Madhu Kaul versus CIT & Another, (2014) 363 ITR 54 (P&H). The Delhi High Court in Commissioner of Income Tax versus K. Ramakrishnan, (2014) 209 DLT 14 has held that for the purpose of calculating period of holding we have to look and take into account the date since the assessee got „beneficial interest‟ in the property. The Allahabad High Court in CIT versus Rama Rani Kalia, (2013) 358 ITR 499 (All) has drawn distinction between holding of an asset and the nature of title over the property and it has been observed that period of holding will determine whether the consideration should be taxed as a short-term capital gains or long-term capital gains. Thus, conversion of leasehold right into freehold by way of improving the title over the property would not affect the taxability of the gain from such property, which is relatable to the period over which the property is held. Thus the asset, i.e. the tenancy rights were held for nearly 14 years and consideration received on surrender has been rightly treated as a long term capital gain. 15. In view of the aforesaid discussion, the question of law is answered in favour of the assessee and against the appellant-Revenue.
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH: KOLKATA
[Before Shri Shamim Yahya, A.M. & Shri George Mathan, J.M.]
I.T.A. No.1443 & 1444/Kol/2014
Assessment Years :2006-07 & 2007-08
M/s. Controlla Electrotech (P) Ltd. Date of pronouncing the Order : 09.09.2014
We have considered the rival submissions. A perusal of the assessment
order, wherein the reasons had been recorded for reopening, clearly shows that the
reopening has been done only on the basis of the statement and disclosure petition filed
by Shri Suresh Kejriwal. This so-called statement and disclosure are the foundation
along with the appraisal report. At the outset, a perusal of the statement from Shri
Kejriwal shows that this is the statement taken in the course of survey. This
statement looses its evidentiary value in so far as the statement recorded in the
course of survey has no conclusive evidentiary value. It is not recorded under oath.
No oath has been administered. The very foundation of the appraisal report and the
reopening fail because of this primary defect. Assuming, we are giving evidentiary
value to this statement, in question no.3 in the statement as has been specified by
the ld. CIT,DR, list of the main parties to whom the said accommodation entries had
been provided by Saket Vinimay Pvt. Ltd. has been listed out 13 in number. When
these names are compared with the chart in the assessment order, which is
specifying the reasons for reopening, shows that many of the names in the list
tallied with that in the chart but the assessee’s loan amount is the highest.
Obviously, assessee’s name must be the main person that Shri Suresh Kejriwal would have remembered, as the assessee is the person to whom such a huge loan
had been extended. But the assessee’s name is conspicuous by its absence in that
list. Thus, the reference to the statement recorded from Shri Kejriwal for the
purposes of reopening in the case of the assessee again fails without a foundation,
as the assessee’s name is nowhere referred to in the statement recorded on the
confessional disclosure. Similarly, even if an attempt to protect the reopening is
made by reference to the disclosure made by Shri Kejriwal even there, there is no
reference to the assessee. Thus, prima facie, there is no live link nor direct nexus
to the statement of Shri Kejriwal of having provided any accommodation entry to
the assessee before us. On this ground itself, the reopening is liable to be held to be
bad in law and we do so.
INCOME TAX APPELLATE TRIBUNAL,MUMBAI - ‘A’ BENCH.
Amit Naresh Sinha ./ITA No.4154/Mum/2013 Date of Pronouncement : 10-09-2014
1.On the circumstances and facts of the case, the Ld.CIT(A) erred in restricting the addition of Rs. 1,30,96,695/- made by the AO u/s.40(a(ia) to Rs.1,18,602/- by relying upon the decisions of Hon'ble ITAT Special Bench, Vishakapatnam in the case of Merilyn Shipping Agency Pvt. Ltd.
2. The appellant prays that the order of the CIT(A) on the above ground be reversed and that of the Assessing officer be restored.
3. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.
We find that expenses related to professional fees,advertisement and management were debited in P&L Account, that same were paid. Therefore, in our view, no disallowance u/s 40(a)(ia) of the Act should be made.We further find that while deciding the appeal in the case of Janapriya Engineers Syndicate (I.T.T.A. No. 352 of 2014- dt. 24.06.2014) the Hon'ble Andhra Pradesh High Court has clarified the issue of interim stay granted by it in the case of Merilyn Shipping & Transports (supra). We will like to reproduce the relevant part of the said order and same reads as under:
"4.We are of the view that until and unless the decision of the Special Bench is upset by this Court, it binds smaller Bench and coordinate Bench of the Tribunal. Under the circumstances, it is not open to the Tribunal, as rightly contended by Mr. Narasimha Sarma, learned counsel, to remand on the ground of pendency on the same issue before this Court, overlooking and overruling, by necessary implication, the decision of the Special Bench. We simply say that it is not permissible under quasi judicial discipline".
From the clarification issued by the Hon'ble High Court, it is clear that until and unless the decision of Marilyn Shipping & Transport(supra)is reversed by the Court,it is binding on all the benches of the Tribunal. We find that Hon'ble Court has held that judicial discipline mandates that the decision of the special bench has to be followed by other benches. As on today,the stay order granted by the Hon’ble Court has been vacated and the order of the special bench is binding on other benches of the Tribunal.Therefore, respectfully following the same,we hold that the FAA was justified in following the order of Marilyn Shipping & Transport (supra). Considering the facts of the case and the clarification issued by the Hon'ble Andhra Pradesh High Court on 24.06.2014 in the case of Janapriya Engineers Syndicate, we decide the effective ground of appeal in favour of the assessee and confirme the order of the FAA.
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA M/s. Azimganj Estates Pvt. Ltd. Date of pronouncement: 05.09.2014
From the above case law of Hon’ble Supreme Court it is clear that the facts of the
present case are directly comparable with the said case. The amount was received because the
assessee had given up its right to purchase and/or to operate the property and the said amount
was held to be capital receipt and not revenue receipt as held by Hon’ble Supreme Court
observing that by giving up its right to purchase and/or to operate the property, injury was inflicted on the capital asset of the company thereby resulting in loss of source of income. In
the present case also the assessee has released/discharged qualcomm from the project
agreement thereby giving up its right to purchase/acquire the equipment from the said party and
this act has certainly inflicted an injury to the capital structure of the assessee company
resulting in loss of source of income. According to us, the entire sum of Rs.3.5 crore was,
therefore, capital receipt not liable to tax. In view of the above facts and circumstances, we
confirm the order of CIT(A) deleting the addition. Appeal of revenue is dismissed.