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Direct Taxes
Tribunal
| Reepal Tralshawala, |
| Chartered Accountant |
REPORTED DECISIONS
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Capital Gains Sec. 50C Scope & ambit AO adopting
stamp duty valuation as against valuation of DVO Not justified Valuation
by DVO Should be based on comparable transactions and market rates and not
by placing too much emphasis on stamp duty valuations A.Y. 2003-04
Ravi Kant vs. ITO [2007] 110 TTJ 297 (Del); Order dated
13-7-2007
In the present case, apparent consideration shown by
assessee was at Rs. 6,50,000/-; stamp duty valuation was fixed at Rs.
15,50,000/- & DVO fair market valuation u/s. 50C(2) was arrived at Rs.
11,42,000/-. Even under the scheme of section 50C, as long as the assessee can
reasonably discharge onus of proving the fair market value of the property,
the consideration stated by the assessee cannot be disturbed. In the instant
case, when the fair market value of the property arrived at by DVO was less
than the stamp duty valuation, the full value of consideration for purposes of
section 48 cannot be taken at a figure higher than DVO report. Further, the
report of the DVO should be based on consideration stated in the registration
documents for comparable transactions as also other relevant factors and not
on valuation of stamp valuation authority. Matter remanded back for de novo
valuation by DVO.
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Capital Gains Exemption under sec. 54 3 flats acquired
out of capital gains and used for residence of family Entitled to exemption
in respect of all the 3 flats A.Y. 1995-96
Prem Prakash Bhutani vs. ACIT (2007) 110 TTJ 440 (Del);
Order dated 21-4-2006
Assessee having acquired three flats out of capital gains
and using them for residence of his family, which included his son and widowed
daughter, was entitled to exemption under section 54 in respect of all the
three of them. The fact that the residential house consists of several
independent units should not be an impediment to the allowance of the
exemption under section 54.
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Capital Gains Ss 2(14), 45 and 56 Sale of immovable
property with imperfect title Right to a property, howsoever imperfect,
constitutes capital asset Income chargeable to tax under the head capital
gains and not income from house property A.Y. 2001-02
ITO vs. Rina B. Parwani [2007] 110 TTJ 460 (Pune); Order
dated 31-5-2007
Gains on sale, which can be taxed as capital gains is a
capital asset and rights to property, howsoever imperfect, constitute a
capital asset. In the present case, rights have been acquired in connection
with the bungalow the receipt can only be treated as capital receipt. A
receipt which is neither a capital gain nor a revenue receipt will be outside
the ambit of income chargeable to tax.
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Capital Gains Ss. 45 r.w.s. 2(13) & 28(i) Acquired
agricultural land by way of inheritance Along with other co-owners paid
development charges to Municipal Committee for approving agricultural land
into Town Planning Scheme After conversion, sold plots in smaller
denomination Transaction to be assessed as capital gains and not adventure
in the nature of trade A.Ys. 1996-97 and 2001-02
Ram Swaroop Saini (HUF) vs. ACIT (2007) 15 SOT 470 (Del);
Order dated 27-4-2007
The assessee was not a dealer in land or was not carrying
on any such business in past or subsequently. The fact that the assessee got
the land converted into non-agricultural land before selling it might raise a
presumption, however, the only intention of the holder of such agricultural
land is to maximize realization from sale of such land. The intention of the
assessee at the time of acquiring the land (i.e., inheritance) and holding it
thereafter was not to deal in real estate. There was nothing to show that the
dominant intention was to embark on adventure in the nature of trade and thus
the transaction was assessable under the head Capital Gains.
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Expenditure in relation to exempt income S. 14A
Expenditure actually incurred for earning tax free income could be considered
for disallowance u/s. 14A Deemed expenditure cannot be disallowed Common
expenditure incurred at head office cannot be artificially apportioned to
earning of tax free income A. Y. 1994-95
Wimco Seedlings Ltd. vs. DCIT (2007) 107 ITD 267 (Del)(TM);
Order dated 21-12-2006
Only expenditure, which has been proved to have been
incurred in relation to the earning of tax free income, can be disallowed, and
the section cannot be extended to disallow even expenditure which is assumed
to have been incurred for the purpose of earning the tax free income. The word
incurred refers to the factual spending of the expenditure in relation to
the exempt income and does not refer to a deemed spending or assumed spending
for the purpose. Common expenditure incurred at the head office cannot be
broken up artificially to attribute or apportion a part thereof to the earning
of the tax free income on the assumption that such part of the common
expenditure was incurred in relation to the tax free income. Not only the
earning of the income but also its relationship with the exempted income must
be clear and must be capable of being ascertained on the face of it without
involving any further mental exercise. The burden would seem to be on the
Assessing Officer not only to show that some expenditure was factually
incurred, also to show its relationship with the income exempt from tax.
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Business expenditure Disallowance u/s. 43B Advance
payment of excise duty to be adjusted against liability to be incurred as and
when goods lifted from factory Deduction allowable on payment basis before
incurring liability to pay such amounts A.Y. 2001-02
DCIT vs. Glaxo SmithKline Consumer Healthcare Ltd. (2007)
110 TTJ 183 (Chd)(SB); Order dated 20-7-2007
Sec. 43B provides for the deduction of sums payable
mentioned in cls. (a) to (f), only if actually paid; but shall be allowed
irrespective of the previous year in which the liability to pay such sum was
incurred by the assessee. The intention of the Legislature is apparent in the
language used in section 43B, that the deduction in respect of tax or duty,
which was actually paid by the assessee has to be allowed as deduction without
looking into the year of incurring liability. The expression "irrespective of
the previous year" dispenses with the concept of previous year, in the matter
of the sums covered by section 43B.
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Income from house property Vacancy allowance Scope and
applicability of s. 23(1)(c) Expression property is let in section
23(1)(c) does not mean that property should have been actually let in previous
year but means intended to be let out A.Y. 2003-04
Premsudha Exports (P) Ltd. vs. ACIT (2007) 110 TTJ 89
(Mum); Order dated 31-5-2007
Expression property is let in cl. (c) of s.23(1) does not
mean that the property should have been actually let in the relevant previous
year or during any time prior to the relevant previous year but means intended
to be let out; property in question being intended to be let out and despite
efforts made, it remained vacant for the whole of the relevant previous year,
its annual value has to be worked out as nil under section 23(1)(c).
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Reassessment Reason to believe S. 147 Proceeding u/s.
147 open only qua items of underassessment Finality of assessment
proceedings on other issues remains undisturbed A.O. not justified in making
enquiries in relation to unconnected items of reassessment A.Y. 2000-01
Silver Mines vs. ITO (2007) 110 TTJ 118 (Jp); Order dated
21-5-2007
During reassessment proceedings, A.O. was not justified in
making enquiries by writing a letter to the assessee qua items which were not
subject-matter of reassessment and in making various additions on that basis.
UNREPORTED DECISION
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Book Profit Sec. 115JA Lease Equalisation Account Is
not a reserve Not to be added while working book profit A.Y. 1997-98
ITO vs. M/s. Pal Credit & Capital Ltd., ITA No. 7526/M/04,
AY 1997-98; Mumbai Bench, Order dated 20-7-2007
The assessee is engaged in the business of leasing and
financing and in respect of the leased assets, the assessee provided for lease
equalization charge as per the Guidance Note issued by ICAI. The purpose of
such provision is to correctly represent recovery of net investment/fair value
of the leased asset over the lease term. Lease equalization charge does not
fall within the scope of reserve and hence, the same is not to be added back
while computing the book profit.
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