ITO, Ward - 36(3), Kolkata, Kolkata V. Shri Sanjay Kumar Todi, Kolkata

ITA 436/KOL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78348 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 07-09-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 14-03-2011
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN; MADHUMATI GHOSH
• Assessee Lawyers: P K TODI; R R CHOWDHURY
• Keywords: Capital asset; Charitable institution; Opportunity of being heard; Transactions in derivatives; Speculation loss; Capital receipt
• Section: 2(14); 43(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B , KOLKATA [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE S RI SHAMIM YAHYA, AM ] ITA NO.436/KOL/2011 ASSESSMENT YEAR : 2007-08 ( APPELLANT ) (RESPONDENT) I.T.O., WARD-36(3) , -VS- SHRI SANJAY KUMAR TODI , KOLKATA KOLKATA (PAN : ABWPT 9146 M) FOR THE APPELLANT SHRI RAVI JAIN, CIT(DR) & SMT.MADHUMATI GHOSH, JCIT, SR.DR FOR THE RESPONDENT SHRI P.K.TODI & R.R.CHOWDHURY, C.A. DATE OF HEARING : 19.06.2014 DATE OF PRONOUNCEMENT : 27 .06.2014. ORDER PER SHRI SHAMIM YAHYA, AM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T ORDER OF LD. C.I.T.(A)- XX, KOLKATA DATED 17.12.2010 AND PERTAINS TO ASSESSMEN T YEAR 2007-08. 2. THE GROUNDS OF APPEAL IN THIS APPEAL READ AS UN DER :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E LD. CIT(APPEALS) ERRED IN HOLDING THAT INCOME FROM THE ACTIVITIES OF MAKING SERIES OF AGREEMENT FOR PURCHASE & SALES IS CAPITAL GAIN AS AGAINST INCOME FROM OTHER SOURCES A S MADE IN THE ASSESSMENT ORDER. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) ERRED IN HOLDING THAT THE LOSS ARISES ON ACCOUNT OF SHARES F OR RS.45,18,679/- IS NON-SPECULATIVE (S.T.C. LOSS) AS AGAINST SPECULATION LOSS AS MADE I N THE ASSESSMENT ORDER. 3. APROPOS GROUND NO.1.- IN THIS CASE THE AO NOTE D THAT THE ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAIN ON SALE OF FLATS OF RS.49,5 0,954/-. HE FURTHER OBSERVED THAT FROM THE DOCUMENTS SUBMITTED THAT THE ASSESSEE HAS MADE AN ADVANCE FOR PURCHASE OF A HOUSE PROPERTY ONLY. THE DETAILS OF THE TWO CASES A S NOTED BY AO ARE AS UNDER : MANTRI SAROVAR, B-804: VARUN DEVELOPER THE ASSESSEE EXPLAINED THAT THE ASSESSEE HAD BROUGH T ONE FLAT NO.804 IN BUILDING NO.4 AT MANTRI SAROVAR FROM VARUN DEVELOPERS, AND HAD PAID RS.29,36,772/- TILL 19/09/2006 AND ALSO PAID RS.1,12,974/- ON 26/06/2006 TOTALLING TO RS.30,49,746/-. DUE TO FUND ITA.NO.436/KOL/2011 SHRI SANJ AY KUMAR TODI A.YR.2007-08 2 CRUNCH THE ASSESSEE HAD TO PART WITH THE FLAT AT R S.56,48,700/- AND MADE A SHORT TERM PROFIT OF RS.25,98,954/-. THE AGREEMENT TO ASSIGN/TRANSFER WAS SIGNED BETWEEN MR.SANJOY TODI AND VARUN DEVELOPERS ON 19-9-2006. OUT OF CONSIDERATION AMOUN T OF RS.29,84,358/- ONLY RS.2,36,772/- WAS PAID BY THE ASSESSEE. THE ASSESSE E TRANSFERS AND ASSINGS HIS RIGHTS FOR A CONSIDERATION OF AN AMOUNT OF RS.56,48,700/-. THE S AME WAS INFORMED TO THE DEVELOPERS M/S. VARUN DEVELOPERS AND THEY HAD GIVEN THEIR CONSENT TO THE ASSESSEE. THE ASSIGNEE HAS AGREED AND ACCEPTED TO PAY THE BALANCE SALE CONSIDERATION OF RS.47,586/- AND ALL OTHER DEPOSIT AND CHARGES AS AGREED BY THE ASSIGNOR (BEING THE ASSESSEE) TO M/S. VARUN DEVELOPERS. THE LEGAL DOCUMENTS WERE EXECUTED BY M/S. VARUN DEVELOPERS TO THE ASSIGNEE AND POSSESSION WAS ALSO GIVEN BY M/S.VARUN DEVELOPERS TO THE ASSIGNEE. EXECUTION WAS DONE THROUGH THE SALE AGREEMENT EXECU TED BY VARUN DEVELOPERS. HENCE THE ASSESSEE IS NOT THE SOLE AND LEGAL OWNER OF THE ASSETS. MITTAL TOWERS : THE ASSESSEE ALSO STATED IN WRITING THAT THE ASSESS EE BOUGHT FLAT NO.303 IN MITTAL TOWERS, FROM M M EXPORTS, AT RS.32,00,000/-. THE FLAT WAS T HEN SOLD AT A PARICE OF RS.56,00,000/-. THE ASSESSEE HAS SHOWN THE SALE OF THE SAME FLAT AT RS.53,52,000/- AND MADE A SHORT TERM PROFIT OF RS.23,52,000/-. IN CASE OF THE PROPERTY AT 303, 3 RD FLOOR, F WING OF MITTAL TOWERS, BANGALORE, IT IS S EEN THAT THE ASSESSEE HAD ACTED AS A VENDOR NO.2. THE V ENDOR NO.1 OF THE SAID PROPERTY WAS M/S. MM EXPORTS. THE SALE DEED CLEARLY STATES THAT THE VENDORS (BEING M M EXPORTS) ACQUIRED THEE TITLE TO THE ABOVE SAID PROPERTY VIDE REGISTERED DEED DATED 10-10-1991. THE VENDORS (BEING M M EXPORTS) ENTERED INTO THE AGREEM ENT FOR SALE WITH THE ASSESSEE, THE VENDOR NO.2, ON 20-10-2005 WHICH WAS BETWEEN M M EX PORTS, THE VENDORS WHO WERE THE LEGAL OWNER AND MR.SANJOY TODI WHO WAS THE INTE NDING PURCHASER. NO CONVEYANCE DEED FOR PURCHASE WAS EXECUTED BETWEEN VENDOR NO.1 AND VENDOR NO.2 AND HENCE THE PROPERTY WAS SOLD BY BOTH THE PARTIES AS VENDOR NO. 1 AND VENDOR NO.2. THE STAMP VALUATION AUTHORITY HAS INFORMED THAT THE MARKET VALUE OF THE PROPERTY NAMELY AT MITTAL TOWERS WAS ASCERTAINED AT RS.55,40 ,000/- AND THE CONVEYANCE DEED WAS EXECUTED AT RS.56,00,000/-. 3.1. FROM THE ABOVE DETAILS THE AO WAS OF THE OPINI ON THAT THE RIGHT ACQUIRED BY THE ASSESSEE UNDER AN AGREEMENT TO SELL IS NOT A PROPRI ETARY RIGHT AND THE SAME IS NOT A CAPITAL ASSET. THE AO FURTHER REFERRED TO THE DEFIN ITION OF CAPITAL ASSET AND PROPERTY. HE ALSO REFERRED TO SEVERAL CASE LAWS. HE OBSERVED THAT IN THIS CASE THE ASSESSEE WAS ONLY HAVING AN AGREEMENT FOR SALE WITH THE VENDOR M /S.MM EXPORTS IN ONE CASE AND IN THE SECOND CASE WAS AN INTENDING PURCHASER AND R ELINQUISHED HIS PARTIAL RIGHTS ONLY FOR A CERTAIN AMOUNT OF PROFIT. THAT IT CANNOT BE S EEN FROM THE DEEDS OF CONVEYANCE EXECUTED THAT THE ASSESSEE WAS THE SOLE AND LEGAL H EIR OF THE PROPERTY. THE AO CONCLUDED AS UNDER :- FOR EVERYONE WHO PURCHASES FLATS BEING CONSTRUCTED BY BUILDERS, THREE EVENTS BOOKING, POSSESSION OF FLATS AND REGISTRATION ARE PART OF THE PROCESS OF ACQUIRING THE FLATS FROM BUILDERS GENERALLY. THE DAY THE FLAT IS BOOKED, THE FLAT IS NOT CREATED BY THE BUILDER, IN A WAY AN ADVANCE ONLY. HOWEVER WHEN THE FLATS ARE READY, THE BUILDER CHECKS ITA.NO.436/KOL/2011 SHRI SANJ AY KUMAR TODI A.YR.2007-08 3 WHETHER THE AGREED AMOUNT IS PAID AND ONCE PAYMENT IS DONE, HE HANDS OVER THE FLATS AND EXECUTES THE REGISTRATION. THE DEFINITION OF TRANSFER UNDER THE IT ACT61 IS G IVEN U/S 2(47A) WHICH UNDER CLAUSE (V) RECOGNIZES ANY TRANSACTION INVOLVING THE ALLOWI NG OF THE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER O F PROPERTY ACT, 1882 (4). THUS ONLY IN CASE THE PAYMENTS HAVE ALL BEEN DONE AND POSSESSION HAS BEEN TAKEN, SUCH AN ASSET IS CONSIDERED TRANSFERRED IN THE NAME OF THE PURCHASER OF THE PROPERTY AND UNTIL THEN IS NOT THE CAPITAL ASSET OF THE PURCHASER. IT IS CLEAR FROM THE ABOVE THAT THE PROPERTIES SOLD WERE NOT THE CAPITAL ASSETS OF THE ASSESSEE AND NEITHER THE ASSESSEE CAN CLAIM IT TO B E CAPITAL ASSETS AS HE WAS HOLDING PARTIAL RIGHTS ONLY AND WAS NOT THE OWNER BUT HAVE EXECUTED AS AN INTENDING PURCHASER. AS PER THE DISCUSSION ABOVE, THE INCOME ACCRUED ON SALE OF THE PROPERTY WAS NOTHING BUT INCOME FROM OTHER SOURCES AND IS TREATED ACCORDINGL Y. 4. AGAINST THIS ORDER THE ASSESSEE APPEALED BEFORE THE LD. CIT(A) IN THE DETAILS SUBMITTED BEFORE THE LD. CIT(A) THE CASE LAWS RELIE D UPON BY THE AO WERE DISTINGUISHED. THEREAFTER SEVERAL CASE LAWS IN SUPP ORT OF THE CLAIM OF THE ASSESSEE WERE FURNISHED. THESE INCLUDE (I) APEX COURTS DECISION IN THE CASE OF CIT VS GRA CE COLLIS (MRS.)(2001) 248 ITR 323 (SC) (II)HONBLE MADRAS HIGH COURT IN THE CASE OF K.R.SR INATH VS CIT 268 ITR 436(MAD) (III) HONBLE DELHI COURT IN THE CASE OF J.K.KASHYA P VS ACIT 302 ITR 255(DEL) 5. CONSIDERING THE ABOVE THE LD. CIT(A) HELD AS UND ER :- I HAVE PERUSED THE ASSESSMENT ORDER AND CONSIDERED THE SUBMISSIONS OF THE APPELLANT. I HAVE ALSO PERUSED VARIOUS JUDICIAL PRONOUNCEMENTS. IT IS AN UNDISPUTED FACT THAT THE APPELLANT ACQUIRED INTEREST IN THE PROPERTY BY ENTE RING INTO AGREEMENT FOR PURCHASE AND MAKING SUBSTANTIAL PAYMENTS. THE APPELLANT EVENTUAL LY RELINQUISHED HIS RIGHT IN THE PROPERTY BY ENTERING INTO AGREEMENT FOR SALE; AND S O, THE TRANSACTION ATTRACTS THE PROVISIONS OF SECTION 45(1). THE PROFIT RECEIVED BY THE APPELLANT FOR RELINQUISHING HIS RIGHTS IN THE PROPERTY IS CLEARLY ASSESSABLE AS CAP ITAL GAIN. THE VARIOUS JUDICIAL PRONOUNCEMENTS ALSO SUPPORT THE CONTENTION OF THE A PPELLANT. IN VIEW OF THE ABOVE, AND, THE SUBMISSIONS OF THE APPELLANT, THE AO IS DIRECTE D TO ASSESS THE PROFIT ON SALE OF FLATS AS SHORT TERM CAPITAL GAIN. GROUND NO.5 IS ALLOWED. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BE FORE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND CONSIDERABLE FORCE IN THE SUBMISSIONS OF THE LD.COUNSEL OF THE A SSESSEE. IN THIS REGARD WE CAN ITA.NO.436/KOL/2011 SHRI SANJ AY KUMAR TODI A.YR.2007-08 4 GAINFULLY REFER TO THE SUBMISSIONS OF ASSESSEE AND THE CASE LAWS REFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) AS UNDER :- THE VIEW SO TAKEN BY THE SUPREME COURT IN THE CASE OF VANIA SILK MILLS P.LTD (1991) 191 ITR 647 IS NO LONGER HELD TO BE A GOOD LAW AND STANDS DISAPPROVED BY THE SUPREME COURT IN A LATER DECISION RENDERED IN THE CASE OF C IT V. GRACE COLLIS (MRS.)(2001) 248 ITR 323 (SC) IN THE FOLLOWING WORDS (PAGE 33) (COPY OF ORDER ENCLOSED ): WE HAVE GIVEN CAREFUL THOUGHT TO THE DEFINITION OF TRANSFER IN SECTION 2(47) AND TO THE DECISION OF THIS COURT IN VANIA SILK MILLS P. LTD. (1991) 191 ITR 647. IN OUR VIEW, THE DEFINITION CLEARLY CONTEMPLATES THE EXTINGUISHMENTS OF RIGHTS IN A CAPITAL ASSET DISTINCT AND INDEPENDENT OF SUCH EXTINGUISHMENTS CONSEQUENT UPON THE TRANSFER THEREOF. WE DO NOT APPROVE, RESPECTFULLY, OF THE LIMITATION OF THE EXPRESSION EXTINGUISHMENTS OF ANY RIGHTS THEREIN TO SUCH EXTINGUISHMENTS ON ACCOUNT OF TRANSFERS OR TO THE VIEW THAT THE EXPRESSION EXTINGUISHMENT OF ANY RIGHTS THEREIN C ANNOT BE EXTENDED TO MEAN THE EXTINGUISHMENTS OF RIGHT INDEPENDENT OF OR OTHERWIS E THAN ON ACCOUNT OF TRANSFER. TO SO READ THE EXPRESSION IS TO RENDER IT INEFFECTIVE AND ITS USE MEANINGLESS. WE READ IT, THEREFORE THE EXPRESSION DOES INCLUDE THE EXTINGUIS HMENTS OF RIGHT IN A CAPITAL ASSET INDEPENDENT OF AND OTHERWISE THAN ON ACCOUNT OF TRA NSFER. IN VIEW OF THE FOREGOING DISCUSSION, WE ANSWER THE QUESTION REFERRED TO US IN FAVOUR OF THE COMMISSIONER OF INCOME TAX (REVENUE) AND AGAINS T THE ASSESSEE. IN OTHER WORDS, WE ANSWER THE QUESTION BY HOLDING THAT THE TRIBUNAL WAS NOT JUSTIFIED IN HOLDING THE AMOUNT OF RS.7,34,000/- AS CAPITAL RECEIPT NOT EXIG IBLE TO CAPITAL GAINS TAX AS NO TRANSFER OF ANY PROPERTY WAS INVOLVED WITHIN THE MEANING OF SECTION 2(47) OF THE INCOME TAX ACT. INSTEAD, WE HOLD BY ANSWERING THE QUESTION THA T THE AMOUNT OF RS.7,34,000/- IS A CAPITAL RECEIPT EXIGIBLE TO CAPITAL GAINS TAX AS IT INVOLVED TRANSFER OF PROPERTY WITHIN THE MEANING OF SECTION 2(47) OF THE INCOME TAX ACT. CIT VS VIJAY FLEXIBLE CONTAINERS (1980) 81 CTR (BOM) 29: (1990) 186 ITR 693 (BOM) CONCURRED WITH ; AHMED G.H.ARIFF & ORS. VS CWT (1970) 76 ITR 471 ( SC) APPLIED; CIT VS J.DALMIA (1984) 42 CTR (DEL) 168: (1984) 14 9 ITR 215 (DEL) DISTINGUISHED . WHILE DECIDING THE ABOVE CASE FOLLOWING CASES WER E REFERRED: CIT VS. J.DALMIA (1984) 149 ITR 215 (DELHI); IT VS GRACE CO LLIS (MRS.) (2001) 248 ITR 323 (SC); AND, CIT VS TATA SERVICES LTD. (1980) 122 ITR 594 (BOM) (COPY OF ORDERS ENCLOSED). THE HONORABLE SUPREME COURT IN THE CASE OF CIT VS. SUN ENGINEERING WORKS P. LTD (1992) 198 ITR 297 (SC) :WERE DISMISSAL OF SLP WIT HOUT ANY REASONS CANNOT BE SAID TO BE LAW DECIDED AND CONSEQUENTLY IT WOULD NOT BE A B INDING PRECEDENT. THE MADRAS HIGH COURT ALSO TOOK THE SAME VIEW IN K .R.SRINATH VS. CIT (2004) 268 ITR 436 (MAD) IN WHICH IT WAS HELD WHERE ASSESSEE WHO HAD A RIGH T OF SPECIFIC PERFORMANCE UNDER AGREEMENT TO OBTAIN CONVEYANCE OF PROPERTY, RELINQUISHES THAT RIGHT AND OBTAINS CONSIDERATION FOR SUCH RELINQUISHMENT, THEREIN A TRANSFER OF CAPITAL ASSETS WHICH WOULD ATTRACT CAPITAL GAIN TAX. THE DELHI HIGH COURT IN J.K.KASHYAP VS ASST.CIT (2008)302 ITR 255 (*DEL) ALSO HELD AS FOLLOWS :WHERE THE ASSESSEE PAID CONSIDERAT ION FOR ACQUIRING SHARE IN PROPERTY BUT DUE TO DISPUTE THE DEAL COULD NOT GET MATERIALI ZED AND SUBSEQUENTLY SUCH PROPERTY WAS SOLD RESULTING IN ASSESSEE RECEIVING PART OF CO NSIDERATION FOR BEING A PARTY TO DISPUTE, GAINS ARISING FROM SUCH SALE WAS LIABLE TO BE TAXED IN ASSESSEES HANDS. SINCE THE PROPERTY HAD NOT YET BEEN TRANSFERRED IN THE NA ME OF THE ASSESSEE, SO THE ASSESSEE ITA.NO.436/KOL/2011 SHRI SANJ AY KUMAR TODI A.YR.2007-08 5 BECAME PARTY TO THIS AGREEMENT AS A CONFIRMING PART Y HAVING ACQUIRED INTEREST IN THE PROPERTY BY VIRTUE OF EARLIER AGREEMENT. THE ASSESS EE CONTENDED THAT HE WAS NOT LIABLE FOR CAPITAL GAINS TAX UNDER SECTION 45(1) READ WITH SECTION 2(47)(V). HELD: THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPT ABLE. EVEN IF THE ASSESSEE HAD NOT BECOME THE OWNER OF THE PROPERTY DUE TO LITIGATION, THE FACT REMAINS THAT HE RECEIVED CONSIDERATION FOR ACQUIRING INTEREST IN THE PROPERT Y AND THAT INTEREST WAS ULTIMATELY RELINQUISHED BY HIM IN FAVOUR OF NEW VENDEE BY VIR TUE OF NEW AGREEMENT AND THE CONSIDERATION RECEIVED BY HIM FOR RELINQUISHING HIS RIGHT IN THE PROPERTY, THUS, THE TRANSACTION ATTRACTS THE PROVISIONS OF SECTION 45(1 ) MAKING HIM LIABLE TO CAPITAL GAINS TAX (COPY OF ORDER ENCLOSED.). SEC 2(14) DEFINED CAPITAL ASSETS AS CAPITAL ASSETS MEANS PROPERTY OF ANY KIND HELD BY ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSI NESS OR PROFESSION. THE WORD PROPERTY OF ANY KIND: IS OF SUCH WIDE AMPLITUDE A ND ARE CLARIFIED THROUGH FOLLOWING CASES HELD :- CAPITAL ASSET INCLUDES EVERY KIND OF PROPERTY AS GENERALLY UNDERSTOOD THE TERM CAPITAL ASSET HAS AN ALL EMBRACING CONNOTATION AN D INCLUDES EVERY KIND OF PROPERTY AS GENERALLY UNDERSTOOD EXCEPT THOSE THAT ARE EXPRESSL Y EXCLUDED FROM THE DEFINITION. SO TOO, THE MEANING OF THE EXPRESSION PROPERTY. IT I NCLUDES EVERY CONCEIVABLE THING, RIGHT OR INTEREST OR LIABILITY SYNDICATE BANK LTD. VS A DDL. CIT (1985) 155 ITR 681 (KER.) EMPHASIS IS NOT ON OWNERSHIP BUT ON HOLDING AND EN JOYING THE DEFINITION OF CAPITAL ASSET UNDER THE INCOME TAX, REFERRING TO PROPERTY OF ANY KIND CARRIES NO WORDS OF LIMITATION. THE DEFINITION IS OF WIDE AMPLITUDE TO INCLUDE EVERY POSSIBLE INTEREST THAT A PERSON MAY HOLD AND ENJOY. THE DEFINITION OF CAPIT AL ASSET REFERS TO PROPERTY OF ANY KIND HELD BY AN ASSESSEE. IN CONTRADICTION TO THE WORD OWNER OR OWNED DEFINITION USES THE PHRASE HELD MADATHIL BROTHERS VS. DY.CIT (2008) 302 ITR 345 (MA D.) ASSET MUST BE A CAPITAL ASSET AT THE TIME OF TRAN SFER UNDER THE CHARGING SECTION, THE CRUCING REQUIREMENT ARE THAT THERE MUST BE A TRANSF ER AND THE TRANSFER MUST BE OF A CAPITAL ASSET. THE IMPLICATION IS THAT AT THE TIME OF THE T RANSFER THE SUBJECT OF THE TRANSFER MUST BE A CAPITAL ASSET M.VENKATESAN VS. CIT (1993) 144 ITR 886 (MAD.) RIGHT TO OBTAIN CONVEYANCE OF PROPERTY IS A PROPER TY A CONTRACT FOR SALE OF LAND IS CAPABLE OF SPECIFIC PERFORMANCE. IT IS ALSO ASSIGNA BLE. A RIGHT TO OBTAIN CONVEYANCE OF IMMOVABLE PROPERTY IS CLEARLY PROPERTY AS CONTE MPLATED BY SECTION 2(14) CIT VS TATA SERVICES LTD. (1980) 122 ITR 594 (BOM). A MORTGAGE IS A CAPITAL ASSET A MORTGAGE IS A CAPITAL ASSET BECAUSE BY THE MOR TGAGE THERE IS A TRANSFER OF INTEREST IN THE PROPERTY MOR TGAGED FORM THE MORTGAGOR TO THE MORTGAGEE BAFNA CHARITABLE TRUST VS CIT (1998) 230 ITR 864 (B OM). SEC 2(4) VI CLEARLY STATE :ANY TRANSACTION WHICH H AS THE EFFECT OF TRANSFERRING, OR ENABLING THE ENJOYMENT OF ANY IMMOVABLE PROPERTY W HICH WAS INSERTED BY THE FINANCE ACT, 1987 W.E.F. 01.04.1988. THE ASSESSING OFFICER CITED CIT VS J.DALMIA (1984) 149 ITR 215 (DELHI) AND CIT VS R.DALMIA (1987) 163 ITR 517 (DELHI WHICH WERE DECIDED BEFORE THE AMENDMENT AND OTHER CASES DECIDED BY DIF FERENT HIGH COURT AND SUPREME COURT WERE NOT CONSIDERED BY AO WHICH ARE AS FOLLOW S :- (I) K.R.SRINATH VS ASST.CIT (2004) 268 ITR 436 (MAD.) (II) CIT VS. LAXMIDEVI RATHANU AND ORS. (2008)296 ITR 36 3(MP) (III) CIT VS. TATA SERVICES LTD. (1980) 122 ITR 594 (BOM. ) (IV) CIT VS. VIJAY FLEXIBLE CONTAINERS (1990)186 ITR 693 (BOM). ACCORDING TO SUPREME COURT IN AHMED G.H.ARIFF & ORS . VS CWT (1970) 761 ITR 471(SC) PROPERTY IS A TERM OF WIDEST IMPORT AND S UBJECT TO ANY LIMITATION WHICH THE CONTEXT MAY REQUIRE, IT SIGNIFIES EVERY POSSIBLE IN TEREST WHICH A PERSON CAN CLEARLY HOLD OR ENJOY AND IN R.C.COOPER VS UNION OF INDIA AIR 19 70 SC 574, THE SUPREME COURT ITA.NO.436/KOL/2011 SHRI SANJ AY KUMAR TODI A.YR.2007-08 6 OBSERVED THAT IN ITS NATURAL CONNOTATION PROPERTY MEANS THE HIGHEST RIGHT A MAN CAN HAVE TO ANYTHING BEING THAT RIGHT WHICH ONE HAS TO LANDS OR TENEMENTS, GOODS OR CHATTELS WHICH DOES NOT DEPEND UPON ANOTHERS COURTESY; IT I NCLUDES OWNERSHIP, ESTATES AND INTERESTS IN CORPOREAL THINGS, AND ALSO RIGHTS SUCH AS TRADE-MARKS, COPYRIGHTS, PATENT AND EVEN RIGHT IN PERSONAM CAPABLE OF TRANSFER OF TRANS MISSION. 6.1. WE FIND THAT EXAMINING THE PRESENT CASE ON THE TOUCHSTONE OF THE ABOVE MENTIONED JUDICIAL PRONOUNCEMENTS, IT IS APPARENT T HAT THE ASSESSEE HAS ACQUIRED INTEREST IN THE PROPERTIES WHICH DO FALL UNDER THE REALM OF CAPITAL ASSET HENCE THE TRANSACTIONS OF RELINQUISHMENT OF THAT INTEREST DOE S GIVE RISE TO CAPITAL GAIN. IN THE PRESENT CASE IT IS AN UNDISPUTED FACT THAT THE ASSE SSEE HAS ACQUIRED INTEREST IN THE PROPERTY BY ENTERING INTO AGREEMENT FOR PURCHASE AN D MAKING SUBSTANTIAL PAYMENTS. WHEN WE EXAMINE THE FACTS IN THE LIGHT OF THE ABOVE JUDICIAL PRONOUNCEMENTS INTEREST ACQUIRED BY THE ASSESSEE DOES BECOME A CAPITAL ASSE T THE ASSESSEE EVENTUALLY RELINQUISHED THE RIGHT IN THE PROPERTY BY ENTERING INTO AGREEMENT FOR SALE. IN THIS VIEW OF THE MATTER THE TRANSACTION ATTRACTS THE PROVISIO N OF SECTION 45(1) OF THE ACT. HENCE THE PROFITS ACCRUING TO THE ASSESSEE FROM THE TRANS FER OF HIS INTEREST IN THE PROPERTY IS CHARGEABLE UNDER INCOME TAX AS CAPITAL GAIN. SINCE CAPITAL GAIN PERTAINS TO SHORT TERM CAPITAL ASSET THE GAIN HAS RIGHTLY BEEN OFFERED AS SHORT TERM CAPITAL GAIN. FURTHERMORE WE NOTE THAT THE RATE OF TAXATION APPLICABLE TO BUS INESS INCOME AS WELL AS THE SHORT TERM CAPITAL GAIN ARE THE SAME. IN THE BACKGROUND O F THE AFORESAID DISCUSSIONS AND THE PRECEDENT WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY WE UPHOLD THE SAME. 7. IN THE RESULT GROUND NO.1 FILED BY THE REVENUE S TANDS DISMISSED. 8. APROPOS GROUND NO.2 : 8.1. ON THIS ISSUE THE AO OBSERVED THAT FROM THE DO CUMENTS FURNISHED ALONG WITH THE RETURN AND THE DOCUMENTS FURNISHED DURING THE C OURSE OF HEARING IT EMERGED THAT THE ASSESSEE HAS SHOWN SHORT TERM CAPITAL LOSS ON SHARES OF RS.4518679/- WHICH ARE FOR THE SALE OF SHARES AND ARE SPECULATIVE IN NATUR E, AND THE ASSESSEE HAS ALSO SHOWN LOSS ON SALE OF COMMODITIES OF RS.423616/-. THAT EV EN THOUGH THE ASSESSEE WAS ASKED ITA.NO.436/KOL/2011 SHRI SANJ AY KUMAR TODI A.YR.2007-08 7 TO PRODUCE THE DOCUMENTARY EVIDENCES FOR SUCH LOSS BUT NOTHING WAS PLACED ON RECORDS. THAT SUCH LOSS ON SALE OF COMMODITIES AND SPECULATIVE TRANSACTIONS CAN ONLY BE SET OFF WITH SPECULATIVE GAINS AND IS TREATED AC CORDINGLY. 9. UPON ASSESSEES APPEAL IN THIS REGARD THE LD. CI T(A) NOTED THE SUBMISSIONS THAT THE SPECULATIVE TRANSACTIONS HAVE BEEN DEFINED U/S 43(5) OF THE ACT AS ONE WHICH IS SETTLED OTHERWISE THAN BY ACTUAL DELIVERY WHICH IS NOT THE CASE OF THE ASSESSEE. THAT IN THE ASSESSEES CASE TRANSFER OF SHARES IS THROUGH D EMAT ACCOUNT. THAT THE TRANSACTIONS WERE MADE IN THE SHARES OF THE QUOTED COMPANIES. TH AT THE ASSESSEE HAS MADE GAINS AND RECEIVED FULL PAYMENT FOR SALES. THAT THE STATE MENT OF PURCHASES AND SALES AND ALSO THE CONTRACT NOTES AND DEMAT ACCOUNT WAS PRODUCED B EFORE THE AO. THAT THE BOOKS OF ACCOUNTS WERE ALSO PRODUCED. THAT THE AO HAS NOT EX PLAINED AS TO HOW HE ARRIVED AT THE CONCLUSION THAT THE ACTION IS SPECULATIVE IN NA TURE. 10. THE LD. CIT(A) FOUND MERIT IN THE SUBMISSIONS O F THE ASSESSEE. HE OBSERVED THAT IN THE AOS ORDER THERE WAS NO PROPER FINDING AND THERE IS NO MATERIAL ON RECORD TO SUPPORT THE ACTION OF THE AO. 101. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPE AL BEFORE US. 11. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT IN THIS CASE THE AO HAS NOTED THAT THE ASSESSEE WAS ASKED T O PRODUCE DOCUMENTARY EVIDENCE FOR THE LOSSES SHOWN BUT NOTHING WAS PLACED ON RECO RDS. IN THIS CIRCUMSTANCES IN ABSENCE OF PROPER DETAILS THE AO TREATED THE TRANSA CTIONS AS SPECULATIVE. HOWEVER, BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED THAT A LL THE DETAILS HAVE BEEN PRODUCED BEFORE THE AO AND THE CIT(A) HAS ACCEPTED THE SUBMI SSIONS AND ACCORDINGLY DELETED THE ADDITION. WE FIND THAT WHEN IN AN ASSESSMENT OR DER THE AO HAS CLEARLY STATED THAT THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENT IN CONNE CTION WITH THE SHARE AND COMMODITY TRANSACTIONS AND THE ASSESSEE IS STATING THAT THE DETAILS WERE SUBMITTED BEFORE THE AO MATTER NEEDED TO BE REVIEWED CAREFULL Y. WHILE WE PRINCIPALLY AGREE WITH THE PROPOSITION THAT WAS SUBMITTED BEFORE THE LD. CIT(A), IN OUR CONSIDERED ITA.NO.436/KOL/2011 SHRI SANJ AY KUMAR TODI A.YR.2007-08 8 OPINION, THE LD. CIT(A) SHOULD HAVE CONFRONTED THIS ASPECT WITH THE AO. SINCE THIS ASPECT IS NOT EMANATING FROM THE RECORD BEFORE US W E REMIT THIS ISSUE TO THE FILE OF AO. THE AO SHALL VERIFY THE DOCUMENTS IN THIS REGARD. A CCORDINGLY THE AO SHALL DECIDE AS PER LAW. NEEDLESS TO SAY THE ASSESSEE SHOULD GET AD EQUATE OPPORTUNITY OF BEING HEARD. 12. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 27.6.2014. SD/- SD/- [ MAHAVIR SINGH ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 27.06.2014. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. SHRI SANJAY KUMAR TODI, 19, AMARTOLA STREET, KOLKAT A-700001. 2 I.T.O., WARD-36(3), KOLKATA 3 . CIT(A)-XX, KOLKATA 4. CIT - KOLKATA. 5. CIT-DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES