Case Law Details
Case Name : ITO Vs Shri Sameer jasuja (ITAT Delhi)
Appeal Number : ITA 4187/Del/2012
Date of Judgement/Order : 24/11/2015
Related Assessment Year : 2009-10
Brief of the Case
ITAT Delhi held in case of ITO v Shri Sameer Jasuja the property has been gifted by the person to his wife, then Assessee will entitled to the exemption u/s 54F if he is left with one property. It further held that section 64(1)(iv) will not operate to nullify gift and would operate only to club income in the hands of donor assessee.
Facts of the Case
In the present facts there were two issues:-
- The AO made the disallowance regarding the account of F&O transaction in foreign currency.
- The second disallowance was made under the exemption u/s 54F by holding that the Assessee was the owner of more than one property.
Order of the CIT(A)
- The ld. CIT(A), in his order mentioned about the agreement of the assessee with the finance companies and bank statements from where the payments have been made to the brokers. The appellant has entered into these F&O transactions during the year. In respect of the various transactions entered into by the appellant he has incurred loss of Rs.2,32,10,575/- and earned profit of Rs. 1,94,37,302/-. Thus there is an actual loss of Rs.37,73,273/- during the year in such transactions. It is not a notional entry which has been passed on the last day of the financial year and represents the value as per the market value on 31st March. It is a running account whereby profit and loss are being incurred on settlement day and amount being debited and credited on account of loss or the profit as the case may be.
- The ld. CIT(A) while going through the gift deed, observed that the appellant has conveyed all rights and privileges whatsoever of the said property forever and has not kept any right with him. It has been further stated in the gift deed that the donee will be the exclusive and absolute owner and that the donee shall enjoy the property with absolute rights including the exclusive unrestricted right to sell or transfer the said property. Therefore, observation of the Assessing Officer in the assessment order that the appellant continues to be the beneficial owner is not correct.
Contention of the Revenue
- Regarding the first issue the ld. Counsel for the Revenue relied on Board’s Instruction No. 3/2010 dated 23.3.10 and contended that the impugned loss claimed by the assessee under the business head was rightly treated as notional loss and the same was not allowed to be set off from the other heads of income or to carry forward the same to the subsequent years.
- Regarding the second issue it was contended that since the assessee owned more than one house property on the date of transfer of original asset, therefore, he was not entitled for deduction u/s 54 of the Act.
Contentions of the Assessee
- Regarding the first issue the Ld. Counsel for the assessee contended that the loss suffered by the assessee on the basis of actual transaction in the foreign exchange derivatives is allowable. Further it was contended that the assessee has suffered gross loss of Rs.2.32 crores and earned a gross profit of Rs.1.94 crore, as such, net loss was Rs.33.73 crore which is not a notional loss but actual loss and the same is allowable to the assessee as per section 43(5) of the Act.
- Learned counsel of the assessee contended that the assessee was the owner of the said property till 29.1.09 only and when the assessee has gifted said property through the registered deed to his wife, then the assessee did not remain the owner of the said property on the date of sale of the property on which the capital gain has arisen i.e. 2.2.2009. Further it was submitted that the rental income for the whole year has been shown by the assessee due to implication of the clubbing provision of section 64(1) of the Act and only showing the rental income does not mean that the assessee continues to be the owner of the gifted property.
Judgement of the Hon’ble Tribunal
- The Hon’ble Tribunal upheld the order passed by the Ld. CIT(A) by observing that the claim of the assessee is not in pursuance to the notional entry which has been passed on the last date of the financial year and represents the value as per market value as on 31st March. Ld. CIT(A) explicitly held that the entry was passed out of running account whereby profit and loss which have been incurred on settlement day and amount have been debited and credited on account of loss or profit as the case may be. Accordingly, this issue was decided in the favour of the assessee.
- The Hon’ble Tribunal held that the assessee has parted his legal right through gift deed dated 29.1.2009, then it cannot be presumed that the assessee continued to be owner of the said property even after execution of registered gift deed in favour of his spouse. So far as the taxable income from the said property is concerned, section 64(1)(iv) will not operate to nullify gift and would operate only to club income in the hands of donor assessee. Accordingly, this issue was also held in the favour of Assessee.