Landmark Cases on Capital Gains

Additions made by the Assessing Officer alleging penny stock transactions and bogus long-term capital gains are rightly deleted if there is no adverse comment from the stock exchange or the company, and no material relating to the assessee is found in the Investigation Wing Report.

Interest awarded under Section 28 of the Land Acquisition Act in respect of enhanced compensation is considered part of the principal compensation, is taxable as capital gains, and is eligible for exemption under Section 10(37) if the acquired land was agricultural.

Disallowing short-term capital loss on the sale of shares is unjustified when the shares were held as an investment and not for trading purposes.

Section 54E deduction is allowable against capital gains assessable under section 50 on depreciable assets. For other provisions, the asset remains a long-term capital asset despite being treated as short-term for section 50.

Bonus shares are akin to splitting existing shares, not a receipt of new property. Therefore, there is no accretion of wealth or gift involved in their issuance.

The six-month period for reinvesting capital gains under Section 54EC is calculated from the date of actual receipt of sale consideration, not the date of transfer or compulsory acquisition.

Transactions involving the sale of shares within the same group, especially when facilitated by a director's spouse being the MD of the counterparty, can be deemed a colorable device to evade tax on long-term capital gains if there's an absence of genuine delivery of shares.

Lease premiums, salami, or pagadi received for granting tenancy rights are capital receipts, not revenue receipts. This premium is treated as a transfer of a capital asset, exigible to capital gains tax.