ACIT, CHENNAI V. Shri N.Ramasubramani, CHENNAI

ITA 1597/CHNY/2009

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77259 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-05-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 12-10-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HARI RAO IRS
• Assessee Lawyers: V D GOPAL
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . . !' , # '$ % BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENTAND SHRI S.S. GODARA, JUDICIAL MEMBER ./ ITA NO. 1597/MDS/2009 # & '& / ASSESSMENT YEAR : 2006-07 THE ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE II, CHENNAI - 600 034. V. SHRI N. RAMASUBRAMANI, 2, NEELAKANTA MEHTA STREET, T. NAGAR, CHENNAI - 600 017. PAN : AADPR 2478 N ()*/ APPELLANT) (,-)*/ RESPONDENT) )* . / APPELLANT BY : SHRI HARI RAO, IRS, JCIT ,-)* . / RESPONDENT BY : SHRI V.D. GOPAL, ADVOCATE / . 01 / DATE OF HEARING : 6 TH MAY, 2014 2!' . 01 / DATE OF PRONOUNCEMENT : 8 TH MAY, 2014 / O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT THIS APPEAL IS FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEAR IS 2006-07. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V I AT - - I.T.A. NO. 1597/MDS/09 2 CHENNAI, DATED 17.7.2009 AND ARISES OUT OF THE ASSE SSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX AC T, 1961. 2. THE ASSESSEE IN THE PRESENT CASE HAS EARNED SHOR T TERM CAPITAL GAINS AS WELL AS SUFFERED SHORT TERM CAPITA L LOSS IN SELLING SHARES DURING THE PREVIOUS YEAR RELEVANT TO THE ASS ESSMENT YEAR UNDER APPEAL. THE SHARES SOLD BY THE ASSESSEE WERE THE SHARES OF M/S MAPPLE ESM TECHNOLOGIES (P) LIMITED. THE AS SESSEE HAS EARNED A SHORT TERM CAPITAL GAINS OF ` 39,59,930/- AND SUFFERED A LOSS OF ` 46,87,200/-. 3. DURING THE SAME PREVIOUS YEAR RELEVANT TO THE IM PUGNED ASSESSMENT YEAR, THE ASSESSEE HAD RECEIVED DIVIDEND OF ` 1,59,86,207/- AGAINST HIS SHAREHOLDINGS IN M/S MAPP LE ESM TECHNOLOGIES (P) LIMITED. THE DIVIDEND WAS DECLARE D ON 25.11.2005. THE DIVIDEND WAS ACTUALLY RECEIVED BY THE ASSESSEE ON 29.11.2005. 4. ON PERUSAL OF THE DETAILS, THE ASSESSING OFFICER FOUND THAT THE SHORT TERM CAPITAL GAINS EARNED BY THE ASSESSEE WAS ` 87,59,450/- ON SALE OF 101500 SHARES OF M/S MAPPLE ESM TECHNOLOGIES (P) LIMITED AND THE SHORT TERM CAPITAL LOSS ON SALE - - I.T.A. NO. 1597/MDS/09 3 OF SHARES OF THAT COMPANY HAS BEEN SET OFF AGAINST THE SHORT TERM CAPITAL GAINS. 5. THE ASSESSING OFFICER FOUND THAT THE SHARES, WHI CH RESULTED IN CAPITAL LOSS ON SALE (216000 SHARES), W ERE PURCHASED ON 8.10.2005 AND SOLD ON 24.11.2005. BUT, THE ASSE SSING OFFICER FOUND THAT EVEN THOUGH THE DATE OF SALE OF THOSE SHARES WERE CLAIMED TO BE 24.11.2005, THE SHARES WERE SOLD ON 29.11.2005, AFTER EARNING THE DIVIDEND DECLARED ON THOSE SHARES. THE ASSESSING OFFICER THEREFORE HELD THAT THE TRANS ACTION LEADING TO SUFFERING SHORT TERM CAPITAL LOSS IS THE CASE OF DIVIDEND STRIPPING AND THEREFORE, HIT BY SECTION 94(7). HE HELD THAT AS PER SECTION 94(7), THE SHORT TERM CAPITAL LOSS INCURRED ON THE SALE OF SUCH SHARES WAS IGNORED FOR THE PURPOSE OF COMPUTIN G THE ASSESSEES INCOME CHARGEABLE TO TAX. ACCORDINGLY, THE SHORT TERM CAPITAL LOSS, INCLUDING THE PROPORTIONATE COST OF TRANSACTION, WAS WORKED OUT AT ` 47,78,871/- AND THE SAME WAS IGNORED AND ADDED BACK TO SHORT TERM CAPITAL GAINS DECLARED BY THE ASSESSEE AND AS SUCH, THE INCOME WAS DETERMINED AT ` 87,38,801/-. - - I.T.A. NO. 1597/MDS/09 4 6. IN FIRST APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE LOSS MAKING SHARES WERE SOL D ON 24.11.2005 AND NOT ON 29.11.2005 AND THEREFORE, IT IS TO BE CONSIDERED THAT THOSE SHARES WERE SOLD BEFORE DECLA RING THE DIVIDEND AND AS SUCH, THERE CANNOT BE A CASE OF DIV IDEND STRIPPING AGAINST THE ASSESSEE. HE, ACCORDINGLY, A CCEPTED THE COMPUTATION OF INCOME FURNISHED BY THE ASSESSEE AND SET ASIDE THE ADJUSTMENT MADE BY THE ASSESSING OFFICER. THE REVENUE IS AGGRIEVED AND THEREFORE THE APPEAL BEFORE US. 7. WE HEARD SHRI HARI RAO, THE LEARNED COMMISSIONER OF INCOME TAX APPEARING FOR THE REVENUE, WHO ARGUED TH E CASE AT LENGTH IN THE LIGHT OF THE STATUTORY PROVISION EXPL AINED IN SECTION 94 OF INCOME-TAX ACT, 1961. SHRI V.D. GOPAL, THE L EARNED COUNSEL APPEARING FOR THE ASSESSEE, JUSTIFIED THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 8. ON HEARING BOTH SIDES, WE HAVE TO HOLD THAT THE SHARES, WHICH INCURRED LOSS ON SALE, WERE ACTUALLY SOLD ON 29.11.2005 AND NOT ON 24.11.2005 AS CONSTRUED BY THE COMMISSIO NER OF INCOME TAX (APPEALS). TRANSFER OF SHARES IS COMING TO EFFECT - - I.T.A. NO. 1597/MDS/09 5 WHEN TRANSFERRING ENTRIES ARE MADE IN THE REGISTERS MAINTAINED BY THE COMPANY. THE CONTENTION THAT THE TRANSFER S HOULD BE CONSTRUED AS TAKEN PLACE ON 24.11.2005 ON THE HANDI NG OVER OF SCRIPS CANNOT BE ACCEPTED. THESE ARE GOVERNED BY S TATUTORY PROVISIONS AND TRANSFER AS PER SUCH STATUTORY PROVI SIONS ALONE CAN BE RECOGNIZED FOR THE PURPOSE OF TAXATION. THE REFORE, WE AGREE WITH THE ASSESSING OFFICER THAT THE SHARES WE RE ACTUALLY SOLD BY THE ASSESSEE ONLY ON 29.11.2005. IT IS TO BE SEEN THAT THE DIVIDENDS WERE DECLARED ON 25.11.2005 AND RECEI VED BY THE ASSESSEE ON 29.11.2005 ITSELF. IT IS CLEAR THEREFO RE THAT THE SHARES RESULTED IN A LOSS WERE SOLD BY THE ASSESSEE AFTER ENJOYING THE DIVIDENDS DECLARED ON THAT. AS PROVID ED UNDER SECTION 94, IT IS A CLEAR CASE OF DIVIDEND STRIPPIN G. AS SUCH, THE ASSESSING OFFICER IS JUSTIFIED IN IGNORING THAT LOS S AND BRINGING TO TAX THE ENTIRE AMOUNT OF SHORT TERM CAPITAL GAINS W ITHOUT SETTING OFF THE SHORT TERM CAPITAL LOSS. 9. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS) IS THEREFORE SET ASIDE AND THE ORDER OF THE ASSESSI NG OFFICER IS RESTORED. THE ASSESSING OFFICER MAY PASS CONSEQUEN TIAL ORDERS AND FOLLOW UP THE ACTION AS REQUIRED UNDER LAW. - - I.T.A. NO. 1597/MDS/09 6 10. IN RESULT, THIS APPEAL FILED BY THE REVENUE IS ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 8 TH OF MAY, 2014 AT CHENNAI. SD/- SD/- (S.S. GODARA) (DR. O.K. NARAYANAN) ( . . !') ( . . . ) # '$ /JUDICIAL MEMBER /VICE-PRESIDENT /CHENNAI, 4' /DATED, THE 8 TH MAY, 2014. KRI. '5 . ,#067 87'0 /COPY TO: 1. )* /APPELLANT 2. ,-)* /RESPONDENT 3. / 90 () /CIT(A)-VI, CHENNAI-34 4. / 90 /CIT, CHENNAI-IV, CHENNAI 5. 7: ,#0# /DR 6. & ; /GF.