Bridgestone Corporation, Madhya Pradesh V. The ACIT (Int. Taxa-2), Ahmedabad

ITA 163/AHD/2021

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Bridgestone Corporation, a foreign company, appealed against the decision of the Commissioner of Income Tax (Appeals) which upheld the Assessing Officer's decision to tax the company's long-term capital gains from the sale of shares at 20%. The company argued that due to a retrospective amendment in the law, these gains should be taxed at 10%. The Tribunal found that the company was eligible for the reduced tax rate based on the retrospective amendment and relevant judicial precedents, despite the absence of a revised return or specific CBDT instructions to this effect.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131455 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 22-01-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 17-06-2021
• Other Referred Cases: B. G. Shirke Construction Technology (P.) Ltd. vs. ACIT, Karnataka State Co-operative Federation Ltd. vs. ACIT, Abhinitha Foundation (P.) Ltd. vs. ACIT, Sesa Goa Ltd. vs. ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment; Revised return; Capital Gains
• Section: 10B; 250; 48; 13; 119

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Ms. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Bridgeston e Corporation, C/o Bridgeston e India Pvt. Ltd ., Plot No. 1 2, Kh eda Growth Centre, Sagore, Dhar, Madhy a Pradesh -454774 PAN: AACCB9848 C (Appellant) Vs ACIT (In t. Taxation -2 ), Ah med abad (Resp ondent) Asses see b y : Shri Yogesh G. Shah, A. R. & M s. Aparna Parelkar, A. R. Revenue by : Shri Vijay Kumar J aisw al, CIT-D. R. Date of hearing : 23-01 -2 023 Date of pronouncement : 22-02 -2 023 आदेश /ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-13, Ahmedabad in Appeal no. CIT(A)-13/Intl. Taxn./Ahd/104/2017-18, in proceeding u/s. 250 of the Act vide order dated 22/04/2021 passed for the assessment year 2014-15. ITA No. 163/Ahd/2021 Assessment Year 2014-15 I.T.A No. 163/Ahd/2021 A.Y. 2014-15 Page No. Bridgestone Corporation vs. ACIT (Int. Taxation-2) 2 2. The assessee has taken the following grounds of appeal:- “Your appellant being dissatisfied with the order passed by the Commissioner of Income-tax (Appeals) - 13, Ahmedabad prefers this appeal against the same on the following amongst other grounds, which are without prejudice to each other. 1. The order passed by the Hon'ble Commissioner of Income Tax (Appeals) [CIT(A)] is erroneous and contrary to the provisions of law and facts and therefore requires to be suitably modified. It is submitted that it be so done now. 2. The Hon'ble CIT(A) has grossly erred in upholding action of AO in rejecting claim of appellant for taxing long term capital gain on sale of shares as per provisions of section 112(l)(c)(iii) of the Act on ground that appellant has opted to pay tax as per provisions of section 112(l)(c)(ii) in return and such change of claim is admissible only by filing revised return of income. It is submitted that it be so held now. 2.1. Hon'ble CIT(A) erred - in not appreciating that appellant conservatively applied provisions of section 112(l)(c)(ii) in return of income on account of ambiguity in law prevailing at that time and pursuant to clarificatory amendment in law vide Finance Act 2017, appellant requested AO to tax capital gain as per provisions of section 112(l)(c)(iii) of the Act. 2.2. Hon'ble CIT(A) ought to have appreciated that filing of revised return is required for making fresh claim during assessment proceedings and in facts of case, appellant had not made fresh claim but merely sought re-computation of tax on capital gains owing to subsequent clarification in law. It is submitted that it be so held now. 2.3. Hon'ble CIT(A) ought to have appreciated that even if claim is treated as fresh claim, then also, appellate authorities are bound to entertain rightful claim made otherwise than by filing revised return. 3. The Hon'ble CIT(A) has erred in confirming the order of AO on ground that neither Finance Act 2017 nor CBDT has provided for any I.T.A No. 163/Ahd/2021 A.Y. 2014-15 Page No. Bridgestone Corporation vs. ACIT (Int. Taxation-2) 3 such mechanism to apply rate of 10% as per provisions of section 112(l)(c)(iii) of the Act from AY 2013-14. It is submitted that in absence of any ambiguity in law, clarificatory amendment in law does not require mechanism for its applicability. It is submitted that it be so held now. 4. The Hon'ble CIT(A) ought to have appreciated that when substantive law confers benefit to appellant under statute with retrospective effect, it ought to have been allowed by AO in the assessment. It is submitted that it be so held now. 5. The Hon'ble CIT(A) ought to have held that in the facts and circumstances of the case, in view of the retrospective amendment in section 1121)(c ) (iii) the capital gain was to be taxed at 10% in the assessment made as claimed during the course of assessment. It is submitted that it be so held now. Your appellant prays for leave to add to alter and/or to amend any of the grounds before the final hearing of the appeal.” 3. The brief facts of the case are that the assessee is a foreign company incorporated in Japan engaged in the business of manufacture of tyres. In the return of income for assessment year 2014-15, the assessee offered long- term capital gains of 6,78,23,37,511/- on sale of shares of its associated company Bridgestone India Private Limited @ 20%. The assessee had submitted a Note in the return of income to the effect that capital gains on sale of shares of its Indian subsidiary are taxable in India in view of paragraph 3 of Article 13 of the India-Japan Tax Treaty read with section 45 of the Act. During the course of assessment proceedings, assessee filed a letter to the AO that in view of the retrospective amendment to section 112(1)(c)(iii) of the Act, the long-term capital gain of 6,78,23,37,511/ - I.T.A No. 163/Ahd/2021 A.Y. 2014-15 Page No. Bridgestone Corporation vs. ACIT (Int. Taxation-2) 4 should be taxed @ 10% instead of 20% as offered in the return of income. The contention of the assessee before the AO was that as per section 112(1)(c)(iii) of the Act as it stood as on the date of filing of return of income, the capital gain on the sale of “unlisted” securities were taxable @10% without giving effect to first and second proviso to section 48 of the Act. But there was uncertainty as to whether the “unlisted” securities as mentioned in the above clause would include shares of a private limited company or not. Accordingly, out of abundant caution, the assessee paid taxes of 1,46,70,19,604/- @ 21.63% (including surcharge on cess) on the sale of such “unlisted” shares of private limited company. Subsequently, Finance Act 2016 amended section 112(1)(c)(iii) of the Act to provide that long-term capital gains arising from the transfer of a capital asset being shares of the company not being company in which the public are substantially interested, shall be chargeable to tax at the rate of 10%. However, the said amendment was made applicable from assessment year 2017-18 and subsequent years. There was lack of clarity for intervening period from assessment year 2013-14 to assessment year 2016-17. Thereafter, Finance Act 2017 clarified that the above amendment will be applicable retrospectively from assessment year 2013-14 and subsequent years. The said clarification of retrospective amendment came into force when the assessment proceedings were in progress before the AO. Accordingly, during the course of assessment proceedings, the assessee brought to the notice of the AO the amendment made under this section and requested him to tax long-term capital gains at 10%. I.T.A No. 163/Ahd/2021 A.Y. 2014-15 Page No. Bridgestone Corporation vs. ACIT (Int. Taxation-2) 5 4. The AO, however, rejected the contentions of the assessee on the following grounds: “2.5. The appellant even after knowing the difference between provisions of section 112(l)(c)(ii) and 112(l)(c)(iii) opted for provision of section 112(l)(c)(ii) although both the provisions were available while filing return of income. 2.6. The appellant is not eligible to make fresh claim in assessment proceedings which was never made in original/ revised return of income. 2.7. Also, it is contended by AO that if case of appellant was not selected for scrutiny and had not been referred to TPO, appellant could not have put a fresh claim before AO. The intention of the amendment in provision cannot put any appellant, if not selected for scrutiny in disadvantage position. 2.8. Amendment vide Finance Act 2017 is applicable only when purchase and sales of unlisted securities/ shares of private company is occurred after 01/04/2013. If unlisted securities/shares of private company were purchased prior to it, benefit of retrospective amendment is not available to appellant.” 5. The assessee filed appeal before Ld. CIT(Appeals), who rejected the claim of the assessee on the ground firstly that such change of claim could have been possible only by filing the revised return of income and secondly, such effect cannot be granted to the assessee in absence to of CBDT issuing any Instruction under section 119 of the Act. While rejecting the claim of the assessee, the Ld. CIT(Appeals) observed as below: I.T.A No. 163/Ahd/2021 A.Y. 2014-15 Page No. Bridgestone Corporation vs. ACIT (Int. Taxation-2) 6 “5.6 I have diligently considered the appellant's submissions, however I am of the considered view that the AO is justified in holding that in the return of income the appellant had opted to pay tax on the LTCG on sale of shares as per the provisions of Section 112(l)(c)(ii) and not u/s. l12(l)(c)(iii) and such change of claim if at all should have been possible only by filing the revised return of income. I am also of the considered opinion that even if it is conceded that the appellant can seek the benefit of amendment of Section 1 12(l)(c)(iii) as it stood modified /clarified by the relevant Finance Act of 2016 and 2017 but the constraints remain for the Income Tax Authority that the Finance Act of 2017 has not provided for any such mechanism as how such benefit could have accrued/ allowed to the appellant and other tax payer otherwise benefit could be extended only if the CBDT had issued any instruction u/s.l 19 of the Act. The appellant has not brought to attention any such provision in the Finance Act and any such communication of the CBDT in its submission. Under the facts and circumstances I don't find any basis to interfere with the assessment order made by the AO. The related grounds are rejected.” 6. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals). During the course of hearing before us, the counsel for the assessee reiterated the arguments taken by the assessee during the course of assessment proceedings as well as before Ld. CIT(Appeals) in the appellate proceedings. Before us, the learned DR agreed that technically the assessee was eligible to be taxed @10% on the capital gains made on sale of shares of its Indian associated, Enterprise Bridgestone India Private Limited, being “unlisted” shares. However, he reiterated the arguments taken by Ld. CIT(Appeals) in the appellate order that such claim could have been entertained only if the assessee had made such claim by way of filing of revised return of income or in the alternative had the CBDT issued any I.T.A No. 163/Ahd/2021 A.Y. 2014-15 Page No. Bridgestone Corporation vs. ACIT (Int. Taxation-2) 7 specific Instruction on how the assessee could have claimed benefit thereof if the time of filing revised return of income was not available. 7. We have heard the rival contentions and perused the material on record. The learned DR before us has agreed that the assessee is technically eligible to be taxed @10% on capital gain of 6,78,23,37,511/- made by way of sale of shares of its Indian associated Enterprise, Bridgestone India Private Limited, in view of the retrospective amendment to section 112(1)(c)(iii) of the Act, which was applicable with retrospective effect from assessment year 2013-14 onwards. We further observe, neither the AO nor the Ld. CIT(Appeals) in their respective orders have denied the claim of the assessee to be taxed @10% of such capital gains on the ground that such reduced rate of tax is not available to the assessee under the Act. Further, we are also in agreement with the argument of the counsel for the assessee that the assessee had offered tax @20% (plus applicable assessee surcharge) on a conservative basis in absence of lack of clarity as to the rate of tax, at the time of filing of return of income, as to whether such sale of “unlisted” shares could be subject to tax @10% and the assessee paid higher tax @20% out of abundant caution. However, the Finance Act 2017 clarified that the above amendment will be applicable retrospectively from assessment year 2013-14 and subsequent years, only during the course of assessment proceedings of the assessee before the AO. Therefore, when the legal position on the eligibility of being taxed @10% on such sale of capital gains became clear to the assessee, during the course of assessment proceedings, he requested the AO that the above capital gains may be taxed @ 10% instead of being taxed @ 20% as offered by the assessee in the return of I.T.A No. 163/Ahd/2021 A.Y. 2014-15 Page No. Bridgestone Corporation vs. ACIT (Int. Taxation-2) 8 income by way of abundant caution. On the eligibility of the assessee of being taxed at the lower rate of 10% in absence of the assessee filing the claim by way of revised return of income and in absence of any specific Instruction by CBDT to this effect, in Circular Number 14 (XL-35) of 1955 dated 11-04-1955 Department has taken a view that the officers of the department must not take advantage of ignorance of the assessee about his rights and it is their duty to assist the tax payer in every reasonable way particularly in the matter of claiming and securing reliefs. Further, in the case of B. G. Shirke Construction Technology (P.) Ltd.[2017] 79 taxmann.com 306 (Bombay), the High Court has held that an assessee is entitled to make a claim before Tribunal which was not raised before Assessing Officer at time of filing return of income or by filing a revised return of income. Again, in the case of Karnataka State Co-operative Federation Ltd.[2021] 128 taxmann.com 1 (Karnataka), the Karnataka High Court held that assessee's fresh claim before appellate authority is entertainable even when same is not claimed in original return of income nor assessee has filed revised return of income to make such claim. In the case of Abhinitha Foundation (P.) Ltd.[2017] 83 taxmann.com 100 (Madras), the Madras High Court held that even if a claim made by assessee-company does not form part of original return or even revised return, it can still be considered by Assessing Officer as well as appellate authorities in case relevant material is available on record. In the case of Sesa Goa Ltd.[2020] 117 taxmann.com 548 (Bombay), the Bombay High Court held that where assessee inadvertently omitted to make claim for deduction under section 10B in respect of two 100 per cent Export Oriented Undertakings, however, all necessary facts for claiming deduction under section 10B were already on I.T.A No. 163/Ahd/2021 A.Y. 2014-15 Page No. Bridgestone Corporation vs. ACIT (Int. Taxation-2) 9 record, Commissioner (Appeals) in exercise of his plenary/co-terminus powers, as well as Tribunal, ought to have entertained claim. Accordingly, in our considered view, the assessee is eligible to be taxed at the reduced rate of 10% in respect of the aforesaid capital gains, even if such claim was not made in the return of income. 8. In light of the above observations, the appeal of the assessee is allowed. Order pronounced in the open court on 22-02-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 22/02/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद