Shri Khodabhai Kalidas Patel, Ahmedabad V. The ACIT.,Circle-6, Ahmedabad

ITA 2101/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89675 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-06-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 25-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Keywords: Cost of acquisition
• Section: 143(3); 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI KUL BHARA T, J.M.) I.T. A. NO. 2101/AHD/2011 (ASSES SMENT YEAR: 2002-03) SHRI KHODABHAI KALIDAS PATEL 2A, TIRTHNAGAR SOCIETY 111 SOLA ROAD, GHATLODIA, AHMEDABAD 380061 V/S THE ACIT, CIRCLE-6, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AIQPP5992A APPELLANT BY : MS. URVASHI SHODHAN RESPONDENT BY : SHRI B.L. YADAV, SR. D.R. ( )/ ORDER DATE OF HEARING : 22-06-2015 DATE OF PRONOUNCEMENT : 25 -06-2015 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT(A)-XI, AHMEDABAD DATED 18.07.2011 FOR A.Y. 2002-03. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM BUSINE SS, CAPITAL GAINS AND INTEREST. ASSESSEE FILED HIS RETURN OF INCOME FOR A .Y. 2002-03 ON 02.08.2002 DECLARING TOTAL INCOME OF RS. 4,98,900/-. THE CASE WAS SELECTED FOR SCRUTINY ITA NO 2101/ AHD/2011 . A.Y. 2002-0 3 2 AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECT ION 143(3) VIDE ORDER DATED 24.01.2005 AND THE TOTAL INCOME OTHER THAN LO NG TERM CAPITAL GAINS WAS DETERMINED AT RS. 3,77,930/- AND THE LONG TERM CAPI TAL GAINS WAS DETERMINED AT RS. 2,15,949/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) AND LATER ON BEFORE HONBL E TRIBUNAL. HONBLE TRIBUNAL VIDE ORDER DATED 24.04.2009 IN ITA NO. 223 6/AHD/2005 RESTORED THE MATTER TO THE FILE OF A.O TO DECIDE THE ISSUE O F LONG TERM CAPITAL GAINS AFRESH IN THE LIGHT OF THE DIRECTIONS GIVEN THEREIN . PURSUANT TO THE DIRECTIONS OF TRIBUNAL, A.O PASSED ORDER U/S. 143(3) R.W.S. 25 4 VIDE ORDER DATED 30.11.2010 AND THE TOTAL INCOME WAS AGAIN DETERMINE D AT RS. 5,93,879/- (COMPRISING OF TOTAL INCOME OTHER THAN LONG TERM CA PITAL GAINS AT RS. 3,77,930/- AND LONG TERM CAPITAL GAIN AT RS. 2,15,9 49/-). AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE L D. CIT(A) WHO VIDE ORDER DATED 18.07.2011 DISMISSED THE APPEAL OF THE ASSESS EE. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), ASSESSEE IS NOW IN A PPEAL BEFORE US AND HAS RAISED THE FOLLOWING EFFECTIVE GROUND:- 1. THE LD. CIT(A)-XI, AHMEDABAD HAS ERRED IN UPHOLDING THE COMPUTATION OF INCOME UNDER THE HEAD LONG TERMS CAPITAL GAIN AT RS. 2,15, 949/-. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD COMPUTED LONG TERM CAPITAL LOSS ON SALE OF SHARES A ND UNITS AFTER DOING INDEXATION BY APPLYING COST INFLATION INDEX. HE ALS O NOTICED THAT ASSESSEE HAD EARNED LONG TERM CAPITAL GAINS OF RS. 1,95,000/ - ON SALE OF BONUS SHARES AND THE AFORESAID LONG TERM CAPITAL GAINS WERE SET OFF AGAINST THE LONG TERM CAPITAL LOSSES AND THEREAFTER ON THE RESULTANT GAIN S, THE TAX RATE OF 10% WAS APPLIED BY ASSESSEE. A.O WAS OF THE VIEW THAT AS P ER THE PROVISO TO SECTION 112, THE CAPITAL GAINS FOR LISTED SECURITIES OR UNI TS SHOULD BE CALCULATED @ ITA NO 2101/ AHD/2011 . A.Y. 2002-0 3 3 10% BEFORE GOING TO THE PROVISIONS OF SECOND PROVIS O TO SECTION 48 AND THEN THE CAPITAL GAIN @ 20% SHOULD BE COMPUTED AS PER TH E PROVISO TO 2 ND PROVISO TO SECTION 48. HE WAS OF THE VIEW THAT ASSESSEE MA Y EXERCISE ONE OF THE CHOICES TO THE ENTIRE BLOCK OF THE LISTED SECURITIE S BUT ASSESSEE CANNOT CLAIM CAPITAL LOSS BY EXERCISING THE OPTION OF INDEXATION IN SOME LISTED SECURITIES AGAINST THE CAPITAL GAIN ARISING BY EXERCISING THE OPTION OF TAX RATE AT 10% IN SOME OTHER LISTED SECURITIES. HE ACCORDINGLY WORKED OUT THE LONG TERM CAPITAL GAINS TAXABLE AT 10% AT RS. 2,15,949/-. AGGRIEVED B Y THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO U PHELD THE ORDER OF A.O BY HOLDING AS UNDER:- 2.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A. R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESS MENT ORDER. THE FACTUAL POSITION OF COMPUTATION OF CAPITAL GAINS IS SUMMARIZED BY THE A PPELLANT IN SUBMISSIONS DATED 14-07-2011 AND FOR THE SAKE OF BREVITY THE SAME IS REPRODUCED AS UNDER :- SR.N O. PARTICULARS OF SCRIPTS. GAIN/LOSS AS PER BOOKS INDEXED GAIN/LOSS INCOME COMPUTED INCOME ASSESSED 1. UNITS OF ULIP-71 -- (-)49,160 (-)49,160 29,699 2. BONUS SHARES OF CIPLA LTD. 1,95,000 1,95,000 1,95,000 1,95,000 3, SHARES OF APRO BIO-CHEM. (-) 8,750 (-)24,870 (-)24,870 (-)8,750 1,86,250 1,20,970 1,20,970 2,15,949 ITA NO 2101/ AHD/2011 . A.Y. 2002-0 3 4 2.2.1AS PER THE ASSESSEE THE TAX SHOULD BE CHARGED @ 10% OF RS. 1,20,970/-. HE HAS CONTENDED THAT AS PER SECTION 48, THE OPTION IS WIT H THE ASSESSEE, WHETHER TO AVAIL BENEFIT OF INDEXATION WHILE COMPUTING THE CAPITAL GAIN. I A GREE WITH THIS LEGAL POSITION OF COMPUTING CAPITAL GAINS II/S. 48 OF THE I. T. ACT. THIS CONTENTION IS IN CONFIRMATION OF ITAT DIRECTIONS. HOWEVER, I DO NOT AGREE THAT CHARGE OF TAX SHOULD BE RESTRICTED TO 10% OF THIS COMPUTATION SPECIALLY WHEN THE ASSESSEE HAS TAKEN B ENEFIT OF INDEXATION ON SOME TRANSACTIONS. THE HON'BLE ITAT DIRECTION IS UNAMBIG UOUS ON THIS ISSUE AND THE SAME IS REPRODUCED AS UNDER:- '.......,... THUS IT IS SEEN THAT THE LEGISLATURE I NTENDED TO TAX THE CAPITAL GAINS WITH INDEXATION AT 20% AND TO LIMIT IT WITHOUT INDEXATIO N TO 10% THEREOF...' THUS, AS PER THESE DIRECTIONS, MAXIMUM CHARGE OF TA X WILL BE 10% OF CAPITAL GAINS WITHOUT INDEXATION. THE A.O. HAS CORRECTLY COMPUTED CAPITAL GAINS OF RS. 2,15,949/- WITHOUT INDEXATION AND TAXED THE SAME AT 10%. IN MY CONSIDERED VIEW, THE ASSESSEE HAS GOT THE OPTION OF TAKING BENEFITS OF INDEXATION, WH ILE COMPUTING THE CAPITAL GAIN. HOWEVER, IF IN SOME TRANSACTIONS, BENEFIT OF INDEXA TION HAS BEEN TAKEN, THAN INCOME HAS TO BE TAXED AT THE RATE OF 20% AS PER THE PROVISION S OF SECTION 112(1) AND THE DIRECTIONS OF I.T.A.T, 2.2.2. IN VIEW OF ABOVE, I DO NOT FIND ANY INFIRMIT Y IN THE ASSESSMENT ORDER AND THIS GROUND OF APPEAL FAILS. 5. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), ASS ESSEE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND LD. CIT(A). SHE FURTHER SUBMITTED THAT THE ISSUE IN TH E PRESENT CASE IS DIRECTLY COVERED BY THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. ANUJ A. SHETH (HUF) REPORTED IN (2010) 190 TAXMAN.COM 33 0 (BOM). SHE FURTHER SUBMITTED THAT IN THE FIRST ROUND UP APPEAL BEFORE TRIBUNAL, HONBLE TRIBUNAL HAD RELIED ON THE DECISION OF MUMBAI TRIBUNAL IN TH E CASE OF MOHANLAL N. ITA NO 2101/ AHD/2011 . A.Y. 2002-0 3 5 SHAH (HUF) VS. ACIT 26 SOT 380 (MUM) AND THAT THE A FORESAID DECISION WHICH WAS RELIED UPON BY THE CO-ORDINATE BENCH HAS ALSO BEEN RELIED UPON BY THE MUMBAI TRIBUNAL IN THE CASE OF DCIT VS. SAVL A MOTOR AGENCIES PVT. LTD. REPORTED IN (2012) 19 TAXMAN.COM 359 (MUM). SH E ALSO PLACED ON RECORD THE COPY OF THE AFORESAID DECISIONS. SHE THE REFORE SUBMITTED THAT IN VIEW OF THE AFORESAID DECISION OF BOMBAY HIGH COURT , THE APPEAL OF THE ASSESSEE DESERVES TO BE ALLOWED. THE LD. D.R. ON TH E OTHER HAND SUPPORTED THE ORDER OF A.O AND LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO COMPUT ATION OF LONG TERM CAPITAL GAINS. IN THE PRESENT CASE, ASSESSEE ADJUSTED THE L OSS ON SALE OF SHARES (AFTER CONSIDERING THE INDEXED COST) AGAINST THE PROFIT EA RNED BY THE ASSESSEE ON CERTAIN SHARES (WITHOUT INDEXATION) AND THE RESULTA NT CAPITAL GAINS WERE OFFERED TO TAX @ 10%. WE FIND THAT THE ISSUE IN THE PRESENT CASE IS COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ANUJ. A SHETH (SUPRA), THE HEAD NOTE OF WHICH READS AS UN DER:- SECTION 112, READ WITH SECTIONS 48 AND 70, OF THE I NCOME-TAX ACT, 1961 - CAPITAL GAINS - TAX ON LONG- TERM CAPITAL GAINS - ASSESSMENT YEAR 2001-02 - WHET HER FOR PURPOSE OF WORKING OUT APPLICATION OF PROVISO TO SECTION 112, THERE IS NOTHING IN SECTION WHICH WOULD DEPRIVE AN ASSESSEE OF INDEXATION CLAI MED ON SALE OF SHARES WHERE THERE IS A RESULTANT LOSS - HELD, YES - WHETHER EFFECT OF PROVISO TO SECTION 11 2 IS THAT BENEFIT OF COST INFLATION INDEX OR INDEXATION WOULD BE AVAILABLE SUBJECT TO CONDITION THAT WHERE TAX ON LONG-TERM CAPITAL GAINS, WITHOUT ADJUSTMENT FOR INDEXATION, EXCEEDS 10 PER CENT, SUCH EXCESS SHALL BE IGNORED - HELD, YES - DURING RELEVANT ASSESSMENT YE AR, ASSESSEE ENTERED INTO EIGHT SALE TRANSACTIONS O F SHARES - IN ONE TRANSACTION SHARES BEING BONUS SHAR ES THEIR COST OF ACQUISITION WAS NIL AND, THEREFORE , ENTIRE SALE CONSIDERATION WAS CONSIDERED AS LONG-TE RM CAPITAL GAIN - OUT OF REMAINING SEVEN TRANSACTIONS, ONE SALE RESULTED IN LONG-TERM CAPITA L GAIN WITH INDEXATION WHEREAS IN REMAINING TRANSACTIONS ASSESSEE REPORTED A LOSS WITH INDEXATI ON - ASSESSEE SET OFF LONG-TERM CAPITAL LOSS FROM L ONG- TERM CAPITAL GAINS AND PAID A TAX OF 10 PER CENT ON NET LONG-TERM CAPITAL GAIN - WHETHER ASSESSEE'S CL AIM OF COMPUTATION OF LONG-TERM CAPITAL GAINS WAS IN CO NSONANCE WITH PROVISO TO SECTION 112(1) - HELD, YES ITA NO 2101/ AHD/2011 . A.Y. 2002-0 3 6 8. IN VIEW OF THE AFORESAID DECISION OF HONBLE BOMBAY HIGH COURT WHICH IS APPLICABLE TO THE FACTS OF THE PRESENT CASE AND IN THE ABSENCE OF ANY CONTRARY BINDING DECISION POINTED OUT BY REVENUE IN ITS SUPP ORT, WE ARE OF THE VIEW THAT THE ASSESSEES GROUND DESERVES TO BE ALLOWED A ND THUS THIS GROUND OF ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 25 - 06 - 2015. SD/- SD/- (KUL BHARAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHM EDABAD