JBF INDUSTRIES LTD, MUMBAI V. ADDL CIT RG 4(2), MUMBAI

ITA 2695/MUM/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3658 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 27-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 07-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DILIP V LAKHANI
• Keywords: Business income; Earning of tax free income; Cost of acquisition
• Section: 14A; 6

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI . . , ! , ' # $%, & !, ' BEFORE SHRI G.S.PANNU, AM AND SHRI AMARJIT SINGH, J M / I.T.A. NO.5235/M/2014 ( & ( ')( / ASSESSMENT YEAR: 2009-10) IL & FS EMPLOYEES WELFARE TRUST PLOT NO. C- 22, G BLOCK, BANDRA- KURLA COMPLEX, BANDRA(E), MUMBAI -400051 / VS. ADDL. COMMR. OF INCOME TAX 19(3) ROOM NO.301, 3 RD FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI - 400012 / I.T.A. NO.5223/M/2014 ( & ( ')( / ASSESSMENT YEAR: 2009-10) ADDL. COMMR. OF INCOME TAX 19(3) ROOM NO.305, 3 RD FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI - 400012 / VS. IL & FS EMPLOYEES WELFARE TRUST PLOT NO. C- 22, G BLOCK, BANDRA- KURLA COMPLEX, BANDRA(E), MUMBAI -400051 ./ ./ PAN/GIR NO. : AAATI0422N ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 03.03.2016 !' /DATE OF PRONOUNCEMENT:26.08.2016 #$ / O R D E R ASSESSEE BY: SHRI DILIP V. LAKHANI DEPARTMENT BY: SHRI BHANWAR SINGH RATNOO ITA NO.5235&5223/M/14 A.Y. 2009-10 2 PER AMARJIT SINGH, JM: THE ASSESSEE AS WELL AS REVENUE HAS FILED AN APPEA L AGAINST THE ORDER DATED 26.05.2014 PASSED BY THE CO MMISSIONER OF INCOME TAX (APPEALS)- 30, MUMBAI [HEREINAFTER REFER RED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMR. OF INCOME TAX (A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER REGARDING THE DISALLOWANCE U/S.14A AMOUNTING TO RS.1,35,25,433/-. THE CONCLUSION REACHED BY THE LEARNED COMMR. OF INCOME TAX (APPEALS) THAT DISALLOWANCE BE RESTRICTED TO RS.1,35,25,433/- IS ERRONEOUS. THE APPELLANT PRAYS THAT NO ADDITION BE MADE U/S.14A AND THE ADDITION CONFIRMED BY THE LEARNED COMMR. OF INCOME TAX (APPEALS) MAY BE DELETED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMR. OF INCOME TAX (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER REGARDING DIMINUTION IN THE VALUE OF THE SHARES AMOUNTING TO RS.52,31,313/-. THE APPELLANT PRAYS THAT THEY ARE ENTITLED TO DEDUCTION OF RS.52,31,313/- AND THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMR. OF INCOME TAX (APPEALS) MAY BE DELETED. 3. THE LEARNED ASSESSING OFFICER HAS ERRED IN LEVYING INTEREST U/S.234B AT RS.14,12,268/- & RS.64,299/- UNDER SEC. 234C. THE APPELLANT DENIES THE LIABILITY OF PAYMENT OF ITA NO.5235&5223/M/14 A.Y. 2009-10 3 INTEREST U/S.234B & SEC.234C. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APPELLANT SUBMIT THAT LEVY OF INTEREST U/S.234B OF RS.14,12,268/- AND RS.64,299/- UNDER SEC 234C IS NOT JUSTIFIED AND BE DELETED. 3. THE REVENUE HAS ALSO RAISED THE FOLLOWING GROUND S:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO COMPUTE THE LONG TERM CAPITAL LOSS ON ACCOUNT OF SALE/TRANSFER OF SHARES OF IL & FS DURING THE YEAR BY DETERMINING COST OF ACQUISITION U/S.45(2A) OF THE I.T.ACT, 1961 READ WITH CIRCULAR NO.768 DATED 24.06.1998 OF THE CBDT INSTEAD OF AVERAGE COST METHOD ADOPTED BY THE AO WHEREBY HE DISALLOWED LONG TERM CAPITAL LOSS OF RS.7,50,92,618/- 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AO BE RESTORED. 4. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE A.Y.2009-10 DECLARING TOTAL INCOME TO THE TUNE OF RS.4,90,71,38 8/- ON 29.09.2009. THE RETURN OF INCOME WAS PROCESSED U/S.143(1) OF TH E INCOME TAX ACT, 1961( IN SHORT THE ACT). THE CASE WAS SELEC TED FOR SCRUTINY ASSESSMENT AND NOTICE U/S.143(2) OF THE ACT DATED 2 4.08.2010 WAS ISSUED AND SERVED UPON THE ASSESSEE. THEREAFTER NO TICE U/S.142(1) OF THE ACT WAS ALSO ISSUED AND SERVED UPON THE ASSESSE E. THE ASSESSEE IS A TRUST SETTLED BY INFRASTRUCTURE LEASING & FINANCI AL SERVICES LTD. IN THE YEAR 1990 FOR THE WELFARE OF ITS EMPLOYEES AND THE EMPLOYEES OF ITA NO.5235&5223/M/14 A.Y. 2009-10 4 ITS ASSOCIATE AND AFFILIATED COMPANIES. THE BENEFI CIARIES OF THE TRUST ARE ALL EMPLOYEES OF THE COMPANY AND THE EMPLOYEES OF THE ASSOCIATE AND AFFILIATED COMPANIES WITHOUT ANY SPECIFIC RATIO OF SHARING OF INCOME OR TRUST FUND. ITS MAIN BUSINESS ACTIVITIE S IS THE INVESTMENT IN SHARES AND SECURITIES, DEALING IN SHARES, DEBENTURE S AND OTHER SECURITIES. THE INCOME OF THE ASSESSEE WAS ASSESS ED TO THE TUNE OF RS.(-)3,20,61,655/-, THEREAFTER, THE ASSESSEE FILED AN APPEAL BEFORE THE LEARNED CIT(A) AND THE LEARNED CIT(A) CONFIRMED THE EXPENDITURE INCURRED TO EARN THE EXEMPT INCOME U/S.14A OF THE A CT TO THE TUNE OF RS.1,35,25,433/- AND ALSO CONFIRMED THE DISALLOWANC E MADE BY THE ASSESSING OFFICER TO THE TUNE OF RS.52,31,313/- ON ACCOUNT OF DIMINUTION IN THE VALUE OF THE SHARES AND ALSO CONF IRMED THE INTEREST U/S.234B OF THE ACT TO THE TUNE OF RS.14,12,268/- A ND RS.64,299/- U/S.234C OF THE ACT, THEREFORE THE PRESENT APPEAL H AS BEEN FILED BEFORE US. WHEREAS THE REVENUE HAS CHALLENGED THE DIRECT ION GIVEN BY THE CIT(A) TO THE ASSESSING OFFICER TO COMPUTE THE LONG TERM CAPITAL LOSS ON ACCOUNT OF SALE/TRANSFER OF SHARE OF ILFS D URING YEAR BY DETERMINING COST OF ACQUISITION U/S.45(2A) OF THE A CT READ WITH CIRCULAR NO.768 DATED 24.06.1998 OF THE CBDT INSTEA D OF AVERAGE COST METHOD ADOPTED BY THE ASSESSING OFFICER WHEREB Y THE ASSESSING OFFICER DISALLOWED THE LONG TERM CAPITAL LOSS TO TH E TUNE OF RS.7,50,92,618/-. ITA NO.5235&5223/M/14 A.Y. 2009-10 5 I.T.A. NO.5235/M/2014 (ASSESSEES APPEAL) ISSUE NO.1:- 5. ASSESSEE HAS CHALLENGED THE DISALLOWANCE RESTRIC TED BY THE LEARNED CIT(A) TO THE TUNE OF RS.1,35,25,433/- U/S. 14A OF THE ACT. IN THE RELEVANT ASSESSMENT YEAR THE ASSESSEE RECEIVED THE DIVIDEND INCOME OF RS.7,33,91,985. HOWEVER, AT THE TIME OF F ILING OF RETURN, THE ASSESSEE DISALLOWED THE INTEREST EXPENSES TO THE TU NE OF RS.25,10,473/- U/S.14A OF THE ACT. THE CONTENTION OF THE ASSESSEE IS THAT THE EXPENDITURE WHICH HAS NOT BEEN INCURRED TO EARN THE EXEMPT INCOME IS NOT LIABLE TO BE CONSIDERED WHILE APPLICATION OF TH E PROVISION U/S.14A READ WITH RULE 8D OF THE ACT. THE CONTENTION OF TH E ASSESSEE IS ALSO THAT THE ASSESSEE INCURRED ONLY THE INTEREST EXPEND ITURE WHICH HAS NOT BEEN CLAIMED AND DEDUCTED ON ACCOUNT OF INTEREST U/ S.14A OF THE ACT. THE ASSESSEE HAS FILED THE DETAILS AT PAGE 20 OF TH E PAPER BOOK IN WHICH HE HAS SHOWN THE EXPENDITURE ON DIFFERENT HEA D. THE ASSESSMENT OF THE ASSESSEE IS FOR THE YEAR OF 2009- 10. NO DOUBT THE PROVISION U/S.14A R.W. RULE 8D OF THE ACT IS APPLIC ABLE. IT IS NOT IN DISPUTE THAT THE PRINCIPLE LAID DOWN IN CASE OF GOD REJ & BOYCE MANUFACTURING COMPANY LTD. VS. DCIT, 234 CTR 1 (BOM ) IS ALSO APPLICABLE IN THIS CASE. BUT WHILE FOLLOWING THE A BOVE SAID LAW NO DOUBT THE EXPENDITURE WHICH HAS NOT BEEN INCURRED T O EARN THE EXEMPT INCOME IS NOT LIABLE TO BE CONSIDERED WHILE ASSESS ING THE EXPENDITURE ITA NO.5235&5223/M/14 A.Y. 2009-10 6 U/S. 14A R.W. RULE 8D OF THE ACT. IT IS NECESSARY TO MENTIONED THE DETAIL THE EXPENDITURE INCURRED BY THE ASSESSEE. DETAILS AMT (RS) VOLUNTARILY DISALLOWED IN RETURN CLAIMED AS DEDUCTION IN RETURN EMPLOYEE WELFARE EXPENSES 10,709,710 10,709,710 DISALLOWED SINCE TAKEN TO BE APPLICATION OF INCOME INTEREST EXPENSES 2,510,473 2,510,473 DISALLOWED VOLUNTARILY U/S.14A LEGAL & PROFESSIONAL EXPENSES 325,000 325,000 CLAIMED AS DEDUCTION SINCE THE SAM E ARE TOBE INCURRED AT ANY POINT OF TIME AND ARE NOT RELATED TO INVESTMENTS (LIKE CONSULTANCY FEE, LAWYER FEE ETC.) MISCELLANEOUS EXPENSES 65,629 65,629 TOTAL 13,610,812 13,220,183 390,629 AS CAN BE SEEN FROM THE ABOVE, AGAINST AN EXPENSE C LAIM OF RS.390,629 MADE BY THE TRUST AS DEDUCTION, THE AO HAS DETERMINED AN ADDITION OF RS. 1,15,20,952/- AS DISALLOWANCE U/S.14A WHICH IS NOT FEASIBLE. MOREOVER, RS.390,629 CLAIMED IN T HE RETURN IS ACTUALLY ALLOWABLE AS A DEDUCTION SINCE THE SAME ARE NOT RELATED TO INVESTMENTS . 6. ASSESSEE VOLUNTARILY DISALLOWED THE EMPLOYEE WEL FARE EXPENSES IN SUM OF RS.10,709,710/- AND INTEREST EXPENSES TO THE TUNE OF RS.2,510,473/-. NOW THE EXPENSES REMAINS TO THE TU NE OF RS. 325,000/- ON ACCOUNT OF LEGAL AND PROFESSIONAL EXPE NSES AND AN AMOUNT OF RS.65,629/- ON ACCOUNT OF MISCELLANEOUS E XPENSES. DISALLOWANCE IS NOT REQUIRED TO BE MADE MORE THAN T HE EXPENDITURE. THE EXPENDITURE REMAINS RS.325,000/- + RS.65,629/- =390,629/-. THESE EXPENSES HAVE SHOWN ON DIFFERENT HEAD BUT FIN DING NO JUSTIFIABLE PIECE OF EVIDENCE, WE ARE OF THE VIEW T HAT RS.25,000/- CAN ITA NO.5235&5223/M/14 A.Y. 2009-10 7 ALSO BE DISALLOWED AS EXPENDITURE TO EARN THE EXEMP T INCOME. THEREFORE, IN VIEW OF THE SAID CIRCUMSTANCES THE FI NDING OF THE CIT(A) ON THIS ISSUE IS HEREBY ORDERED TO BE SET ASIDE AND ASSESSING OFFICER IS DIRECTED TO ASSESS THE INCOME OF THE ASSESSEE IN VI EW OF THE OBSERVATIONS MADE ABOVE. ACCORDINGLY THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NO.2:- 7. UNDER THIS ISSUE THE ASSESSEE CHALLENGED THE CON FIRMATION OF DISALLOWANCE MADE BY THE ASSESSING OFFICER REGARDIN G THE DIMINUTION OF VALUE OF SHARES AMOUNTING TO RS.52,31,313/-. TH E CONTENTION OF THE APPELLANT IS THAT THE INVESTMENT IN WHICH THE ABOVE DIMINUTION HAVE BEEN TREATED BY THE TRUST AS STOCK IN TRADE AND AS PER THE ACCOUNTING STANDARD IT HAS BEEN VALUED AT MARKET VALUE OR COST , WHICHEVER IS LOWER. ASSESSING OFFICER WAS OF THE VIEW THAT AS THE STOCK IN TRADE WAS NOT SOLD THEREFORE NOTIONAL PROFIT OR LOSS COUL D NOT BE TAKEN FOR ASSESSMENT UNDER THE PROVISION OF THE ACT. THE CON TENTION OF THE ASSESSEE IS THAT THE ASSESSEE HAS TREATED SHARES OF LISTED COMPANIES AS STOCK IN TRADE AND THE REGULAR PROFIT AND LOSS ON T HE SALE OF THE SHARES IF ANY HAS BEEN OFFERED TO TAX AS BUSINESS INCOME A ND AS THE MARKET VALUE AS ON 31.03.2009 FOR SUCH SHARES IS LESS THAN ITS COST SUB DIMINUTION IN THE VALUE OF THE SHARES IS TO BE TREA TED AS BUSINESS LOSS. THE ASSESSING OFFICER RELIED UPON THE CASE INDIAN O VERSEAS BANK 51 TAXAMAN 283 (MADRAS). THE FINDING OF THE ASSESSING OFFICER WAS ITA NO.5235&5223/M/14 A.Y. 2009-10 8 CONFIRMED BY THE CIT(A). HOWEVER, THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE LAW SETTLED BY THE HONBLE SUPREME COURT IN CASE OF UNITED COMMERCIAL BANK REPORTED IN 240 ITR 355 BUT THE CIT(A) NOWHERE DISCUSSED THE SAID LAW AND ENDORSED THE VIE W OF THE ASSESSING OFFICER. CIT(A) WAS ALSO OF THE VIEW TH AT THE TRUST WAS NOT CARRYING OUT THE ACTIVITY OF SHARES THEREFORE THE C ONTENTION OF THE APPELLANT HAS BEEN DECLINED. INFACT, ASSESSEE IN H IS ACCOUNTS BOOKS WAS TREATING THE INVESTMENT AS STOCK IN TRADE AND A CCORDINGLY BOOKS OF ACCOUNTS WERE BEING MAINTAINED. THEREFORE, IN THE S AID CIRCUMSTANCES THE FINDING OF THE CIT(A) ON THIS ISSUE WAS ON WRON G PATH. MOREOVER, THE LAW RELIED BY THE ASSESSEE WAS NOT SEEN AND DIS CUSSED. THE DETAILS OF THE INVESTMENT AND DIMINUTION OF VALUE OF SHARES HAS BEEN FURNISHED WHICH LIES AT PAGE 15 OF THE PAPER BOOK. NO DOUBT IT IS TO BE SEEN WHETHER DIMINUTION OF INVESTMENT IN THE SHARES IS LIABLE TO ALLOWABLE OR NOT. THIS MATTER OF CONTROVERSY HAS A LREADY BEEN ADJUDICATED BY THE HONBLE SUPREME COURT IN CASE OF UNITED COMMERCIAL BANK REPORTED IN 240 ITR 355 WHEREIN THI S CONTROVERSY HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. THE OBSERVATION OF THE HONBLE SUPREME COURT HAS BEEN R EPRODUCED BELOW:- OUR VIEW, AS STATED ABOVE, CONSISTENTLY FOR 30 YEA RS, THE ASSESSEE WAS VALUING THE STOCK-IN-TRADE AT COST FOR THE PURPOSE OF STATUTORY BALANCE SHEET, AND FOR THE INCOME-TAX RETURN, ITA NO.5235&5223/M/14 A.Y. 2009-10 9 VALUATION WAS AT COST OR MARKET VALUE, WHICHEVER WA S LOWER. THAT PRACTICE WAS ACCEPTED BY THE DEPARTMENT AND TH ERE WAS NO JUSTIFIABLE REASON FOR NOT ACCEPTING THE SAME. PRE PARATION OF THE BALANCE-SHEET IN ACCORDANCE WITH THE STATUTORY PROV ISION WOULD NOT DISENTITLE THE ASSESSEE IN SUBMITTING THE INCOM E-TAX RETURN ON THE REAL TAXABLE INCOME IN ACCORDANCE WITH THE M ETHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE CONSISTENTLY AND REGULARLY. THAT CANNOT BE DISCARDED BY THE DEPARTMENTAL AUTHOR ITIES ON THE GROUND THAT THE ASSESSEE WAS MAINTAINING THE BALANC E-SHEET IN THE STATUTORY FORM ON THE BASIS OF THE COST OF THE INVESTMENTS. IN SUCH CASES, THERE IS NO QUESTION OF FOLLOWING TW O DIFFERENT METHODS FOR VALUING ITS STOCK-IN-TRADE (INVESTMENTS ) BECAUSE THE BANK WAS REQUIRED TO PREPARE THE BALANCE SHEET IN T HE PRESCRIBED FORM AND IT HAD NOT OPTION TO CHANGE IT. FOR THE P URPOSE OF INCOME-TAX AS STATED EARLIER, THAT IS TO BE TAXED I S THE REAL INCOME WHICH IS TO BE DEDUCTED ON THE BASIS OF THE ACCOUNTING SYSTEM REGULARLY MAINTAINED BY THE ASSESSEE AND THA T WAS DONE BY THE ASSESSEE IN THE PRESENT CASE. 8. IN VIEW OF THE SAID OBSERVATION, WE ALLOWED T HE DIMINUTION IN THE VALUE OF THE SHARE AMOUNTING TO RS.52,31,313/-, THE REFORE, WE SET ASIDE THE ORDER PASSED BY THE CIT(A) ON THIS ISSUE . ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ISSUE NO.3:- ITA NO.5235&5223/M/14 A.Y. 2009-10 10 9. ACCORDING TO ISSUE NO.3, THE ASSESSEE HAS CHALLE NGED THE INTEREST U/S.234B TO THE TUNE OF RS.14,12,268/- AND RS.64,29 9/- U/S.234C. SINCE THE ISSUE NO.2 HAS ALSO BEEN DECIDED IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE, THEREFORE THE CONSEQUENTIA L RESULT IS LIABLE TO BE FOLLOWED. ACCORDINGLY, WE SET ASIDE THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE. I.T.A. NO.5223/M/2014 (REVENUES APPEAL) ISSUE NO.1:- 10. THE REVENUE HAS CHALLENGED THE DIRECTION GIVEN BY THE CIT(A) ON THIS ISSUE TO THE ASSESSING OFFICER TO COMPUTE T HE LONG TERM CAPITAL LOSS ON ACCOUNT OF IL & FS DURING THE YEAR BY DETERMINING COST OF ACQUISITION U/S.45(2A) OF THE ACT READ WITH CIRCULAR NO.768 DATED 24.06.1998. HOWEVER, THE REVENUE IS OF THE V IEW THAT THE AVERAGE COST METHOD ADOPTED BY THE ASSESSING OFFICE R IS LIABLE TO BE IMPLEMENTED WHEREAS THE ASSESSING OFFICER DISALLOWE D THE LONG TERM CAPITAL LOSS TO THE TUNE OF RS.7,50,92,618/-. BEFORE GOING FURTHER IT IS NECESSARY TO ADVERT THE FINDING OF TH E LEARNED CIT(A) IN THIS REGARD. 4. I HAVE DULY CONSIDERED THE SUBMISSION OF THE AP PELLANT AND IN THE SAID RESPECT IT IS RELEVANT TO REFER TO SECTION 45(2A) OF ACT, WHICH IS AS FOLLOWS: ITA NO.5235&5223/M/14 A.Y. 2009-10 11 (2A) WHERE ANY PERSON HAS HAD AT ANY TIME DURING PREVIOUS YEAR ANY BENEFICIAL INTEREST IN ANY SECURITIES, THEN, ANY PROFITS OR GAINS ARISING FROM TRANSFER MADE BY THE DEPOSITORY OR PARTICIPANT OF SUCH BENEFICIAL INTEREST IN RESPECT OF SECURITIES SHALL BE CHARGEABLE TO INCOME-TAX AS THE INCOME OF THE BENEFICIAL OWNER OF THE PREVIOUS YEAR IN WHICH SUCH TRANSFER TOOK PLACE AND SHALL NOT BE REGARDED AS INCOME OF THE DEPOSITORY WHO IS DEEMED TO BE THE REGISTERED OWNER OF SECURITIES BY VIRTUE OF SUB - SECTION (1) OF SECTION 10 OF THE DEPOSITORIES ACT, 1996, AND FOR THE PURPOSE OF (I) SECTION 48; AND (II) (II) PROVISO TO CLAUSE (42A) OF SECTION 2, THE COST OF ACQUISITION AND THE PERIOD OF HOLDING O F ANY SECURITIES SHALL BE DETERMINED ON THE BASIS OF THE FIRST-IN-FIRST-OUT METHOD. INSERTED BY THE DEPOSITORIES, ACT, 1996, W.E.F FROM 20.09.1995, WHICH PROVIDES AS FOLLOWS: . THE APPELLANTS IS CONTENTION THAT IT HAS DOMICILED IL & FS SHARES IN TWO DIFFERENT DEMAT ACCOUNTS. IN F.Y. 2008- ITA NO.5235&5223/M/14 A.Y. 2009-10 12 09, 11,54,613 SHARES WERE LYING AS OPENING STOCK IN THE DEMAT ACCOUNT WITH DP ID 11177127 AND 56,09,953 IL &FS SHARES LYING AS OPENING STOCK IN THE DEMAT ACCO UNT WITH DP ID 11396032 AND SINCE THESE SHARES WERE TRANSFERRED BY IEWT (THE APPELLANT) IN DEMAT FORM, IT HAS APPLIED SEC. 45(2A), AND, ON THE BASIS OF FIFO, TAK EN COST OF 11,54,613 SHARES RS.150 PER SHARE AND FOR THE BA LANCE 4,25,138 SHARES AT RS.85.06 PER SHARE. I, THEREFOR E, FIND THAT SE.45(2A) IS A SPECIFIC PROVISION UNDER THE AC T, WHICH PRESCRIBED THE METHOD TO DETERMINE THE COST O F ACQUISITION AND THE PERIOD OF HOLDING OF ANY SECURI TY, I.E. ON THE BASIS OF FIRST-IN AND FIRST-OUT METHOD. THE AO HAS NOT DISPUTED THAT THE SHARES HAVE BEEN HELD BY THE DEPOSITORY AND TRANSFERRED IN THE DEMAT FORM AND FI FO METHOD IS NOT APPLICABLE IN SUCH CASES. HE HAS ALS O NOT DOUBTED THE COMPUTATION OF CAPITAL GAIN ON FIFO BAS IS. HE HAS MERELY APPLIED THE ABOVE TWO REFERRED DECISI ONS WITHOUT DISCUSSING AS TO HOW SE.45(2A) IS NOT APPLI CABLE IN THE ABOVE CASE AND HOW THE TWO DECISIONS WITHOUT DISCUSSING AS TO HOW SEC.45(2A) IS NOT APPLICABLE I N THE ABOVE CASE AND HOW THE TWO DECISIONS OVER-RIDE SPEC IFIC PROVISIONS OF THE ACT. I FURTHER FIND THAT THE DE CISION IN THE CASE OF BOMBAY HIGH COURT IN THE CASE OF DAHIBE N UMEDBHAI (SUPRA) AND EMERALD & CO. (SUPRA) WERE ITA NO.5235&5223/M/14 A.Y. 2009-10 13 RENDERED PRIOR TO THE INSERTION OF PROVISION OF SUB -SECTION (2A) U/S. 45 OF THE ACT. IN VIEW OF THE SAME, THE ABOVE TWO CONDITIONS ARE NOT APPLICABLE. I THEREFORE, DI RECT THE AO TO COMPUTE THE LONG TERM CAPITAL GAIN / LOSS ON ACCOUNT OF SALE/TRANSFER FOR SHARES OF IL & FS DURI NG THE YEAR BY TAKING INTO ACCOUNT THE PROVISIONS OF SEC.4 5(2A) OF THE ACT AND CIRCULAR NO.768 DATED 24.06.1998. FURTHER, WHILE COMPUTING THE INCOME / LOSS UNDER TH E ABOVE HEAD, HE SHOULD TAKE INTO ACCOUNT THE CORRECT FIGURES OF OPENING STOCK AS ALSO FOR THE PURPOSE OF CALCULATION OF COST OF THE SHARES. 4.1 THE ABOVE GROUNDS OF APPEAL TAKEN BY THE APPELL ANT, THUS, STAND ALLOWED. 11. AT THE TIME OF ARGUMENT NO DISTINGUISHABLE FACT S HAVE BEEN PLACED ON RECORD BY THE REVENUE TO WHICH IT CAN BE ASSUME THAT THE CIT(A) HAS PASSED THE ORDER WRONGLY AND ILLEGALLY. THE SPECIFIC DIRECTIONS HAS BEEN GIVEN BY THE CIT(A) TO DETERMIN E THE COST OF ACQUISITION U/S.45(2A) OF THE ACT READ WITH CIRCULA R NO.768 DATED 24.06.1998. NOTHING SEEMS UNJUSTIFIABLE. SINCE TH E MATTER OF CONTROVERSY HAS RIGHTLY BEEN ADJUDICATED BY THE CIT (A), THEREFORE, WE NOWHERE FOUND ANY GROUND TO INTERFERE WITH THIS ORD ER, THEREFORE WE UPHOLD THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGA INST THE REVENUE. ITA NO.5235&5223/M/14 A.Y. 2009-10 14 ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 12. ACCORDINGLY, APPEAL OF THE ASSESSEE IS HEREBY A LLOWED AND APPEAL OF THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH AUGUST, 2016 SD/- SD/- (G.S.PANNU) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : AUGUST, 2016 MP MP MP MP + , -&#$. /.)# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. + / BY ORDER, - & //TRUE COPY// 0/% (DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI