DCIT-7(2), MUMBAI V. SAVLA MOTOR AGENCIES PVT. LTD., MUMBAI

ITA 3069/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7792 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2001-2002
• Appeal Filed On: 19-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JIGNESH R SHAH
• Keywords: Capital asset; Cost of acquisition; Capital Gains
• Section: 143(3); 12

Judgement Text

I.T.A NO.3069/ MUM/2010 SAVLA MOTOR AGENCIES PVT.LTD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL, J BENCH, MUMBAI. BEFORE SHRI D.K.AGARWAL, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NO.3069/ MUM/2010 ASSESSMENT YEAR: 2001-02 DY.CIT -7(2) .. APPELLANT ROOM NO.624, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. VS SAVLA MOTOR AGENCIES PVT.LTD. ,. RESPONDENT FLAT NO.8, 1 ST FLOOR, 163, HARI OM NIWAS, SION(E) MUMBAI. PA NO.AAACS 0677 G APPEARANCES: SUMEET KUMAR, FOR THE APPELLANT JIGNESH R SHAH, FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HA S CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 10 TH DECEMBER, 2009, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE I NCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2001-02. 2. THE GRIEVANCES RAISED IN THIS APPEAL ARE AS FOLL OWS:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD CIT (A) HAS ERRED IN HOLDING THAT LONG TERM CAPI TAL GAINS SHOULD BE WORKED OUT EACH TRANSACTION WISE AND TAX SHOULD BE CHARGED @ 10% OR 20% (WITHOUT INDEXATION/WITH INDEXATION RESP ECTIVELY) WHICHEVER IS BENEFICIAL TO THE ASSESSEE/AT THE OPTI ON OF THE ASSESSEE IGNORING THAT THE LAW WITH RESPECT TO TAXA TION OF LONG TERM CAPITAL GAIN ON SALE OF SHARES HAD UNDERGONE A CHANGE W.E.F. 2000-2001 WHEREIN LONG TERM CAPITAL GAIN ON SALE OF SHARES COULD I.T.A NO.3069/ MUM/2010 SAVLA MOTOR AGENCIES PVT.LTD. 2 BE OFFERED TO TAX @10% PLUS SURCHARGE INSTEAD OF 20 % PLUS SURCHARGE, IF THE COST IS NOT MODIFIED BY ADOPTING THE COST INFLATION INDEX? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD CIT (A) HAS ERRED IN HOLDING THAT LONG TERM CAPI TAL GAINS SHOULD BE WORKED OUT EACH TRANSACTION WISE AND CHARGING @ 10% OR 20% (WITHOUT INDEXATION/WITH INDEXATION RESPECTIVELY) W HICHEVER IS BENEFICIAL TO THE ASSESSEE/AT THE OPTION OF THE ASS ESSEE IGNORING THAT THE PROVISIONS OF SECTION 112 OF THE ACT WHICH REQUIRES THE TAX RATE ON LONG TERM CAPITAL GAINS ARISING FROM TRANS FER OF LISTED SECURITIES/UNITS WILL BE 10% OF THE GAINS COMPUTED WITHOUT INDEXATION OF COT AND FURTHER, INCOME TAX COMPUTED U/S.112 OF THE ACT IS TO BE INCREASED BY SURCHARGE, IF ANY, AT SPE CIFIED RATE ON THE TAX SO COMPUTED? 2. BRIEFLY STATED THE MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE COMPANY HAS DECLARED LONG TERM CAPITAL GAIN OF RS. 2,91,84,981 ON SALE OF SHARES. IN THE WORKING ENCLOSED WITH THE RETURN OF INCOME, THE ASSESSEE HAS SEPARATELY COMPUTED CAPITAL GAINS FOR DIFFERENT SHA RES AND AT THE END HAS ARRIVED AT LONG TERM CAPITAL GAINS CHARGEABLE @ 11. 3%. THE AO FURTHER NOTED THAT THE ASSESSEE HAS ADOPTED THE COST VALUE OF SHA RES AT INDEX COST INSTEAD OF ADOPTING ACTUAL COST OF ACQUISITION WHILE ARRIVING AT LONG TERM CAPITAL GAIN. IT WAS OBSERVED BY THE AO THAT THE LAW WITH RESPECT TO TAXATION OF LONG TERM CAPITAL ON SALE OF SHARES HAD UNDERGONE A CHANGE W. E.F. 2000-2001, WHEREIN, LONG TERM CAPITAL GAIN ON SALE OF SHARES COULD BE O FFERED TO TAX @ 10% PLUS SURCHARGE INSTEAD OF 20% PLUS SURCHARGE, IF THE COS T IS NOT MODIFIED BY ADOPTING THE COST INFLATION INDEX. THE AO WAS OF THE VIEW T HAT THE ASSESSEE HAS ADOPTED WRONGLY COST INFLATION INDEX AND OFFERED CAPITAL G AIN @ 10% PLUS SURCHARGE. IT WAS IN THIS BACKDROP, THE ASSESSEE WAS ASKED TO EXP LAIN AS TO WHY INCOME UNDER THE HEAD CAPITAL GAINS SHOULD NOT BE WORKED OUT O N SALE PRICE MINUS THE ACTUAL COST OF ACQUISITION WHICH COMES TO RS. 4,21,20,693 AND INDEXATION SHOULD NOT BE GIVEN. IN RESPONSE TO THE ASSESSING OFFICERS REQU ISITION, THE ASSESSEE SUBMITTED THE COMPUTED STATEMENT OF CALCULATION OF LONG TERM CAPITAL GAIN (WITH INDEXATION TAXABLE @ 20%) AND STATEMENT OF CALCULAT ION OF LONG TERM CAPITAL GAIN (WITHOUT INDEXATION TAXABLE @ 10%) EXPLAINING THE WORKING OF LONG TERM CAPITAL. THE ASSESSEE ALSO RELIED ON THE DECISION OF THE ITAT IN THE CASE OF ANUJ I.T.A NO.3069/ MUM/2010 SAVLA MOTOR AGENCIES PVT.LTD. 3 A SHETH, HUF VS ITO, WHEREIN, SIMILAR VIEW HAS BEEN CONFIRMED. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALS O MATERIAL PLACED BEFORE HIM, THE INCOME OF THE ASSESSEE FROM LONG TERM CAP ITAL GAIN WAS WORKED OUT ON SALE PROCEEDS MINUS ACTUAL COST OF ACQUISITION WITH OUT INDEXATION AT RS. 4,21,20,694 BY THE ASSESSING OFFICER. AGGRIEVED, T HE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A), WHO FOLLOWING THE DEC ISION OF A CO-ORDINATE BENCH IN THE CASE OF MOHAN & SHAH, HUF VS ACIT, 26 SOT 38 0(MUM), UPHELD THE WORKINGS IN RESPECT OF LONG TERM CAPITAL GAINS SUBM ITTED BY THE ASSESSEE AT RS.35,78,015. THE ASSESSING OFFICER IS NOT SATISFI ED AND IS IN APPEAL BEFORE US. 3. WE FIND THAT, AS LEARNED REPRESENTATIVES FAIRLY AGREE EVEN THOUGH LEARNED DEPARTMENTAL REPRESENTATIVE RATHER DUTIFULL Y RELIES UPON THE STAND PF THE ASSESSING OFFICER, THE ISSUE IS SQUARELY COVERE D BY THE DECISION OF A CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF MOHA NLAK N SHAH(HUF) V ACIT, 26 SOT 380(MUM), WHEREIN, THE TRIBUNAL, AFTER REFERRIN G SECTION 48, SECTION 70 AND SECTION 11, INTER ALIA, OBSERVED AS FOLLOWS: FROM THE ABOVE PROVISION OF LAW, IT CAN BE SEEN TH AT THE CAPITAL GAINS ON EACH OF THE CAPITAL ASSET TRANSFERRED HAS TO BE COM PUTED AND THEN AGGREGATED BY SETTING OFF THE LOSS, IF ANY, FROM TH E TRANSFER OF LONG-TERM CAPITAL ASSETS FROM THE GAIN, IF ANY, OF THE OTHER LONG-TERM CAPITAL ASSETS. AS PROVIDED IN S. 48, THE OPTION IS WITH THE ASSESS EE TO OR NOT TO AVAIL THE BENEFIT OF INDEXATION FOR THE COMPUTATION OF CAPITA L GAINS ON THE TRANSFER OF EACH OF THE LONG-TERM CAPITAL ASSET, IT IS ONLY AFTER COMPUTING THE CAPITAL GAINS AS PER S. 48, CAN IT BE AGGREGATED BY SETTING OFF THE LOSS UNDER S. 70 OF THE IT ACT AND IT IS THEN THAT THE R ATE OF TAX AS PROVIDED UNDER S. 112 IS APPLIED. THE SECOND PROVISO TO S. 1 12 PROVIDES THAT IF THE CAPITAL ASSET WHICH IS TRANSFERRED IS A LISTED SECU RITY OR UNITS OR A ZERO COUPON BOND, AND IF THE TAX PAYABLE THEREON EXCEEDS TEN PER CENT OF THE CAPITAL GAINS COMPUTED WITHOUT INDEXATION, THEN SUC H EXCESS SHALL BE IGNORED FOR THE PURPOSE OF COMPUTING THE TAX PAYABL E THE ASSESSEE. THUS, IT IS SEEN THAT THE LEGISLATURE INTENDED TO TAX THE CAPITAL GAINS WITH INDEXATION AT 20 PER CENT AND TO LIMIT THE TAX ON T HE CAPITAL GAINS ON TRANSFER OF LISTED SECURITIES OR UNITS OR ZERO COUP ON BONDS COMPUTED WITHOUT INDEXATION TO 10 PER CENT THEREOF. 4. SINCE THE LD CIT (A) HAS MERELY FOLLOWED THE DEC ISION OF THE ITAT IN THE CASE OF MOHANLAL N SHAH (SUPRA) AND SINCE IT IS AN ADMITTED POSITION THAT THE ISSUE IN APPEAL IS COVERED BY THE SAID CO-ORDINATE BENCH DECISION, WE SEE NO I.T.A NO.3069/ MUM/2010 SAVLA MOTOR AGENCIES PVT.LTD. 4 NEED TO INTERFERE WITH HIS CONCLUSIONS. WE APPRO VE THE SAME AND DECLINE TO INTERFERE IN THE MATTER. 5. IN THE RESULT, APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH, 2011 SD/- (D.K.AGARWAL) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 31 ST MARCH, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),13, MUMBAI 4. COMMISSIONER OF INCOME TAX, 7 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH J, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI