ACIT 23(1) ERSTWHILE ACIT 19(3), MUMBAI V. IL & FS EMPLOYEES WELFARE TRUST, MUMBAI

ITA 4138/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0502 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 03-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AIRIJU JAI KARAN DR
• Assessee Lawyers: DILIP V LAKHANI
• Keywords: Cost of acquisition
• Section: 10

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, I MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.4138/MUM/2015 ASSESSMENT YEAR: 2011-12 ACIT-23(1), ERSTWHILE ACIT-19(3), ROOM NO.113, 1 ST FLOOR, MATRU MANDIR, T ARDEO GRANT ROAD, MUMBAI-400007 / VS. M/S IL & FS EMPLOYEES WELFARE TRUST, THE IL & FS FINANCIAL CENTRE, PLLT NO.C-22, G BLOCK BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051 ( / REVENUE) ( #$% & /ASSESSEE) PAN. NO . AAATI0422N ' & ( / DATE OF HEARING : 17/05/2017 ' & ( / DATE OF ORDER: 26/05/2017 ! / REVENUE BY SHRI AIRIJU JAI KARAN -DR #$% & ! / ASSESSEE BY SHRI DILIP V. LAKHANI ITA NO.4138/MUM/2015 & IL & FS EMPLOYEES WELFARE TRUST 2 / O R D E R PER JOGINDER SINGH(JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 07/04/2015 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE GRUDGE OF THE DEPARTMENT IS WITH RESPECT TO DIR ECTION TO THE ASSESSING OFFICER TO RE-COMPUTE THE LTC LOSS ON ACCOUNT OF SALE/TRANSFER OF SHARES OF IL & FS DURING THE YE AR BY TAKING INTO ACCOUNT THE PROVISIONS OF SECTION 45(2A) OF TH E ACT AND CIRCULAR NO.768 DATED 24/06/1998 WITHOUT APPRECIATI NG THE FACT THAT IL & FS SOLD DURING THE YEAR, WERE NOT LI STED IN THE STOCK EXCHANGE, THEREFORE, THE FIFO METHOD ADOPTED BY THE ASSESSEE FOR WORKING THE CAPITAL GAIN IS NOT CORREC T. 2. DURING HEARING, AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE, SHRI DILIP V. LAKHANI, CONTENDED THAT THE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE C ASE OF ASSESSEE ITSELF FOR ASSESSMENT YEAR 2009-10 (ITA NO.5235/MUM/2014 AND 5223/MUM/2014) ORDER DATED 30/09/2016 AND ALSO FOR ASSESSMENT YEAR 2010-11 (IT A NO.5485/MUM/2014). THIS FACTUAL MATRIX WAS CONSENTE D TO BE CORRECT BY SHRI AIRIJU JAI KARAN, LD. DR, 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE ORDER OF THE TRIBUNAL DATED 30/09/2016 (SU PRA) FOR ITA NO.4138/MUM/2015 & IL & FS EMPLOYEES WELFARE TRUST 3 ASSESSMENT YEAR 2010-11, IN THE CASE OF ASSESSEE IT SELF, FOR READY REFERENCE AND ANALYSIS:- INSTANT APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 27TH JUNE 2014, PASSED BY THE LEARNED COMMISS IONER (APPEALS) 30, MUMBAI, FOR THE ASSESSMENT YEAR 2010 11. THE ONLY EFFECTIVE GROUND RAISED BY THE DEPARTMENT READ S AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER (APPEALS) ERRED IN DIRECTI NG THE ASSESSING OFFICER TO COMPUTE THE LONG TERM CAPITAL GAIN ON ACCOUNT OF SALE / TRANSFER OF SHARES OF IL & FS DUR ING THE YEAR BY DETERMINING COST OF ACQUISITION UNDER SECTION 45(2A ) OF THE ACT R/W CIRCULAR NO.768 DATED 24.06.1998 TO THE CBDT IN STEAD OF AVERAGE COST METHOD ADOPTED BY THE A.O. WHEREBY DIS ALLOWED LONG TERM CAPITAL GAIN OF ` 12,76,44,285. 2. BRIEF FACTS ARE, THE ASSESSEE TRUST IS ENGAGED I N THE ACTIVITIES OF INVESTMENT IN SHARES AND SECURITIES, DEALING IN SHA RES, DEBENTURE AND OTHER SECURITIES. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE FILED ITS RETURN OF INC OME DECLARING INCOME OF ` 57,73,28,600 ON 22ND JULY 2010. DURING THE ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSES SING OFFICER THAT THE ASSESSEE HAD CLAIMED LONG TERM CAPITAL LOS S OF ` 29,30,17,200. ON VERIFYING THE DETAILS OF ASSESSEE S CLAIM, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD TAKEN THE COST OF ACQUISITION OF SHARES @ BY APPLYING FIFO METHOD A S PER SECTION 45(2A) OF THE ACT. THE ASSESSING OFFICER, H OWEVER, REJECTED ASSESSEES CLAIM AND INVOKING THE PROVISIO NS OF SECTION 55(2)(AA) OF THE ACT COMPUTED THE LONG TERM CAPITAL LOSS AT ` 16,53,72,915. BEING AGGRIEVED OF THE AFORESAID DECI SION OF THE ASSESSING OFFICER, ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3. DURING THE COURSE OF APPEAL PROCEEDINGS, THE LEA RNED COMMISSIONER (APPEALS) HAVING NOTED THAT IN ASSESSM ENT YEAR 2009 10, WHILE DECIDING SIMILAR NATURE OF DISPUTE IN ASSESSEES ITA NO.4138/MUM/2015 & IL & FS EMPLOYEES WELFARE TRUST 4 OWN CASE, HE HAS ALLOWED ASSESSEES CLAIM BY DELETI NG THE ADDITION MADE BY THE ASSESSING OFFICER, FOLLOWED TH E SAME AND ACCEPTED ASSESSEES CLAIM OF LONG TERM CAPITAL LOSS . BEING AGGRIEVED, THE DEPARTMENT IS IN APPEAL BEFORE US. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LEARNED COUNS ELS APPEARING FOR BOTH THE PARTIES AGREED BEFORE US THA T THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 200910. ON A PERUSAL OF THE ORDER PASSED BY THE TRIBUNAL IN ITA NO.5235/ MUM./2014, ETC., DATED 26TH AUGUST 2016, IN ASSESSEES OWN CAS E FOR THE ASSESSMENT YEAR 200910, IT IS NOTICED THAT THE TRI BUNAL WHILE DECIDING THE ISSUE HAS UPHELD THE CLAIM OF THE ASSE SSEE WITH THE FOLLOWING OBSERVATIONS: 10. THE REVENUE HAS CHALLENGED THE DIRECTION GIVEN BY THE CIT(A) ON THIS ISSUE TO THE ASSESSING OFFICER TO CO MPUTE THE LONG TERM CAPITAL LOSS ON ACCOUNT OF IL & FS DURING THE YEAR BY DETERMINING COST OF ACQUISITION U/S.45(2A) OF THE A CT READ WITH CIRCULAR NO.768 DATED 24.06.1998. HOWEVER, THE REVE NUE IS OF THE VIEW THAT THE AVERAGE COST METHOD ADOPTED BY TH E ASSESSING OFFICER IS LIABLE TO BE IMPLEMENTED WHEREAS THE ASS ESSING OFFICER DISALLOWED THE LONG TERM CAPITAL LOSS TO THE TUNE O F RS.7,50,92,618/-. BEFORE GOING FURTHER IT IS NECESS ARY TO ADVERT THE FINDING OF THE LEARNED CIT(A) IN THE 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: (2A) WHERE ANY PERSON HAS HAD AT ANY TIME DURING P REVIOUS YEAR ANY BENEFICIAL INTEREST IN ANY SECURITIES, THE N, ANY PROFITS OR GAINS ARISING FROM TRANSFER MADE BY THE DEPOSITORY OR PARTICIPANT OF SUCH BENEFICIAL INTEREST IN RESPECT OF SECURITIE S SHALL BE CHARGEABLE TO INCOME-TAX AS THE INCOME OF THE BENEF ICIAL OWNER OF THE PREVIOUS YEAR IN WHICH SUCH TRANSFER TOOK PL ACE AND SHALL NOT BE REGARDED AS INCOME OF THE DEPOSITORY WHO IS DEEMED TO BE ITA NO.4138/MUM/2015 & IL & FS EMPLOYEES WELFARE TRUST 5 THE REGISTERED OWNER OF SECURITIES BY VIRTUE OF SUB -SECTION (1) OF SECTION 10 OF THE DEPOSITORIES ACT, 1996, AND FOR T HE PURPOSE OF (I) SECTION 48; AND (II) (II) PROVISO TO CLAUSE (42A) OF SECTION 2, THE COST OF ACQUISITION AND THE PERIOD OF HOLDING OF ANY SECURI TIES SHALL BE DETERMINED ON THE BASIS OF THE FIRST-IN-FIRST-OUT M ETHOD. INSERTED BY THE DEPOSITORIES, ACT, 1996, W.E.F FROM 20.09.19 95, WHICH PROVIDES AS FOLLOWS: . THE APPELLANTS IS CONTENTION THAT IT HAS DOMICILED IL & FS SHARES IN TWO DIFFERENT DEMAT ACCOUNTS. IN F.Y. 200 8-09, 11,54,613 SHARES WERE LYING AS OPENING STOCK IN THE DEMAT ACCOUNT WITH DP ID 11177127 AND 56,09,953 IL &FS SH ARES LYING AS OPENING STOCK IN THE DEMAT ACCOUNT 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, TAKEN COST OF 11,54,613 SHARES RS.15 0 PER SHARE AND FOR THE BALANCE 4,25,138 SHARES AT RS.85.06 PER SHARE. I, THEREFORE, FIND THAT SE.45(2A) IS A SPECIFIC PROVIS ION UNDER THE ACT, WHICH PRESCRIBED THE METHOD TO DETERMINE THE C OST OF 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 AN D TRANSFERRED IN THE DEMAT FORM AND FIFO METHOD IS NOT APPLICABLE IN SUCH CASES. HE HAS ALSO NOT DOUBTED THE COMPUTATION OF C APITAL GAIN ON FIFO BASIS. HE HAS MERELY APPLIED THE ABOVE TWO REFERRED DECISIONS WITHOUT DISCUSSING AS TO HOW SE.45(2A) IS NOT APPLICABLE IN THE ABOVE CASE AND HOW THE TWO DECISI ONS WITHOUT DISCUSSING AS TO HOW SEC.45(2A) IS NOT APPLICABLE I N THE ABOVE CASE AND HOW THE TWO DECISIONS OVER-RIDE SPECIFIC P ROVISIONS OF THE ACT. I FURTHER FIND THAT THE DECISION IN THE CA SE OF BOMBAY HIGH COURT IN THE CASE OF DAHIBEN UMEDBHAI (SUPRA) AND EMERALD & CO. (SUPRA) WERE RENDERED PRIOR TO THE IN SERTION OF PROVISION OF SUB-SECTION (2A) U/S. 45 OF THE ACT. I N VIEW OF THE SAME, THE ABOVE TWO CONDITIONS ARE NOT APPLICABLE. I THEREFORE, DIRECT 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 ITA NO.4138/MUM/2015 & IL & FS EMPLOYEES WELFARE TRUST 6 TAKING INTO ACCOUNT THE PROVISIONS OF SEC.45(2A) OF THE ACT AND CIRCULAR NO.768 DATED 24.06.1998. FURTHER, WHILE CO MPUTING THE INCOME / LOSS UNDER THE ABOVE HEAD, HE SHOULD TAKE INTO ACCOUNT THE CORRECT FIGURES OF OPENING STOCK AS ALSO FOR TH E PURPOSE OF CALCULATION OF COST OF THE SHARES. 4.1 THE ABOVE GR OUNDS OF APPEAL TAKEN BY THE APPELLANT, THUS, STAND ALLOWED. AT THE TIME OF ARGUMENT NO DISTINGUISHABLE FACTS HA VE BEEN PLACED ON RECORD BY THE REVENUE TO WHICH IT CAN BE ASSUME THAT THE LEARNED CIT(A) HAS PASSED THE ORDER WRONGLY AND ILLEGALLY. THE SPECIFIC DIRECTIONS HAS BEEN GIVEN BY THE CIT(A ) TO DETERMINE THE COST OF ACQUISITION U/S.45(2A) OF THE ACT READ WITH CIRCULAR NO.768 DATED 24.06.1998. NOTHING SEEMS UNJUSTIFIABL E. SINCE THE MATTER OF CONTROVERSY HAS RIGHTLY BEEN ADJUDICATED BY THE CIT(A), THEREFORE, WE NOWHERE FOUND ANY GROUND TO INTERFERE WITH THIS ORDER, THEREFORE WE UPHOLD THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 9. ACCORDINGLY, APPEAL OF THE ASSESSEE IS HEREBY AL LOWED AND APPEAL OF THE REVENUE IS HEREBY DISMISSED. 5. AS THERE IS NO MATERIAL DIFFERENCE IN FACTS IN T HE IMPUGNED ASSESSMENT YEAR NOR ANY CONTRARY DECISION HAS BEEN BROUGHT TO OUR NOTICE, RESPECTFULLY FOLLOWING THE AFORESAID DE CISION OF THE COORDINATE BENCH OF THE TRIBUNAL RENDERED IN ASSES SEES OWN CASE CITED SUPRA, WE UPHOLD THE ORDER OF THE LEARNE D COMMISSIONER (APPEALS) BY DISMISSING THE GROUND RAI SED BY THE REVENUE. 6. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . WE FIND THAT IN THE AFORESAID ORDER, WHILE DISMISS ING THE APPEAL OF THE REVENUE, THE TRIBUNAL DULY CONSIDERED THE DECISION FOR THE TRIBUNAL FOR ASSESSMENT YEAR 2009- 10 (SUPRA) ORDER DATED 26/08/2016 AND THEREAFTER REACH ED TO A PARTICULAR CONCLUSION. THERE IS NO MATERIAL DIFFERE NCE IN THE FACTS OF THE YEAR UNDER CONSIDERATION. RESPECTFULLY FOLLOWING ITA NO.4138/MUM/2015 & IL & FS EMPLOYEES WELFARE TRUST 7 THE DECISIONS OF THE CO-ORDINATE BENCH THAT TOO IN THE OWN CASE OF THE ASSESSEE, WE UPHOLD THE IMPUGNED ORDER, RESULTING INTO DISMISSAL OF APPEAL OF THE REVENUE. FINALLY, APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 26/05/2017. SD/- SD/- ( MANOJ KUMAR AGGARWAL ) (JOGINDER SINGH) '!# / ACCOUNTANT MEMBER $!# /JUDICIAL MEMBER MUMBAI; * DATED : 26 /05/2017 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-. / THE APPELLANT (RESPECTIVE ASSESSEE) 2. /0-. / THE RESPONDENT. 3. 1& ( , ) / THE CIT, MUMBAI. 4. 1& / CIT(A)- , MUMBAI, 5. 34 /&# , ,( # 5 , / DR, ITAT, MUMBAI 6. 6$ 7 / GUARD FILE. ! / BY ORDER, 03,& /& //TRUE COPY// /! (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI