ACIT, New Delhi V. Mrs. Archana Gupta, New Delhi

ITA 4491/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3666 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 26-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR
• Assessee Lawyers: MUKESH DUA
• Keywords: Capital asset
• Section: 45(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER ITA. NO.4491/D/09 ASSESSMENT YEAR : 2006-07 ASSTT. CIT, VS. MRS. ARCHANA GUPTA, CIRCLE 30(1), 4594-A/9, DARYA GANJ, NEW DELHI NEW DELHI PAN NO.AADPG4191K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMRENDRA KUMAR, SR. DR RESPONDENT BY : SHRI R.S. SINGHVI & MUKESH DUA, CA ORDER PER K.G. BANSAL: AM: THIS APPEAL OF THE REVENUE EMANATES FROM THE ORDER OF CIT(A)- XXV, NEW DELHI, PASSED ON 12.10.2009 IN APPEAL NO.1 54/07-08, AND IT PERTAINS TO ASSESSMENT YEAR 2006-07. THE ONLY SUBSTANTIVE GROUND IN THE APPEAL IS THAT ON THE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.14.05 LAC, MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CO NVERSION OF SHARES FROM STOCK IN TRADE TO INVESTMENT. 2. THE FACTS OF THE CASE ARE THAT OUT OF STOCK IN T RADE, THE ASSESSEE TRANSFERRED 1,00,000 SHARES OF BHARTI TELE VENTURE LTD. (BTVL FOR SHORT) TO THE INVESTMENTS. THE COST OF THESE SHARES WAS RS.2,21,45,000/-. THESE SHARES HAD BEEN VALUED IN STOCK AT 2 RS.2,01,65,000/-. THIS VALUE WAS REVISED TO RS.2,0 7,40,000/- IN THE COURSE OF ASSESSMENT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE OBTAINED A BENEFIT OF RS.14,05,000/- ( RS.2,21,45,000/- - RS.2,07,40,000/-) BY TREATING THE STOCK IN TRADE AS A CAPITAL ASSET. THEREFORE, HE BROUGHT THIS AMOUNT TO TAX BY INCLUDI NG IT IN THE TOTAL INCOME OF THE ASSESSEE. THE ADDITION WAS DELETED B Y THE LEARNED CIT(A) BY GIVING A FINDING THAT THERE IS NO PROVISI ON IN THE STATUTE TO DEEM SUCH A POTENTIAL BENEFIT AS INCOME. OTHERWISE , THERE WAS NO TRANSFER AS THE ASSESSEE CONTINUED TO BE THE OWNER OF THE SHARES. 3. BEFORE US, THE LEARNED DR REFERRED TO FINDINGS O F THE ASSESSING OFFICER AND THE LEARNED CIT(A) IN THE MATTER. IT W AS FAIRLY STATED BY HIM THAT SINCE THE ASSESSEE CONTINUED TO BE THE OWN ER OF THE SHARES ALBEIT AS INVESTMENTS, THERE WAS NO SALE OF SHARES TO ANY THIRD PARTY. 3.1 IN REPLY, THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO PARAGRAPH 5.1 OF THE IMPUGNED ORDER, I N WHICH THE RATIO OF THE CASE OF KIKABHAI PREMCHAND VS. CIT (1953) 24 IT R 506 (SUPREME COURT) HAS BEEN DISCUSSED. IT IS MENTIONE D THAT IN THAT CASE SHARES AND SILVER BARS WERE WITHDRAWN FROM STO CK IN TRADE AND SETTLED ON TRUST WHERE THE ASSESSEE WAS THE MANAGIN G TRUSTEE. THE HONBLE COURT HELD THAT NO INCOME ARISES TO THE ASS ESSEE AS A RESULT OF THE AFORESAID TRANSFER. IT WAS FURTHER HELD THA T SOME BENEFIT MIGHT HAVE BEEN STORED UP BY THE ASSESSEE FOR HIMSELF. B UT THE TRANSACTION, NOT BEING A BUSINESS TRANSACTION AND T HE ASSESSEE HAVING DERIVED NO IMMEDIATE PECUNIARY GAIN, THE TRA NSFER WAS NOT EXIGIBLE TO TAX INASMUCH AS THE INCOME-TAX ACT DID NOT PROVIDE FOR 3 TAXATION OF A POTENTIAL FUTURE BENEFIT. RELYING ON THIS DECISION, IT WAS HELD IN PARAGRAPH 5.3 THAT SUCH A CONVERSION DID NO T CONSTITUTE TRANSFER WITHIN THE MEANING OF SECTIONS 2(47) AND 45(2). 3.2 RELIANCE WAS ALSO PLACED ON THE DECISION OF H BENCH OF MUMBAI TRIBUNAL IN THE CASE OF ACIT VS. BRIGHT STAR INVESTMENT (P) LTD. (2008) 24 SOT 288, IN WHICH IT WAS MENTIONED T HAT THE PROVISION CONTAINED IN SECTION 45(2) DEALS WITH THE CONVERSIO N OF A CAPITAL ASSET INTO STOCK IN TRADE. SUCH A TRANSACTION IS DEEMED TO BE THE TRANSFER, BUT THE CAPITAL GAINS ON SUCH TRANSFER BECOME TAXAB LE ONLY WHEN THE STOCK IN TRADE IS SOLD. THERE IS NO PROVISION IN T HE ACT FOR A CONTRARIAN SITUATION IN WHICH CONVERSION OF STOCK IN TRADE INT O INVESTMENT IS DEEMED TO BE THE TRANSFER. 3.3 IT WAS ALSO SUBMITTED THAT AS AND WHEN THE SHAR ES OR A PART OF THE SHARES WILL BE SOLD, CAPITAL GAIN WILL BE OFFER ED FOR TAXATION AND THE GAIN WILL BE COMPUTED ON THE BASIS OF THE COST OF A CQUISITION AND NOT THE VALUE AT WHICH THE CONVERSION HAS BEEN MADE. 4 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBM ISSIONS MADE BEFORE US. THE RATIO OF THE CASE OF KIKABHAI PREMCHAND AND BRIGHT STAR INVESTMENT (P) LTD. (SUPRA) IS APPLICAB LE TO THE FACTS OF THE CASE AS NO TRANSFER HAS BEEN MADE IN FAVOUR OF ANY THIRD PARTY. THE ASSESSEE WAS THE OWNERS OF SHARES AND HE CONTINUES TO BE THE OWNER THEREOF. THERE CANNOT BE A TRANSFER TO SELF UNLESS A FICTION IS SPECIFICALLY CREATED UNDER ANY STATUTORY PROVISION. AS MENTIONED EARLIER, THERE IS NO CONTRARIAN PROVISION TO SECTIO N 45(2). IN ANY CASE, THE SHARES HAVE ALSO NOT BEEN TRANSFERRED TO ANY TH IRD PARTY. IN VIEW 4 THEREOF, IT IS HELD THAT NOTHING IS LIABLE TO BE TA XED IN THE HANDS OF THE ASSESSEE ON ACCOUNT OF THE AFORESAID CONVERSION. 4. IN RESULT, THE APPEAL IS DISMISSED. 5. THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 09.07 .2010. SD/- SD/- ( RAJPAL YADAV ) ( K.G. BANSAL ) JUDICIAL MEMBER ACCOUNTANT ME MBER DT.9.07.2010. NS COPY FORWARDED TO:- 1. ASSTT. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE -30(1), NEW DELHI. 2. MRS. ARCHANA GUPTA, 4594-A/9, DARYA GANJ, NEW DE LHI. 3. THE CIT 4. THE CIT (A), NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY BY ORDER (ITAT, NEW DELHI).