DCIT, Circle - 3, Kolkata, Kolkata V. M/s. Runit Investment Co. Ltd., Kolkata

ITA 51/KOL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78332 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 11-01-2011
• Court: TRIBUNAL
• Department Lawyers: P K CHAKRABORTY
• Assessee Lawyers: S M SURANA
• Keywords: Capital asset
• Section: 143(3); 147; 148; 263; 10; 154

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 51/KOL/2011 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2004-05 DEPUTY COMMISSIONER OF INCOME-TAX, VS. M/S. RUNIT INVESTMENT CO. LTD. CIRCLE-3, KOLKATA (PAN:AABCR6206R) (,- /APPELLANT ) (./,-/ RESPONDENT ) & & & & & / I.T.A NO. 594/KOL/2011 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2004-05 M/S. RUNIT INVESTMENT CO. LTD. VS. DEPUTY COMMIS SIONER OF INCOME-TAX, CIRCLE-3, KOLKATA. (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 24.04.2014 DATE OF PRONOUNCEMENT: 07.05.2014 FOR THE REVENUE: SHRI P. K. CHAKRABORTY, JCIT, SR. DR FOR THE ASSESSEE: SHRI S. M. SURANA, ADVOCATE $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THESE CROSS APPEALS BY REVENUE AND ASSESSEE ARE AR ISING OUT OF ORDER OF CIT(A)-1, KOLKATA IN APPEAL NO. 577/CIT(A)-I/CIR-3/09-10 DATE D 30.09.2010. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-3, KOLKATA U/S. 143(3)/147/263 OF T HE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEARS 2004 -05 VIDE HIS ORDER DATED 31.12.2009. 2. FIRST WE TAKE UP REVENUES APPEAL. THE ONLY ISS UE IN THIS APPEAL OF REVENUE IS, WHETHER THE ASSET I.E. SHARES HELD BY ASSESSEE FOR 12 MONTH S IS ELIGIBLE TO BE ASSESSEED AS LONG TERM CAPITAL GAIN OR SHORT TERM CAPITAL GAIN. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.1: 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.72,26,423/- BY TREATING THE SAME AS LONG TERM CAPITAL GAIN IGNORING THE FACT THAT IT IS ACTUALLY SHORT TERM CA PITAL GAIN. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEES NAT URE OF BUSINESS IS NBFC ACTIVITIES, ENGAGED IN THE BUSINESS OF TRADING, INVESTMENT IN S HARES AND GRANING OF LOANS AND ADVANCES. IN THE PRESENT CASE BEFORE US, ORIGINAL ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT VIDE ORDER 2 ITA NO. 51/K/2011 & ITA NO.594/K/2011 RUNIT INVESTMENT CO. LTD. AY:2004-05 DATED 18.07.2005 BUT SUBSEQUENTLY, THE SAME WAS REC TIFIED U/S. 154 OF THE ACT ON 28.11.2005. SUBSEQUENTLY, THE CIT PASSED REVISION ORDER U/S. 26 3 OF THE ACT, WHICH WAS UPHELD BY HONBLE JURISDICTIONAL HIGH COURT. SUBSEQUENTLY, A NOTICE U/S. 147 READ WITH SECTION 148 OF THE ACT WAS ISSUED DATED 16.03.2009 FOR THE REASON THAT THE CAP ITAL GAIN WAS TO BE ASSESSED AS SHORT TERM CAPITAL GAINS, WHICH HAS ESCAPED ASSESSMENT. ACCOR DING TO AO, THE ASSESSEE HAS DECLARED CAPITAL GAINS OF RS.72,29,600/-, WHICH WAS A SHORT TERM CAPITAL GAIN BUT ASSESSEE DECLARED THE SAME AS LONG TERM CAPITAL GAIN. ACCORDING TO AO, T HIS BEING A SHORT TERM CAPITAL GAIN IS NOT EXEMPT U/S. 10(36) OF THE ACT AND IS TO BE ASSESSED AS SHORT TERM CAPITAL GAIN IN VIEW OF THE PROVISIONS OF SECTION 2(42A) OF THE ACT. THE MAIN REASON OF THE AO TO ASSESS THE SAME AS SHORT TERM CAPITAL GAIN WAS THAT AS PER THE PROVISIONS OF SECTION 2(42A) OF THE ACT CLEARLY STATES THAT IN THE ABSENCE OF WORDS FROM AND TO, WHICH CLEA RLY INDICATES TO EXCLUDE THE DATE TO PURCHASE AND PERHAPS THE TWELVE MONTHS SHOULD BE CO MPLETED PRIOR TO THE DATE OF SALE. THE AO MAINLY RELYING ON THE PROVISIONS OF SECTION 2(42A) OF THE ACT, TREATED THE LONG TERM CAPITAL GAIN DECLARED BY ASSESSEE AS SHORT TERM CAPITAL GAIN VID E PARA 5 AND 6 OF THE ASSESSMENT ORDER, WHICH IS AS UNDER: 5. HERE THE ASSESSEE IN HIS SUBMISSION DT.23. 12.0 9 CALCULATED THE TOTAL DAYS OF HOLDING WAS 366 DAYS WHICH INCLUDES FEBRUARY OF 29 DAYS. TH E MATTER OF LEAP YEAR IS A SPECIAL INCIDENT OCCURS ONCE IN A FOUR YEAR AND THE ACT GEN ERALLY DEALS WITH GENERAL INCIDENT. WHEN THERE IS NOTHING SPECIFICALLY MENTIONED IN THE ACT REGARDING THE SPECIAL INCIDENT THEN THE GENERAL COUNTING WILL BE ACCEPTED. HENCE, IN NO WAY THE PERIOD OF HOLDING IS MORE THAN 12 MONTHS. AGAIN REGARDING THE CITED CASE OF MANSH MA HESWARY AND VEGETABLE PRODUCTS LTD. AS SUCH THERE IS NO TWO NTERPRETATON OR ANY AMBIG UTY. IT HAS WHATSOEVER WITH A HOLDING OF THE SHARES WAS NOT MORE THAN 12 MONTHS. HENCE, CAPI TAL GAIN ARISES FROM THE SALE OF TWO SETS OF SHARES OF VAM ORGANICS LTD. (LATER CHANGE T O JUBILLANT ORGANOSYS LTD.) IS CONSIDERED AS SHORT-TERM CAPTAL GAIN. 6. AS PER CHART MENTIONED IN PARA 3, THE TOTAL SH ORT-TERM CAPITAL GAIN IS RS.72,26,423/-. ON THE BASIS OF THE RETURN OF INCOME AND INFORMATIO N/DOCUMENTS COLLECTED DURNG THE COURSE OF HEARING AND ABOVE DISCUSSION THE TOTAL SH ORT-TERM CAPITAL GAIN OF THE ASSESSEE CALCULATED AT RS.72,26,423/-. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT( A), WHO HELD THAT THE SHARES ARE HELD FOR TWELVE MONTHS AND ARE ELIGIBLE FOR CLAIMING THE SAME TO BE LONG TERM CAPITAL GAIN AS PER THE PROVISION OF SECTION 2(42A) OF THE ACT AS WELL AS S ECTION 10(36) OF THE ACT. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. THE ADMITTED FACTS ARE THAT FOLLOWING ARE THE DETAI LS OF PURCHASE AND SALE OF TWO SETS OF SHARES: SL. NO NAME OF THE COMPANY DT. OF PURCHASE QUA- NTITY PURCHASE AMOUNT (RS.) DT. OF SALE QUANTITY SALE AMOUNT (RS.) REMARKS 1. VAM ORGANICS 10.03.03 2500 3,79,125 10.03.04 250 0 32,33,475 GAIN OF 3 ITA NO. 51/K/2011 & ITA NO.594/K/2011 RUNIT INVESTMENT CO. LTD. AY:2004-05 LTD. (CHANGE TO JUBILLANT ORGANOSYS LTD.) RS.28,54,350 2. -DO- 11.03.03 3804 5,73,072 11.03.04 3804 49 ,49,145 GAIN OF RS.43,76,073 TOTAL GAIN RS. 72,26,423 THERE IS NO DISPUTE ABOUT THE ABOVE FACTS. ADMITTE DLY THE REVENUE ALSO CONCEDED THAT THE ASSESSEE IS HOLDING THE SHARES FOR 12 MONTHS, WHICH IS CLEAR FROM THE ASSESSMENT ORDER BUT REVENUES CHARGE IS THAT THE SHARE SHOULD BE HELD M ORE THAN 12 MONTHS AND ONLY THEN THE ASSESSEE CAN TAKE BENEFIT OF THE PROVISIONS OF SECT ION 10(36) OF THE ACT IN RESPECT OF EXEMPTION OF LONG TERM CAPITAL GAIN IN RELATION TO ELIGIBLE E QUITY SHARES. THE PROVISION OF SECTION 2(42A) OF THE ACT TALKS OF SHORT TERM CAPITAL ASSET WHICH MEANS A CAPITAL ASSET HELD BY AN ASSESSEE FOR NOT MORE THAN 12 MONTHS IMMEDIATELY PRECEDING THE DATE OF ITS TRANSFER. THE RELEVANT PROVISION OF SECTION 2(42A) OF THE ACT READS AS UND ER: 2(42A) SHORT TERM CAPITAL ASSET MEANS A CAPITAL ASSET HELD BY AN ASSESSEE FOR NOT MORE THAN THIRTY SIX MONTHS IMMEDIATELY PRECEDING THE DA TE OF ITS TRANSFER. [PROVIDED THAT IN THE CASE OF A SHARE HELD IN A COM PANY (OR ANY OTHER SECURITY LISTED IN A RECOGNISED STOCK EXCHANGE IN INDIA OR A UNIT OF THE UNIT TRUST OF INDIA ESTABLISHED UNDER THE UNIT TRUST OF INDIA ACT, 1963 (52 OF 1963) OF A UNIT OF A MUTUAL FUND SPECIFIED UNDER CLAUSE (23D) OF SECTION 10) (OR A ZERO COUPON BOND) , THE PROVISIONS OF THIS CLAUSE SHALL HAVE EFFECT AS IF FOR THE WORDS THIRTY SIX MONTHS , THE WORDS TWELVE MONTHS HAD BEEN SUBSTITUTED.] SIMILARLY, THE CLAIM MADE BY ASSESSEETHAT SHARES SO LD ARE LONG TERM CAPITAL ASSET EXEMPT U/S. 10(36) OF THE ACT. THE RELEVANT PROVISIONS OF SECT ION 10(36) READS AS UNDER: 10(36)- ANY INCOME ARISING FROM THE TRANSFER OF LO NG TERM CAPITAL ASSET, BEING AN ELIGIBLE EQUITY SHARE IN A COMPANY PURCHASED ON OR AFTER THE 1 ST DAY OF MARCH, 2003 AND BEFORE THE 1 ST DAY OF MARCH, 2004 AND HELD FOR A PERIOD OF TWELVE MONTHS OR MORE. EXPLAINING THIS PROVISION, A CIRCULAR WAS ISSUED BY CBDTI.E. CIRCULAR NO. 7 OF 2003 DATED 5.9.2003 (REPORTED IN (2003) 263 ITR (ST.) 62 WAS I SSUED WHEREIN IT WAS EXPLAINED THAT IN ORDER TO GIVE INCENTIVE FOR INVESTMENT IN EQUITY SHARES A NEW EXEMPTION CLAUSE IN SECTION 10(36) WAS INSERTED AND SPECIFICALLY MENTIONED THE PERIOD OF H OLDING I.E. PERIOD OF 12 MONTHS OR MORE.THE RELEVANT CIRCULAR READS AS UNDER: 17. EXEMPTION OF LONG TERM CAPITAL GAINS ON TRANSF ER OF LISTED EQUITY SHARES 17.1 SECTION 10 OF THE INCOME-TAX ACT, 1961, RELATES TO INCOMES, WHICH DO NOT FORM PART OF TOTAL INCOME. 17.2. IN ORDER TO GIVE INCENTIVE FOR INVESTMENT IN EQUITY SHARES, A NEW CLAUSE (36) HAS BEEN INSERTED IN SECTION 10 PROVIDING THAT ANY INCO ME ARISING FROM TRANSFER OF A LONG TERM CAPITAL ASSET, BEING ELIGIBLE EQUITY SHARE IN A COMPANY LISTED ON ANY RECOGNIZED STOCK EXCHANGE IN INDIA AND ACQUIRED ON OR AFTER MA RCH 1, 2003, BUT BEFORE MARCH 1, 2004, AND HELD FOR A PERIOD OF TWELVE MONTHS OR MOR E SHALL BE EXEMPT FROM TAX. THE 4 ITA NO. 51/K/2011 & ITA NO.594/K/2011 RUNIT INVESTMENT CO. LTD. AY:2004-05 TGRANSACTION OF SALE OF SUCH SHARE SHOULD HAVE BEEN ENTERED INTO ON A RECOGNIZED STOCK EXCHANGE IN INDIA. 17.3. IT HAS ALSO BEEN STATED IN THE EXPLANATION TH AT ELIGIBLE EQUITY SHARE FOR THE PURPOSES OF THIS CLAUSE SHALL MEAN (I) ANY EQUITY S HARE IN A COMPANY WHICH IS A CONSTITUENT OF BSE-500 INDEX OF THE STOCK EXCHANGE, MUMBAI, AS ON THE MARCH 1, 2003, (II) ANY EQUITY SHARE OF A COMPANY ALLOTTED THROUGH A PUBLIC ISSUE ON OR AFTER THE MARCH 1, 2003, AND LISTED ON A RECOGNISED STOCK EXCHANGE IN INDIA BEFORE THE MARCH 1, 2004. 17.4. IT IS FURETHER CLARIFIED THAT THE TERM PUBLI C ISSUE USED IN CLAUSE (II) OF THE EXPLANATION TO SECTION 10(36) SHALL INCLUDE THE OFF ER OF EQUITY SHARES IN A COMPANY TO THE PUBLIC THROUGH A PROSPECTUS, WHETHER BY THE COMPANY OR BY THE EXISTING SHAREHOLDERS OF THE COMPANY. 17.5. THIS AMENDMENT WILL TAKE EFFECT FROM APRIL 1, 2004, AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2004-05 AND SUBSEQU ENT YEARS. 6. WE FIND THAT BY FINANCE ACT, 2003 A NEW CLAUSE (36) HAS BEEN INSERTED IN SECTION 10 OF THE ACT W.E.F. 01.04.2004 SO AS TO PROVIDE THAT ANY INCOME ARISING FROM THE TRANSFER OF LONG TERM CAPITAL ASSET, BEING AN ELIGIBLE EQUITY SHARE IN A COMPANY PURCHASED ON OR AFTER 01.03.2003 BUT BEFORE 01.03.2004 AND HELD FOR A PERIOD OF TWEL VE MONTHS OR MORE SHALL BE EXEMPT FROM TAX FOR AND FROM AY 2004-05. IT MEANS THAT THIS CIRCUL AR AND THE CLAUSE (36) AS INSERTED IN SECTION 10 BY FINANCE ACT, 2003 CLEARLY MENTIONED THE HOLDI NG PERIOD OF SHARES AS TWELVE MONTHS OR MORE FOR CLAIMING EXEMPTION IN RESPECT OF LONG TERM CAPITAL GAINS IN RELATION TO SHARES. THERE IS NO DISPUTE THAT THE ASSESSEE HAS HELD THE SHARES FO R TWELVE MONTHS, AS NOTED IN THE ASSESSMENT ORDER BY REVENUE, THERE IS NO SCOPE FOR ANY OTHER I NTERPRETATION OTHER THAN THAT THE SHARES HELD BY THE ASSESSEE ARE LONG TERM CAPITAL ASSET ELIGIBL E FOR EXEMPTION UNDER CLAUSE (36) OF SECTION 10 OF THE ACT. HENCE, WE CONFIRM THE ORDER OF CIT( A) AND ALLOW THE CLAIM OF THE ASSESSEE. 7. THE ISSUE OF ASSESSEES APPEAL IS REGARDING JURI SDICTIONAL POINT. THE SAME WAS NOT SERIOUSLY ARGUED BY LD. COUNSEL FOR THE ASSESSEE. HENCE, THE SAME IS DISMISSED BEING NOT PRESSED. 8. IN THE RESULT, BOTH APPEALS OF REVENUE AND ASSES SEE ARE DISMISSED. 9. ORDER IS PRONOUNCED IN THE OPEN COURT ON 07 TH MAY, 2014 SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 07 TH MAY, 2014 12 '3' 4 JD.(SR.P.S.) 5 ITA NO. 51/K/2011 & ITA NO.594/K/2011 RUNIT INVESTMENT CO. LTD. AY:2004-05 $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT- DCIT, CIRCLE-3, KOLKATA 2 ./,- / RESPONDENT M/S. RUNIT INVESTMENT CO. LTD., 12, GOVT. PLACE (EAST), 3 RD FLOOR, KOLKATA-69.. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .