SHRI RAJENDRA PATHAK, UDAIPUR V. ADIT, Jaipur

ITA 53/JPR/2012

• Counselvise Citation: 5323114 RSA 2012
• Duration Of Justice: 3 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 18-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEENA JEPH JCIT DHK
• Keywords: Capital asset; Invalid notice; Gift; Residential status; Share purchase agreement; Opportunity of being heard; Additional evidence
• Section: 142(1); 5(2); 27; 6; 139

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA-@ ITA NO. 53/JP/2012 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 . SHRI RAJENDRA PATHAK, 6-7, SECTOR-3, SHANTI NAGAR, UDAIPUR. CUKE VS. ASSTT. DIRECTOR INCOME-TAX (INTL. TAXATION) JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAEPP 4270 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI RAJEEV SOGANI (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SMT. NEENA JEPH (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 21.05.2015. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 11/8/2015. VKNS'K@ ORDER PER SHRI T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATING FROM THE ORDER OF LD. CIT (A)- II, JAIPUR DATED 01.10.2011 FOR THE ASSESSMENT YEAR S 2008-09. THE DETAILED GROUNDS RAISED ARE AS UNDER :- 1. THAT THE LD. CIT (A)-II JAIPUR ERRED IN LAW AND FAC TS WHILE UPHOLDING THE JURISDICTION OF LD. ACIT-2, UDAIPUR AND NOT QUA SHING THE WHOLE ASSTT. PROCEEDINGS ON THE BASIS OF FOLLOWING FACTS :- THAT THE NOTICE ISSUED U/S 143(2) OF THE I. TAX ACT , 1961 DTD. 22.9.2009 (SERVED ON 30-9-2009) BY THE ASSTT. COMMI SSIONER OF I. TAX, CIRCLE-2, UDAIPUR (RAJ.) PICKING UP THE CASE IN SCR UTINY IS INVALID, BAD IN 2 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. LAW AND WITHOUT JURISDICTION. AS PER THE NOTIFICATI ON ISSUED VIDE F. NO. ADDL DIT (INTL. TAX)JPR/JURIS/2008-09/93 DTD. 1 ST SEPT. 2008 IN EXERCISE OF POWERS CONFERRED BY THE CENTRAL BOARD OF DIRECT TAXES U/S (1) & (2) OF SECTION 120 OF THE I. TAX ACT, 1961, THE JURISDI CTION OF THE CASE (I.E. NON-RESIDENT) LIES WITH THE ASSTT. DIRECTOR OF I. T AX (INTL. TAXATION), JAIPUR. THUS THE WHOLE ASSTT. PROCEEDINGS (BASED ON INVALID NOTICE) ARE INVALID, BAD-IN-LAW, WITHOUT JURISDICTION AND THUS DESERVES TO BE QUASHED. 2. THAT THE LD. ASSTT. DIRECTOR OF I. TAX (INTL. TAXAT ION), JAIPUR ERRED IN LAW AND FACTS WHILE TREATING THE FOREIGN INCOME OF ASSESSEE AMOUNTING TO RS. 41,98,615/- (BEING SALE PROCEEDS OF SHARES O F VEDANTA RESOURCES PLC. AT U.K.) AS BELONGING TO HIS WIFE AN D FURTHER ERRED IN TAXING THE SAME IN INDIA TREATING IT AS RECEIVED IN INDIA WHEREAS IN FACT THE INCOME WAS EARNED AND RECEIVED IN U.K. WHICH WA S ONLY REMITTED TO INDIA. FURTHER THE LD. CIT (A)-II, JAIPUR ALSO ERRED IN LA W AND FACTS WHILE UPHOLDING THE ABOVE ADDITION. 3. THAT THE LD. ASSTT. DIRECTOR OF I. TAX (INTL. TAXAT ION), JAIPUR ERRED IN LAW AND FACTS WHILE TAXING THE FOREIGN INCOME IN CA SE OF NON-RESIDENT ASSESSEE AFTER INVOKING THE PROVISIONS OF SECTION 6 4 (BY APPLYING CLUBBING PROVISIONS U/S 64 TREATING IT AS FOREIGN I NCOME OF WIFE) WHEREAS IN FACT, ANY FOREIGN INCOME EVEN OF SPOUSE COULD NOT BE TAXED IN THE HANDS OF NON-RESIDENT.(AS IT NEITHER ACCRUED OR ARISE IN INDIA NOR IT WAS RECEIVED OR DEEMED TO BE RECEIVED IN INDIA A S PER THE PROVISIONS OF SECTION 5 OF THE I. TAX ACT, 1961. IT WAS ONLY A REMITTANCE IN INDIA. FURTHER THE LD. CIT (A)-II, JAIPUR ALSO ERRED IN LA W AND FACTS WHILE UPHOLDING THE ABOVE ADDITION. 4. THAT WITHOUT PREJUDICE TO ABOVE, ADDITION OF RS. 41 ,98,615/- BY THE LD. ASSTT. DIRECTOR OF I. TAX (INTL. TAXATION), JAIPUR IS TOO EXCESSIVE, WITHOUT ANY BASIS & JUSTIFICATION AND FURTHER UPHOL DING THE ADDITIONS BY THE LD. CIT (A)-II, JAIPUR IS ALSO WITHOUT ANY BASI S AND JUSTIFICATION. 3 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. 2. GROUND NO. 1 IS AGAINST CHALLENGING THE NOTICE I SSUED UNDER SECTION 143(2) DATED 22.09.2009 SERVED ON 30.09.2009 BY THE ACIT CIRCLE- 2 UDAIPUR. THE ASSESEE IS A NON- RESIDENT. HE FILED HIS INCOME TAX RETURN FOR THE Y EAR UNDER CONSIDERATION ON 09.01.2009 DECLARING INCOME OF RS. 6,88,582/-. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE IT ACT AND WAS PICKED UP FOR SCRUTINY BY ISSUING NOTICE UNDER SECTION 143(2) OF THE IT ACT, 1961. THE CASE WAS TIME TO TI ME ATTENDED BY SHRI CHITRANJAN PAGARIA, C.A. AND AR OF THE ASSESSEE BEFORE THE ACI T, CIRCLE-2, UDAIPUR. THE CASE WAS TRANSFERRED TO THE ASSISTANT DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) JAIPUR BY ACIT, CIRCLE-2, UDAIPUR BY TRANSFER MEMO DY. NO. 71 9 DATED 13.09.2010. A FRESH NOTICE UNDER SECTION 143(2) ALONG WITH NOTICE UNDER SECTION 142(1) WAS ISSUED ON 16.09.2010 WHICH WAS RETURNED UNSERVED WITH THE REM ARKS ASSESSEE HAS LEFT THE PREMISES. FRESH NOTICE DATED 06.10.2010 FOR COMPL IANCE ON 19.10.2010 WAS ISSUED AFTER TELEPHONIC CONVERSATION WITH THE LD. COUNSEL OF THE ASSESSEE AT HIS ADDRESS. THIS TIME THE ASSESSEE CHALLENGED THE JURISDICTION VIDE LETTER DATED 12.10.2010. THE ASSTT. DIRECTOR OF INCOME-TAX (INTL. TAXATION) HAD INFORME D TO THE ASSESSEE THAT THE JURISDICTION OVER THE CASE OF NON-RESIDENT ASSESSEE VEST WITH THE ADDL. DIT (INTL. TAXATION), JAIPUR IN VIEW OF THE NOTIFICATION ISSUE D VIDE F.NO. ADDL.DIT(INTL.TAX)/JPR/JURIS/2008-09/93 DATED 1 ST SEPTEMBER, 2008 ISSUED IN EXERCISE OF POWERS CONFERRED BY THE CENTRAL BOARD OF DIRECT TAX ES UNDER SUB-SECTION (1) & (2) OF SECTION 120 OF THE IT ACT, 1961. A COPY OF THE NOTI FICATION WAS ALSO PROVIDED TO THE ASSESSEE. THE ASSESSEE CHALLENGED THE JURISDICTION OF THE AO BEFORE LD. CIT (A) WHO DISMISSED THE ASSESSEES APPEAL BY OBSERVING AS UND ER :- 4 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. 3.1. I HAVE DULY CONSIDERED THE SUBMISSIONS OF TH E APPELLANT. AS PER THE NOTIFICATION ISSUED VIDE F.NO. ADDL. DIT (INTL. TAX ) JPR/JURIS/2008-09/93 DATED 01.09.2008 IN EXERCISE OF POWERS CONFERRED BY THE CENTRAL BOARD OF DIRECT TAXES U/S (1) & (2) OF SECTION 120 OF THE IN COME TAX ACT, 1961, THE JURISDICTION OF THE CASE (I.E. NON RESIDENT) LIES W ITH THE ASSISTANT DIRECTOR OF INCOME TAX (INTL. TAXATION), JAIPUR, WITH EFFECT FROM 01.09.2008. HOWEVER, IN THE PRESENT CASE, THE APPELLANT HAD FIL ED HIS RETURN OF INCOME WITH ACIT, CIRCLE-2, UDAIPUR. THE PROCESSING WAS D ONE BY THE CLERICAL STAFF. THE ACIT ISSUED NOTICE U/S 143(2) DATED 22.0 9.2009 FOR SELECTING THE CASE UNDER SCRUTINY. ON REALIZING THAT THE CAS E OF THE APPELLANT WAS THAT OF A NON RESIDENT, THE ACIT TRANSFERRED THE CA SE OF THE APPELLANT TO ADIT (INTL. TAX), JAIPUR. SINCE THE JURISDICTION O VER THE NON RESIDENT CASES LAY WITH THE ADIT (INTL. TAX.), JAIPUR, THERE WAS N O NEED TO PASS ORDER U/S 127 OF THE I T ACT. ON THE CONTRARY, IT IS OBVIOUS THAT THE APPELLANT HAD FILED HIS RETURN OF INCOME WITH ACIT, CIRCLE-2, UDA IPUR DELIBERATELY TO ESCAPE THE SCRUTINY. THE ACIT AFTER BECOMING AWARE OF THE STATUS OF THE APPELLANT IMMEDIATELY TRANSFERRED THE CASE TO ADIT (INTL. TAX.), JAIPUR. THUS NO FAULT COULD BE FOUND WITH THE APPROACH OF T HE AO. WHEN THE APPELLANT HAS HIMSELF FILED HIS RETURN WITH A PARTI CULAR AO, HE CANNOT CHALLENGE THE ISSUE OF NOTICE BY THAT AO SINCE THE AO WAS NOT AWARE THAT HE DID NOT HAVE JURISDICTION OVER THAT CASE OUT OF THOUSAND OF RETURNS FILED WITH HIS CIRCLE. IT IS CRYSTAL CLEAR THAT JURISDIC TION CANNOT BE CONFERRED ON AN ASSESSING OFFICER BY THE CONSENT OF THE ASSESSEE . THE VOLUNTARY RETURN FILED BY THE ASSESSEE WAS ACCEPTED BY THE DEPARTMEN T AND NOTICE U/S 143(2) WAS ISSUED. DURING COURSE OF ASSESSMENT PROC EEDINGS UPON PRODUCTION OF DOCUMENTS BY THE ASSESSEE, THE AO CAM E TO CONCLUSION THAT HIS STATUS WAS NON-RESIDENT AND IMMEDIATELY HIS CAS E WAS TRANSFERRED TO ADIT (INTL. TAX.), JAIPUR. THEREFORE, NO FAILURE OF JUSTICE IS OCCASIONED OR PREJUDICE IS CAUSED TO THE ASSESSEE. THE MISTAKE I N FILING RETURN WITH THE 5 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. AO AT UDAIPUR HAS TO BE SOLELY ATTRIBUTED TO THE AS SESSEE. IN VIEW OF SECTION 124(5), THE ASSESSEE WAS NOT ENTITLED TO CA LL IN QUESTION THE JURISDICTION OF THE ACIT, CIRCLE-2, UDAIPUR, AS HE OUGHT TO HAVE RAISED THE OBJECTION UNDER CLAUSE (A) OF SUB-SECTION (5) OF SE CTION 124 WITHIN A PERIOD OF ONE MONTH FROM THE DATE ON WHICH HE FILED THE RETURN UNDER SUB-SECTION (1) OF SECTION 139 OR AFTER THE COMPLET ION OF THE ASSESSMENT, WHICHEVER IS EARLIER. IT IS FURTHER SEEN THAT THE APPELLANT HAD STATED VIDE LETTER DATED 18.10.2010 TO THE ADIT (INTL TAX.), JA IPUR THAT HE HAD FILED HIS RETURN OF INCOME FOR A.Y. 2008-09 WITH ACIT, CI RCLE-2, UDAIPUR ON 09.01.2009 SINCE HE HELD THE JURISDICTION OVER HIS CASE. HOWEVER BEFORE ME, A CONTRADICTORY STAND HAS BEEN TAKEN WHEREIN IT HAS BEEN ARGUED THAT THE ACIT, CIRCL3E-2, UDAIPUR COULD NOT HAVE ISSUED NOTICE U/S 143(2) AS HE DID NOT HAVE THE JURISDICTION OVER THE CASE OF THE ASSESSEE. THE APPELLANT IS THEREFORE GUILTY OF SHIFT IN STAND AS PER HIS CO NVENIENCE. THE SUPREME COURT IN THE CASE OF CENTRAL POTTERRIES (AIR 1966 S C 932), WHILE DEALING WITH A CASE UNDER THE PROVISIONS OF THE C.P. AND BA ZAR SALES TAX ACT, 1947, HELD THAT WHEN THE TAXING AUTHORITIES DERIVE THEIR JURISDICTION TO MAKE ASSESSMENT UNDER THE PROVISIONS OF THE ACT AND ASSESSEE VOLUNTARILY FILES THE RETURN UNDER SECTIONS 3 AND 10(1) OF THE ACT ON WHICH THE ASSESSMENT HAS BEEN MADE, IT WOULD BE IDLE TO CONTE ND THAT THE PROCEEDINGS TAKEN ON ITS OWN RETURN ARE WITHOUT JUR ISDICTION. THIS GROUND OF APPEAL IS ACCORDINGLY DISMISSED. 3. NOW THE ASSESSEE IS BEFORE US. THE LD. A/R OF T HE ASSESSEE SUBMITTED THAT BEFORE THE LD. CIT (A) THE APPELLANT HAD RAISED TWO FOLD CONTENTIONS :- 3.1. IF LD. ADIT (INTL. TAXATION) WAS HAVING JURISD ICTION OVER THE CASE OF ASSESSEE THEN ISSUE OF NOTICE U/S 143(2) BY ACIT, CIRCLE-2, UDAIP UR WAS INVALID AS IT WAS WITHOUT 6 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. JURISDICTION. HENCE NO VALID NOTICE WITHIN THE PERI OD PRESCRIBED U/S 143(2) HAS BEEN ISSUED AND, THEREFORE, ASSESSMENT WAS INVALID AND B AD-IN-LAW. 3.2. THE ALTERNATE CONTENTION WAS THAT IF TRANSFER OF CASE TO ADIT (INTL. TAXATION) IS VALID THEN SUCH TRANSFER OF JURISDICTION COULD HAVE BEEN ONLY U/S 127 OF INCOME TAX ACT. SUCH TRANSFER OF JURISDICTION IS BAD-IN-LAW AS NO O PPORTUNITY WAS PROVIDED AS REQUIRED U/S 127(2) OF INCOME-TAX ACT, 1961. 3.3. AS PER THE DEFINITION OF ASSESSING OFFICER, TH E ASSESSING OFFICER IS THE OFFICER WHO IS VESTED WITH JURISDICTION AS PER ORDER UNDER SUB SECTION (1) OR (2) OF SECTION 120 OF THE INCOME TAX ACT. HENCE THE ASSESSING OFFICER, IN THE CASE OF THE ASSESSEE, WAS ADIT (INTERNATIONAL TAXATION) JAIPUR. SECTION 139(1) OF INCOME-TAX ACT DOES NOT REQUIRE THE ASSESSEE TO FILE THE RETURN WITH ASSESSING OFFICER SINCE THE ASSESSEE WAS AN EXISTING ASSESSEE AND THEREFORE RETURN OF INCOME WAS FILED W ITH ACIT, CIRCLE-2, UDAIPUR. IT IS NOT THE CASE OF REVENUE THAT ASSESSEE WAS ARE OF THE NO TIFICATION FOR CHANGE IN THE JURISDICTION FOR NON-RESIDENT ASSESSEE TO ADIT (INT ERNATIONAL TAXATION), JAIPUR. THE ASSESSEE IN THE COMPUTATION OF INCOME HAD MENTIONED THAT STATUS OF ASSESSEE WAS OF NON-RESIDENT AND THIS FACT IS NOT DISPUTED. ONCE TH E REVENUE HAS ACCEPTED THAT THE RETURN FILED BY THE ASSESSEE IS VALID THEN NOTICE U /S 143(2) SHOULD HAVE BEEN ISSUED BY THE ASSESSING OFFICER HAVING JURISDICTION OVER THE ASSESSEE WITHIN THE PERIOD MENTIONED IN PROVISO TO SECTION 143(2) OF INCOME-TAX ACT, 196 1. NOTICE U/S 143(2) ISSUED BY ACIT, CIRCLE-2, UDAIPUR CANNOT BE CONSIDERED AS A NOTICE ISSUED BY ASSESSING OFFICER. 3.4. HE FURTHER RELIED UPON THE FOLLOWING CASE LAWS :- 7 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. SHRI M.L. SETHI VS. SHRI R.P. KAPUR (1972) 2 SCC 427 (SC) M.I. BUILDERS VS. ITO (2008) 115 ITD 419 (LUCKNOW) RAJEEV MEWARA VS. ITO (2010) 35 SOT 1 (INDORE) ITO VS. RAJENDER PRASAD GUPTA 135 TTJ 9 (JODHPUR)(UO) CIT VS. SMT. ANJALI DUA (2008) 219 CTR 183 (DELHI) DR (MRS) K.B. KUMAR VS. ITO (2010) 131 TTJ 511 (DELHI) ITO VS. NASEMAN FARMS (P) LTD. (2010) 134 TTJ 472 (DELHI) RANJEET SINGH VS. ACIT (2009) 120 TTJ 517 (DELHI) THE LD. A/R HAS ALSO DRAWN OUR ATTENTION ON SECTION 292BB AND ARGUED THAT THE SAME IS NOT APPLICABLE ON THE ASSESSEE AS THREE SITUATIONS PRESCRIBED IN THIS SECTION HAS NOT BEEN MATCHED. THE ASSESSEE HAS OBJECTED THE JURISDI CTION OF THE AO. HE FURTHER RELIED ON THE CASE OF CIT VS. AVI-OIL INDIA (P) LTD., 323 ITR 242 (P&H). HE FURTHER RELIED ON THE CASE OF RANJEET SINGH VS. ACIT (2009), 120 TTJ 517 (DELHI) AND ARGUED THAT THIS WAS THE TRANSFER FROM ONE CCIT TO ANOTHER. THEREFOR E, ORDER UNDER SECTION 127 IS TO BE PASSED. HENCE THE ASSESSMENT ORDER PASSED BY THE AD IT (INTERNATIONAL TAXATION) IS INVALID AND BAD IN LAW. HE FURTHER CITED VARIOUS C ASES ON VALID NOTICE UNDER SECTION 143(2) AND ARGUED THAT THE ACIT CIRCLE-2 UDAIPUR SH OULD NOT HAVE ISSUED NOTICE UNDER SECTION 143(2) OF THE IT ACT AS HE WAS NOT HAVING A NY JURISDICTION ON NON-RESIDENT 8 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. ASSESSEE VIDE INSTRUCTIONS ISSUED BY THE CCIT. THE CASE LAWS QUOTED BY THE LD. CIT (A) I.E. CENTRAL POTTERIES LTD. VS. STATE OF MAHARASHTR A & OTHERS (1966) AIR 932) IS DISTINGUISHABLE BECAUSE IT WAS DELIVERED IN DIFFERE NT CONTEXT. THE HONBLE SUPREME COURT IN THE CASE OF SUN ENGINEERING WORKS PVT. LTD. (1992) 198 ITR 297 (SC) ALSO RELIED UPON BY THE LD. A/R, HAS CAUTIONED ON HOW TO APPLY THE RULING OF THE SUPREME COURT AND JUDGMENT HAVE TO BE CONSIDERED IN THE LIG HT OF THE QUESTIONS WHICH WERE BEFORE THE COURT. THE LD. A/R REQUESTED TO QUASH T HE ORDER PASSED BY THE ADIT (INTERNATIONAL TAXATION), JAIPUR. 4. AT THE OUT SET, THE LD. D/R VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT (A) AND ARGUED THAT LD. CIT (A) HAS CONSIDERED ALL THE OBJE CTIONS RAISED BY THE ASSESSEE. THEREFORE, SAME MAY BE CONFIRMED. 5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE FILED RETURN FOR A.Y. 2008-09 ON 09.01.200 9 WITH ACIT CIRCLE-2, UDAIPUR. THE CASE WAS PROCESSED UNDER SECTION 143(1) ON 25.06.20 09. THE CASE WAS SELECTED FOR SCRUTINY BY ISSUING NOTICE UNDER SECTION 143(2) ON 22.09.2009. AS PER NOTIFICATION ISSUED VIDE F. NO. ADDL. DIT (INTL. TAX/JPR/JURIS/2008-09/ 93 DATED 1 ST SEPTEMBER, 2008, THE JURISDICTION OVER THE CASE OF NON-RESIDENT ASSESSEE VESTS WITH THE ASSTT. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION), JAIPUR, UNDER SECTION 120 OF THE IT ACT AS PER POWERS CONFERRED BY THE CBDT. IT IS FACT THAT ASS ESSEES PAN WAS WITH ACIT CIRCLE-2, UDAIPUR AS HE WAS ABLE TO PROCESS THE INCOME-TAX RE TURN UNDER SECTION 143(1) ON 25.06.2009. THE ASSESSEES SCRUTINY ASSESSMENT PRO CEEDINGS WERE ATTENDED BY SHRI CHITRANJAN PAGARIA, C.A. & AUTHORIZED REPRESENTATIV E OF THE ASSESSEE BEFORE THE ACIT 9 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. CIRCLE-2, UDAIPUR. THE CASE WAS TRANSFERRED BY THE ACIT CIRCLE-2, UDAIPUR TO ADIT (INTERNATIONAL TAXATION), JAIPUR VIDE TRANSFER MEMO DY.NO. 719 DATED 13.09.2010. THEREAFTER A FRESH NOTICE UNDER SECTION 143(2) ALON G WITH NOTICE UNDER SECTION 142(1) WAS ISSUED ON 16.09.2010 WHICH WAS RETURNED UNSERVE D WITH THE REMARKS THAT THE ASSESSEE HAD LEFT THE PREMISES. FRESH NOTICE DATED 06.10.2010 FOR COMPLIANCE ON 19.10.2010 WAS ISSUED AFTER TELEPHONIC CONVERSATION WITH THE LD. COUNSEL BY THE ASSISTANT DIRECTOR (INTERNATIONAL TAXATION), JAIPUR AT THE COUNSELS ADDRESS. THE ASSESSEE FIRST CHALLENGED THE JURISDICTION VIDE LET TER DATED 12.10.2010 WHICH WAS EXPLAINED BY ADIT (INTERNATIONAL TAXATION), JAIPUR VIDE HIS LETTER DATED 02.11.2010 THAT THE JURISDICTION OVER THE CASE OF NON-RESIDENT ASSE SSEE VESTS WITH THE ADIT (INTERNATIONAL TAXATION) JAIPUR. AS PER SECTION 120 , THE ACIT CIRCLE-2 UDAIPUR WAS HAVING THE JURISDICTION OVER THE CASE OF THE ASSESS EE AS RETURN WAS FILED BY THE ASSESSEE WITH HIM. THERE WAS A NOTIFICATION DATED 1 ST SEPTEMBER, 2008 REGARDING JURISDICTION OVER THE NON-RESIDENT ASSESSEE WHICH WAS NEITHER IN THE KNOWLEDGE OF THE ASSESSEE NOR IN THE KNOWLEDGE OF THE AO. WHEN HE CAME TO KNOW T HAT JURISDICTION OF NON-RESIDENT ASSESSEE IS WITH ADIT (INTERNATIONAL TAXATION), JAI PUR, HE IMMEDIATELY TRANSFERRED THE FILE TO ADIT (INTERNATIONAL TAXATION) JAIPUR. THE ASSESSEE AS PER SECTION 124(3) HAD NOT CHALLENGED THE JURISDICTION BEFORE THE AO WITHI N ONE MONTH FROM THE DATE ON WHICH HE WAS SERVED NOTICE UNDER SECTION 143(2) OF THE IT ACT AS HE CHALLENGED THE JURISDICTION OF THE ADIT (INTL. TAXATION), JAIPUR O N 12.10.2010 WHEREAS FIRST NOTICE UNDER SECTION 143(2) WAS ISSUED ON 22 ND SEPTEMBER, 2009. FURTHER, EVEN THE OBJECTION REGARDING JURISDICTION WAS RAISED BEFORE THE AO WHI CH CAN BE ENTERTAINED BY THE 10 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. COMMISSIONER OR CHIEF COMMISSIONER FROM THE DATE OF NOTIFICATION I.E. 1 ST SEPTEMBER, 2008 AS PER SECTION 124(2) OF THE IT ACT. THE CAS E LAW CITED BY THE ASSESSEE ARE NOT SQUARELY APPLICABLE. THE ASSESSEES STATUS WAS NON- RESIDENT BUT HE FILED THE RETURN BEFORE THE ACIT CIRCLE-2 UDAIPUR, PAN WAS LYING WIT H HIM AS IS EVIDENT FROM THE PROCESSING MADE BY THE ACIT, CIRCLE-2, UDAIPUR ON 2 5.06.2009. THE JURISDICTION OF NON- RESIDENT WAS DECIDED BY THE ADDL. DIRECTOR OF INCOM E-TAX (INTERNATIONAL TAXATION), JAIPUR AS PER DIRECTION OF THE CBDT ISSUED FOR NON- RESIDENT ASSESSEE. THEREFORE, THERE IS NO NEED TO PASS ORDER UNDER SECTION 127 OF THE IT A CT AS ADDITIONAL DIT (INTERNATIONAL TAXATION) JAIPUR HAD PASSED THE ORDER IN PURSUANCE OF DIRECTION OF CBDT. THE CASE LAWS REFERRED BY THE ASSESSEE ARE NOT SQUARELY APPL ICABLE TO THE FACTS OF THIS CASE. THE LD. A/R HAD NOT CONTROVERTED THE FINDINGS GIVEN BY LD. CIT (A). THEREFORE, WE CONFIRM THE ORDER OF THE LD. CIT (A). THE GROUND NO. 1 OF THE ASSESSEE IS DISMISSED. 6. GROUND NOS. 2, 3 & 4 OF THE ASSESSEE ARE AGAINST TREATING THE OVER ALL INCOME OF THE ASSESSEE AMOUNTING TO RS. 41,98,615/- AS BELONG ING TO HIS WIFE, RECEIVED IN UK WHICH WAS ONLY REMITTED TO INDIA AND CLUBBING THESE RECEIPTS IN THE HANDS OF THE ASSESSEE UNDER SECTION 64 OF THE IT ACT. THE AO OB SERVED THAT THE ASSESSEE HAD CLAIMED EXEMPTION IN RESPECT OF CAPITAL GAIN INCOME ARISING OUT OF SALE PROCEEDS OF RS. 41,98,615/- ON ACCOUNT OF SALE OF SHARES OF VEDANTA RESOURCES PLC IN LIEU OF HIS NON- RESIDENT STATUS. THE AO FURTHER OBSERVED THAT THROU GH A LETTER DATED 16.04.2004 OF VEDANTA RESOURCES PLC THE ASSESSEE WAS ALLOTTED 350 0 SHARES OF VEDANTA RESOURCES PLC UNDER THE LONG TERM INCENTIVE PLAN. HOWEVER, FROM T HE COPY OF SHARE CERTIFICATE ISSUED ON 27.03.2007 BY THE COMPANY, IT WAS OBSERVED THAT THE REGISTERED HOLDER OF THE SHARES 11 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. WAS MRS. SUNITA PATHAK. ON RECORD THERE IS A SALE INSTRUCTION FORM DATED 21.05.2007 SIGNED BY SMT. SUNITA PATHAK. THE SALE PROCEEDS WER E CREDITED IN ICICI BANK ACCOUNT NO. 611901502535, WHICH IS A JOINT ACCOUNT WITH FI RST NAME OF SMT. SUNITA PATHAK AND SECOND NAME SHRI RAJENDRA PATHAK. ON THE ISSUE, TH E AO GAVE REASONABLE OPPORTUNITY OF BEING HEARD AND ASKED TO FURNISH FOLLOWING EVIDE NCES VIDE LETTER DATED 02.11.2010 :- 1. THE SALE OF SHARES OF VEDANTA RESOURCES PLC AM OUNTING TO RS. 41,98,615/- ARE IN THE NAME OF MRS. SUNITA PATHAK A S PER THE SHARE CERTIFICATE DATED 27.03.2007. THE SALE INSTRUCTION FORM DATED 21.05.2007 IS ALSO IN THE NAME OF MRS. SUNITA PATHAK. UNDER TH ESE CIRCUMSTANCES HOW THE RESULTANT CAPITAL GAIN HAS BEEN CLAIMED EXEMPT IN THE NAME OF THE ASSESSEE. 2. ELABORATE THE CIRCUMSTANCES AND MANNER IN WHICH T HE SHARES OFFERED BY M/S. VEDANTA RESOURCES PLC VIDE LETTER D ATED 16.06.2004 WERE TRANSFERRED IN THE NAME OF MRS. SUNITA PATHAK AND T HE TAX IMPLICATIONS OF THE SAME IN THE HANDS OF THE ASSESSEE IF ANY. 3. PLEASE FURNISH THE COPIES OF INCOME TAX RETURN F OR THE A.Y. 2008-09 OF MRS. SUNITA PATHAK ALONGWITH THE COMPUTATION OF INCOME AND HER RESIDENTIAL STATUS WITH EVIDENCE. 4.EXPLAIN THE TRANSACTIONS RELATING TO SALE AND PURC HASE OF SHARES CLAIMED TO BE PERTAINING TO MRS. SUNITA PATHAK IN THE JOINT ACCOUNT MAINTAINED BY THE ASSESSEE. 5. FURNISH THE STATEMENT OF AFFAIRS OF THE ASSESSEE AN D HIS WIFE MRS. SUNITA PATHAK FOR THE RELEVANT ASSESSMENT YEARS IN SUPPORT OF YOUR CLAIM. THE ASSESSEE SUBMITTED REPLY VIDE LETTER DATED 13 TH NOVEMBER, 2010 AND SUBMITTED AS UNDER :- 12 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. THE ASSESSEE HAS BEEN ON EMPLOYEE OF VEDANTA RESO URCES PLC. AND AS A RESULT OF EMPLOYMENT BASED ON HIS PERFORMANCE THE C OMPANY GRANTED HIM SHARE OPTIONS IN THE COMPANY WITH A LOCK IN PERIOD. HIS WIFE MRS. SUNITA PATHAK HAS NEVER BEEN EMPLOYED BY ANY COMPANY AND T HEREFORE QUESTION OF PERFORMANCE BONUS DOES NOT ARISE. THE ORIGINAL S HARES HAD BEEN ISSUED IN ASSESSEES NAME, SINCE THE VALUE OF SHARES SUBSE QUENTLY INCREASED, AS A MATTER OF CAUTION THE WIFE WAS MADE NOMINEE SINCE H E DID NOT KNEW THAT THE WOULD BE ENCASHING THE SHARES SO EARLY. BY APP OINTING WIFE AS NOMINEE OF SHARES OR AS ALLEGED BY TRANSFER MRS. SU NITA PATHAK DOES NOT BECOME SUO MOTO OWNED OF THE SHARES AND TAX LIABIL ITY CANNOT BE TRANSFERRED. IF MRS. SUNITA PATHAK WOULD HAVE BEEN OWNER OF THE SHARES THE ASSESSEE HAD NO EVIDENCE TO SHOW THAT HOW THE S HARES GOT TRANSFERRED FROM HIS NAME TO HER NAME, NO GIFT DEED WAS SIGNED. AT ALL THE TIMES THE ASSESSEE WAS THE LEGAL OWNER OF THE SHARE OPTIONS. SIR, YOUR ATTENTION IS INVITED TO SECTION 64 OF THE I. TAX ACT, 1961 WHICH READS AS UNDER :- INCOME OF INDIVIDUAL TO INCLUDE INCOME OF SPOUSE MINOR CHILD ETC. 64 IN COMPUTING THE TOTAL INCOME OF ANY INDIVIDUAL THERE SHALL BE INCLUDED ALL SUCH INCOME AS ARISES DIRECTLY OR INDIRECTLY (IV) SUBJECT TO THE PROVISIONS OF CLAUSE (I) OF SEC TION 27 TO THE SPOUSE OF SUCH INDIVIDUAL FROM ASSETS TRANSFERRED DIRECTLY OR INDIRECTLY TO THE SPOUSE BY SUCH INDIVIDUAL OTHERWISE THAN FOR ADEQUATE CONS IDERATION OR IN CONNECTION WITH AN AGREEMENT TO LICE APART. THE AO GAVE ANOTHER SHOW CAUSE NOTICE ON THIS ISSUE UNDER SECTION 142(1) OF THE ACT. THE ASSESSEE AGAIN FILED REPLY BEFORE THE AO BY LET TER DATED 29.11.2010 WHICH HAS REPRODUCED BY THE AO AT PAGES 3 & 4 OF THE ASSESSME NT ORDER. AFTER CONSIDERING THE 13 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. ASSESSEES REPLY, THE AO HELD THAT ASSESSEE HAD FAI LED TO FURNISH THE NECESSARY DETAILS OF TRANSACTIONS AS TO HOW THE SHARES ALLOTTED TO TH E ASSESSEE WERE REGISTERED IN THE NAME OF HIS WIFE. EARLIER THE ASSESSEE TOOK THE PLEA THAT THE WIFE WAS MADE NOMINEE OF THE SHARES BUT FAILED TO ANSWER THE QUERY HOW THE N OMINEE COULD BE THE REGISTERED OWNER OF THE SHARES AND BE ABLE TO SIGN THE SALE IN STRUCTION FORM. THE ASSESSEE HAD HIMSELF ADMITTED THAT HE HAD NO EVIDENCE TO SHOW HO W THE SHARES GOT TRANSFERRED FROM HIS NAME TO HIS WIFES NAME. NO GIFT DEED WAS SIGNE D. THE ASSESSEE HAD ALSO FAILED TO DECLARE WHETHER ANY TAX WAS PAID IN UK AND IF PAID IN WHOSE NAME IT WAS PAID. THE ASSESSEE HAD HIMSELF STRESSED THAT THE PROVISIONS O F SECTION 64 ARE APPLICABLE TO THE TRANSACTION AND THE RESULTANT CAPITAL GAIN EARNED B Y HIS WIFE. AS THE ASSESSEE HAD FAILED TO FILE DOCUMENTARY EVIDENCE AND DETAILS OF TRANSAC TION AS TO HOW THE WIFE BECAME THE REGISTERED OWNER OF THE SHARES, IN THE FACTS AND CI RCUMSTANCES OF THE CASE IT WAS A FIT CASE TO INVOKE PROVISIONS OF SECTION 64 OF THE IT A CT. AS PER THE PROVISIONS OF SEC. 64, INCOME OF ANOTHER PERSON IS TO BE INCLUDED IN THE T OTAL INCOME OF THE INDIVIDUAL. HOWEVER, SUCH AN INCOME WILL FIRST BE COMPUTED IN T HE HANDS OF RECIPIENT AS IF IT WAS HIS INCOME AND SUCH RECIPIENT WILL COMPUTE THIS INCOME UNDER THE RELEVANT HEAD AFTER CLAIMING EXEMPTION/ALLOWANCES/DEDUCTIONS PERMISSIBL E UNDER THE RELEVANT HEAD IN WHICH IT FALLS. SUCH INCOME COMPUTED, UNDER THE RELEVANT HEAD, WILL BE INCLUDED IN THE TOTAL INCOME OF THE INDIVIDUAL UNDER THE SAME HEAD OF INC OME. IN THIS CASE THE WIFE OF THE ASSESSEE IS A RESIDENT INDIAN AND IS LIABLE FOR TAX ON HER GLOBAL INCOME. FURTHER IN VIEW OF THE SECTION 5 OF THE IT ACT, THE TOTAL INCOME O F ANY PREVIOUS YEAR OF A PERSON WHO ;IS A NON RESIDENT INCLUDES ALL INCOME FROM WHATEVER SO URCE DERIVED WHICH IS RECEIVED OR 14 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. DEEMED TO BE RECEIVED IN INDIA IN SUCH YEAR BY OR O N BEHALF OF SUCH PERSON. THE ASSESSEE HAD RECEIVED THIS INCOME IN INDIA BY VIRTU E OF CREDIT OF THE AMOUNT TO THE JOINT ACCOUNT. THE SHARES WERE REGISTERED IN HER NAME WH ICH ORIGINALLY BELONGED TO THE ASSESSEE. THE MODE AND MANNER IN WHICH THE SHARES W ERE GOT REGISTERED IN THE NAME OF THE WIFE ON 27.03.2007 AND SOLD ON 21.05.2007 HA D NOT BEEN DISCLOSED BY THE ASSESSEE. THE COST OF SHARES TO THE WIFE IS ALSO NO T DISCLOSED. UNDER THESE CIRCUMSTANCES, THE AO HAD CHOOSE TO COMPUTE THE ENT IRE PROCEEDS IN THE HANDS OF THE WIFE AS SHORT TERM CAPITAL GAIN WHICH BY VIRTUE OF SECTION 64 OF THE ACT IS BEING CLUBBED IN THE TAXABLE INCOME OF THE ASSESSEE. THUS HE MAD E ADDITION OF RS. 41,98,615/- IN THE INCOME OF THE ASSESSEE AS CLUBBED UNDER SECTION 64 OF THE IT ACT. 7. BEING AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT (A), WHO HAD CONFIRMED THE ADDITION BY OBSERVIN G AS UNDER :- 4.1. I HAVE DULY CONSIDERED THE SUBMISSIONS OF TH E APPELLANT. THE FACTS OF THE CASE ARE THAT THE AO NOTICED THAT 3500 SHARE S OF VEDANTA RESOURCES STANDING IN THE NAME OF SMT. SUNITA PATHA K, WIFE OF THE APPELLANT WERE SOLD IN THE YEAR UNDER REFERENCE AND ENTIRE SALE PROCEEDS WERE REMITTED IN ICICI BANK ACCOUNT OF SMT. SUNITA PATHAK HELD JOINTLY WITH HER HUSBAND ON 20.6.2007. ON THE OTHER HAND, IT WAS THE CONTENTION OF THE APPELLANT THAT HE WAS ALLOTTED THESE SHARES (TECHNICALLY ON OPTION ) OF VEDANTA RESOURCES PLC ON 16.04.2004. IT WAS A LO NDON BASED COMPANY AND WAS LISTED IN THE LONDON STOCK EXCHANGE AND IT W AS THE HOLDING COMPANY OF ASSESSEE EMPLOYER COMPANY M/S. STERLITE INDUSTRIES INDIA LTD. IT WAS ARGUED THAT THE SHARES WERE ALLOTTED TO HIM FOR HIS EXCELLENT PERFORMANCE AND IT WAS TERMED AS PERFORMANCE INCENT IVE PLAN OF THE 15 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. COMPANY. THE OPTION WAS EXERCISED BY THE ASSESSEE B Y PAYING A CONCESSIONAL PRICE $ 0.10 PER SHARE. THESE SHARE WE RE REGISTERED BY THE COMPANY IN THE NAME OF HIS WIFE I.E. SUNITA PATHAK AT THE INSTRUCTION OF THE ASSESSEE AND THE SHARE CERTIFICATE WAS ISSUED O N 27.03.2007. THESE SHARES WERE LISTED IN THE LONDON STOCK EXCHANGE. THE SE SHARES WERE SOLD BY THE ASSESSEE THROUGH HSBC SECURITIES IN LONDON A ND THE ENTIRE SALE PROCEEDS OF RS. 41,98,615/- WERE REMITTED IN HIS IC ICI BANK ACCOUNT (HELD JOINTLY WITH HIS WIFE SMT. SUNITA PATHAK) IN INDIA ON 20.06.2007 BY HSBC SECURITIES, LONDON UNDER THE INSTRUCTIONS OF THE AS SESSEE. ON CAREFUL CONSIDERATION OF FACTS IN ENTIRETY, I AM UNABLE TO ACCEPT THE ARGUMENTS OF THE APPELLANT. THE SHARE CERTIFICATE DATED 27.03.20 07 SHOWS THAT 3500 SHARES OF VEDANTA RESOURCES PLC WERE STANDING IN TH E NAME OF SMT. SUNITA PATHAK AND SHE WAS THE REGISTERED HOLDER OF THESE SHARES. THE SALE INSTRUCTION FORM WAS ALSO SIGNED BY SMT. SUNITA PAT HAK ON 21.05.007. WITHOUT THIS SALE INSTRUCTION FORM, THE SHARES COUL D NOT HAVE BEEN SOLD. SMT. SUNITA PATHAK HAD FURTHER DIRECTED THE BROKER M/S. HSBC SECURITIES TO REMIT THE SALE PROCEEDS IN HER BANK ACCOUNT WITH ICICI BANK IN INDIAN RUPEE. FURTHER IN THE AUTHORIZATION FORM, SMT. SUNI TA PATHAK HAD DECLARED HER TO BE THE REGISTERED HOLDER OF 3500 SHARES OF V EDANTA RESOURCES PLC. THE APPELLANT HAS FAILED TO EXPLAIN AS TO HOW THE A LLEGED NOMINEE BEING HIS WIFE I.E. SMT. SUNITA PATHAK HAD SOLD THE SHARE S, IN WHAT CAPACITY SHE HAD INSTRUCTED THE BROKER TO SELL THE SHARES AND WH Y THE SALE PROCEEDS WERE CREDITED IN HER BANK ACCOUNT WITH ICICI BANK I N INDIAN RUPEE. WHEN A PERSON AUTHORIZES HIS WIFE TO BE A NOMINEE THEN I N SUCH AN EVENTUALITY HE CONTINUES TO BE THE REGISTERED OWNER OF THE MOVA BLE PROPERTY. HOWEVER IN THE PRESENT CASE, THE SHARES WERE REGIST ERED IN THE NAME OF SMT. SUNITA PATHAK AND SHE HAD COMPLETED ALL THE FO RMALITIES OF TRANSACTIONS OF SALE OF SHARES AS A OWNER. THERE I S NO EVIDENCE PLACED BY THE APPELLANT ON RECORD TO SUGGEST THAT THESE 3500 SHARES OF VEDANTA 16 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. RESOURCES PLC WERE INITIALLY TRANSFERRED IN HIS NAM E IN THE YEAR 2004 AND LATER ON AS PER HIS INSTRUCTION, THESE SHARES WERE TRANSFERRED IN THE NAME OF HIS WIFE I.E. SMT. SUNITA PATHAK. THERE IS NO EV IDENCE BROUGHT ON RECORD BY THE APPELLANT THAT PAYMENT FOR PURCHASE OF SHARE S WAS MADE BY HIM FROM HIS SALARY. THE ACTION OF THE AO TO CLUB THE CAPITAL GAIN IN THE HANDS OF THE APPELLANT IS PROPER SINCE AS PER THE PROVISI ONS OF SECTION 5 OF I T ACT, THE TOTAL INCOME OF A NON RESIDENT SHALL INCLU DE ALL THE INCOME FROM WHATSOEVER SOURCE DERIVED WHICH IS RECEIVED OR DEEM ED TO BE RECEIVED IN INDIA IN SUCH YEAR. IT WAS HELD BY HONBLE SUPREME COURT IN THE CASE OF CIT VS. CALCUTTA AGENCY LTD. (19 ITR 191) THAT THE BURDEN OF PROVING THE NECESSARY FACTS IN ORDER TO ENTITLE THE ASSESSEE TO CLAIM AN EXEMPTION IS UPON THE ASSESSEE AS THE RELEVANT FACTS ARE WITHIN THE SPECIAL KNOWLEDGE OF THE ASSESSEE AND IT IS FOR THE ASSESSEE TO ESTAB LISH THIS FACT BY ADDUCING PROOF THEREOF. IN THE PRESENT CASE, THE ASSESSEE H AS FAILED TO DISCHARGE THIS BURDEN. THERE IS NOT AN IOTA OF EVIDENCE SUBMI TTED BY THE APPELLANT TO SUGGEST THAT THESE 3500 SHARES WERE EVER REGISTERED IN THE NAME OF THE APPELLANT. SINCE THESE SHARES GOT REGISTERED IN THE NAME OF WIFE OF THE APPELLANT I.E. SMT. SUNITA PATHAK ON 27.03.2007 AND WERE SOLD ON 21.05.2007, THE RESULTANT CAPITAL GAIN HAS TO BE TR EATED AS SHORT TERM CAPITAL GAIN. THE COUNSEL OF THE APPELLANT HAS ALS O PLACED RELIANCE ON THE DECISION OF HONBLE MUMBAI HIGH COURT IN THE CASE O F CIT VS. KHAMBATY FY (159 ITR 203) BUT THE FACTS OF THE CITED CASE ARE C LEARLY DISTINGUISHABLE. IN THE CITED CASE, THE AO CLUBBED THE SHARE OF PROFIT ARISING TO THE WIFE & MINOR CHILDREN OF THE ASSESSEE IN THE HANDS OF NON- RESIDENT ASSESSEE AND FIRM IN WHICH ASSESSEE, HIS WIFE AND MINOR CHILDREN WERE PARTNERS WAS SITUATED IN A FOREIGN COUNTRY- NIGERIA. THIS DECISI ON IS OF NO HELP TO THE ASSESSEE. ACCORDINGLY THE ADDITION OF RS. 41,98,615 /- MADE BY THE AO IS CONFIRMED. THESE GROUNDS OF APPEAL ARE DISMISSED. 17 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. 8. NOW THE ASSESSEE IS BEFORE US. THE ASSESSEES A /R ALSO FILED A PRAYER UNDER RULE 29 OF ITAT RULES 1963 FOR ADMISSION OF ADDITIO NAL EVIDENCES. THE LD. A/R OF THE ASSESSEE ARGUED THAT THE ASSESSEE WAS ALLOTTED SHAR ES BY HIS EMPLOYER COMPANY UNDER LONG TERM INVESTMENT PLAN (LTIP) OF THE COMPANY. TH E PURCHASE PRICE WAS PAID BY THE ASSESSEE HIMSELF, BY WAY OF DEDUCTION FROM HIS SALA RY. THE ASSESSEE WAS NON-RESIDENT BUT HIS WIFE WAS A RESIDENT IN INDIA. UNDER THE ALL OWED MECHANISM THE ASSESSEE GOT THE SHARES ISSUED IN HIS WIFES NAME. THESE SHARES WERE SOLD AT RS. 41,98,615/- OUT OF INDIA. THE CONTROVERSY IN APPEAL IS WHETHER GAIN ON SUCH SHARE SALE BELONGS TO THE ASSESSEE OR HIS WIFE, AS, IF BELONGING TO ASSESSEE, THE SAME IS NOT TAXABLE IN INDIA, HE BEING NON-RESIDENT. WHEREAS, IF THE GAIN IS BELONGI NG TO HIS WIFE, THE SAME IS TAXABLE IN INDIA, SHE BEING RESIDENT IN INDIA. IF SUCH GAIN IS BELONGING TO HIS WIFE, WHETHER THE SAME IS RIGHTLY CLUBBED IN THE HANDS OF THE ASSESSE E. HE SUBMITTED THE ADDITIONAL EVIDENCES CONSISTING OF PAGES 1 TO 30 ALONG WITH TH E APPLICATION REQUESTING TO ADMIT THESE EVIDENCES AS THEY GO TO THE ROOT OF THE CAUSE . THESE ARE THE TERMS OF WARD OF SHARES AND RULES OF THE COMPANY WHICH WERE NOT SUBM ITTED BEFORE THE LOWER AUTHORITIES AS WERE BROUGHT FROM THE COMPANY AND SUBMITTED NOW. PAGE 25 IS THE PAY SLIP OF ASSESSEE SHRI RAJENDRA PATHAK FOR THE FINANCIAL YEA R 2006-07. PAGES 26 TO 28 ARE LETTERS RECEIVED BY THE ASSESSEE FROM THE COMPANY REGARDING COST OF SHARES. PAGE 29 IS REGARDING INTIMATION OF THE PROGRESS OF THE COMPANY AND PAGE 30 IS AN AUTHORIZATION REQUEST FORM FOR DEALING IN VEDANTA RESOURCES PLC. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS, THESE FACTS WERE MADE AVAILABLE TO BOTH THE LOWER AUTHORITIES. HOWEVER, THESE EVIDENCES COU LD NOT BE MADE AVAILABLE TO THE 18 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. LOWER AUTHORITIES AS THE ASSESSEE DURING MAJOR PART OF THE PROCEEDINGS WAS STAYING OUT OF INDIA. ALL THE ABOVE EVIDENCES ARE VERY VITAL AN D CRUCIAL TO THE ISSUE UNDER APPEAL. THEREFORE, HE REQUESTED TO ADMIT THE ADDITIONAL EVI DENCES. HE FURTHER RELIED ON THE CASE OF ABHAY KUMAR SHROFF VS. ITO OF ITAT, PATNA THIRD MEMBER BENCH IN ITA NOS. 95 & 193/PAT/1993 A.Y. 1989-90 (63 ITD (PAT) 144. 9. AT THE OUT SET, THE LD. D/R OPPOSED THE ADMISSIO N OF ADDITIONAL EVIDENCES FILED BY THE ASSESSEE STATING THAT SUFFICIENT OPPORTUNITY HA S BEEN GIVEN BY THE LOWER AUTHORITIES DURING THE COURSE OF ASSESSMENT AND APPELLATE PROCE EDINGS. AS PER RULE 29, THE ITAT HAS NOT DIRECTED TO FILE SUO MOTO ADDITIONAL EVIDEN CES FOR DISPOSAL OF THE APPEALS. THEREFORE, SAME SHOULD NOT BE ENTERTAINED. 10. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS FOUND THAT THESE DOCUMENTS WERE NOT SUBMITTED BEFORE THE LOWER AUTHORITIES AT THE TIME OF ASSESSMENT AND APPELLATE PROCEEDINGS. IT IS FACT TH AT ASSESSEE IS RESIDING OUTSIDE INDIA AND IS A NON-RESIDENT. WHATEVER EVIDENCES FILED ALO NG WITH THE PRAYER GO TO THE ROOT OF THE CAUSE, WE CONSIDER THAT THESE DOCUMENTS ARE REQ UIRED TO BE FILED AND TO BE CONSIDERED FOR DISPOSAL OF THIS APPEAL. THE CASE L AW REFERRED BY THE ASSESSEE I.E. ABHAY KUMAR SHROOF VS. ITO (SUPRA) IS SQUARELY APPLICABLE AND AS PER ITAT RULE 29, WE ALLOW THIS PRAYER OF THE ASSESSEE ALONG WITH THE ADDITION AL EVIDENCES. 11. THE LD. A/R OF THE ASSESSEE FURTHER SUBMITTED T HAT BOTH THE LOWER AUTHORITIES HAVE ERRED IN DECIDING THE ISSUE AGAINST THE ASSESS EE BY MISDIRECTING THEMSELVES ABOUT THE REAL OWNERSHIP OF SHARES. THE DECISION OF THE L OWER AUTHORITIES IS BASED ON THE SOLE 19 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. REASON OF SHARES BEING REGISTERED IN THE NAME OF TH E WIFE OF THE ASSESSEE. THE AUTHORITIES HAVE IGNORED THE OTHER PECULIAR FACTS O F THE CASE. THE ASSESSEE, ON 05.03.2004 WAS AWARDED SHARE/GIVEN OPTION UNDER THE VEDANTA LONG TERM INCENTIVE PLAN (LTIP) OF VEDANTA RESOURCES PLC. (HOLDING COMP ANY OF ASSESSEES EMPLOYER COMPANY). THE LD. A/R SUBMITTED SOME OF THE KEY FE ATURES OF THE SAID LTIP AS UNDER :- UNDER LTIP THE ASSESSEE WAS ENTITLED TO ACQUIRE 350 0 SHARES OF VEDANTA RESOURCES PLC ON PAYMENT OF 0.10 $ PER SHAR E WHICH WAS SUBJECT TO SATISFACTION OF THE PERFORMANCE CONDITIO N UNDER THE PLAN. THE ELIGIBILITY UNDER THE PLAN AS WELL AS THE NUMBE R OF SHARES ALLOTTED UNDER THE PLAN WAS BASED ON THE PERFORMANC E CONDITIONS WHICH WAS TO BE SATISFIED BY THE ASSESSEE HIMSELF. TILL THE TIME THE SHARES WERE VESTED IN THE NAME OF THE ASSESSEE, THE ASSESSEE WAS NOT ENTITLED TO SELL, TRANSFER, PL EDGE, ASSIGN OR OTHERWISE DISPOSE OF THE SHARES UNDER THE PLAN. THE LD. A/R FURTHER SUBMITTED THAT ON SATISFYING TH E PERFORMANCE CONDITIONS UNDER THE PLAN THE ASSESSEE VIDE LETTER DATED 09.04.2007 WAS ALLOTTED SHARES OF VEDANTA RESOURCES PLC UNDER THE VEDANTA LONG TERM INCENTIVE PLAN. THE SAID SHARES WERE LISTED ON THE LONDON STOCK EXCHANGE. IN THE SAID LETTER THE COMPANY CATEGORICALLY STATED THAT BASED ON THE REQUEST OF THE ASSESSEE SHARES CERTIFI CATE WAS ISSUED IN THE NAME OF HIS WIFE, HOWEVER, THE TERMS OF THE AWARD AND RULES UND ER THE LTIP SHALL HAVE TO BE FULFILLED BY THE ASSESSEE HIMSELF. THE PAYMENT FOR THE PURCHASE OF SHARES UNDER THE SAID PLAN WAS DEDUCTED FROM THE ASSESSEES SALARY F OR THE MONTH OF MARCH, 2007. 20 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. 11.1. THE LD. A/R SUBMITTED THAT ON 21.05.2007 THE ASSESSEE THROUGH HIS WIFE SMT. SUNITA PATHAK EXECUTED THE SALE INSTRUCTION FORM OF HSBC SECURITIES, LONDON (BEING BROKER APPOINTED BY VEDANTA FOR SELLING SHARES FOR ITS EMPLOYEES) FOR SELLING THE SHARES ALLOTTED UNDER THE LTIP ON THE LONDON STOCK EXCHANGE . ALTHOUGH THE AUTHORIZATION REQUEST FORM FOR DEALING IN VEDANTA RESOURCES PLC. SHARES WERE SIGNED BY THE WIFE OF THE ASSESSEE, SMT. SUNITA PATHAK, YET AT SL. NO. 3 OF THE SAID REQUEST FORM THE POSITION WAS SPECIFIED AS AGM (COMMERCIAL), ALSO AT SL. NO. 5 THE DATE OF COMMENCEMENT OF EMPLOYMENT WAS MENTIONED. THE SAID PARTICULARS WERE OF THE ASSESSEE HIMSELF. 11.2. THE LD. A/R FURTHER SUBMITTED THAT THE SHARES WERE SUBSEQUENTLY SOLD BY HSBC SECURITIES BASED ON THE INSTRUCTIONS RECEIVED. THE SALE PROCEEDS WERE RECEIVED BY HSBC SECURITIES IN LONDON ACTING AS AGENT OF THE ASSESSE E. THE AMOUNT SO RECEIVED WAS SUBSEQUENTLY TRANSFERRED BY HSBC SECURITIES TO THE INDIAN BANK ACCOUNT OF THE ASSESSEE ON 20.06.2007 WHICH WAS HELD IN THE JOINT NAME WITH HIS WIFE. 11.3. THE LD. A/R ALSO SUBMITTED THAT ONCE IT IS ES TABLISHED THAT THE CONSIDERATION WAS PAID BY THE ASSESSEE THEN THE ASSESSEE IS THE REAL OWNER. ALLOTMENT OF SHARES WAS TO THE ASSESSEE EMPLOYEE FOR ACKNOWLEDGING HIS EMPLOYM ENT CONTRIBUTION. THIS WAS NOT A TRANSACTION OF PURCHASE OF SHARES FROM OPEN MARKET. UNDER THE LONG TERM INCENTIVE PLAN SCHEME THE ENTITLEMENT WAS FOR EMPLOYEE ONLY. FOR ALL PURPOSES AND INTENT, THE ASSESSEE WAS OWNER OF SHARE AND IN THE NOTE ATTACHE D WITH THE RETURN OF INCOME, IT IS CLEARLY MENTIONED THAT SHARES WERE SOLD BY THE ASSE SSEE. THE HONBLE APEX COURT IN CASE OF RAI BAHADUR MOHAN SINGH OBEROI V. CIT (1973 ) 88 ITR 53 (SC) HAD AN OCCASION TO CONSIDER THE TAXABILITY OF DIVIDEND IN RESPECT O F SHARES IN THE NAME OF WIFE AND SONS 21 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. OF THE ASSESSEE OBSERVED THAT CONSIDERATION WAS PAI D BY THE ASSESSEE AND THEREFORE DIVIDEND IS TAXABLE IN HANDS OF ASSESSEE IN THAT CA SE, THE HONBLE APEX COURT CONSIDERED THE DECISION IN THE CASE OF KISHANCHAND LUNIDASING BAJAJ (1966) 60 ITR 500 (SC) IN WHICH IT HAS BEEN HELD THAT THE COMPANY FOR ITS PUR POSE RECOGNIZE THE REGISTERED SHAREHOLDER AS OWNER BUT FOR THE PURPOSE OF TAX, TH E DIVIDEND WILL BE DEEMED TO ACCRUE OR ARISE TO THE REAL OWNER OF THE SHARES. HENCE FOR THE PURPOSE OF THE TRANSFER OF SHARES, THE REGISTERED HOLDER HAS TO COMPLETE THE F ORMALITIES AND THIS WILL NOT MAKE THE REGISTERED HOLDER TO BE OWNER FOR TAX PURPOSES. THE SHARES, IF HELD IN THE NAME OF THE COPARCENER OF HUF AND FUNDS PROVIDED BY HUF THEN DI VIDEND AND PROFIT ON SALE OF SHARES WILL BE TAXABLE IN THE HANDS OF HUF AND NOT IN THE HANDS OF COPARCENER AS INDIVIDUAL. 11.4. BEFORE THE LD. CIT (A), DECISION OF THE HONB LE BOMBAY HIGH COURT IN THE CASE OF CIT VS. FY KHAMBATY, 159 ITR 203 WAS RELIED UPON FO R THE PROPOSITION THAT FOR THE PURPOSE OF SECTION 64(1), THE RESIDENT STATUS OF AS SESSEE HAS TO BE CONSIDERED AND, THEREFORE, FOREIGN INCOME OF RESIDENT WIFE CANNOT B E CLUBBED IN THE HANDS OF THE NON- RESIDENT HUSBAND. THE LD. CIT (A) HAS NOT APPRECIAT ED THE DECISION OF THE HONBLE BOMBAY HIGH COURT AND HAS SIMPLY MENTIONED THAT THE DECISION IS OF NO HELP TO THE ASSESSEE. THE LD. A/R PLACED RELIANCE ON THE FOLLOWING JUDICI AL PRONOUNCEMENTS :- CIT VS. KESHAVLAL LALLUBHAI PATEL (1965) 55 ITR 637 (SC) O.N. MOHINDROO VS. CIT (1975) 99 ITR 583 (DELHI) 22 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. CIT VS. PRAVIN RATILAL THAKKAR (1988) 170 ITR 224 (BOMBAY) CIT VS. M. VINODA RAO & OTHERS (1993) 200 ITR 50 (KAR) ARVIND SINGH CHAUHAN VS. ITO (2014) 31 ITR (T) 105 (AGRA TRIB) RANJIT KUMAR BOSE VS. ITO (1986) 18 ITD 230 (CAL.) CIT VS. F.Y. KHAMBATY (1986) 159 ITR 203 (BOMBAY) THE LD. A/R CONCLUDED THAT IN VIEW OF THE ABOVE THE SHARES WERE BENEFICIALLY AND IN SUBSTANCE OWNED BY THE ASSESSEE HIMSELF, THE ASSESS EE IS UNDISPUTEDLY NON-RESIDENT, THE TRANSFER HAS TAKEN PLACE OUTSIDE INDIA AND THE CAPITAL GAIN HAD ARISEN AND ACCRUED OUT OF INDIA, THE SALE CONSIDERATION WAS ALSO RECEI VED BY THE ASSESSEE THROUGH HIS AGENT OUT OF INDIA, THE SHARES, SINCE OWNED BY THE ASSESS EE HIMSELF, THE INCOME CANNOT ARISE IN THE HANDS OF RESIDENT WIFE OF THE ASSESSEE AND, THEREFORE, PROVISIONS OF SECTION 64 AND SECTION 5 WOULD HAVE NO APPLICATION. 12. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. M/S. VEDANTA RESOURCES PLC VIDE LETTER DATED 05.03.2004 HAD INFORMED TO THE ASSESSEE THAT THE REMUNERATION COMMITTEE OF VEDANTA RESOURCES PLC HAS GRANTED TO THE ASSESSEE AN AWARD UNDER THE INDIAN SUB PLAN TO THE PLAN IN RESP ECT OF 3,500 ORDINARY SHARES IN THE COMPANY. THE AWARD TO ASSESSEE WAS SUBJECT TO SATI SFACTION OF PERFORMANCE OF CONDITION SUMMARIZED IN THE ATTACHED APPENDIX-I TO THIS LETTER, TO ACQUIRE SHARES ON 23 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. PAYMENT OF US 10 CENT PER SHARE. NUMBER OF SHARES CAPABLE OF ACQUISITION WILL DEPEND ON THE EXTENT TO WHICH THE PERFORMANCE CONDITIONS A RE SATISFIED. AWARDS WILL GENERALLY NOT BE EXERCISABLE UNTIL 26 TH FEBRUARY, 2007. THE APPENDIX-I SUMMARISED THE MAIN TERMS OF THE AWARD GRANTED UNDER THE PLAN AS PER IT EM NO. (B) THERE IS A RESTRICTION ON AWARD CLAUSE ON THE ASSESSEE NOT TO SELL/TRANSFER, PLEDGE, ASSIGN OR OTHERWISE DISPOSE ALL OR ANY SHARES WHICH ARE THE SUBJECT OF AN AWARD OR ANY INTEREST THEREIN. ANY ATTEMPT BY THE ASSESSEE TO SELL, TRANSFER, PLEDGE, ASSIGN O R OTHERWISE DISPOSE OF SUCH SHARES BEFORE THE SHARES HAVE VESTED OR ANY INTEREST THERE IN SHALL RESULT IN THE IMMEDIATE LAPSE OF THE AWARD. THE VEDANTA ALUMINA LTD. AS PER LETT ER DATED 9 TH APRIL, 2007 HAD SENT SHARES CERTIFICATE FOR THE VEDANTA RESOURCES PLC AW ARD BY THE COMPANY UNDER THE LONG TERM INCENTIVE PLAN. IT IS FURTHER MENTIONED THAT BASED ON THE ASSESSEES REQUEST THE SHARES CERTIFICATE HAD BEEN ISSUED IN THE NAME OF H IS WIFE SMT. SUNITA PATHAK. HOWEVER, THE TERMS OF THE AWARD AND RULES OF VEDANTA RESOURC ES PLC UNDER LONG TERM INCENTIVE PLAN HAVE TO BE FULFILLED BY THE ASSESSEE AND PROVI SIONS OF APPENDIX-I ARTICLE 3(B) IS APPLICABLE I.E. RESTRICTION OF TRANSFER OF AWARD. THE SAID SHARES WERE LISTED ON THE LONDON STOCK EXCHANGE. THE PAYMENT FOR THE PURCHASE OF SHARES UNDER THE SAID PLAN WAS DEDUCTED FROM THE ASSESSEES SALARY FOR THE MON TH OF MARCH, 2007 UNDER THE HEAD LTIP 04 AT RS. 15,260/-. ON 21.05.2007 THE ASSESSE E THROUGH HIS WIFE SMT. SUNITA PATHAK EXECUTED THE SALE INSTRUCTION FORM OF HSBC S ECURITIES, LONDON FOR SELLING THE SHARES ALLOTTED UNDER THE LTIP ON THE LONDON STOCK EXCHANGE. THE AUTHORIZATION REQUEST FORM FOR DEALING THE VEDANTA RESOURCES PLC WAS SIGNED BY HIS WIFE SMT. SUNITA PATHAK, DATE OF START OF EMPLOYMENT HAS BEEN SHOWN AS 10.08.2002 BY THE AGM, 24 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. COMMERCIAL IN AUTHORIZATION REQUEST FORM. SUBSEQUE NTLY THESE SHARES WERE SOLD BY HSBC SECURITIES BASED ON THE INSTRUCTIONS RECEIVED. THE SALE PROCEEDS WERE RECEIVED BY HSBC SECURITIES IN LONDON ACTING AS AGENT OF THE AS SESSEE. THE RESULTANT AMOUNT WAS TRANSFERRED BY HSBC SECURITIES TO ICICI BANK ON 20. 06.2007 AT RS. 41,98,615/-. THE ASSESSEE HAD MADE PAYMENT OF EXERCISE PRICE @ US 10 CENT PER SHARE WHICH HAS BEEN ADJUSTED AGAINST THE SALARY OF THE ASSESSEE IN THE MONTH OF MARCH, 2007. THE ASSESSEE WAS REAL OWNER OF THESE SHARES ALTHOUGH THE SHARES WERE IN THE NAME OF THE WIFE OF THE ASSESSEE SMT. SUNITA PATHAK. THE SHARES SOLD BY TH E HSBC SECURITIES, LONDON ON THE INSTRUCTIONS OF THE WIFE OF THE ASSESSEE. THE SALE PROCEEDS WERE RECEIVED OUTSIDE INDIA. LATER ON IT WAS TRANSFERRED BY IT IN INDIAN BANK AC COUNT MAINTAINED WITH ICICI BANK ON 20.06.2007. THE CAPITAL GAIN ARISE OR DEEMED TO BE ARISE OUTSIDE INDIA AS ASSESSEE IS A NON-RESIDENT. AS PER SECTION 5(2) OF THE ACT, TO TH E TOTAL INCOME OF ANY PREVIOUS YEAR OF A PERSON WHO IS A NON-RESIDENT INCLUDE ALL INCOME F ROM WHATEVER SOURCES DERIVED WHICH IS RECEIVED OR DEEMED TO BE RECEIVED IN INDIA IN SU CH YEAR BY OR ON BEHALF OF SUCH PERSON OR ACCRUES OR ARISES OR IS DEEMED TO HAVE AC CRUED OR ARISEN TO HIM IN INDIA DURING SUCH YEAR. AS PER EXPLANATION-1, INCOME ACCR UING OR ARISING OUTSIDE INDIA SHALL NOT BE DEEMED TO BE RECEIVED IN INDIA WITHIN THE ME ANING OF THIS SECTION BY REASON ONLY OF THE FACT THAT IT IS TAKEN INTO ACCOUNT IN A BALA NCE SHEET PREPARED IN INDIA. THEREFORE, IT IS CLEAR FROM SECTION THAT IN CASE OF ASSESSEE N ON-RESIDENT AND INCOME ACCRUES OR ARISES OUTSIDE INDIA SHALL NOT BE INCLUDED IN THE I NCOME OF THE ASSESSEE. THE SHARES WERE HELD BY THE ASSESSEE. THE EMPLOYER COMPANY IS SUED THESE SHARES ON THE BASIS OF SCHEME AND PERFORMANCE OF THE ASSESSEE. THERE WAS A RESTRICTION ON THIS AWARD WHICH 25 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. PROVED THAT THESE SHARES WERE ALLOTTED TO THE ASSES SEE BUT ON REQUEST SAME WERE ISSUED IN THE NAME OF HIS WIFE SMT. SUNITA PATHAK. IT IS FURTHER HELD THAT SECTION 64 IS ALSO NOT APPLICABLE ON THIS TRANSACTION BECAUSE ASS ESSEE IS A NON-RESIDENT AND EVEN IF IT IS PRESUMED THAT THESE SHARES WERE TRANSFERRED WITH OUT ANY CONSIDERATION TO THE WIFE OF THE ASSESSEE WHO IS NON-RESIDENT BEING A CAPITAL AS SET NOT TAXABLE IN INDIA ON ACCOUNT OF STATUS OF THE ASSESSEE. THEREFORE, SAME CANNOT BE CLUBBED IN THE HANDS OF THE ASSESSEE AS CAPITAL ASSET/CAPITAL GAIN ARISES/ACCRU ED OUTSIDE INDIA. FURTHER, THE CASE LAWS RELIED UPON BY THE ASSESSEE ARE SQUARELY APPLI CABLE AS REAL OWNER OF THE SHARES WAS ASSESSEE, NOT HIS WIFE. THEREFORE, SAME SHOULD BE TAXED IN THE HANDS OF NON- RESIDENT ASSESSEE BUT AS PER SECTION 5(2), THIS INC OME ACCRUED OR ARISE OUTSIDE INDIA. THUS THERE IS NO TAX IN THE CASE OF THE ASSESSEE. WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT (A) WAS NOT RIGHT IN UPHOLDING THE SHAR E TRANSACTION AS TAXABLE IN THE HANDS OF THE ASSESSEE. ACCORDINGLY WE REVERSE THE ORDER OF LD. CIT (A). 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 11.08.2015. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 11/8/ 2015 DAS/ 26 ITA NO. 53/JP/2012 A.Y. 2008-09. SHRI RAJENDRA PATHAK, UDAIPUR VS. ADIT (INTL. TAX.) JAIPUR. VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI RAJENDRA PATHAK, UDAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ADIT (INTERNATIONAL TAXATION), JAI PUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 53/JP/2012) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR