ACIT, New Delhi V. Shri Bharti Gupta Ramola, New Delhi

ITA 5561/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3861 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 24-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K MONGA
• Keywords: Capital asset

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH A DELHI ] BEFORE SHRI R. P. TOLANI, JM AND SHRI K. D. RANJ AN, AM I. T. APPEAL NO. 5561 (DEL) OF 2010. ASSESSMENT YEAR : 2006-07. ASSTT. COMMISSIONER OF INCOME-TAX, SMT . BHARTI GUPTA RAMOLA, C I R C L E : 47 (1), VS. H 334, NARAINA VIHAR, N E W D E L H I. N E W D E L H I. PAN / GIR NO. AAEPR 1353F. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI K. M. GUPTA, ADV.; DEPARTMENT BY : SHRI A. K. MONGA, SR. D. R. O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 200 6-07 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)XXX, NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS FOLLOWS :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) HAS ERRED IN : (I) DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICE R, BY TREATING THE CAPITAL GAINS UNDER CONSIDERATION AS LONG TERM CAPITAL GAIN , NOT CONSIDERING THE FACT THAT IN THE ASSESSEES CASE, THE PERIOD OF HOL DING OF CAPITAL ASSETS (UNITS OF MUTUAL FUNDS IN THE PRESENT CASE) AS ON T HE DATE IMMEDIATELY PRECEDING THE DATE OF TRANSFER IS LESS THAN OF EQUA L TO 12 MONTHS AND 2 I. T. APPEAL NO. 5561 (DEL) OF 2010. HENCE THE CAPITAL GAIN ARISING THEREFROM IS LIABLE TO BE TREATED AS SHORT TERM CAPITAL GAIN AS PER THE PROVISIONS OF SECTION 2(42A) OF THE I. T. ACT, 1961; (II) HOLDING THAT THE STT PAID CAN NOT BE TREATED AS INC OME WHEREAS SINCE THE DEDUCTION IS NOT ALLOWED ON ACCOUNT OF STT PAID AS PER THE 5 TH PROVISO OF SECTION 48 OF THE I. T. ACT, 1961, THE AMOUNT OF STT PAID WAS RIGHTLY ADDED BY THE ASSESSING OFFICER UNDER THE HEAD SHORT TERM CAPITAL GAIN. 3. THE FIRST ISSUE FOR CONSIDERATION RELATES TO DEL ETING THE ADDITION MADE BY THE ASSESSING OFFICER TREATING THE CAPITAL GAINS AS SHORT TERM CA PITAL GAINS. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE DURING THE FY RELEVANT TO AY UNDER CON SIDERATION THE ASSESSEE SOLD UNITS OF TWO MUTUAL FUNDS EXACTLY ON COMPLETION OF HOLDING 12 MO NTHS AND ACCORDINGLY TREATED THE GAINS AS LONG TERM CAPITAL GAINS. THE ASSESSEE PURCHASED 4, 60,657 UNITS OF BIRLA FLOATING RATE FUND- LONG TERM GROWTH PLAN ON 14/10/2004 WHICH WERE SOLD ON 1 4/10/2005 RESULTING IN CAPITAL GAIN OF RS.2,72,386/-. THE ASSESSEE PURCHASED 1,46,970 UNIT S OF BIRLA DIVIDEND YIELD PLAN ON 29/09/2004 AND SOLD THE SAME ON 29.09.2005 RESULTIN G IN CAPITAL GAIN OF RS.18,31,241/-. THE ASSESSEE PAID STT OF RS.10,350/-. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER EXAMINED THE CONTENTION OF THE ASSESSEE AN D DISPUTED THE CLAIM OF THE ASSESSEE THAT THE ABOVE GAIN WAS LONG TERM AND TREATED THE SAME AS S HORT TERM CAPITAL GAIN FOR THE REASON THAT THE ASSET SHOULD HAVE BEEN HELD BY THE ASSESSEE FOR M ORE THAN 12 MONTHS TO BE CLASSIFIED AS LONG TERM CAPITAL ASSET. IF THE ASSETS ARE HELD LESS TH AN OR EQUAL TO 12 MONTHS AS ON THE DATE OF IMMEDIATELY PRECEDING THE DATE OF TRANSFER, THE ASS ETS WERE TO BE TREATED AS SHORT TERM CAPITAL ASSETS WITHIN THE MEANING OF PROVISIONS OF SECTION 2(42A) OF THE ACT. THE ASSESSING OFFICER, THEREFORE, TREATED THE GAINS ARISING ON TRANSFER OF UNITS AS SHORT TERM CAPITAL GAINS AS THE ASSETS WERE HELD EXACTLY FOR 12 MONTHS. 4. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED TH AT PROVISIONS OF SECTION 2(42A) REFERS TO NOT MORE THAN 12 MONTHS WHICH DOES NOT MEAN THE ASSET SHOULD BE HELD FOR MORE THAN 12 MONTHS MEANING THEREBY IF THE SHARES/ UNITS OF M UTUAL FUNDS ARE HELD FOR 12 MONTHS IT CEASES TO BE LONG TERM CAPITAL ASSET. THE KEY WORDS ARE NOT MORE THAN 12 MONTHS. THE WORDS NOT 3 I. T. APPEAL NO. 5561 (DEL) OF 2010. MORE THAN 12 MONTHS MEANS 12 MONTHS OR LESS THAN 1 2 MONTHS. THE LD. CIT (APPEALS) ON CONSIDERATION OF SUBMISSION OF THE ASSESSEE OBSERVE D THAT IN THE BANKING AND COMMERCIAL TERMS MORE THAN 365 NIGHTS HAD PASSED IN 12 MONTHS TIME. EVEN FOLLOWING THE ANALOGY FOR CALCULATING INTEREST LEVIABLE / PAYABLE BY / TO THE ASSESSEE, I F THE FRACTION OF THE MONTH IS IGNORED STILL 12 MONTHS HAVE BEEN COMPLETED BEFORE THE DATE OF SALE. THE LD. CIT (APPEALS) ACCORDINGLY TREATED THE CAPITAL GAIN ARISING ON SALE OF UNITS OF MUTUAL FUNDS AS LONG TERM CAPITAL GAINS. 5. BEFORE US, THE LD. SR. DR SUBMITTED THAT THE ASS ETS WERE HELD FOR THE PERIOD OF 12 MONTHS WHEREAS AS PER DEFINITION OF SHORT TERM CAPITAL GAI N CONTAINED IN SECTION 2(42A) OF THE ACT THE ASSETS HELD MORE THAN 12 MONTHS HAVE TO BE TREATED AS LONG TERM CAPITAL GAIN. THE LD. CIT (APPEALS) FOR HIS DECISION HAS RELIED ON TERMINOLOG Y USED IN BANK WHEREAS THE ISSUE IS TO BE DECIDED AS PER PROVISIONS OF THE INCOME-TAX ACT. O N THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUBMITTED THAT AS PER THE DEFINITION OF SHORT TERM CAPITAL GAINS IF AN ASSET IS HELD FOR 12 MONTHS OR MORE, IT WILL BE LONG TERM CAPITAL GAIN. HE PLACED RELIANCE ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF VINOD KUMAR JAIN VS. CIT 46 DTR 185. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT THE ASSETS HAVE BEEN SOLD EXACTL Y ON THE DAY WHEN PERIOD OF 12 MONTHS WAS COMPLETED. EXPRESSION SHORT TERM CAPITAL ASSET H AS BEEN DEFINED UNDER SECTION 2(42A) OF THE INCOME TAX ACT, 1961, ACCORDING TO WHICH SHORT TERM CAPITAL GAIN MEANS A CAPITAL ASSET, HELD BY AN ASSESSEE FOR NOT MORE THAN 36 MONTHS IMMEDIATELY PRECEDING THE DATE OF ITS TRANSFER. PROVISO TO SECTION 2(42A) OF THE ACT PRESCRIBES THE TIME IN RESPECT OF SHARES OF 12 MONTHS IN PLACE OF 36 MONTHS. SECTION 2(42B) DEFINES THE SHORT TERM CAPI TAL GAINS AND MEANS CAPITAL GAINS ARISING FROM TRANSFER OF A SHORT TERM CAPITAL ASSET. LONG TERM CAPITAL ASSET HAS BEEN DEFINED UNDER SECTION 2(29A) OF THE ACT AND MEANS A CAPITAL ASSET, WHICH IS NOT A SHORT TERM CAPITAL ASSET. THEREFORE, IN VIEW OF THE DEFINITION OF LONG TERM CAPITAL ASSET A ND SHORT TERM CAPITAL ASSET, IT IS TO BE DECIDED WHETHER IN A CASE WHERE SHARE ARE HELD EXACTLY FOR 12 MONTHS WHETHER THE CAPITAL GAIN ARISING ON HIS TRANSFER WILL BE LONG TERM CAPITAL GAIN OR SHOR T TERM CAPITAL GAIN. IN CASE OF SHARES, SHORT TERM CAPITAL ASSET MEANS A CAPITAL ASSET, HELD BY AN ASS ESSEE FOR NOT MORE THAN 12 MONTHS IMMEDIATELY 4 I. T. APPEAL NO. 5561 (DEL) OF 2010. PRECEDING THE DATE OF ITS TRANSFER. THE LANGUAGE E MPLOYED IN SECTION 2(42A) CLEARLY SHOWS THAT AN ASSET, WHICH IS HELD MORE THAN 12 MONTHS IMMEDIA TELY PRECEDING THE DATE OF ITS TRANSFER WILL BE SHORT TERM CAPITAL GAIN. THE LANGUAGE OF THE SE CTION IS VERY CLEAR AND UN-AMBIGUOUS. THUS IN ORDER TO QUALIFY AS LONG TERM CAPITAL ASSET, THE SH ARES SHOULD BE HELD BY THE ASSESSEE FOR A PERIOD OF MORE THAN 12 MONTHS. IN OTHER WORDS, IT SHOULD BE HELD AT LEAST FOR THE PERIOD 12 MONTHS AND ONE DAY, IMMEDIATELY PRECEDING DATE OF TRANSFER. F URTHER THE DEFINITION EMPLOYS THE EXPRESSION IMMEDIATELY PRECEDING THE DATE OF ITS TRANSFER WHI CH WOULD MEAN THAT THE DAY ON WHICH AN ASSET IS TRANSFERRED HAS TO BE EXCLUDED. THE TERM TRANS FER HAS BEEN DEFINED UNDER SECTION 2(47) OF THE ACT AND INCLUDES THE SALE, EXCHANGE OR RELINQUISHME NT OF THE ASSETS ETC. ETC. IN THE CASE OF ASSESSEE, THE UNITS OF BIRLA FLOATING RATE FUND WER E SOLD ON 14/10/2005. SIMILARLY IN THE CASE OF BIRLA YIELD PLANT THE UNITS WERE PURCHASED ON 29 /09/2004 AND SOLD ON 29/09/2005. HOWEVER, IN THE CASE OF ASSESSEE THE UNITS OF BOTH THE FUNDS HAVE BEEN SOLD ON EXACTLY COMPLETION OF PERIOD OF 365 DAYS I.E. ONE YEAR. SINCE THE ASSESSEE HAD NOT HELD THE UNITS OF THE MUTUAL FUND FOR A PERIOD OF ONE YEAR AND ONE DAY, THE NATURE OF ASSET IN THE HANDS OF THE ASSESSEE ON THE DATE ON WHICH THEY WERE TRANSFERRED ARE SHORT TERM CAPITAL ASSETS AND THE CAPITAL GAIN ARISING ON TRANSFER OF SUCH UNITS WILL BE SHORT TERM CAPITAL GAIN AND N OT LONG TERM CAPITAL GAIN. RELIANCE PLACED BY THE ASSESSEE ON THE DECISION OF HONBLE PUNJAB & HA RYANA IN THE CASE OF VINOD KUMAR JAIN (SUPRA) IS DISTINGUISHABLE ON FACTS. IN THIS CASE THE ASSESSEE WAS ALLOTTED FLAT BY DDA ON 27 TH FEBRUARY, 1982 ON PAYMENT OF INSTALLMENTS BY ISSUAN CE OF ALLOTMENT LETTER WHEREAS SPECIFIC FLAT NUMBER WAS ALLOTTED AND THE POSSESSION WAS DELIVERE D ON 15 TH MAY, 1986. RIGHT OF THE ASSESSEE PRIOR TO 15 MAY, 1986 WAS A RIGHT IN THE PROPERTY. THE SAID FLAT WAS SOLD ON 06 TH JANUARY, 1989. IT WAS HELD THAT IT COULD NOT BE SAID THAT PRIOR TO DATE OF POSSESSION OF THE FLAT THE ASSESSEE WAS NOT HOLDING THE FLAT. THEREFORE, THE CAPITAL GAIN ARISING ON SALE OF THE SAID FLAT ON 6 TH JANUARY, 1989 WAS A LONG TERM CAPITAL GAIN. THUS THE FACTS OF THE CASE OF SHRI VINOD KUMAR JAIN (SUPRA) RELIED UPON BY THE ASSESSEE ARE ENTIRELY DIFFERENT FROM THE CASE OF THE ASSESSEE. THEREFORE, THE ASSESSEE DOES NOT DERIVE ANY SUPPORT FROM ANY DECIS ION RELIED UPON BY HER. ACCORDINGLY, IN OUR CONSIDERED OPINION, THE LD. CIT (APPEALS) WAS NOT J USTIFIED IN TREATING THE CAPITAL ASSET AS LONG TERM CAPITAL ASSET RELYING ON THE BANK TERMINOLOGY. THE ISSUE HAS TO BE DECIDED AS PER THE PROVISIONS OF THE INCOME TAX ACT AND NOT AS PER THE PROVISIONS OF THE BANKING ACT. WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT (APPE ALS) AND RESTORE IT TO THE FILE OF THE ASSESSING OFFICER. 5 I. T. APPEAL NO. 5561 (DEL) OF 2010. 7. THE SECOND ISSUE FOR CONSIDERATION RELATES TO TH E ISSUE THAT STT PAYMENTS COULD NOT BE TREATED AS INCOME. DURING THE COURSE OF HEARING, I T WAS POINTED OUT BY THE LD. AR OF THE ASSESSEE THAT STT PAID WAS NOT CLAIMED AS DEDUCTION. THE LD . CIT (APPEALS) HAS HELD THAT STT PAID CARRIES NO RELEVANCE IF THE ASSETS ARE TREATED AS L ONG TERM CAPITAL GAIN. HOWEVER, IN ANY CASE STT PAID CANNOT BE TREATED AS INCOME AND DISALLOWED. 8. WE HAVE HEARD BOTH THE PARTIES. SECTION 48 OF T HE INCOME-TAX ACT PROVIDES THE MODE OF COMPUTATION OF CAPITAL GAINS, AS PER FIFTH PROVISO, NO DEDUCTION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS IN RESPECT OF ANY SUM PAID ON ACCOUNT OF SECURITY TRANSACTION TAX UNDER CHAPTER VII OF THE F INANCE NO. 2 ACT, 2004. DURING THE COURSE OF HEARING IT HAS BEEN POINTED OUT THAT THE ASSESSEE H AS NOT CLAIMED DEDUCTION WHILE COMPUTING THE CAPITAL GAINS ON ACCOUNT OF STT. THEREFORE, NO DIS ALLOWANCE CAN BE MADE. THE LD. CIT (APPEALS), THEREFORE, IS JUSTIFIED IN HOLDING THAT THE STT PAID BY THE ASSESSEE, CANNOT BE ADDED WHILE COMPUTING THE CAPITAL GAINS. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A) HOLDING THAT NO DISALLOWANCE CAN BE MAD E ON ACCOUNT OF STT PAYMENT. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 31 ST MAY, 2011. SD/- S D/- [ R. P. TOLANI ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31 ST MAY, 2011. *MEHTA * 6 I. T. APPEAL NO. 5561 (DEL) OF 2010. COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.