SANJU VERMA, MUMBAI V. DCIT 25(3), MUMBAI

ITA 5977/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3817 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 09-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Salary income; Cost of acquisition
• Section: 143(3); 10

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 5977 /MUM/2013 ( / ASSESSMENT YEAR : 2010-11) SANJU VERMA, 53, OCEAN CREST, 85 WARDEN ROAD, OPP TATA GARDEN, MUMBAI 400 025. / V. DCIT 25(3), PRATYAKSHAR BHAVAN, BANDRA KURLA COMPLEX, MUMBAI. ./ PAN : AAQPV2017C ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI JITENDRA JAIN REVENUE BY : SHRI SUNIL KUMAR AGARWAL- DR / DATE OF HEARING : 24-2-2016 / DATE OF PRONOUNCEMENT : 6-5-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 5977/MUM/2013, IS DIRECTED AGAINST THE ORDER DATED 23.07.2013 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 35, MUMBAI (HEREINAFTER CA LLED THE CIT(A) ), FOR THE ASSESSMENT YEAR 2010-11, THE APPELLATE PROCEEDINGS BEFORE THE CIT(A) ARISING FROM THE ASSESSMENT ORDER DATED 30.11.2012 PASSED B Y THE LEARNED ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT,1961(HEREI NAFTER CALLED THE ACT). 2. THE GROUNDS RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAF TER CALLED THE TRIBUNAL) READS AS UNDER:- ITA 5977/MUM/2013 2 I DENIAL OF INDEXATION BENEFIT BY THE CIT(A) ON LONG TE RM CAPITAL GAINS . 1. THE LEARNED C.I.T. IN HER ORDER DATED 19TH JULY, 2 013 HAS ERRED IN DENYING THE BENEFIT OF INDEXATION ON LONG TERM CA PITAL GAINS ACCRUING ON SALE OF MUTUAL FUND UNITS OF HSBC FIXED TERM SERIES 59. 2. THE LEARNED C.I.T. HAS FAILED TO APPRECIATE THAT THE OPTION OF EXERCISING INDEXED COST AND PAYING TAX ON LONG TERM C APITAL GAINS @ 20% OR NOT EXERCISING THE OPTION OF INDEXED COST AND P AYING TAX @ 10% IS THE PREROGATIVE OF THE ASSESSEE AND THAT THIS RIGHT CA NNOT BE DENIED BY THE REVENUE AUTHORITIES. 3. THE APPELLANT PRAYS THAT THE BENEFIT OF INDEXATION SH OULD BE ALLOWED WHILE COMPUTING LONG TERM CAPITAL GAINS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL AND HAS DECLARED INCOME FROM SALARY IN THE RETURN OF INCOME FILED WITH THE REVENUE. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 143(2) OF THE ACT, IT WAS OBSERVED BY THE A.O. THAT THE DESPI TE BEING ASKED , THE ASSESSEE WAS NOT ABLE TO OFFER , INTER-ALIA, ANY EX PLANATION FOR THE FOLLOWING CREDIT ENTRIES APPEARING IN THE BANK STATEMENT:- (I) RS. 1,44,84,120/- ON 17/07/2009 (II) EXCEPT FOR STATING THAT THE AMOUNT OF RS. 1,44,84, 120/- WAS RECEIVED FROM M/S HSBC, M.F. , D.N. ROAD, FORT, MUM BAI . THE A.O. CALLED INFORMATION FROM HSBC, MUTUAL FUND WHEREBY THE HSBC, M.F. INTIMATED THAT THE AMOUNT OF RS. 1,44,84,120/- REPRESENTED REDEMPTION OF HSBC GLOBAL ASSET MANAGEMENT IN WHICH THE ASSES SEE INVESTED RS. 1,29,00,000/- ON 15.7.2008. THE ASSESSEE SUBMITTED THAT IT DID NOT DISPUTE THAT THE SAID INCOME OF RS. 15,84,120/- AROSE OUT OF THE REDEMPTION OF THE HSBC M.F. , WHEREBY INVESTMENT MADE BY THE ASSESSEE IN HSBC MF WAS RS. 1,29,00,000/- . THE ASSESSEE OFFERED TO PAY LONG TE RM CAPITAL GAIN TAX ON THE ITA 5977/MUM/2013 3 INCOME BEING LONG TERM CAPITAL GAINS OF RS. 15,84,1 20/- AS PER THE PROVISIONS OF THE ACT. THE A.O. ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE AND BROUGHT IT TO TAX AT SPECIAL RATE OF 20% WITHOUT GIVING THE BENEF IT OF COST INFLATION INDEXATION, VIDE ASSESSMENT ORDERS DATED 30.11.2012 PASSED U/S. 143(3) OF THE ACT . 5. AGGRIEVED BY THE ASSESSMENT ORDER DATED 30.11.20 12 PASSED BY THE A.O. U/S 143(3) OF THE ACT, THE ASSESSSEE FILED AN FIRST APPEAL BEFORE THE CIT(A). 6. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT B ENEFIT OF COST INFLATION INDEXATION SHOULD BE GRANTED TO THE ASSESSEE AND SU BMITTED THE WORKING AS UNDER:- THE CAPITAL GAINS WORKING POST INDEXATION IS AS UN DER: CAPITAL GAINS ON REDEMPTION OF HSBC MF FUNDS UNITS : FULL VALUE OF SALE CONSIDERATION 16.07.2009 RS. 1,44,84,120/- LESS INDEXED COST OF ACQUISITION PURCHASE DATE- 15.07.2008 (12,900,000*632/582) RS. 1,40,08,247 /- LONG TERM CAPITAL GAINS RS. 4,75,873/- ============== THE ASSESSEE SUBMITTED THAT RS. 4,75,873/- BE CHARG ED TO TAX AS LONG TERM CAPITAL GAINS AS COMPUTED ABOVE. THE ASSESSEE SUBMI TTED COPY OF MUTUAL FUND STATEMENT BEFORE THE CIT(A). THE CIT(A) UPHELD THE ADDITION OF RS. 15,84,120/- M ADE BY THE AO ON THE REDEMPTION OF MUTUAL FUND OF THE HSBC , BUT THE CIT (A) HELD THAT THE ASSESSEE HAS NOT DISCLOSED THE SAID INCOME IN THE R ETURN OF INCOME FILED WITH THE REVENUE AND HAS NOT AVAILED OF THE OPTION OF CH OOSING OF THE METHOD OF CALCULATION OF THE CAPITAL GAINS TAX, THE A.O. IS F REE TO ADOPT EITHER METHOD WITH OR WITHOUT APPLYING COST INFLATION INDEX. THU S, THE CIT(A) DIRECTED THE ITA 5977/MUM/2013 4 A.O. TO CALCULATE TAX ON THE LONG TERM CAPITAL GAIN TAX RATE AT 10% WITHOUT INDEXATION OR 20% WITH INDEXATION WHICHEVER IS FAVO RABLE TO THE REVENUE, VIDE ORDERS DATED 23.07.2013. 7. AGGRIEVED BY THE ORDERS DATED 23.07.2013 OF THE CIT(A), THE ASSESSE FILED SECOND APPEAL WITH THE TRIBUNAL. 8. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LONG TERM CAPITAL GAIN IS TO BE COMPUTED AFTER ALLOWING THE BENEFIT O F COST INFLATION INDEX AS PER SECOND PROVISO TO SECTION 48 OF THE ACT AND RATE OF TAX SHOULD BE 20% ON LONG TERM CAPITAL GAINS ARRIVED AT AFTER ADJUSTING FOR C OST INFLATION INDEX, OR AT THE TAX RATE OF 10% WITHOUT CLAIMING THE BENEFIT OF COS T INFLATION INDEX AT THE CHOICE OF THE ASSESSEE. THE CIT(A) REJECTED THE CON TENTION OF THE ASSESSEE ON THE GROUND THAT THE SAID LONG TERM CAPITAL GAINS AR E NOT DECLARED IN THE RETURN OF INCOME FILED BY THE ASSESSEE WITH THE REVENUE. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS PER SECTION 112 OF THE ACT READ WITH THE FIRST PROVISO TO SECTION 112(1) OF THE ACT, THE AFORE-STA TED BENEFIT OF OPTION OF PAYING TAX ON LONG TERM CAPITAL GAINS @20% AFTER IN DEXATION OR 10% WITHOUT AVAILING THE BENEFIT OF INDEXATION HAS TO BE GRANTE D TO THE ASSESSEE AND MERELY BECAUSE THE GAINS ARE NOT DECLARED IN RETURN OF INC OME FILED WITH THE REVENUE, THE BENEFIT OF CHOOSING OPTION OF PAYING TAX AT THE RATE OF 20% OR 10% AS THE CASE MAY BE CANNOT BE DENIED TO THE ASSESSEE. THE LD. COUNSEL RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT V. PRUTHVI BROKERS AND SHAREHOLDERS PRIVATE LIMITED REPORTED I N (2012)349 ITR 336(BOM. HC) AND SUBMITTED THAT THE LONG TERM CAPI TAL GAIN IS TO BE CHARGED TO TAX @ 10% WITHOUT ADJUSTING FOR COST INFLATION I NDEXATION OR 20% AFTER ALLOWING FOR COST INFLATION INDEXATION AT THE CHOIC E OF THE ASSESSEE, WHICHEVER IS BENEFICIAL TO THE ASSESSEE. ITA 5977/MUM/2013 5 9. THE LD. D.R., ON THE OTHER HAND, SUBMITTED THAT TO AVAIL OPTION U/S 112 OF THE ACT, THE ASSESSEE HAS TO OPT THAT OPTION IN THE RETURN OF INCOME FILED WITH THE REVENUE. THE ASSESSEE HAS NOT TAKEN/AVAIL ED THE SAID OPTION AS THE LONG TERM CAPITAL GAINS ARISING FROM TRANSFER OF HS BC MF WERE NOT DECLARED IN THE RETURN OF INCOME FILED WITH THE REVENUE AND THE SAME CANNOT BE NOW ALLOWED TO THE ASSESSEE. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND AL SO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE OBSERVED THAT THE ASS ESSEE BEING AN INDIVIDUAL HAS EARNED LONG TERM CAPITAL GAIN ON REDEMPTION OF HSBC M.F. WHICH IS CHARGEABLE TO TAX U/S 112(1)(A) READ WITH THE FIRST PROVISO TO SECTION 112(1) OF THE ACT. THE ASSESSEE HAS NOT DECLARED THE SAID LO NG TERM CAPITAL GAIN IN THE RETURN OF INCOME FILED WITH THE REVENUE. HOWEVER, AS PER THE PROVISIONS OF SECTION 112(1)(A) OF THE ACT, ANY INCOME ARISING TO AN RESIDENT INDIVIDUAL FROM TRANSFER OF LONG TERM CAPITAL ASSET WHICH IS CHARGE ABLE TO TAX UNDER THE HEAD CAPITAL GAIN IS CHARGEABLE TO TAX @ 20% AFTER ALLOW ING THE BENEFIT OF THE COST INFLATION INDEXATION AS PROVIDED IN THE SECOND PROV ISO TO SECTION 48 OF THE ACT. HOWEVER, WITH RESPECT TO THE INCOME ARISING FROM TH E TRANSFER OF LONG TERM CAPITAL ASSET BEING LISTED SECURITIES OR UNITS OR Z ERO COUPON BONDS FOR THE INSTANT ASSESSMENT YEAR UNDER APPEAL SHALL BE CHAR GEABLE TO TAX @ 10% OF THE AMOUNT OF CAPITAL GAIN BEFORE GIVING EFFECT TO THE SECOND PROVISO TO SECTION 48 OF THE ACT I.E. WITHOUT APPLYING COST INFLATION INDEX TO THE COST OF ACQUISITION OR COST OF IMPROVEMENT OF THE SAID CAPI TAL ASSETS BEING LISTED SECURITIES OR UNITS OR ZERO COUPON BONDS . THE ABO VE STATED CHARGEABILITY TO TAX OF LONG TERM CAPITAL GAINS WITH OR WITHOUT THE BENEFIT OF INDEXATION U/S 112 OF THE ACT READ WITH SECOND PROVISO TO SECTION 48 OF THE ACT, IS TO BE AVAILED AT THE OPTION OF THE TAX-PAYER WHICHEVER I S MORE BENEFICIAL TO THE TAX- PAYER AS IS CONTEMPLATED BY THE WORDINGS USED BY TH E LEGISLATURE IN THE AFORE- STATED RELEVANT PROVISIONS OF THE ACT THE RELEVANT PROVISIONS OF THE ACT AS ARE ITA 5977/MUM/2013 6 APPLICABLE FOR THE INSTANT ASSESSMENT YEAR UNDER AP PEAL ARE REPRODUCED HEREUNDER : [ TAX ON LONG-TERM CAPITAL GAINS. 112. (1) WHERE THE TOTAL INCOME OF AN ASSESSEE INCLUDES ANY INCOME, ARISING FROM THE TRANSFER OF A LONG-TERM CAPITAL AS SET, WHICH IS CHARGEABLE UNDER THE HEAD CAPITAL GAINS, THE TAX PAYABLE BY THE ASSESSEE ON THE TOTAL INCOME SHALL BE THE AGGREGATE OF, (A) IN THE CASE OF AN INDIVIDUAL OR A HINDU UNDIV IDED FAMILY, 1 [BEING A RESIDENT,] (I) THE AMOUNT OF INCOME-TAX PAYABLE ON THE TOTAL INCOME AS REDUCED BY THE AMOUNT OF SUCH LONG-TERM CAPITAL GAI NS, HAD THE TOTAL INCOME AS SO REDUCED BEEN HIS TOTAL INCOM E ; AND (II) THE AMOUNT OF INCOME-TAX CALCULATED ON SUCH LONG-TERM CAPITAL GAINS AT THE RATE OF TWENTY PER CENT : PROVIDED THAT WHERE THE TOTAL INCOME AS REDUCED BY SUCH LON G-TERM CAPITAL GAINS IS BELOW THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX, THEN, SUCH LONG-TERM CAPITAL GAINS SHAL L BE REDUCED BY THE AMOUNT BY WHICH THE TOTAL INCOME AS SO REDUCED FALL S SHORT OF THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TA X AND THE TAX ON THE BALANCE OF SUCH LONG-TERM CAPITAL GAINS SHALL B E COMPUTED AT THE RATE OF TWENTY PER CENT ; ******* ******* 9 [ PROVIDED THAT WHERE THE TAX PAYABLE IN RESPECT OF ANY INCOM E ARISING FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET, BEI NG LISTED SECURITIES 10 [OR UNIT] 11 [OR ZERO COUPON BOND], EXCEEDS TEN PER CENT OF THE AMOUNT OF ITA 5977/MUM/2013 7 CAPITAL GAINS BEFORE GIVING EFFECT TO THE PROVISION S OF THE SECOND PROVISO TO SECTION 48 , THEN, SUCH EXCESS SHALL BE IGNORED FOR THE PURPOS E OF COMPUTING THE TAX PAYABLE BY THE ASSESSEE. 12 [EXPLANATION.FOR THE PURPOSES OF THIS SUB-SECTION, (A) LISTED SECURITIES MEANS THE SECURITIES (I) AS DEFINED IN CLAUSE (H) OF SECTION 2 13 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (32 OF 1956); AND (II) LISTED IN ANY RECOGNISED STOCK EX CHANGE IN INDIA; (B) UNIT SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (B) OF EXPLANATION TO SECTION 115AB .]] ****** ****** THE TAXES ARE TO BE COLLECTED BY THE AUTHORITY OF LAW AS PER THE MANDATE OF THE ACT. MERELY BECAUSE THE ASSESSEE HAS NOT FILED THE DETAILS OF LONG TERM CAPITAL GAIN IN THE RETURN OF INCOME FILED WITH THE REVENUE , THE ASSESSEE CANNOT BE DENIED THE BENEFIT OF PROVISIONS OF SECTI ON 112(1)(A) OF THE ACT READ WITH THE FIRST PROVISO TO SECTION 112(1) OF THE ACT . THE ASSESSEE BEING AN INDIVIDUAL IS ENTITLED TO CHOOSE THE OPTION WHICHEV ER IS MORE BENEFICIAL TO THE ASSESSEE AS ARE AVAILABLE U/S 112(1)(A) READ WITH F IRST PROVISO TO SECTION 112(1) OF THE ACT , PROVIDED OTHER CONDITIONS ARE FULFILLED. THE ASSESSEE HAS RIGHT TO CHOOSE TO BE TAXED ON LONG TERM CAPITAL GA INS ARISING FROM THE TRANSFER OF HSBC MF EITHER @ 20% AFTER CLAIMING THE BENEFIT OF COST INFLATION INDEXATION AS PROVIDED IN SECTION 112(1)(A) OF THE ACT READ WITH SECOND PROVISO TO SECTION 48 OF THE ACT , TO COMPUTE INDEX ED COST OF ACQUISITION OR INDEXED COST OF IMPROVEMENT OF THE CAPITAL ASSET , OR TO BE CHARGEABLE TO TAX @ 10% WITHOUT ADJUSTING THE COST OF ACQUISITION OR IM PROVEMENT WITH COST ITA 5977/MUM/2013 8 INFLATION INDEX AS PER PROVISIONS OF SECTION 112(1 )(A) OF THE ACT READ WITH FIRST PROVISO TO SECTION 112(1) OF THE ACT IN THE CASE OF LONG TERM CAPITAL GAIN ARISING ON TRANSFER OF LISTED SECURITIES OR UNITS O R ZERO COUPON BONDS AS APPLICABLE FOR THE INSTANT ASSESSMENT YEAR,PROVIDED OTHER CONDITIONS ARE FULFILLED. THUS, THE A.O. IS DIRECTED TO ALLOW THE BENEFIT OF CHOOSING THE OPTION TO THE ASSESSEE IN ACCORDANCE WITH THE PROVISIONS O F SECTION 112(1)(A) OF THE ACT READ WITH FIRST PROVISO TO SECTION 112(1) OF TH E ACT , AFTER VERIFYING THAT ALL OTHER CONDITIONS AS STIPULATED UNDER THE ACT FOR CL AIMING THE AFORE-STATED BENEFITS ARE DULY FULFILLED BY THE ASSESSEE. THE A PPEAL OF THE ASSESSEE IS ALLOWED AS INDICATED ABOVE. WE ORDER ACCORDINGLY. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA N0. 5977/MUM/2013 FOR THE ASSESSMENT YEAR 2010-11 IS AL LOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH MAY, 2016. # $% &' 06-05-2016 ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 06-05-2016 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS ITA 5977/MUM/2013 9 !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI E BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI