Appellate tribunal upholds tax ruling, affirms conversion of Short Term Capital Loss to Long Term Capital Gain.

The appellate tribunal affirmed the decision of the CIT (A) in a tax case, ruling that the amendment in section 49(iii)(e) was clarificatory and applied retrospectively. It upheld the conversion of Short Term Capital Loss into Long Term Capital Gain based on the original cost of acquisition and confirmed the levy of interest under section 234B. The appeal by the assessee was dismissed on 27/05/2016.

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Issues Involved:
1. Whether the amendment in section 49(iii)(e) inserting clause (xiii) of section 47 is of clarificatory nature.
2. Conversion of Short Term Capital Loss into Long Term Capital Gain.
3. Levy of interest under section 234B of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Clarificatory Nature of Amendment in Section 49(iii)(e):
The assessee argued that the amendment in section 49(iii)(e) inserting clause (xiii) of section 47 was not clarificatory but substantive, and hence, it should not apply retrospectively. The appellate tribunal held that section 47 deals with transactions not regarded as transfers, while section 49 deals with the cost of acquisition in specific modes. It was clarified that section 49(1)(iii)(e) introduced by the Finance Act, 2012, with effect from 1.4.1999, was merely clarificatory and not substantive. The tribunal concluded that the cost of acquisition in the hands of the company (assessee) should be the same as that of the firm (M/s. Sarju Cold Storage), i.e., Rs. 2,50,000/-, and any revaluation of assets by the firm does not alter this cost. Therefore, the amendment was correctly applied retrospectively.

2. Conversion of Short Term Capital Loss into Long Term Capital Gain:
The assessee contended that the AO erred in converting the Short Term Capital Loss into Long Term Capital Gain based on the revaluation of assets. The AO determined that the revaluation of land from Rs. 2,50,000/- to Rs. 3,70,00,000/- was done to evade Long Term Capital Gain tax by claiming a loss. The tribunal upheld the AO's view, stating that the cost of acquisition for the assessee company should be the same as that of the firm, regardless of any revaluation. The tribunal found no merit in the assessee's argument and confirmed that the cost of acquisition should be Rs. 2,50,000/-, leading to the correct calculation of capital gains.

3. Levy of Interest under Section 234B:
The assessee argued against the levy of interest under section 234B, claiming that the amendment being retrospective should not attract interest for non-payment of advance tax. The tribunal dismissed this argument, stating that since the primary ground regarding the cost of acquisition was dismissed, the levy of interest under section 234B was correctly confirmed by the CIT (A). The tribunal found no infirmity in the order of the CIT (A) and upheld the levy of interest.

Conclusion:
The appellate tribunal dismissed the appeal of the assessee, confirming the order of the CIT (A). The tribunal held that the amendment in section 49(iii)(e) was clarificatory and applicable retrospectively, upheld the conversion of Short Term Capital Loss into Long Term Capital Gain based on the original cost of acquisition, and confirmed the levy of interest under section 234B. The appeal was pronounced dismissed in the open court on 27/05/2016.

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