Long Term Capital Gains exemption contested on basis of regulatory probes; tribunal found no evidential basis for denial, so exemption stands.

Long term capital gains exemption under section 10(38) was contested where revenue relied on ongoing SEBI and SFIO investigations; the Tribunal held the assessing officer labelled the issuer a penny stock without placing independent evidence on record, and relied on material that did not exist at the time of assessment and was not before the CIT(A) or ITAT. The HC observed ongoing regulatory probes do not alter whether LTCG benefits may be claimed, accepted the Tribunal's factual findings as binding and concluded no substantial question of law arose.

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Issues: Whether the assessee was entitled to exemption under Section 10(38) of the Income-tax Act, 1961 in respect of long-term capital gains on sale of shares of Shilpi Cable Technologies Ltd.

Analysis: The question was decided on factual findings by the Tribunal and the CIT(A). The authorities below recorded that the assessee held the shares for more than one year, purchased and sold them through recognised stock exchange platforms with payments routed through banking channels, and paid securities transaction tax. No evidence was placed on record by the assessing officer to demonstrate that the transactions were not genuine or that the company qualified as a penny stock in the assessment year under appeal. Alleged subsequent or ongoing investigations by regulatory authorities were not part of the material before the assessing officer, CIT(A) or the Tribunal. As the contested determinations rest on findings of fact, they were not open to interference in the present proceedings.

Conclusion: Exemption under Section 10(38) of the Income-tax Act, 1961 in respect of the long-term capital gains was upheld; the appeal by the revenue is dismissed.

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