2026 (2) TMI 710 - AT - Income Tax

Long Term Capital Gains exemption upheld where demat trading with STT confirmed; unexplained-income additions deleted.

Long term capital gain exemption under Section 10(38) was treated as applicable where shares were held in demat form for over one year, sold through a ... Addition u/s 68 - LTCG claimed u/s. 10(38) denied - Gain arising on sale of equity shares HELD THAT:- Assessee has kept the equity shares in Demat account and after holding them for more than a year, has sold equity shares through registered sale broker on online platform of the recognized stock exchange and that the shares have been sold on the live share price appearing on the recognized stock exchange controlled by the SEBI. The assessee also duly paid STT and therefore has fulfilled all the conditions prescribed u/s. 10(38) of the Act for claiming benefit of exemption of LTCG from sale of equity shares. Respectfully following the decisions referred in the case of Shri Jayesh Kumar Javia (HUF) [2021 (6) TMI 966 - ITAT INDORE] and Affluence Commodities (P.) Ltd.[2024 (4) TMI 199 - GUJARAT HIGH COURT] which has been subsequently affirmed by the Hon'ble Apex Court [2025 (8) TMI 697 - SC ORDER], the alleged claim of assessee u/s. 10(38) of the Act stands allowed. Addition made u/s. 68 of the Act stands deleted - addition for unexplained expenditure u/s. 69C also stands deleted. Assessee appeal allowed. Issues: Whether long term capital gain claimed under Section 10(38) of the Income-tax Act, 1961 arising from sale of equity shares of M/s. Kappac Pharma Ltd. is genuine and whether additions made under Section 68 and Section 69C of the Income-tax Act, 1961 in respect of the sale consideration and alleged expenditure are deletable.Analysis: The Tribunal examined evidence that the shares were held in demat form for more than one year, sold through a registered broker on the online trading platform of a recognised stock exchange, and securities transaction tax was paid. Decisions of coordinate benches and the High Courts treating transactions in M/s. Kappac Pharma Ltd. shares as genuine and allowing exemption under Section 10(38) were followed. On these facts and precedents, the conditions for exemption under Section 10(38) were found satisfied and the premise for additions under Section 68 and Section 69C, namely that the sale consideration and expenses were unexplained or bogus, was not sustained.Conclusion: The long term capital gain under Section 10(38) of the Income-tax Act, 1961 is allowed as genuine; the additions made under Section 68 and Section 69C of the Income-tax Act, 1961 are deleted and the appeal is allowed in favour of the assessee.