TaxTMI 
TaxTMI 
2010 (3) TMI 874
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....vestments. For assessment year 2000-01, return of income declaring total income of Rs. 9,08,99,794 was filed by her on 27-10-2000. The return was processed under section 143(1) and no scrutiny was done in her case for the relevant assessment year. She had during the assessment year 2000-01, purchased 1,00,000 equity shares of DSQ Software on 9-4-1999 on spot delivery basis for a purchase consideration of Rs. 3,39,71,750. Out of the above, 63,000 shares were sold on 24-3-2000 and balance 37,000 was sold on 30-3-2000 as per the broker's contract note dated 30-3-2000. She claimed that the sale of 63,000 shares were made on 8-4-2000 as per broker bill for sett No. 01. She offered for tax as short-term capital gains the capital gain on sale of 63,000 shares in assessment year 2001-02. The sale in respect of 37,000 shares was claimed as long-term and offered to tax a sum of Rs. 5,33,85,080 as long-term capital gains in assessment year 2001-02. According to her, the broker raised the bill for this transaction in the broker bill for sett No. 02 on 12-4-2000 and delivery of shares and its corresponding pay-in/pay-out took place only on 12-4-2000. Since the corresponding sale and delivery ha....
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.... has raised a bill on 12-4-2000 for these transactions marking delivery of shares. The assessee has claimed that the broker has raised these bills after schedule pay-in/pay-out of securities to Stock Exchange which was completed on 12-4-2000. As per the broker's bills which is claimed by the assessee as broker's note the holding period exceeds one year and, therefore, there is long-term capital gains on the sale of these shares. The submissions of the assessee have been carefully considered. As per the delivery of share and broker's bill, there is an incidence of long-term capital gains on the sale of these shares. However, if the transaction is assumed to be completed on the first date of contract, i.e., 30-3-2000 and the subsequent formalities are only completion of these transactions then capital gain will relate back to the earlier year, i.e., assessment year 2000-01. The assessee has furnished the copy of ledger account in the books of the broker where the sale bill is credited to assessee's account on 12-4-2000. As the assessee has already offered this income in assessment year 2001-02, the same is assessed in this year to protect the interest of revenue." 4. The Assess....
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....ded such transactions are followed up by delivery of shares and also the transfer deeds. Similarly, in respect of the purchasers of the securities, the holding period shall be reckoned from the date of broker's note for purchase on behalf of the investors. In case the transactions take place directly between the parties and not through stock exchanges, the date of contract of sale as declared by the parties shall be treated as the date of transfer provided it is followed up by actual delivery of shares and the transfer deeds.' (4)The broker's bill for settlement period is drawn after the pay-in/pay-out date, i.e., after delivery is made and payments received/made. The fact that the CBDT has envisaged a scenario where delivery may not place after issue of Broker's note means that they did not want to treat the broker's bill as the requisite date but the contract note issued by the broker. Accordingly, short-term capital gains on sale of these shares had accrued on 30-3-2000, i.e., relevant to assessment year 2000-01. (5)Since, the assessee has offered this income in assessment year 2001-02 as long-term capital gain, the same was accepted in that year by the Assessing Officer p....
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.... to sell. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of CIT v. Bhurangya Cool Co. [1958] 34 ITR 802 wherein it was held that the title in the movable property passes when they are actually delivered to the buyer. Further reliance was placed on the decision in the case of Vasudev Ramchandra Shelat v. Pranlal Jayanand Thakar [1975] 45 Comp. Cas. 43, wherein the Hon'ble Supreme Court held that the interest under an agreement of sale of shares passes from seller to the buyer, on delivery of the share certificate accompanied with duly executed transfer form. Reliance was also placed on the decision of the Hon'ble Madras High Court in case of CIT v. M. Ramaswamy [1985] 151 ITR 122 and Kerala High Court in case of Rajagiri Rubber & Produce Co. Ltd. v. CIT [1993] 203 ITR 663 following the abovereferred Supreme Court decision, wherein it was held that between the transferor and the transferee, the transaction is complete when the share certificate are handed over by delivery. 6. The Assessing Officer relied upon Circular No. 704, dated 28-4-1995 of CBDT. The Circular gives instructions regarding determination of the date of transfer and holding period fo....
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....ear 2000-01 dated 22-3-2007 after recording following reasons :- "Shri Suresh Jajoo : Assessment year 2000-01 :- (1)From the assessment year 2001-02, it is seen that the assessee had purchased 2,00,000 shares of DSQ software on 5 and 7-4-1999 (on spot basis) for a purchase consideration of Rs. 7,43,61,500. These holdings have been sold on 24-3-2000 for Rs. 46,81,22,650 and long-term capital gain of Rs. 39,37,61,150 have been declared on these transactions. (2)During the course of assessment proceedings, the assessee furnished the distinctive numbers and the broker's contract notes dated 24-3-2000. It was found that the date of transaction was as 24-3-2000. The transaction had been carried out on the Stock Exchange in Settlement period (23-3-2000 to 30-3-2000). The bill was reportedly raised by the broker, Herald Equity (P.) Ltd. (in which the assessee is a director) for this settlement on 8-4-2000 for these transactions after completion of the settlement period. (3)Capital gains are taxable on accrual basis, and in the case of listed securities, the date of transaction is the date of sale/purchase of the security. Therefore, the shares were transferred on 24-3-2000 i.e.....
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....ncome-tax Circle 4(2), Mumbai." 9. In the reassessment proceedings, Shri Suresh Jajoo took a stand regarding taxability of long-term capital gain declared in assessment year 2001-02 as short-term capital gain in assessment year 2000-01, which were identical as were taken in the case of Smt. Vimla Jajoo. The Assessing Officer, however, rejected the claim of the assessee and brought to tax short-term capital gain in assessment year 2000-01 for identical reasons as were given in the case of Smt. Vimla Jajoo. Before the Assessing Officer, assessee did not raise any ground regarding validity of reopening of assessment proceedings; but before learned CIT(A), the assessee raised the ground regarding validity of initiation of reassessment proceedings, which was ground No. 1. However, at the time of hearing, the assessee did not press for adjudication of the aforesaid ground; and, therefore, the said ground was dismissed. 10. In these appeals in the case of both the assessees, they have filed application seeking admission of four additional grounds of appeal. Out of 4 grounds of appeal, ground Nos. 1 and 4 relate to validity of initiation of reassessment proceedings. Ground Nos. 1 ....
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.... of reassessment proceedings. It was reiterated that the facts are already available on record; and, therefore, additional ground has to be admitted for adjudication. It was also submitted that in Ground No. 1 in both the appeals, the assessees have challenged the action of the revenue in taxing the short-term capital gains in assessment year 2000-01; and this ground would be good enough to cover point of validity of initiation of proceedings under section 148 of the Act. It was submitted that validity of initiation of reassessment proceedings is an issue with regard to jurisdiction and goes to the root of the case. The fact that it was not raised before the Assessing Officer and not pressed before learned CIT(A) was not a bar to raise the same before ITAT. In this regard, reliance was placed by learned counsel for the assessee on the, decision of Hon'ble Punjab and Haryana High Court in the case of Vijay Kumar Jain v. CIT [1975] 99 ITR 349 ; wherein it was laid down that the assessee was not precluded from urging a ground before the Tribunal challenging the validity of notice under section 148 for the reason that the same ground was raised before learned CIT(A); but was given up. ....
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....ftware purchased by Mrs. Vimla Jajoo on 9-4-1999 and sold by her on 12-4-2000. In assessment year 2001-02, she claimed that these shares were purchased on 9-4-1999 and sold on 12-4-2000; and, therefore, capital gain on sale of the above shares were long-term capital gain. We have also noticed that the Assessing Officer while framing assessment for assessment year 2001-02, expressed an opinion that according to contract note of broker furnished by the assessee which was dated 30-3-2000, sale of shares should be considered as having been concluded on 30-3-2000 falling with the previous year relevant to assessment year 2000-01. The Assessing Officer, in the said assessment order, has further recorded the submissions of the assessee that the date of broker's bill is the date of sale, i.e., 12-4-2000; and, therefore, sale should be treated as complete only on 12-4-2000, i.e., period falling within previous year relevant to assessment year 2001-02. The Assessing Officer did not come to any definite conclusion on this issue. He expressed the opinion that as per the delivery of shares and broker's bill, there is only an incident of long-term capital gains on sale of shares. He, however, ex....
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....r 2001-02 on 27-2-2004. Notice under section 148 for assessment year 2000-01 was issued by the Assessing Officer in the case of both the assessees only on 22-3-2007. According to him, the delay in the issue of notice to make a substantive assessment also points out to the fact that the assessments for assessment year 2001-02 were in fact was not a protective assessment. 20. Learned counsel for the assessee submitted that if really, the Assessing Officer believed that the income offered by the assessee for a particular assessment year is to be taxed only in another assessment year, then it is for the Assessing Officer to first reopen assessment year to which, he believes the income relates to and make substantive assessment and then make a protective assessment in other year. In other words, it was submitted that protective assessment should always follow a substantive assessment. According to him, in the above facts and circumstances, it cannot be said that the Assessing Officer entertained reasonable belief that income chargeable to tax for a particular assessment year has escaped assessment. The learned counsel for the assessee in this regard relied on the decision of Hon'ble ....
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....3(3) for assessment year 1997-98 was completed on 25-2-2000. On 3-11-2000, there was a search and consequent there to, notice under section 148 dated 26-3-2003 was issued to the assessee. Consequent to the search, block assessment order was framed on 30-11-2008 in which, sum of Rs. 5.27 crores was held to be expenditure not related to the business of the assessee and considered as undisclosed income for the block period. In the reassessment proceedings under section 148, very same amount was added on a protective basis. When the Assessing Officer made aforesaid addition in the reassessment proceedings under section 148, he noticed that the order of the Assessing Officer in the block assessment making the addition has already deleted by learned CIT(A). The appeal of the revenue before the Tribunal was pending. The Assessing Officer while making addition in the reassessment proceedings under section 148 had observed that the addition was being made on protective measure. It is in the aforesaid background of fact, question of validity of initiation of reassessment proceedings had come up for consideration before the Tribunal. 24. The Tribunal firstly explained the concept of Protec....
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....livery of share certificate and receipt of payment are only formalities and, therefore, when these formalities are completed the date of sale would relate back to the date of the broker's contract note. The Assessing Officer was also satisfied on looking into the ledger account of the assessees as per the books of the broker that payment was made only on 12-4-2000. Finally, the Assessing Officer taxed the capital gain as a long-term capital gain as offered by the assessee. The Assessing Officer made the following observations :- "As the assessee has already offered this income in assessment year 2001-02, the same is assessed in this year to protect the interest of the revenue." Whether the above observations are enough to conclude that the assessment of the capital gain as long-term capital gain in assessment year 2001-02 by the Assessing Officer was only a protective assessment? We have already seen the ratio laid down by the Hon'ble Supreme Court in the case of Lalji Haridas ( supra) wherein the Hon'ble Supreme Court while recognizing the concept of protective assessment has very clearly laid down that there must be an exhaustive enquiry and the question as to who is liable....
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.... section 132 and included one income in the block assessment, is he empowered to include the same income, on protective basis, in the reassessment of the original regular assessment for the year, which is included in the block period? Before answering this question, it will be relevant to see the effect of the answer in positive or negative. If the answer is given in affirmative it will mean that the Assessing Officer is empowered to include it in the reassessment on the protective basis. Thus, there will be presumption that though the Assessing Officer had included such income in the block assessment, but he still has the reason to believe that this income is also taxable in the regular assessment. This presumption will belie the concept of reassessment which is always there to tax an income which is chargeable to tax but has escaped assessment. In order to give a different colour, the ld. DR contended that this disallowance was made on protective basis only and, hence, cannot be equated with the substantive disallowance. We have noted above about the validity and presumption of the protective assessment in general. Protective assessment cannot be independent of substantive assess....
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....on for the same in regular assessment on protective basis. When the matter came up before the Hon'ble High Court, it was held that the same income which was assessed as the undisclosed income for the block period, could not have been assessed even on protective basis in regular assessments under section 143 for those years. In the instant case, we are concerned with the reassessment, in which there are more restraints on the power of the Assessing Officer. We, therefore, hold that the initiation of reassessment proceedings on this count cannot be upheld." 29. If the above assessment for assessment year 2001-02 is not a protective assessment but assessments pure and simple, can the Assessing Officer entertain a belief that income chargeable to tax has escaped assessment? The contention of the learned D.R. on the above aspect was placing reliance on the wordings of Explanation 2(c)( ii) to section 147 of the Act, which lays down that for the purposes of section 147, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely, where an assessment has been made, but such income has been assessed at too low a rate. According to the lea....
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....g the validity of the Taxation on Income (Investigation Commission) Act, 1947, and the revised assessments. In 1956, the Income-tax Officer issued notices for reassessment under section 34(1A) of the Indian Income-tax Act, 1922, for the assessment years 1943-44 to 1946-47. The said notice under section 34(1A) for reassessment was challenged by the assessee. The Tribunal held on the facts that the reassessment proceedings had not been validly initiated. On a reference, the Hon'ble Bombay High Court held, that the facts showed that the revenue had not treated the revised assessments or the recovery proceedings as illegal. It was, therefore, impossible for the Income-tax Officer to have entertained a reasonable belief that income had escaped assessment when he issued the notices under section 34(1A). The Income-tax Officer had no jurisdiction to initiate the reassessment proceedings. The Hon'ble Delhi High Court in the case of CIT v. R. Dalmia [1982] 135 ITR 346 had an occasion to deal with identical case. The facts before the Hon'ble Delhi High Court were that in assessment year 1960-61, the ITO sought to tax in the hands of the assessee a sum of Rs. 6,25,000 received as dividend. Of....
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....ows:- 1.(i)The learned CIT(A) grossly erred in adding a sum of Rs. 5,33,85,030 as short-term capital gains as against the same being offered to tax as long-term capital gains by the appellant in assessment year 2001-02. (ii)He grossly erred in not following the Circular No. 704 wherein the date of broker note/bill is to be treated as date of transfer provided such transaction is followed by delivery. 34. Additional ground Nos. 2 and 3 also are an amplification of ground No. 1 and they are admitted for adjudication. They read as follows :- (3)The learned CIT(A) failed to appreciate that the capital gains arising on :- (a)sale of 63,000 shares has been assessed for assessment year 2001-02 on the basis of the broker's bill dated 8-4-2000/actual delivery (the contract note being dated 24-3-2000). (b)in previously as well as subsequent years have been made on the basis of the broker's bill/actual delivery. (c)sale of 20,000 shares out of the total transaction of 57,000 shares was assessed for assessment year 2001-02 on the basis of the broker's bill/actual delivery of shares (the contract note being dated 30-3-2000) but the capital gain on the sale of the 37,000 sha....
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....d order of the Tribunal in assessment years 2002-03 and 2003-04 quashing the order of CIT under section 263 of the Act. It was submitted that the documents sought to be filed as additional evidence are already on record of the Assessing Officer in the earlier and subsequent years and their authentic- ity cannot be doubted. It was also submitted that these documents surfaced much earlier to the dispute in the present appeals and, therefore, there cannot be any prejudice to the revenue nor can be there be any objection to their admissibility. Relying on the decision of the Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT [1992] 193 ITR 321, it was argued on behalf of the assessee that where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. We will deal with the admissibility as well as the relevancy of these documents later, if necessity arises. At present, we will deal with the appeal on merits de hors the additional evidence. ....
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....per the contract note of the broker because the subsequent events like delivery of share certificate and receipt of payment are only formalities and, therefore, when these formalities are completed the date of sale would relate back to the date of the broker's contract note. The Assessing Officer was also satisfied on looking into the ledger account of the assessees as per the books of the broker that payment was made only on 12-4-2000. The above facts are accepted by the Assessing Officer even in the assessment order for assessment year 2000-01 which is subject-matter of the present appeal. 38. In the case of Suresh Jajoo, he purchased 1,50,000 shares and 50,000 shares of DSQ Software Ltd. (hereinafter referred to as 'DSQ') on 5-4-1999 and 7-4-1999 on spot basis. When shares are purchased on spot basis the transaction is settled on the very same day or within next two days. The broker's contract note evidencing purchase is at pages-1 and 2 of assessee's paper book. It is dated 5-4-1999 and 7-4-1999 respectively. The corresponding broker's bill regarding the above purchase is at pages-4 and 5 of the assessee's paper book. The assessee sold all the above shares. The Broker's cont....
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....exchanges, it is the established procedure that the brokers first enter into contracts for purchase/sale of securities and thereafter, follow it up with delivery of shares, accompanied by transfer deeds duly signed by the registered holders. The seller is entitled to receive the consideration agreed to as on the date of contract. In such cases, it was clarified that the date of transfer of shares should be the date of broker's note provided such transactions were followed up by delivery of shares and also the transfer deeds. The Board further clarified that in respect of the transactions of shares directly between the parties and not through stock exchange, date of contract of sale as declared by the parties shall be treated as the date of transfer provided it is followed up by actual delivery of shares and the transfer deeds. 40. The CIT(A)'s specific findings in the case of Mrs. Vimala Jajoo was that the date of actual delivery of shares was on 11-4-2000 and the date of payment was 12-4-2000. In the case of Suresh Jajoo, the date of actual delivery of shares and date of pay out was 8-4-2000. The CIT(A) relied on the decision of the ITAT Amritsar Bench in the case of Max Teleco....
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....tion has to be paid. It was, therefore, contended that sale is complete in the case of sale through brokers only when there is delivery of shares together with the instrument of transfer duly signed and consideration for sale is received. 43. The learned counsel for the assessee relied on the following decisions in support of his contention that sale of shares is complete only when there is delivery of share certificate together with instrument of transfer duly signed by the transferor. M. Ramaswamy's case (supra); Rajagiri Rubber & Produce Co. Ltd.'s case (supra) and Vasudev Ramchandra Shelat's case (supra). The learned counsel for the assessee drew our attention to the date of delivery and date of payment in the case of both the assessees which in the case of Mrs. Vimala Jajoo on 11-4-2000 and 12-4-2000 respectively. In the case of Suresh Jajoo, the date of actual delivery of shares and date of pay out was 8-4-2000. It was his submission that in the case of both the assessees the date of transfer by way of sale was beyond a period of 12 months from the date of purchase which was 9-4-1999 in the case of Vimla Jajoo and 5-4-1999 and 7-4-1999 respectively in the case of Suresh Ja....
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....y him that an investor cannot directly transact in a stock exchange and has to transact only through a broker who is a member of the stock exchange. It was further submitted by him that before a broker transacts on behalf of a client he has to enter into a client broker agreement as per the norms prescribed in the Securities and Exchange Board of India (SEBI). According to him, when an investor places an order for sale of securities and when the broker sells it on behalf of the client and issues a broker's note, which is a document issued by the broker immediately on conclusion of the sale by him on behalf of his client, sale is complete. According to him, sale is complete when the broker issues contract note or broker's contract note. He placed strong reliance on the provisions of SGA. Section 19 lays down the general rule that there is transfer of ownership in goods in a contract of sale at the point of time as the parties to the contract intend as per the agreement between the parties. Such intention of the parties shall be gathered from the terms of the contract the conduct of the parties and circumstances of the case. Unless a different intention appears, rules contained in se....
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....rding the above purchase is at page-3 of the assessee's paper book. Thus, there is no dispute that date of purchase was 9-4-1999. 51. Out of the above, the assessee sold 57,000 shares. The broker's contract note regarding the sale is at page-2 of the assessee's paper book. It is dated 30-3-2000. It refers to the fact that the contract is a forward contract. It refers to the settlement period from 23-3-2000 to 30-3-2000. The price at which the shares were to be sold was Rs. 1,778.48 Ps. per share. In a forward contract, the person entering into a contract in specified shares in a settlement cycle of seven days has the option of carrying forward his transaction to the next settlement cycle. He also has an option of offsetting the transaction by an opposite transaction in the same settlement. The assessee carried forward this transaction of sale of shares. The broker raised a bill dated 8-4-2000 in which the transaction of sale of shares at Rs. 1,778.48 Ps. is reflected and a corresponding purchase of shares of the same quantity of 57,000 shares for Rs. 1,782.30 Ps. is shown as carried forward. Thus, the transaction was carried forward to be settled in the next settlement period 30....
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....ghts therein; or (iii)the compulsory acquisition thereof under any law; or (iv)in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment; or (v)any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or (vi)any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. Explanation. -For the purposes of sub-clauses (v) and (vi), 'immovable property' shall have the same meaning as in clause (d) of section 268UA." 54. As per the definition of ('Transfer') under section 2(47), transfer in relation to a capital asset, among other modes of transfer, to include sale, exchange or relinquishment of the capital asset. The mode of transfer app....
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....al cases and the leading case is the decision of the Hon'ble Supreme Court in the case of Vasudev Ramchandra Shelat (supra). In the said case, there was a gift of shares by the donor to the donee under a gift deed which was followed by delivery of share certificates to the donor together with blank transfer forms (instrument of transfer). The donor died before the registration of the transfer in the register of the company. The question before the Hon'ble Court was whether the transfer was complete. The Hon'ble Supreme Court held that the transfer is complete on the delivery of share certificate together with the instrument of transfer duly signed to the donee by the donor. The aforesaid ruling has applied in cases decided under the Income-tax Act, 1961. In M. Ramaswamy's case (supra), the facts were that the assessee sold certain shares in a company to another company consisting of himself, his brother and father and incurred a capital loss. The ITO held that as the alleged transfer did not find a place in the share certificate register maintained by the company, the sale could not be considered as complete and the assessee continued to be the owner of the shares. Consequently, he....
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.... and long-term capital gains and accord different treatment for the purpose of levy of tax on such gain. The issue whether a particular asset is a long-term asset or short-term asset depends on the period of holding of the capital asset by the assessee. In the case of 'Transfer of Shares', there was confusion as what should be considered as date of purchase and date of sale for the purpose of ascertaining whether the capital asset was a short-term capital asset or long-term asset. Therefore, CBDT issued clarification vide Circular No. 704, dated 28-4-1995 where it was mentioned that when shares are transacted through stock exchanges, it is the established procedure that the brokers first enter into contracts for purchase/sale of securities and thereafter, follow it up with delivery of shares, accompanied by transfer deeds duly signed by the registered holders. The seller is entitled to receive the consideration agreed to as on the date of contract. In such cases, it was clarified that the date of transfer of shares should be the date of broker's note provided such transactions were followed up by delivery of shares and also the transfer deeds. The Board further clarified that in re....
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....lar No. 704, dated 28-4-1995 recognises the fact that transfer of shares is complete only on delivery and payment. If in law the position is otherwise there was no need to have issued the Circular at all. The Circular became necessary because there was confusion as what should be considered as date of purchase and date of sale for the purpose of ascertaining whether the capital asset was a short-term capital asset or long-term asset. The Circular took note of the procedure when shares are transacted through stock exchanges that brokers first enter into contracts for purchase/sale of securities and thereafter, follow it up with delivery of shares, accompanied by transfer deeds duly signed by the registered holders followed by payment. The Circular clarified that the date of transfer of shares should be the date of broker's note provided such transactions were followed up by delivery of shares and also the transfer deeds. The Board further clarified that in respect of the transactions of shares directly between the parties and not through stock exchange, date of contract of sale as declared by the parties shall be treated as the date of transfer provided it is followed up by actual d....
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....n 10(23G) of the Income-tax Act, 1961 (in short 'the Act'). The assessment was taken up under scrutiny. During the course of assessment proceedings, the assessee filed a revised return of income on 29-10-1999 with a Note stating that the long-term capital gain on the sale of shares was disclosed in the return as an abundant precaution. However, the agreement for sale of shares contained certain conditions to be complied with before the sale. Since some of the conditions had not been complied with and transfer deeds of shares and share certificates were handed to the purchaser on 23-4-1998 along with receipt of consideration, the assessee stated that long-term capital gain on sale of shares was liable to be considered in the assessment year 1999-2000. The conditions were complied with in April, 1998. The Assessing Officer held that the offer not to sell and acceptance of the parties to purchase became final as soon as the same was signed by all the parties. The sale was followed by delivery of shares in pursuance of the agreement. Thus, the Assessing Officer held that the transaction was covered by CBDT's Circular No. 704 and, therefore, the date of contract of sale shall be the dat....
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....eturns showing capital gains. Thus, it was held that the Assessing Officer was justified in bringing to tax the resultant capital gain on transfer of shares on the date of execution of the contract. Following the said decision, the Tribunal held that the entire agreement was executed on 17-3-1998 among the parties was acted upon. The approval of Government authorities had been received the shares were delivered along with transfer deeds on 23-4-1998. Therefore, the case of the assessee was fully covered by the aforesaid Circular of the Board as the date of transfer for the purpose of section 45 would be 17-3-1998 and not 23-4-1998. 61. Recently the Mumbai Bench of the ITAT in the case of Mrs. Hami Aspi Balsara (Taxpayer) (supra) had an occasion to consider the decision of the Amritsar Bench in the case of Max Telecom Ventures Ltd. (supra) and Circular No. 704, dated 28-4-1995. The facts in the aforesaid case was that the assessee, being part of a Promoter Group, held shares in 3 companies. The Promoter Group entered into a share purchase agreement (SPA) on 27-1-2005 with Dabur India Ltd. (Buyer) to sell their shares in the 3 companies, on the terms and conditions as agreed in th....
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....in which it is used. We further find lot of substance in the argument of ld. counsel in this regard with reference to inclusion of clause (v) in the definition of ('transfer') under section 2(47) only with reference to immovable property and not with reference to movable property. In the present case when final delivery of shares took place on 1/15-4-2005 and, therefore, in view of the decision in the case of M. Ramaswamy (supra) and Rajgiri Rubber & Produce Co. (supra), in our opinion, transfer of shares took place on 1/15-4-2005. This view is fully supported by the decision of the Hon'ble Supreme Court in the case of Shellate V.R. v. P.J. Thakkar, 45 Company Case 43 wherein, it was held that procedure required by law was to be complied with and, accordingly, delivery of share certificate along with transfer deed had to be handed over to purchaser in order to complete the transfer." The Tribunal observed as follows on the decision of the Amritsar Bench in the case of Max Telecom Ventures Ltd. (supra) and CBDT Circular No. 204, dated 28-4-1995 :- "12. Now coming to the decision of the Amritsar ITAT in the case of Max Telecom Ventures (supra). We are of the opinion that the sa....
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.... letters of discharge from the lenders recording the unconditional and irrevocable discharge of the guarantees and the cancelled the original guarantees. This occurred on 1-4-2005. Therefore, the date of contract of sale as declared by the parties in the share purchase agreement was 1-4-2005. The directors resigned on the date as per the said Article. Therefore, the contract was completed on fulfilment of conditions contemplated in Article 6 which took place on 1-4-2005. Thus, from the very beginning, the parties had declared the date of contract of sale subject to fulfilment of conditions and, therefore, on the date of fulfilment of above conditions, the date of contract of sale crystallized. We are, therefore, of the opinion that this Circular in no way prejudice the assessee's claim." 62. The above decision clearly supports the plea of the assessee raised before us that the CBDT Circular No. 704, dated 28-4-1995 cannot be the basis to conclude that the date of sale is the date of the Broker's contract note. As already stated it is contrary to the provisions of law and, therefore, to that extent not binding in the case of the assessees. 63. For the reasons given above, we h....
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....e. The Assessing Officer invoked the provisions of section 14A of the Act. The Assessing Officer did so because both the assessees had income under the head 'Dividend', which was tax-free. Learned CIT(A) confirmed the addition made by the Assessing Officer. 67. Before us, learned counsel for the assessee raised preliminary objection. He referred to the proviso to section 14A of the Act and submitted that the proviso specifically barred reopening of an assessment for invoking provision of section 14A of the Act. On behalf of the revenue, it was submitted that proviso to section 14A only bars reopening of an assessment to make a disallowance under section 14A of the Act but in a case, where the assessment is otherwise validly re-opened, there is no bar on the part of the Assessing Officer to invoke provisions of section 14A of the Act. Learned counsel for the assessee in this regard brought to our notice that similar objection was raised and considered by the Tribunal in the case of Thacker & Co. Ltd. v. ITO [2007] 106 ITD 141 and this Tribunal held that even if an assessment is invalidly reopened, that does not give a license to the Assessing Officer to invoke section 14A in resp....