TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 651
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....urred wholly and exclusively in connection with the transfer of shares offloaded in public issue and the expenditure was correctly claimed by the assessee under section 48( 1) of the Income Tax Act, 1961. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the long term capital gains on shares allotted to the public in a public issue was taxable at the rate of 10% and not 20% as computed by the Assessing Officer.” 2. Facts in brief:– The assessee is a company, which is engaged in various kind of project development and financial services and has filed its return of income on 28th November 2006, at an income of Rs. 83,59,73,203. Along with the computation of income, the assessee had also shown income from short term capital gain and long term capital gain. This also included income from divestment of listed shares in IL&FS Investmart Ltd. of Rs. 25,41,65,133 after indexation. After detail scrutiny, the assessment under section 143(3), was completed at an income of Rs. 142,51,48,030, vide order dated 29th December 2008. Thereafter, proceedings under section 154 were initiated with regard to certain mistakes in ....
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.... the expenditure incurred wholly and exclusively in connection with the transfer of assessee’s share. Accordingly, he held that these expenditures incurred by other company and reimbursed by the assessee, cannot be deducted while computing the capital gain under section 48. 5. Before the learned Commissioner (Appeals), the assessee had submitted that the assessee was one of the promoters of IL&FS Investmart Ltd. in which the assessee had investments in its shares. The said company had made a public issue in the financial year 2005–06 of 88,00,000 shares. The assessee being one of the shareholders offered 26,00,000 shares to the public. This aspect was duly mentioned in the prospectus issued to the public and approved by the SEBI. The market price per share was determined at Rs. 125 per share which was realized by the assessee. This resulted into aggregate sale consideration of Rs. 32,50,000, on which capital gain was shown and offered. The working of the capital gain was shown as under:– a. Sale consideration Rs. 32,50,00,000 b. Cost of shares Rs. 5,48,30,956 c. Selling & distribution expenses Rs. 1,60,03,911 d. Net capital gains Rs. 25,41,65,133 It was also sub....
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....ssessment was reopened within four years from the end of relevant assessment year, therefore, the condition-of failure on the part of appellant to disclose fully and truly all material facts, was not applicable. However the Honourable Supreme Court in the case of Kelvinator of India (supra) has held that the reopening on the basis of change of opinion is not permissible under the Act/law even within four years from the end of relevant assessment year. In the facts and circumstances, it is held that the reopening was purely based on change of opinion and, therefore, the reopening was bad in law. Even on merits also, there was no case for disallowing appellant’s claim of expenses incurred on account of sale / transfer of shares.” 7. Thereafter, the learned Commissioner (Appeals) has proceeded to consider the matter on merits also. From the material placed on record, the learned Commissioner Observed that IL&FS Investmart Ltd. had incurred the expenditure in relation to the initial public offer and assessee’s proportionate share of such an expenditure was at Rs. 1,60,03,911. A copy of invoices in this regard, which were filed before the Assessing Officer was also noted by him a....
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.... of such shares offloaded in public issue by offering the same to the public at large. In the facts and circumstances, the expenditure was correctly claimed by the appellant under section 48(1) of the Act. Therefore, the AO was not justified in disallowing appellant’s claim. This ground of appeal is therefore allowed.” 8. There was another issue whether long term capital gain on sale of shares in the present case would be taxed @ 20% or @ 10%. It was argued by the assessee that the long term capital gain in respect of listed securities has to be taxed @ 10% and the assessee had opted not to avail indexation and the correct rate of tax was 10% and not 20% as per section 112 of the Act. The learned Commissioner (Appeals) accepted this contention on the ground that these shares were allotted to the public after listing of the said shares on the stock exchange. The public at large would not purchase any unlisted shares. Thus, the correct rate of tax should be at 10%. Accordingly, the learned Commissioner (Appeals) allowed the assessee’s appeal. Aggrieved, the Revenue is in appeal before the Tribunal. 9. The learned Departmental Representative, before us, submitted that, first o....
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....of the Assessing Officer as well as the learned Commissioner (Appeals) and the material available on record. The main dispute in the present appeal is disallowance of the claim of expenditure of Rs. 1,60,03,911 in computation of capital gain which was on account of expenditure incurred in connection with the transfer of capital asset resulting into long term capital gain. On a perusal of the records, it is seen that the computation of the income as well as the expenditure were submitted before the Assessing Officer at the time of original assessment proceedings. While completing the assessment under section 143(3), the Assessing Officer has not made any computation in the assessment order. However, in the proceedings under section 154, he has accepted the computation as shown by the assessee. Without going into the issue of, whether the re–opening is on account of “change of opinion” or not, we would, first, like to discuss the merits of the case. It is undisputed fact that the assessee had offered sale of Rs. 26,00,000 shares to the public which was part of the entire lot of shares offered to the public. The IL&FS has incurred the expenditure aggregating to Rs. 7,01,70,994 f....