TaxTMI 
TaxTMI 
2013 (9) TMI 1122
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....f the Income Tax Act, 1961 (herein after referred to as 'the Act') was issued to the assessee in response to which the assessee replied that the return of income filed earlier be treated as one filed in response to the notice under section 148 of the Act. The assessment proceedings were taken up by issue of notice under section 143(2) of the Act. After calling for and examining the details filed, the Assessing Officer completed the assessment by an order under section 143(3) of the Act (to be read as 'order u/s.143(3) r.w.s. 147 of the Act) by order dt.22.12.2010 wherein the income of the assessee was determined at Rs. 6,21,84,170. In the order of assessment the Assessing Officer considered the share transactions as ' a business activity'. Having done so, the Assessing Officer computed the loss on sale of shares at Rs. 2,06,340 and allowed it as a deduction from consultancy business income declared under the head 'Profits and Gains from business and profession'; disallowed the STCL of Rs. 2,08,47,311 and brought to tax the entire LTCG of Rs. 6,03,03,610 from sale of shares as "Income from Capital Gains." 2.2 Aggrieved bythe order of assessment for Ass....
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....petition and the submissions of the learned Departmental Representative, that this is a fit case for condonation of delay in filing the C.O. and condone the said delay of 81 days in filing the C.O. The C.O. is accordingly admitted for hearing and adjudication. 4.3 From the written submissions made before us, the assessee's contentions in brief are as under :- (i) that the assessment can be reopened under section 148 for a specific purpose only, based on information/material available. However, the Assessing Officer conducted a roving enquiry which is bad in law. (ii) the reasons for reopening the assessment was never given to the assessee though request for the same were made by letter dt.3.1.2013 and subsequent follow ups. (iii) that the assessment was reopened to assess source of funds for investment of Rs. 2 Crores in ICICI PMS. (iv) that though the Assessing Officer was satisfied with the source of funds of investment, he concluded the assessment based on other findings, which is not tenable in view of the judicial decisions cited by the assessee in the written submissions. ITA No.450/Bang/2012 - Revenue's appeal for Assessment ....
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....res cum-bonus just before the allotment of bonus shares and selling the same ex-bonus immediately after the allotment of bonus shares has generated a capital loss, even while keeping intact the share holding and consequently the wealth of the assessee. The Assessing Officer on examination of these transactions invoked CBDT's Instruction No.1827 dt.31.8.1989 to treat these transactions as trading activities and hold the loss arising therefrom to be loss from business activities. The Assessing Officer, however, treated the LTCG on sale of other shares amounting to Rs. 6,03,03,610 as LTCG only and not as 'Profit from business.' 6.3.2 On appeal, the learned CIT(Appeals) held that these share transactions to be "bonus stripping" in investors' parlance and held them to be covered under section 94(8) of the Act. As section 94(8) of the Act cover only "units" and not "securities", the learned CIT(Appeals) held that there is no legislative sanction to disallow the loss claimed by the assessee. In coming to this view, the learned CIT(Appeals) compared the provisions of section 94(8) of the Act which related to "bonus stripping" with the provisions of section 94(7) of the A....
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....adopted the first-in-first-out (FIFO) method which is as provided in section 45(2A) of the Act. Further, in terms of section 55(2)(aa)(iiia) of the Act, introduced by Finance Act, 1995 and w.e.f. 1.4.1996, the cost of bonus shares are to be taken as NIL. Hence, it is clear that these transactions are in accordance with the provisions of section 55(2)(aa) of the Act. 6.4.3 The learned CIT(Appeals) observed that these transactions which generate a notional loss is commonly called "bonus stripping". Bonus stripping refers to a transaction where a person purchases shares of a company cum-bonus after the public announcement of the bonus issue by the company and after he gets entitled to receive the bonus shares on the record date, he sells the original shares and continues to hold the bonus shares. Usually, after the record date, the share price declines almost proportionately to the extent of dilution caused by the Bonus Issue. The record date is the cut-off date as on which the beneficial holders of the shares on record will be considered eligible for receiving/being allotted bonus shares. Anyone buying shares after this date will not be eligible for bonus share allotment. Upon the....
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.... the amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of such additional units referred to in clause (b) as are held by him on the date of such sale or transfer. Explanation. - For the purposes of this section, - (a) "interest" includes a dividend ; (aa) "record date" means such date as may be fixed by- (i) a company for the purposes of entitlement of the holder of the securities to receive dividend; or (ii) a Mutual Fund or the Administrator of the specified undertaking or the specified company as referred to in the Explanation to clause (35) of section 10 the purposes of entitlement of the holder of the units to receive income, or additional unit without any consideration, as the case may be; (b) "securities" includes stocks and shares ; (c) securities shall be deemed to be similar if they entitle their holders to the same rights against the same persons as to capital and interest and the same remedies for the enforcement of those rights, notwithstanding any difference in the total nominal amounts of the respective securities or in the form in which they are held or in the mann....