AI Drafter 
TaxTMI 
TaxTMI 
2019 (12) TMI 752
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....g denial of benefit of indexation for the purpose of computing capital gain from the Financial Year ("FY") 2005-06. 2 Ground No. 2: That the Ld. CIT(A) has erred on facts in holding that indexation was done by Appellant from FY 2007-08, when the Appellant has calculated the same from FY 2005-06 in the original income tax return. 3. Ground No. 3: That Ld. CIT(A) has erred in law and on facts, in splitting the total consideration received on sale of shares allotted to the Assessee under an Employee Stock Option Plan, and taking the sale value above fair market value as "Income from other sources" under section 56(2)(vii) of Income-tax Act, 1961 ("the Act") 4 Ground No. 4: That Ld CIT(A) has erred in consequently denying benefit under section 54F of the Act on the amount which has been taken as Income from Other Sources, thus making an addition of INR 19,92,66,923 on this account." 3. The assessee has raised the following grounds of appeal in ITA No. 1964/Del/2019 for the Assessment Year 2015-16:- "1. "Whether the Ld. CIT (A) has erred in law and on facts and in circumstances of the case in treating income on account of sale of shares of M/s Pine....
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....operty sold by the assessee, facts shows that assessee declared a long-term capital gain of INR 30762604/- on sale of residential property 264, Espace Nirwana Country, Sector 70 at Gurgaon. The cost of acquisition of the above property was taken at INR 10808674, indexed from financial year 2007 - 08 taking the cost inflation index of 551. During the course of assessment proceedings, assessee filed a revised computation of income and claimed indexation benefit from financial year 2005 - 06 on part of the cost paid during that FY. 2005 - 06. Assessee computed indexation on the basis of the date of payments i.e. date of booking of house, made in respect of the said property stating that legal right had been accrued to the assessee on the date of payment of the 1st installment. It was further stated that assessee had acquired a right to get a particular property and that right of the assessee itself is a capital asset. Therefore, according to assessee, benefit of indexation has to be granted to the assessee from the year it booked the residential property and not the year in which it was registered in the name of the assessee or the year in which possession is given to assessee. 8. ....
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....10. Against this decision of the learned CIT - A , assessee is in appeal before us. In ground number 1 of the appeal stating that the learned CIT - A has erred in law and on facts in upholding the addition of INR 2049007/- made by the learned assessing officer on account of wrong denial of benefit of indexation for the purpose of computing capital gain from the financial year 2005 - 06 instead of 2007 - 08 as claimed by the learned AO. 11. We have heard the rival parties on this issue. Short issue involved before us is whether the assessee is entitled to the indexation of the cost of acquisition from the date of allotment of the property or from the date of registration of the conveyance deed or handing over the possession to the assessee. The learned assessing officer rejected the claim of the assessee, as assessee did not furnish it through a return of income but by way of a letter. In fact, according to us it was not a fresh claim of the assessee but merely correction of a computation of capital gain. This issue is squarely covered in favour of the assessee by the decision of the honourable Delhi High Court in 102 taxmann.com 196 Principal Commissioner of Income tax v. Ora....
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....her observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessed to raise an additional ground in accordance with law and reason. ITA 261/2002 Page 5 of 6 The same observations would apply to appeals before the Tribunal also." 9. This High Court in CIT v. Natraj Stationery Products (P) Ltd., (2009) 312 ITR 222, had observed that Goetz (India) Ltd. (supra) would not apply if the assessee had not made a 'new claim' but had asked for recomputation of deduction. Reference can also be made to the decision in Commissioner of Income Tax v. Rose Services Apartment India P. Ltd., [2010] 326 ITR 100 (Delhi), wherein a Division Bench of this Court rejected the contention of the Revenue that the Tribunal could not have entertained the plea, holding that the tribunal was empowered to deal with the issue and was ent....
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....made at the time of entering into the buyers agreement. In the next financial year i.e. FY 2007 2008 assessee paid a further sum of INR 1 043842/-. Therefore the total cost of acquisition to the assessee was INR 1 0808674/-. At the time of filing of the return of income assessee index the total cost of acquisition of INR 1 0808674 by applying the cost inflation index for financial year 2007 - 2000 date of 551. Thus the indexed cost of acquisition was claimed at rupees 22136270/-. Consequently the long-term capital gain on sale of the above property was derived at INR 3 0762604/-. During the course of assessment proceedings by letter dated 1/12/2017 assessee submitted at serial number 4 details of revised calculation of income under the head capital gain. In that letter, assessee indexed the cost of 9764832 paid in financial year 2005 - 2006 by applying the cost inflation index of 497 applicable to that financial year resulting into indexed cost of 20119091/-. It further indexed INR 1 043842/- paid in financial year 2007 - 2008 by applying the cost inflation index of 551, thereby indexed cost of acquisition of 1939917/- for that financial year was computed. Accordingly total cost....
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.... which the assessee for entered into the buyers agreement for the property sold. 15. The learned departmental representative vehemently supported the order of the learned assessing officer and the learned CIT - A. On the merits of the issue he submitted that assessee should only be granted the deduction of the cost of acquisition of the property from the date on which the property was first ' held' by the assessee. 16. We have carefully considered the rival contention and perused the orders of the lower authorities. Honourable Delhi High Court in case of CIT vs Ramakrishnan 363 ITR 59 has held that in order to determine the taxability of capital gain arising from sale of property, it is date of allotment of property which is relevant for the purpose of computing holding period and not date of registration of conveyance deed. Though the above decision was with respect to the provisions of section 2 (42A) of the income tax act 1961 where the plot was allotted and the plot was sold. Therefore, the same asset, which was allotted, was existing on the date of allotment and on the date of conveyance deed. Thus, admittedly the above decision was with respect to competition of the hol....
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....6 by applying the cost inflation index applicable to financial year 2005 - 2006 of 497 instead of cost inflation index of 551 applicable for financial year 2007 - 2008 (the year in which the possession of the property was given) to the assessee. Therefore, we reverse the finding of the lower authorities and allow ground number 1 and 2 of the appeal of assessee. 17. The ground number 3 of the appeal of the assessee as well as ground no 1 & 2 of appeal of ld AO is with respect to the decision of the learned CIT - A in splitting the total consideration received on sale of shares allotted to the assessee under employee stock option plan[ ESOP] and taking the sale value above fair market value as income from other source u/s 56 (2) (vii) of the act. The fact shows that during the year the assessee has transferred 719999 equity shares of Pine labs private limited to Pine Labs Pte Ltd at a consideration of INR 3 59999500/-. The appellant has offered the above income under the head income from capital gains and claimed exemption under section 54F of the income tax act of INR 277593383 on account of investment of the sale proceeds in purchase of residential house. The assessee was an emp....
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....t value of the share i.e. Rs. 500 minus Rs. 223.24 = Rs. 276.76 per share shall be treated as income from other sources u/s 56(2) (vii) of the act. 19. The learned authorised representative vehemently reiterated the facts as stated by us hereinabove and submitted that the shares were received as employee stock option, they were transferred after holding for substantial period of 3 to 7 years and offered as capital gain. He referred to circular number 4 of 2007 dated 15/6/2007 to say that the shares were held as investment by the assessee. Thus he submitted that as assessee was an employee of the company, held shares for substantial period of time, gain arising on sale of such there should be chargeable to tax as capital gain only. He further referred to letter dated 02/05/2016 [F. No. 225/12/2016/ITA - II] wherein with a view to reduce litigation and maintain consistency in approach in assessment the CBDT instructed that the income arising from transfer of listed shares in securities, which are held for more than 12 months would be taxed under the head capital gain unless the taxpayer itself treats these as stock in trade and transfer thereof as its business income. Similarly fo....
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....to a share purchase agreement which is placed at page number 89 - 115 of the paper book. It was further claimed that if the assessee has not transferred the controlling interest of such company then there was no need for the assessee to enter into such a deed. It was further stated that circular cited by the learned authorised representative dated 29/2/2016 does not apply to the facts of the case because it is stated in para number 3 (Iii) that where the transfer of unlisted shares is made along with the control and management of the underlying business and the assessing officer would take appropriate view in such a situation and therefore the present case the learned assessing officer has taken a correct view about the taxability of the sale of such sales and consequent gain arising there from, is chargeable to tax under the head business income only. 21. We have carefully considered the rival contention and perused the orders of the lower authorities. The facts are not in dispute that assessee was an employee of Pine labs private limited and received shares of that company as part of employee stock option plans. Those shares were held by the assessee for substantially long per....
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.... exist on the application of these principles to the facts of an individual case since the taxpayers find it difficult to prove the intention in acquiring such shares/securities. In this background, while recognizing that no universal principal in absolute terms can be laid down to decide the character of income from sale of shares and securities (i.e. whether the same is in the nature of capital gain or business income), CBDT realizing that major part of shares/securities transactions takes place in respect of the listed ones and with a view to reduce litigation and uncertainty in the matter, in partial modification to the aforesaid Circulars, further instructs that the Assessing Officers in holding whether the surplus generated from sale of listed shares or other securities would be treated as Capital Gain or Business Income, shall take into account the following- (a) Where the assessee itself, irrespective of the period of holding the listed shares and securities, opts to treat them as stock-in-trade, the income arising from transfer of such shares/securities would be treated as its business income, (b) In respect of listed shares and securities held for a peri....