Tax Tribunal: Gains from Gifted Diamonds Are Long-Term Capital Gains, Holding Period Counts from Gift Receipt Date.

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....ITAT ruled in favor of taxpayer regarding treatment of gains from diamond sales. Assessee received rough diamonds as gift from grandfather in AY 1994-95, which were later processed and sold. The Tribunal determined the period of holding should be calculated from gift receipt date, qualifying the assets as long-term capital assets. Despite conflicting CBDT circulars, ITAT held that statutory provisions prevail over administrative circulars. The gains were properly characterized as Long Term Capital Gains (LTCG) u/s 2(42A) of Income Tax Act, rejecting revenue's attempt to treat proceeds as unexplained cash credits u/s 68. The documented chain of possession, processing, and sale established legitimate transaction basis, negating revenue's unexplained credit allegations.....