2009 (6) TMI 688 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition of Rs. 13,82,385 on account of Long Term Capital Gain on the sale of DSE Ticket.
2. Jurisdiction of CIT(A) under section 246A of the Income-tax Act.

Detailed Analysis:

1. Deletion of Addition of Rs. 13,82,385 on Account of Long Term Capital Gain on the Sale of DSE Ticket:

The core issue revolves around whether the transfer of a Delhi Stock Exchange (DSE) ticket by Smt. Chand Rani Jain to the assessee-company constitutes a taxable event for capital gains in the assessment year 2001-02. The Assessing Officer (AO) had made an addition of Rs. 13,82,385 as Long Term Capital Gain, arguing that the transfer was complete when the assessee-company allotted 25,000 shares to Smt. Chand Rani Jain in lieu of the DSE ticket.

The assessee contended that the transfer was conditional upon the completion of registration formalities with the DSE and SEBI, which had not been completed during the relevant assessment year. Thus, no valid transfer occurred, and consequently, no capital gain could be assessed.

The CIT(A) accepted the assessee's argument, noting that the transfer was contingent upon the approval from DSE and SEBI, which had not been obtained. Therefore, the CIT(A) concluded that no transfer of the DSE ticket occurred in the assessment year 2001-02, making the AO's addition premature. The CIT(A) directed that the capital gains could be assessed only when the registration formalities were completed.

The Tribunal upheld the CIT(A)'s decision, emphasizing that the formalities required for the transfer were indeed pending, and hence, the transfer was not complete in the assessment year under consideration. The Tribunal found no reason to interfere with the CIT(A)'s order, dismissing the department's appeal.

2. Jurisdiction of CIT(A) under Section 246A of the Income-tax Act:

The cross-objection raised by the assessee questioned whether the CIT(A) had acted beyond the jurisdiction conferred by section 246A of the Income-tax Act while disposing of the appeal. The CIT(A) had directed the AO to take necessary action upon the completion of registration formalities by DSE and SEBI.

However, this cross-objection was not pressed by the assessee during the proceedings. Consequently, the Tribunal dismissed the cross-objection as not pressed.

Conclusion:

The Tribunal concluded that the AO's addition of capital gains was premature as the transfer of the DSE ticket had not been completed due to pending registration formalities with DSE and SEBI. The CIT(A)'s order was upheld, and both the department's appeal and the assessee's cross-objection were dismissed.