2011 (7) TMI 1201 - AT - Income Tax

Summary

Issues involved: Determination of whether the sale of shares should be treated as Long Term Capital Gain or Short Term Capital Gain.

Summary:

Issue 1: Classification of Capital Gain
The appeal by the Revenue challenged the treatment of the sale of shares as Long Term Capital Gain instead of Short Term Capital Gain.

- The assessee claimed the shares were acquired on 01/12/2004, while the Assessing Officer argued they were held only when credited in the Demat account on 05/02/2005.
- The Assessing Officer relied on CIT vs. Chunilal Khushaldas (1974) to support the position that the holding period started from the date of Demat credit, making it a short-term capital asset.
- The CIT(A) referred to CBDT Circular No.704 dated 28/04/1995, emphasizing the date of acquisition as the date of allotment, not the Demat credit date.
- The CIT(A) concluded that the shares were held for more than 12 months, qualifying as long-term capital gain.

Issue 2: Interpretation of Holding Period
The Revenue argued that the holding period starts from the Demat credit date, while the CIT(A) and the assessee contended it begins from the date of allotment.

- The Revenue emphasized that shares are acquired upon Demat credit, making the holding period less than 12 months.
- The CIT(A) and the assessee relied on the CBDT Circular and relevant IT Act sections to support the date of allotment as the acquisition date.
- The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal and confirming the treatment of the gain as long-term capital gain.

In conclusion, the Tribunal upheld the CIT(A)'s decision, considering the date of allotment as the acquisition date and rejecting the Revenue's argument based on the Demat credit date.