2016 (6) TMI 893 - HC - Income Tax

Validity of decision of tribunal based on its earlier decision - Revenue unable to show whether appeal against the earlier decision of the tribunal has been filed or not - Capital gain computation - date of the transfer of an asset to determine LTCG or STCG - whether the Tribunal was correct in concurring with the CIT(A) that only the date of the first holding i.e. the date of acquisition of shares as stock in trade and not the subsequent period of holding as capital asset is to be accepted? - Held that - One of the basic feature of Rule of Law is certainty of law and uniform application of law amongst all the assessees i.e. equal treatment. Thus where the Tribunal has taken a view on a legal issue and the Revenue has in turn either accepted it or challenged it in a higher forum then where a subsequent order of the Tribunal follows the earlier order of the Tribunal then the assessee must be treated in the same manner in which the assessee in the earlier case has been treated. However there could be valid reasons for the Revenue to take a different view in this case then that taken in the earlier case then the reasons for the same must be set out in the memo of appeal or at least before the hearing in an affidavit filed by the Officer of the Revenue before the Court. The State cannot act arbitrarily to pick and chose the orders from which appeals would be filed. In the circumstances of the present case we are constrained to dismiss the appeal on the inference that the earlier order of the Tribunal in Bright Star Investment (2008 (7) TMI 442 - ITAT BOMBAY-H ) has been accepted by the Revenue. This for the reason that as the Officer of the Revenue has not filed any affidavit pointing out the reasons why the impugned order is being challenged in the face of no appeal in the case of Bright Star Investment (supra). Thus we see no reason to interfere with the impugned order. Accordingly we dismiss the appeal of revenue.

Issues:
1. Interpretation of capital gains computation by the Tribunal.
2. Acceptance of the date of acquisition for distinguishing between stock in trade and capital asset.
3. Importance of the date of transfer in distinguishing between long term and short term capital assets.

Issue 1: Interpretation of capital gains computation by the Tribunal

The High Court heard an appeal by the Revenue against the Income Tax Appellate Tribunal's order regarding the computation of capital gains for Assessment Year 2004-05. The Revenue raised questions challenging the Tribunal's decision on the computation of capital gains. The Court emphasized the need for consistency and certainty in tax matters and highlighted the importance of the Revenue providing reasons for filing an appeal when the issue is identical to a previous case. The Court expressed dissatisfaction with the Revenue's failure to clarify whether an appeal had been filed in a similar case and warned that the appeal may be dismissed if such information is not provided. The Court stressed the significance of establishing a valid reason for challenging a decision that follows a previous order to ensure equal treatment under the law.

Issue 2: Acceptance of the date of acquisition for distinguishing between stock in trade and capital asset

The Court noted that the Revenue's appeal was based on a case similar to a previous decision involving Bright Star Investment Ltd. The Court directed the Revenue to provide information on any appeal filed in the Bright Star Investment case and reasons for challenging the current order if no appeal had been filed in the previous case. Despite repeated requests, the Revenue failed to provide necessary details, leading the Court to question the Revenue's approach to the case. The Court highlighted the importance of uniform application of law and criticized the Revenue for not justifying the appeal in light of a previous accepted order. The Court dismissed the appeal due to the Revenue's failure to provide reasons for challenging the current order when no appeal had been filed in the previous case.

Issue 3: Importance of the date of transfer in distinguishing between long term and short term capital assets

The Court emphasized the Rule of Law's requirement for certainty and uniformity in legal matters, stressing that the Revenue must justify filing an appeal when a decision follows a previous order. The Court expressed disappointment with the Revenue's lack of action in providing reasons for challenging an order that mirrors a previous accepted decision. The Court highlighted the need for the Revenue to demonstrate valid reasons for pursuing an appeal to prevent arbitrary decision-making and ensure equal treatment for all taxpayers. Ultimately, the Court dismissed the appeal due to the Revenue's failure to provide justifications for challenging the current order in the absence of an appeal in a similar case.

In conclusion, the High Court of Bombay dismissed the Revenue's appeal concerning the computation of capital gains for Assessment Year 2004-05. The Court emphasized the importance of providing valid reasons for challenging a decision that follows a previous order to maintain consistency and certainty in tax matters. The Court's decision highlighted the need for equal treatment under the law and criticized the Revenue for not justifying the appeal when no appeal had been filed in a similar case. The dismissal of the appeal was based on the Revenue's failure to provide reasons for challenging the current order without a corresponding appeal in a previous case.

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