1990 (10) TMI 145 - AT - Income Tax

Summary

Issues:
1. Determination of whether the transfer of certain shares resulted in long-term or short-term capital gains.

Analysis:
The appeal in this case concerns the assessment year 1986-87 and revolves around the question of whether the transfer of certain shares resulted in long-term or short-term capital gains. The assessee, an HUF, held shares of a company in the name of the karta of the HUF who passed away. Bonus shares were issued after the karta's death, and the delivery was delayed due to the absence of a succession certificate. The assessing officer contended that the shares were held for less than 36 months, resulting in short-term capital gains. The Commissioner of Income-tax (Appeals) upheld this view, considering factors such as the date of transfer as per the company's register and the omission of the shares in previous wealth-tax returns.

The counsel for the assessee argued that the delay in the delivery of bonus shares did not affect the ownership by the HUF and that the shares were held since their issuance. The legal representative of the Department supported the authorities' decisions. The tribunal analyzed the Company Law provisions, emphasizing that shares must be held in the name of a natural person, not an HUF. The tribunal clarified that the dispute was not about ownership but the duration of holding the shares. It highlighted the necessity of legal formalities for mutation of shares after the death of the karta.

The tribunal rejected the assessing officer's argument that the shares did not exist before a specific date, emphasizing that the shares were issued earlier but formalities delayed their transfer. Referring to legal principles, the tribunal concluded that the bonus shares were held by the HUF for over 36 months, resulting in long-term capital gains. Additionally, the tribunal addressed another set of shares, where the assessing officer's classification of short-term capital gains for bonus shares issued later was upheld, leading to a partial allowance of the appeal.

In summary, the tribunal ruled in favor of the assessee, determining that the bonus shares were held for more than 36 months, resulting in long-term capital gains. The tribunal also upheld the assessing officer's decision regarding another set of shares, leading to a partial allowance of the appeal.