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2009 (6) TMI 688

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..... mt. Chand Rani Jain M/s. V.K. Securities for transfer of the ticket of the DSE, to take necessary action." 2. The assessee-company was incorporated on 29-3-1993 under the name of Varu Portfolio and Management Services (P.) Ltd. As per resolution passed on 7-2-2000, the name of the company was changed to M/s. V.K. Jain Securities (P.) Ltd. The authorized capital of the assessee-company was also raised from Rs. 5 lakhs to Rs. 45 lakhs. In the process, 15,000 shares of face value of Rs. 100 were allotted to three persons, namely, Smt. Chand Rani Jain, Sh. Manoj Jain, Sh. Pankaj Jain. Out of 15,000 shares, 7,500 shares of the value of Rs. 7.5 lakhs were allotted to Smt. Chand Rani Jain. It came to the notice of Assessing Officer that Smt. Chand Rani Jain was also allotted 25,000 shares in lieu of sale of a ticket of Delhi Stock Exchange Ltd. (DSE) worth Rs. 25 lakh. Smt. Chand Rani Jain being proprietor of M/s. C.R. Jain Company was carrying on the business of share broker and vide agreement dated 1-4-2000, she had transferred the ticket of DSE to the assessee-company in lieu of 25,000 shares of Rs. 100 each and the relevant clause governing such transfer reads as under : .....

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..... y and his shareholding continues to remain as such for a period of 5 years from the date of succession; and ( c ) the sole proprietor does not receive any consideration or benefit, directly or indirectly in any form or manner, other than by way of allotment of shares in the company. 5. The Assessing Officer did not accept the submission of the assessee that all the conditions laid down in proviso to section 47( xiv ) stood satisfied. From the details and balance-sheet of M/s. Chand Rani Jain Co. it was noted by the Assessing Officer that all the assets and liabilities of the sole proprietary concern as it stood immediately before the succession did not become the assets and liabilities of the assessee-company. The Assessing Officer required the assessee to explain as to how it could be claimed that conditions laid down in section 47( xiv ) were fulfilled. The assessee vide reply dated 16-8-2003 submitted that transfer of Delhi Stock Exchange Ticket was subject to permission from SEBI and DSE which was pending and reference was made to clause 1 of the transfer agreement which has already been reproduced in the above part of this order. Referring to that clause it was submitt .....

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..... ous year in which the requirements of proviso to clause ( xiv ) are not complied with. In other words, if exemption is granted to the transferor on sale of capital asset by application of section 47( xiv ), the capital gain on such transfer becomes chargeable in the hands of successor company in the year in which any of the conditions laid down in proviso to section 47( xiv ) are not complied with. The three conditions which have been laid down in proviso to section 47( xiv ) have already been described in the above part of the order. In these circumstances, the Assessing Officer has charged capital gain in the hands of the assessee-company by invoking section 47A(3) of the Act. 6. Before CIT(A) it was the contention of assessee that no such capital gain could be charged in the hands of the assessee as there was no transfer of capital asset by said M/s. C.R. Jain Co. to the assessee-company of the Delhi Stock Exchange Ticket as such transfer was never permitted by the DSE and SEBI. It was submitted that such permission from both the authorities was a condition precedent for the transfer and these conditions being not fulfilled, there was no valid transfer as envisaged in sect .....

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..... on the consideration of Rs. 25 lakhs in the shape of allotment of shares to Smt. Chand Rani Jain in performance of agreement entered into between the assessee and said Smt. Chand Rani Jain. The documents regarding transfer of tickets were also submitted to the respective authorities. Therefore, transfer of Delhi Stock Exchange Ticket owned by Smt. Chand Rani Jain was completed in the year under consideration as both the parties had completed their formalities. Thus, the capital gain was rightly assessed by the Assessing Officer in the hands of successor company by applying the provisions to section 47A(3). Relying on the order of Assessing Officer, it was vehemently pleaded by ld. DR that the order of Assessing Officer should be restored and that of CIT(A) be set aside. 8. On the other hand, referring to the clause of agreement, which is quoted above, it was pleaded by ld. AR that the transfer will be completed on a later date after the completion of registration formalities with the DSE and SEBI and the fact that in the year under consideration no such completion of registration formalities was there, ld. CIT(A) was right in arriving at a conclusion that no transfer took place .....

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..... e placed on record that such registration formalities were not completed in the year under consideration and it is also shown that they were not completed even upto the year ending on 31-3-2004. Therefore, the CIT(A) was right in holding that transfer of ticket of Delhi Stock Exchange did not take place during the year under consideration and, thus, no capital gain could be charged in the present year. The ld. CIT(A) was also right in observing that tax could be levied on the capital gain in the year in which such registration formalities are completed as per the relevant provisions of Income-tax Act. We also find no fault with respect to such findings of ld. CIT(A). Therefore, there is no good ground to interfere with the order of CIT(A). 11. Keeping in view of above discussion, we decline to interfere in the order of CIT(A) and the departmental appeal is dismissed. 12. So as it relates to cross-objection filed by the assessee, the ld. AR did not press the cross-objection. Hence, cross-objection is dismissed being not pressed. 13. In the result, appeal filed by the department and cross objection filed by the assessee both are dismissed in the manner aforesaid. - - T .....

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