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TMI Blog2011 (9) TMI 488X X X X Extracts X X X X X X X X Extracts X X X X ..... sional rate of tax @ 10% on LTCG. -Decided against the assessee. - IT APPEAL NO. 1689 (DELHI) of 2010 - - - Dated:- 30-9-2011 - A.D. JAIN, K.G. BANSAL, JJ. Rahul Khare for the Appellant. Ms. Reena S. Puri for the respondent. ORDER K.G. Bansal, Accountant Member The assessee has taken two grounds in the appeal that on the facts and in law, the ld. Deputy Commissioner of Income-tax erred in -(i) treating sale of shares of Punj Lloyd Ltd. ('PLL' for short) as a taxable transaction on account of its being a transaction of unlisted security in stead of non-taxable transaction in listed security, thereby resulting in addition of Rs. 39,50,10,566/-; and (ii) charging tax @ 20% applicable in respect of long-term capital gain ('LTCG' for short) instead of 10% assuming but not admitting that it is a long-term taxable security. It may be mentioned that the appeal has been filed against the order of CIT(Appeals)-XVII, New Delhi, dated 10.03.2010 and, therefore, the designation of the authority "DCIT" mentioned in the ground is taken as "CIT(Appeals)". 2. The facts of the case are that the assessee is a promoter-director of the company, PLL, whose shares were not quo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 20%. 3. Before us, the assessee filed additional evidence in the form of circular dated 19.01.2006 issued by the SEBI regarding "IPOs- ISINs to be activated after commencement of trading on the stock exchanges". It is mentioned that having regard to development relating to transaction in shares of IPOs during pre-listing period, the depositories are advised that in case of IPOs they shall activate the ISINs only on the date of commencement of trading on the stock exchange. It is further mentioned that the circular is being used in exercise of powers conferred u/s 11(1) of the Securities Exchange Board of India Act, 1992, to protect the interest of investors in securities and to promote the development of, and to regulate, the securities market. As this circular is in public domain, the same is admitted and it be taken into consideration for deciding the appeal. 4. Before us, the ld. counsel furnished a brief background of facts. The assessee is a promoter-director of the PLL. The company was controlled by various family members of the assessee. In the month of October, 2005, the company obtained approval of the SEBI for subscription of shares through the IPO. Along with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to STT under the aforesaid Chapter VII. A great stress has been laid on the word "chargeable". In this connection, it is submitted that the assessee has not paid the STT. It is also admitted that the Registrar has not paid the STT. He charged commission of 7.25% of the sale proceeds. However, payment or non-payment of STT is not the crux of the matter. What is to be seen is whether the STT is payable. This tax, in normal circumstances, is payable by the broker who passes it on to the buyer or seller of the security, as the case may be. In this case, the basis of allocation of shares had been decided on 29.12.2005 as per evidence on page No. 27 of the paper book. The trading approval was received on 05.01.2006 as per PLL post issue activity timeline, placed in the paper book on page Nos. 49 and 50. The sale proceeds were credited to the account of the assessee on 06.01.2006 as per evidence placed on page No. 41 of the paper book. The sale proceeds were received after deduction of the commission chargeable by the Registrar. On this date the ISIN was also activated. Therefore, the transfer of shares took place on 06.01.2006, when the shares had been listed. Accordingly, it is argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to undertake any responsibility for the financial or other soundness of the company etc. Obviously this letter cannot be taken to be an approval of listing the security on the exchange on 04.11.2005. Shares were also not listed on the exchange on this date. Similar is the position in respect of the letter dated 14.11.2005 issued by the NSE. Since these letters do not lead to the conclusion of the listing of the security on the stock exchanges on the respective dates, subsequent approval cannot relate back to this date. The basis of allotment was admittedly decided on 29.12.2005. The share of the company had not been listed on this date on any stock exchange. This decision in the matter freezes the names of allottee or buyer and number of shares allotted or sold to them, therefore, this is a relevant date to consider the issue of date of sale. Admittedly, the corporate action for debit of promoter account was taken on this date. This means that the assessee lost any control over his shares transferred to the escrow account on this date. Corporate action for credit of allottees' account was also taken on this date. This is also an admitted fact. This means that the shares were tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Expenses Account, a sum equal to 7.63% of the amount outstanding in the Public Offer Account of such Banker to the Offer. Following such transfer by each of the Bankers to the Offer to the Public Offer Expense Account, the remainder in the Public Offer Account shall be remitted or distributed to the Company and each Selling Shareholder immediately and in any event within two days of receipt by the Bankers to the Offer of written instructions for disbursement from the Company or any of the Selling Shareholders, as the case may be." 4.5 Therefore, it can be very well held that the sale proceeds were constructively received by the assessee on 29.12.2005 or at best on 30.12.2005. Therefore, it is held that the sale was effected on 29.12.2005. Coming to SEBI's circular dated 19.01.2006, the depositories have been advised to activate ISINs only on the date of commencement of trading on the stock exchange, being 06.01.2006 in this case. This has been done to protect the interest of the investors, and regulation and development of the market. As mentioned earlier, this is for the facility of buyers, existing shareholders and directors in respect of shares not offloaded by them. Non-act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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