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TMI Blog2012 (7) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... place in the stock exchange. capital gain tax at the rate of 10% was payable only in case of 'listed securities'. Since, these shares had been transferred to the applicants in the public offer, by 5.1.2006 before they were actually listed on the stock exchanges on 6.1.2006, they were not 'listed securities' at the time of sale by the appellant and consequently, the transaction would not be eligible for payment of capital gain tax at the lower rate of 10%. - IT APPEAL NO. 183 OF 2012 - - - Dated:- 9-7-2012 - BADAR DURREZ AHMED AND V.K. JAIN, JJ. JUDGMENT V.K. Jain, J. The appellant/assessee is a promoter/director of M/S Punj Lloyd Limited (PLL), which came out with an Initial Public Offering (IPO) of its shares in December, 2005. Along with the Public Issue, the existing shareholders, including the appellant/assessee, also offered shares held by them in PLL, to the public. The appellant before this Court offered 5,99,693 shares to the general public through the said offer. Red-Herring Prospectus, with Securities and Exchange Board of India (SEBI), was filed on 29.11.2005, after provisional approval from Bombay Stock Exchange on 04.11.2005 and National Stock Excha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the purview of Section 98 of Finance (2) Act, 2004 and consequently, would not be eligible for exemption under Section 10(38) of the Income-tax Act. 4. The Assessing Officer took the view that the transaction of sale of shares did not take place in the stock exchange and consequently, was not eligible for exemption from payment of capital gains tax. The order passed by the Assessing Officer was challenged by the appellant before the Commissioner of Income-tax (Appeals). The CIT(Appeals) noted that the shares of the company were listed on BSE w.e.f. January 06, 2006 as was evident from notification No.20060105-12 issued by the stock exchange on 05.01.2006, whereas the demat account of the appellant was debited in respect of shares offered for sale, on 29.12.2005 and, therefore, had sold the shares at the time when they were not listed on the recognized stock exchange. The view taken by the Assessing Officer in this regard was accordingly upheld. The appellant took the matter, therefore, to Income-tax Appellate Tribunal (herein after referred to as the 'Tribunal'). By the impugned order dated 30.09.2011, the Tribunal held that the shares were transferred on 29.12.2005 or had p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Once, the money had been received from the applicants, allotments were made to them, excess money was refunded to them and the shares were transferred to their demat accounts, it is difficult to accept that the ownership of the shares in question had not vested in the applicants in the public issue, by 05.01.2006. It is the appellant's own case that the provisional approval for listing was received from BSE on 04.11.2005 and NSE on 14.11.2005. It is also his case that the final listing approval from BSE as well as NSE was received on 04.01.2006. It is also stated in the appeal that trading approval from BSE and NSE was received on 05.01.2006. We fail to appreciate how it can be said that the ownership of shares in question did not vest in the applicants or continued to vest in the appellant even after 05.01.2006, by which date, not only the shares had been transferred to the demat accounts of the applicants but the listing as well as trading approvals had also been granted by both the stock exchanges. There was absolutely no legal impediment in the applicants selling the shares, on or after 05.01.2006. 7. Admittedly, trading of these shares in the stock exchanges commenced only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions were credited in the demat accounts of the applicants in the public issue, they became beneficial owners of the shares credited to their account and, consequently, they alone were entitled to exercise all the rights and receive all the benefits in respect of the shares of (PPL) credited in their demat accounts. 9. Section 19 of the Sale of Goods Act, to the extent it is relevant, provides that where there is a contract for sale of specific or ascertained goods, the property in them is transferred to the buyer at such time, as the parties to the contract intend it to be transferred. It further provides that to ascertain the intention of the parties, regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. It also provides that unless a different intention appears, the rules contained in Sections 20 to 24 are the rules for ascertaining the intention of the parties, as to the time at which the property in the goods is to pass to the buyer. Section 20 of the Sale of Goods Act, provides that where there is an unconditional contract for the sale of specific goods in deliverable state, the property in goods passes to the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproval had been granted by the NSE as well as by BSE by 5.1.2006 and once these permissions were granted, neither there was any occasion nor was it permissible for the Bankers/Registrars to refund the application money to the applicants in the public issue. 13. It was next contended by the learned Senior Counsel for the appellant that contract for sale of shares was in the nature of a contingent contract, dependent upon the listing of shares on the stock exchanges and, therefore, it cannot be said that the transaction was complete on 5.1.2006. We, however, find no merit in the contention. Even if, we proceed on the assumption that the sale of shares was contingent upon grant of listing approvals by the stock exchange, the transaction was complete and the contract became enforceable once the listing and trading approvals were granted by the stock exchanges on 5.1.2006. It cannot be said that the contract for sale of shares was also contingent or credit of the sale consideration in the bank account of the appellant. There is no such stipulation either in the Red Herring Prospectus or in the Escrow Agreement. As stated earlier, once the shares had been credited in the demat accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demat account. 16. The expression 'transfer' in relation to a capital asset has been defined in Section 2(47) of the Income Tax Act and includes the extinguishment of any rights therein. The term 'transfer', having been given a wide meaning in the Income Tax Act, cannot be interpreted with reference to other statutes, which apply in different contexts and for different purposes. In any case no such statutory provision has been brought to our notice, which could mean that transfer of shares was not complete before the sale consideration was actually credited to the bank account of the appellant/assessee. Once the shares were transferred first from the demat account of the appellant to the account of the Registrar to the Issue and then to the demat accounts of the applicants/allottees, consequent to allotment made in consultation with the stock exchanges, the transfer was complete in terms of Section 2(47) of the Act. In any case, the transfer for the purpose of Income-tax Act being complete prior to 6.1.2006 and the trading in stock exchange having commenced only on 6.1.2006, it cannot be said that the transaction involved in this case had taken place in the stock exchange. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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