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TMI Blog2014 (9) TMI 651X X X X Extracts X X X X X X X X Extracts X X X X ..... lates to sale of shares i.e., transfer of capital asset - the finding recorded by the CIT(A) after verifying the entire records is factually and legally correct and there is no reason to deviate from findings - allowing the claim of deduction of an expenditure u/s 48 by the CIT(A) in the computation of long term capital gain is upheld. Rate of taxability of LTCG on shares allotted – 10% or 20% - Held that:- The long term capital gain was in respect of listed securities and, therefore, the rate of tax should be 10% and not 20% as per section 112 because for a public issue, the shares have to be listed at the stock exchange and then only they are allotted to the public in the ratio approved by the stock exchange - It is after listing the public receives the shares and is also entitled to sell the shares in the stock exchange – the order of the CIT(A) is upheld – Decided against revenue. - ITA no. 2842/Mum./2011 - - - Dated:- 23-10-2013 - SHRI B. RAMAKOTAIAH AND SHRI AMIT SHUKLA, JJ. For the Appellant : Mr. O.P. Singh For the Respondent : Mr. Dilip V. Lakhani ORDER Per: Amit Shukla: The present appeal has been preferred by the Revenue, challenging the impugned ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s completed u/s 143(3) or 29.12.2008 at total income of ₹ 142,51,48,030/-. Thereafter, order u/s 154 the Act was passed on 11.02.2009· revising the total income ₹ 205,59,07,357/-. It is noticed from the information available that the expenses of ₹ 1,60,03,911/- claimed as expenditure on transfer of shares while computing the taxable long term capital gain on sale of IL FS Investmart Ltd. pertain to the IPO of shares brought out by IL FS Investment Ltd. The said expenses were not incurred by the assessee company. Further, the said expenses incurred for the purpose of IPO by lL FS Investmart Ltd. cannot be considered as expenses incurred by the assessee company wholly and exclusively in connection with transfer of capital asset viz. the said shares for the purpose of long term capital gain. Hence, I am of the view that income to the extent of the said claim of expenses of ₹ 1,60,03,911/- has escaped assessment within the meaning of the provisions of Section 147 of the Act. Therefore, notice u/s 148 of the Act is hereby issued.” 3. In the re–assessment order, the Assessing Officer observed that while computing the capital gain on sale of IL FS Inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e–opening amounts to “change of opinion” and reliance was placed on the decision of the Hon'ble Supreme Court in CIT v/s Kalvinator of India, [2010] 320 ITR 561 (SC). 6. The learned Commissioner (Appeals), after examining these facts, came to the conclusion that such a re–opening on these facts amounts to “change of opinion”. The relevant findings on this issue, as recorded by the learned Commissioner (Appeals), is reproduced herein below:– “2.3 I have carefully considered the facts of the case. During the year, the appellant sold the shares of IL FS Investment Ltd. and the capital gain thereon was duly shown by the appellant in the return of income. The appellant's return of income was selected for scrutiny. During original assessment proceedings, the AO vide point no. 18 19 of the questionnaire annexed to the notice u]s.142(1) asked for the details of capital gains and details of investments sold during the year. The appellant filed details of capital gains along with other details i.e. details of sales consideration, the cost, the expenses towards sales of shares etc. These details were filed by the appellant during original assessment proceedings. The AO did not ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, any expenditure incurred has to be allowed as deduction while computing capital gain under section 48(1). This expenditure was solely and exclusively connected with the transfer of shares to the public. A certificate to this effect was also furnished from IL FS Investmart Ltd. The learned Commissioner (Appeals), after examining these facts, allowed the deduction and accepted the assessee’s claim after observing and holding as under:– “3.3 I have carefully considered the facts of the case. As per provisions to section 48, the expenditure incurred wholly and exclusively in connection with transfer of shares was allowable as a deduction for computing the capital gains. There is no restriction in the Act as to how the Shares should be sold i.e. through stock exchange, through directed transaction with the customer or through sale in public issue of shares. Even otherwise, the AC has not discussed that the shares should have been sold through stock exchange and not in public issue of shares. In the case under consideration, in fact the AO failed to correctly appreciate the facts of the case i.e. made on transaction. The appellant was holding shares of IL FS Investment Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh IPO when it was not listed. The listing of shares was a subsequent event and, therefore, the rate of tax applicable should be 20%. 10. The learned Counsel for the assessee, on the other hand, submitted that once the Assessing Officer had required the requisite details during the course of original assessment proceedings in the questionnaire issued along with the notice under section 142(1) and in response these details have been furnished, then it is a normal presumption that the Assessing Officer has applied his mind and formed his opinion. The computation of capital gain was also made by the Assessing Officer in his order under section 154. Thus, to re–examine the nature of expenses in the computation of capital gain amounts to “change of opinion” which is not permissible in the law. He, thus, strongly relied upon the findings of the learned Commissioner (Appeals) on this score. On merits, he submitted that the assessee had submitted the details of entire expenses which was incurred by IL FS and also the proportionate shares of the expenditure which was to be shared by the assessee. The assessee had sold 26,00,000 shares and proportionate expenditure relating to IPO was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding recorded by the learned Commissioner (Appeals) after verifying the entire records as discussed above is factually and legally correct and there is no reason to deviate from such findings. Therefore, allowing the claim of deduction of such an expenditure under section 48 by the learned Commissioner (Appeals) in the computation of long term capital gain is hereby upheld. 12. Otherwise also, we agree with the findings of the learned Commissioner (Appeals) that the long term capital gain was in respect of listed securities and, therefore, the rate of tax should be 10% and not 20% as per section 112 because for a public issue, the shares have to be listed at the stock exchange and then only they are allotted to the public in the ratio approved by the stock exchange. It is after listing the public receives the shares and is also entitled to sell the shares in the stock exchange. Thus, the findings of the learned Commissioner (Appeals) on this score is also upheld. Once that is so, the other issues become purely academic. Since we have already upheld the order of the learned Commissioner (Appeals) on merits, we do not wish to give our conclusion on the validity of re–opening on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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