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TMI Blog2015 (2) TMI 778X X X X Extracts X X X X X X X X Extracts X X X X ..... s 'derived from' would normally indicate in case of shares, the dividend received on shares and not the sale of the shares. The amount received on sale of shares is not derived from it as it is received on the transfer of shares leading to extinguishment of all rights in the shares so sold. Thus the interpretation by the Revenue also find support from the fact that Section 115E of the Act specifically indicates income by way of long term capital gains to be entitled to the benefit of Section 115E of the Act as it is not considered to be an income derived from an investment. Chapter XIIA of the Act itself makes a distinction between income derived from an asset and an income arising on sale of assets, leading to long term capital gains. The later is a case of income being attributable to sale of assets. We hold that the income arising on sale of assets leading to short term capital gains is not income derived from foreign exchange asset so as to qualify as investment income within the meaning of Section 115E of the Act. - Decided in favour of the Revenue - INCOME TAX APPEAL NO. 549 OF 2000 - - - Dated:- 18-2-2015 - M.S. SANKLECHA AND G.S. KULKARNI, JJ. For the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only to longterm capital gains but also to investment income. Thus the sale of 10,000 bonus shares of Tata Chemicals Ltd. although short term capital gains was an investment income and thus covered by Section 115E of the Act attracting concessional rate of income tax. 7 Being aggrieved, the revenue carried the order of the CIT(A) in appeal to the ITAT. By the impugned order dated 12th July 1999, the ITAT upheld the order of the CIT(A) by following it's decision in the matter of Smt. Trishala Jain (supra). 8 Before considering the submissions of the respective Counsel, it may be convenient to reproduce the relevant provisions of Chapter XIIA of the Act. Definitions. 115C. In this Chapter, unless the context otherwise requires, (a) convertible foreign exchange means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder; (b) foreign exchange asset means any specified asset which the assessee has acquired or purchased with, or subscribed to in, convertible foreign exchange; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been filed by the revenue. The benefit of the same should be available to all assessees; (d) Section 115E does not specifically exclude shortterm capital gains from the definition of investment income. Thus, the benefit cannot be denied by reading the shortterm capital gains into Section 115E of the Act; and (e) in any view of the matter, if two views are possible then, the view in favour of the assessee has to be adopted in the matters of interpretation of fiscal statutes. 11 It is an admitted position between the parties that 10,000 bonus shares of Tata Chemicals is a specified Foreign Exchange Asset in the hands of the RespondentAssessee who is a nonresident. Thus, Chapter XIIA of the Act is undisputedly arises for consideration in the present facts. 12 The preliminary objection on behalf of the assesee is that in view of the decision of the Delhi High Court in ITAT in Smt. Trishali Jain (supra) on identical issue not being challenged by the Revenue, this Court should dismiss this appeal as the law should be uniformly applied. However, this submission ignores the fact that the Mumbai Bench of ITAT in the case of Sunderdas Haridas (supra) on identical facts has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le foreign exchange. Chapter XIIA of the Act itself sets out the products/ assets which are covered by it and shares in an Indian Company, is a specified asset. 16 The impugned order of the ITAT has extended the benefit of Section 115E of the Act to the RespondentAssessee, as the issue stands covered by virtue of its decision in Trishala Jain (supra). The ITAT in Trishala Jain (supra) held that income on account of short term capital gain was income derived out of investment income i.e. equity shares. This was on the ground that the 'Investment Income' as defined in Chapter XIIA of the Act is income derived from Foreign Exchange Assets. Thus, the gain made by sale of shares although a short term capital gain would fall under head 'Investment Income'. For the purpose of coming to the aforesaid conclusion, reliance was placed upon the decision of the Apex Court in Sevantilal M. Sheth v/s. CIT 68 ITR 503. In Sevantilal M. Sheth (supra), the Supreme Court while dealing with the issue of clubbing of income has held under the Income Tax Act, 1922 (the '1922 Act') that there is no difference between the income arising from assets and that arising from the sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of the shares/ asset is not ordinarily an income but a receipt on capital account. It is only in view of the definition of income as provided in Section 2(24) of the Act that capital gains chargeable to tax under Section 45 of the Act would be income for the purposes of this Act. However, Section 2 of the Act itself makes it clear that the definition as given in Section 2 of the Act would apply unless the context otherwise requires. If we apply the definition of income as provided in Section 2 of the Act to the use of the word 'Investment Income' found in Chapter XIIA of the Act and particularly in Section 115E thereof, we would render the words 'Income by way of long term capital gain' therein redundant. This is not permissible in a taxing statute. Therefore, the definition of income as given in the Act which covers capital gains can not be applied in the context of Section 115E of the Act, as its application would render a part of the statute otiose. 20 It is equally true that in exceptional cases, additional words may be ignored on the basis that they were introduced only to allay the fears of those who would otherwise feel that exemption would not be ext ..... X X X X Extracts X X X X X X X X Extracts X X X X
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