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TMI Blog2015 (8) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... appointed is synchronous with the intent and objective of the creation of the Trust; and that holding the shares of just one corporate entity not being desirable was a decision as per the prudence of the Trust. We, for the above discussion, are ad idem with the ld. CIT(A), in arriving at the conclusion that from the sale of shares undertaken by the assessee during the year under consideration, no business activity stands made out. Therefore, we uphold the action of the ld. CIT(A) in directing the A.O. to treat the gain in question as a capital gain. However, this gain was claimed by the assessee as exempt u/s 10(38) of the Act. As per this provision, any income arising from the transfer of a long term capital asset, being an equity share in a company, shall not be included while computing the total income. This has not been taken into consideration by the ld. CIT(A), though this provision is clearly applicable to the facts of the case. Accordingly, the grievance of the assessee is found to be justified and is accepted as such. We hold that the profit on the transfer of shares is assessable as capital gain exempt u/s 10(38) of the Act. - Decided in favour of assessee. - I .T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nafide delay. The ld. CIT(A) had granted the exemption claimed by the assessee u/s 10(38) of the Act and, therefore, there was no reason for the assessee to prefer any appeal thereagainst before us. However, it was in pursuance to the A.O s order giving effect to the order of the ld. CIT(A), that the notice u/s 156 of the Act as above, was issued to the assessee. It is this, which has grievanced the assessee, necessitating the filing of the present appeal. The delay in question, i.e., the delay of 18 days in filing the appeal has occurred in the process. The ld. CIT(A) decided the assessee s appeal vide order dated 5-6-2013. The certified copy of this order was received by the assessee on 27-6-2013. The due date for filing the appeal was 26-8-2013. The A.O. s order, giving effect to the order of the ld. CIT(A) s order was passed on 1-8-2013. The copy thereof was received by the assessee on 20-8-2013. The present appeal ultimately got to be filed only on 13-9- 2013. Now, evidently, the factual matrix, as delineated in the affidavit, explains the bonafides of the assessee. The assessee itself having become the aggrieved party, as above, against the order of the ld. CIT(A), obviously, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the impugned order, the ld. CIT(A) directed the A.O. to treat the gain arisen out of the purchase and sale of shares as a capital gain, rather than business income, as held by the A.O. Aggrieved, the parties have filed their respective appeals before us. 5. The ld. D.R. has contended that the ld. CIT(A) has erred in issuing the aforesaid direction to the A.O., for the transactions entered into by the assessee were clearly business transactions, inasmuch as 1,83,114 shares, which were held by the Trust in its corpus, were sold for a sum of ₹ 16,14,74,624/-, within a period of seven days from the date of acquisition thereof, that obviously, as correctly taken note of by the A.O., the conduct of the assessee clearly shows that the intention for the creation of the trust was not to hold the shares as investment, but to sell the same for earning profit; that the volume, frequency, continuity and regularity of transactions in a systematic manner for earning income through a Portfolio Manager, as correctly observed by the A.O., confirmed the activity as a business activity carried on by the assessee with the primary objective of maximizing the profit. 6. The ld. Counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eficiaries of the Trust including travel, medical, education. marriage, maintenance, insurance, payment of insurance premium or any other requirement which according to the Trustee is essential to ensure welfare and benefit of the Beneficiaries, etc. c. To provide for consolidation and ring fencing of assets. d. To undertake investment activities in immovable assets. e. To contribute to charitable initiatives, which are unanimously recommended by the Beneficiaries. It is evident from the above, that it is the utilization of the Trust corpus and the income arising therefrom, for the benefit of the children of the Settlors, i.e., the beneficiaries of the Trust, which is the prime objective of the assessee Trust. By such utilization of the Trust corpus, intergenerational transfer of wealth is sought to be ensured by an effective succession planning mechanism. A reading of clause (b) of Schedule I of the Trust Deed evinces the provision for needs of the beneficiaries of the Trust, existing as well as future, so as to ensure their welfare and benefit. Clause (b) of Schedule 1 provides as an object, to undertake investment activities, immovable assets. Clause (b) makes provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares by the assessee was in the nature of business/adventure in the nature of trade. As seen hereinabove, the six lacs shares of M/s Tech Mahindra Ltd. were contributed towards the corpus of the Trust. These shares were sold and exemption u/s 10(38) of the Act was claimed on the sale proceeds. Now, the very object of the Trust was the utilization of the Trust corpus and the income generated therefrom in investment, so as to ensure the benefit of the Trustees. It needs to be seen as to whether the transfer is towards this avowed intention, or not. It has come on record by way of the assessee s written submission dated 31-3-2010 (assessee s paper book, pages 32-47), filed before the ld. CIT(A), that out of the six lacs shares, contributed towards the corpus of the Trust, 96% were allotted to Shri Vineet Nayyar, Settlor of the Trust under the Employee Stock Option Plan (ESOP for short). The remaining 26,000 shares were purchased by the said Settlor, That is to say, that i.e., only about 4% shares were bought by the Settlor. Then, whereas under the ESOP, the shares were allotted on 26-3-2007, they were settled on the Trust only on 24-3-2010, which shows that it was not the intention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee Trust, but they were contributed to its corpus at the time of the very inception of the Trust; that the assessee s claim holding pattern by way of diversification of asset was also not repelled by the A.O.; that the fact that a Portfolio Manager was appointed is synchronous with the intent and objective of the creation of the Trust; and that holding the shares of just one corporate entity not being desirable was a decision as per the prudence of the Trust. 13. We, for the above discussion, are ad idem with the ld. CIT(A), in arriving at the conclusion that from the sale of shares undertaken by the assessee during the year under consideration, no business activity stands made out. 14. Therefore, we uphold the action of the ld. CIT(A) in directing the A.O. to treat the gain in question as a capital gain. However, this gain was claimed by the assessee as exempt u/s 10(38) of the Act. As per this provision, any income arising from the transfer of a long term capital asset, being an equity share in a company, shall not be included while computing the total income. This has not been taken into consideration by the ld. CIT(A), though this provision is clearly applicable t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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