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TMI Blog2009 (5) TMI 946X X X X Extracts X X X X X X X X Extracts X X X X ..... asset' is relevant in considering whether the share is a long-term asset or not and consequently whether it is long-term capital gains or not. 3. The CIT(A) ought to have upheld the claim for exemption under s. 10(38) in respect of the capital gains arising on sale of shares." 2. After hearing both the parties we find that during assessment proceedings the AO has noticed that the assessee had shown long-term capital gain of ₹ 63,16,406 which was claimed exempt. Upon enquiry it was submitted that stocks were converted into investments on 1st April, 2004. It was argued that these stocks were owned from the date of allotment and, therefore, holding period had to be counted from the date of allotment of shares. It was contend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble jurisdictional High Court in the case of CIT vs. Kamala Devi (1997) 140 CTR (Mad) 411: (1997) 227 ITR 701(Mad) wherein it was held that the period in which the shares were held by the firm was also to be taken into account as the holding of the partners who got it at the time of dissolution. According to him the case of the assessee was better because the assessee itself was holding the share first as stock-in-trade and later on as capital asset. 4. The learned counsel for the assessee further submitted that what was relevant to see was whether the asset sold at the time of transfer was a capital asset or not. Since at the time of transfer the asset was capital asset, exemption on long-term capital gain should have been allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me specifically excludes the stock-in-trade. She also submitted that conversion of stock-in-trade into capital asset had already been recognized by the provision of s. 45(2) of the Act which means that the legislature was aware of the process of conversion and, therefore, whenever it was felt necessary a provision has been enacted accordingly. She argued that while determining the holding period, the nature of asset has to be necessarily kept in mind. 6. We have considered the rival submissions carefully in the light of the material on record. Admittedly the shares sold by the assessee company were treated as stock-in-trade upto 31st March, 2004 and they were converted into capital asset only on 1st April, 2004. No doubt, in the decision r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonal use by the assessee or any member of his family dependent on him, but excludes' (a) jewellery; (b) archaeological collections; (c) drawings; (d) paintings; (e) sculptures; or (f) any work of art". "Sec. 2(42A) 'short-term capital asset' means a capital asset held by an assessee for not more than thirty-six months immediately preceding the date of its transfer : Provided that in the case of a share held in a company or any other security listed in a recognised stock exchange in India or a unit of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963) or a unit of a mutual fund specified under cl. (23D) of s. 10 or a zero coupon bond, the provisions of this clause s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came into existence only from 1st April, 2004 before which it was merely a stock-in-trade and the same cannot be treated as capital asset as per the definition of capital asset. Therefore, the holding period prescribed in s. 2(42A) of the Act has also to be reckoned when the asset i.e., shares became capital asset w.e.f. 1st April, 2004. As pointed out by the Hon'ble Supreme Court in the case of Orissa State Warehousing Corporation vs. CIT (supra), only the language used in the statute is required to be considered while interpreting the fiscal statute which means that no words can be added to find out the intention, but at the same time no word can be ignored while interpreting taxation laws. 8. As far as the decision of the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above it becomes clear that the issue before the Hon'ble Court was whether the period during which the asset was owned by the firm was also to be reckoned or not. The Hon'ble High Court took this view because normally the provisions of one Act cannot be incorporated in all the Acts and even as per the Partnership Act, though the assets can be owned by the firm but in reality, the partners are the real owners. Therefore, the issue was totally different and is not useful for the present case. 10. Similarly the cases of CIT vs. ACE Builders (P) Ltd. (supra) and Raka Food Products (supra) are also totally on different facts and in both these cases what has been decided is that even though the depreciable assets are required to be t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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