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TMI Blog2017 (5) TMI 1698X X X X Extracts X X X X X X X X Extracts X X X X ..... ued within statutorily allowed time period, the reassessment was valid. Addition sustained by CIT(Appeals) under short term capital gains , though originally done by the ld. Assessing Officer u/s. 69 of the Act, assessee has filed copy of the accounts statement for its investment in Sundaram Bond Saver Inst Bonus (Principal units) as well as Sundaram Bond Saver Inst. Bonus (Bonus Units). There is no dispute that bonus units were issued to the assessee on 23.03.2004. There is also no dispute that ld. Assessing Officer had applied Sec. 94(7) of the Act in the assessment year 2004-2005. Where a financial asset is allocated to a assessee without any payment, on the basis of holding of any other asset, the cost of the former has to be tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (Appeals) erred in holding that amount of ₹ 49,42,821 / - would be taxable as short term capital gain and there will be no cost of acquisition being bonus units. 3.1 The Commissioner of Income tax (Appeals) ought to have appreciated that the above investment in Sundaram Mutual Fund is nothing but a switch over from an already existing investment in Sundaram Mutual Fund. Hence. cannot be taxable as short term capital gain. 3.2 The Commissioner of Incometax (Appeals) erred in holding that the provisions of Section 94(8) will not be applicable for the assessment year 2005- 06, being the year under appeal. 4. The Appellant craves leave to file additional grounds at the time of hearing . It is cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see moved in appeal before the ld. Commissioner of Income Tax (Appeals). Contention of the assessee was that reopening done was invalid. According to the assessee, notice on the dissolved firm was not issued and served within the time prescribed u/s. 149 of the Act. On merits, it was argued that it had initially subscribed to Sundaram Bond Saver Inst (Principal units) on 18.03.2004 for a value of ₹ 1,00,00,000/-. As per the assessee on the said units, the mutual fund issued bonus units in March, 2004. Such bonus units, as per the assessee was treated as dividend income for assessment year 2004-2005. Assessee pointed out that ld. Assessing Officer had applied Sec. 94(7) of the Act while doing the assessment for assessment year 2004-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing done for the impugned assessment year was invalid. 6. Viz-a-viz treatment for the sum of ₹ 49,42,821/-, as short term capital gains, contention of the ld. Authorised Representative was that though the assessee had switched out of M/s. Sundraram Bond Saver Inst (Bonus units) on 28.09.2004, the resulting receipts of could not considered as short terms capital gains. According to him, in the immediately preceding assessment year, viz, assessment year 2004-05, short term capital loss arising on sale of the original units were not allowed to be carried forward, by applying Sec. 94(7) of the Act. As per ld. Authorised Representative the value of the bonus units were set off against such capital loss. Thus, according to him, bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bond Saver Inst Bonus (Principal units) as well as Sundaram Bond Saver Inst. Bonus (Bonus Units). There is no dispute that bonus units were issued to the assessee on 23.03.2004. There is also no dispute that ld. Assessing Officer had applied Sec. 94(7) of the Act in the assessment year 2004-2005. The relevant para of the assessment order for assessment year 2004-05 is reproduced hereunder:- The assessee has claimed a Short term capital gain of ₹ 49,97,835/-- on account of the sale of Sundaram Mutual Fund Units, Relevant details of the purchase and sale of these Units have been brought on record. Accordingly, these Units were purchased just before the date of dividend declaration and the sale of these Units is immediately a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th, the bonus units allotted on 22.03.2004 with any value. At this juncture, it will be apposite to reproduce Sec. 55(2) sub clause (aa) of the Act. (aa) in a case where, by virtue of holding a capital asset, being a share or any other security, within the meaning of clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) (hereafter in this clause referred to as the financial asset), the assessee-- (A) becomes entitled to subscribe to any additional financial asset ; or (B) is allotted any additional financial asset without any payment, then, subject to the provisions of sub-clauses (i) and (ii) of clause (b)-- (i) in relation to the original financial asset, on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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