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TMI Blog2021 (9) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... early makes a distinction that there are many financial instruments other than the company shares through which the investor are entering capital market and in order to provide such units and all securities traded in the recognized stock exchange, a level playing field with the company's share is proposed to be amended and thus, the said Memorandum clearly makes a distinction between the company shares and other than company shares.The above decision of the ITAT has laid down the correct legal principle which we have discussed in the preceding paragraphs. On a search made, we find that the Revenue has not challenged the order of the ITAT before the Court, but it is the assessee, who has challenged it before the High Court of Delhi and obviously not against the above finding, which was rendered in favour of the assessee. The above Circular issued by the CBDT will clearly indicate that all shares whether listed or unlisted have enjoyed the benefit of shorter period of holding and even any investment in shares of private limited companies enjoyed long-term capital gains on its transfer after twelve months. - Decided against revenue. - T.C.A.No.78 of 2016 - - - Dated:- 7-9-202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he shares were acquired. After noting certain facts, the CIT was of the opinion that the order of assessment is erroneous and prejudicial to the interest of Revenue and accordingly, proceeded with the matter under Section 263 of the Act. After hearing the assessee, an order was passed by the CIT dated 15.02.2011 by directing the Assessing Officer to workout the short term capital gains keeping in mind the rate of interest. The said order was given effect to by the Assessing Officer by order dated 30.12.2011. Aggrieved by the same, the assessee preferred appeal to the Commissioner of Income Tax (Appeals), Tiruchirappalli (for brevity the CIT(A) ). The assessee contended that the Revenue has made a mistake by treating the shares held for more than twelve months as short term capital assets whereas, the proviso to Section 2(42A) clearly defines an asset as a long term capital asset and therefore, the gain should be taxed at the special rate of 20%. The CIT(A) after taking into consideration the factual and legal submissions made by the assessee, noted that the shares need not be one of a company, which is listed in its stock exchange and even shares of private limited companies are e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instruments through which the small investors are increasingly getting the benefit of investment in the capital market. In order to provide such units and all the securities traded in the recognised stock exchanges a level playing field with company shares, the Finance Act has amended the provisions of Section 2(42A) so that the maximum holding period for which such instruments are to be considered as short-term will be 12 months in place of 36 months. In other words, such assets are to be considered long-term capital assets if they are held for more than 12 months. The expression securities will have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956. This amendment takes effect from 1st April, 1995 and will, accordingly, apply in relation to assessment year 1995-96 and subsequent years. 7.The above amendment came into effect from 01.04.1995. In the case on hand, the assessee purchased the shares during November, 1993, as stated, in a company which was not listed. The sale of shares took place in 1996 and the amendment would apply. 8.To be noted that between 1978-79 to 1987-88, there is no differential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange in India. This is precisely the reason for which the amendment has been brought above and this is clear on a reading of the explanatory notes, which states that in order to provide such units and all the securities traded in the recognized stock exchanges a level playing field with company shares, the Finance Act has amended the provisions of Section 2(42A) so that the maximum holding period for which such instruments are to considered as short term will be twelve months in the place of thirty six months. 12.The argument of Mr.M.Swaminathan, learned Senior Standing Counsel is that the definition of securities as defined under Section 2(h) of the Securities Contracts Act should be taken note of. This aspect has also been dealt with by the Tribunal and it was held that although under the Securities Contracts Act, the term securities includes shares, but in Section 2(42A) of the Act, shares have been mentioned separately. As pointed out earlier, the use of the word or in between each of the categories of holding is very important and such distinction needs to be borne in mind. It may be true that securities as defined under Section 2(h) of the Securities Contracts A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Deputy Commissioner of Income Tax, Circle-16(2), Delhi [2017 SCC OnLine ITAT 18870]. Two of the issues, which were framed for consideration by the ITAT were (i) whether the CIT(A) erred on facts and in law in observing that for unlisted shares to qualify as long term capital asset , the period of holding was 36 months and not 12 months as per the first proviso to Section 2(42A) (as applicable during the year under consideration) read with Section 2(29A) of the Act; and (ii) Whether the CIT(A) erred on facts and in law in holding that the shorter period of 12 months to qualify as long term capital asset was only applicable to unlisted shares sold during the period 01.04.2014 to 10.07.2014, in terms of second proviso to Section 2(42A), which was inserted by the Finance (No.2) Act, 2014, with effect from 01.04.2015. 15.We find from paragraphs 85 to 87 of the order, which have crystallized the arguments of the learned counsel appearing for the assessee and the Revenue and we find those arguments to be substantially similarly to the arguments, which were advanced before us. The ultimate conclusion arrived at by the ITAT was that so far as the term used 'shares held in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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