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TMI Blog2024 (8) TMI 1117X X X X Extracts X X X X X X X X Extracts X X X X ..... exemption u/s 54F of the Act and decide the issue afresh as per the provisions of law, after affording reasonable and adequate opportunity of being heard to the assessee. Thus, these grounds are accordingly allowed. Cash deposits - explanation of the assessee that the same has been received out of the petty loans given to friends and relatives, cannot be brushed aside lightly, considering the returned income of assessee being more than Rs. 50 Lakhs and sale consideration being more than Rs. 2 Crores. The returned income and the capital gain go on to show the status of the assessee and, therefore, deposit of petty sum of Rs. 3,08,600/- on different dates should not be looked upon adversely - we direct the AO to delete the impugned addition. This ground is also allowed. - Shri Narendra Kumar Billaiya, Hon ble Accountant Member And Shri Sandeep Singh Karhail, Hon ble Judicial Member For the Assessee : Shri Madhur Agrawal Shri Fenil Bhatt, A/R For the Revenue : Smt. Mahita Nair, Sr. D/R ORDER PER NARENDRA KUMAR BILLAIYA, AM : This appeal by the assessee is preferred against the order dated 09/05/2024, by NFAC, Delhi, [in short ld. CIT(A) ] pertaining to Assessment Year 2013-14. 2. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed long term capital gains and further claimed deduction u/s 54F of the Act. The assessee was asked to furnish details to prove that the shares were long term capital gain. The assessee filed detailed reply explaining the date of investment in the impugned shares, the details of sale of shares, how the capital gains were computed and how the exemption u/s 54F of the Act was claimed. After considering the detailed submissions of the assessee, the AO was of the opinion that the holding period of shares is less than 36 months as the holding period is 31 months. Drawing support from the provisions of Section 2(42A) of the Act, the AO came to the conclusion that the impugned sale of shares gave rise to short term capital gain and taxed the same accordingly and since the gains were treated as short term capital gain, the claim of exemption u/s 54F of the Act was also denied. 3.1. Proceeding further, the AO noticed that the assessee has deposited cash total to Rs. 3,08,600/- and found that the assessee has no explanation and added the same u/s 69 of the Act. 3.2. The assessee agitated the matter before the ld. CIT(A) but without any success. 4. Before us, the ld. Counsel for the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e words twelve months had been substituted. Explanation (1). - .' 10. In terms of the above definition, short term capital asset would mean a capital asset held by an assessee for not more than 36 months immediately preceding the transfer. The interplay of the provision in section 2(42A) would be relevant for the case on hand, which states that in case of a share held in a company or any other security listed in a recognized stock exchange in India or a unit of the Unit Trust of India or a unit of a Mutual Fund or a zero coupon bond, the provisions of the clause shall have effect as if for the words thirty-six months , the words twelve months had been substituted. 11. What is important to note is to use the word or in between each of the categories of items mentioned in the proviso. The first of which being shares held in company. The provision does not make a distinction between a public company, a private company, a listed company or an unlisted company. The second category is other securities and a condition has been imposed under the statute that for the benefit of the reduced period of twelve months, the other securities should be listed in a recognized stock exchange in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me, the assessee approached the High Court of Karnataka. While answering the question, the Court took into consideration the definition of short-term capital asset as defined under section 2(42A), the circular issued by the Central Board of Direct Taxes (CBDT) bearing Circular No. 684 dated 10-6-1994 and pointed out that the shares held in a company, which may be a private limited company, a public limited company or a listed company or any other security other than those shares listed in a recognized stock exchange in India, if it is held for a period of twelve months, then it ceased to be a short term capital asset and it becomes a long term capital asset. Therefore, the Court pointed out that the authorities have not kept this distinction in mind and they have misread the section and accordingly, the appeal filed by the assessee was allowed. The above decision would apply with full force to the case on hand warranting answering of the substantial question of law in favour of the respondent-assessee. 14. Identical issue came up for consideration before the Income-tax Appellate Tribunal (ITAT), Delhi Bench in the case of Analjit Singh v. Dy. CIT [2018] 92 taxmann.com 310. Two of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s proposed to be amended and thus, the said Memorandum clearly makes a distinction between the company shares and other than company shares. 16. In our considered view, the above decision of the ITAT has laid down the correct legal principle which we have discussed in the preceding paragraphs. 17. 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. 18. Further, we take note of the Explanatory Notes to the Provisions of the Finance (No.2) Act, 2014 vide Circular No. 01/2014, dated 21-1-2015. In paragraph 5.2 of the Circular, it has been stated as follows: 5.2 The shorter period of holding of not more than twelve months for consideration as short-term capital asset was introduced for encouraging investment on stock market where prices of the securities are market determined. However, all shares whether listed or unlisted have enjoyed the benefit of short period of holding and even any investment in shares of private limited companies enjoyed long-term capital gains on i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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