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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI GAGAN GOYAL
IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “B”, MUMBAI BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER
ITA No.1620/M/2023 Assessment Year: 2011-12 M/s. Nipra Trading Private National Faceless Appeal Limited, Centre (NFAC), 501, Corporate Arena, Delhi D.P. Piramal Road, Vs. Bangur Nagar S.O., Goregaon, Mumbai – 400 104 PAN: AABCN1311K (Appellant) (Respondent)
Present for: Assessee by : Mr. Gautam R. Mota, C.A. Revenue by : Mr. Ashok Kumar Ambastha, D.R. Date of Hearing : 26 . 07 . 2023 Date of Pronouncement : 08 . 09 . 2023 O R D E R
Per : Kuldip Singh, Judicial Member: The appellant, M/s. Nipra Trading Private Limited (hereinafter referred to as ‘the assessee’) by filing the present appeal, sought to set aside the impugned order dated 26.07.2021 passed by the National Faceless Appeal Centre(NFAC) [Commissioner of Income Tax (Appeals), Delhi] (hereinafter referred to as CIT(A)] qua the assessment year 2011-12 on the grounds inter-alia that :- “The Appellant submits the following ground, which is without prejudice:
ITA No.1620/M/2023 2 M/s. Nipra Trading Private Limited 1. The order passed by the learned National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as 'the learned CIT(A)"] is bad in law and on facts. 2. Re: Order passed by CIT(A) is bad in law: 2.1 The learned CTT(A) grossly erred in stating that the order cannot be recalled as per the provision of Income Tax Act inspite of specific provision in section 154 of the Income Tax Act. 3. Re: Capital gain on account of sale of listed equity shares treated as Short Term Capital Gains instead of Long Term Capital Gains. 3.1 The leamed CIT(A) grossly erred in holding that Equity Shares of Visagar Polytex Limited are not listed on recognized stock exchange, thereby denying benefit of 1" proviso to Sec. 2(42A) for the purpose of computing the period of holding and consequently treating the gain as short term capital gains. 3.2 The learned CIT(A) failed to appreciate the submissions made by the Appellant that the share of Visagar Polytex Limited are listed on recognized stock exchange and disregarded the same with a reason that he doesn't have power to recall his own order.” 2. Briefly stated facts necessary for consideration and adjudication of the issues at hand are : the assessee company is into the business of broking and dealing in shares and other securities. assessee's return of income for the year under consideration declaring total income of Rs.60,00,039/- showing the book loss of Rs.73,17,886/- under section 115JB of the Income Tax Act, 1961 (for short 'the Act') was processed and the assessment was framed under section 143(3) of the Act determining the total income at Rs.60,00,040/-. However, subsequently assessment was reopened by initiating the proceedings under section 147/148 of the Act and in response to the notice issued the assessee claimed the original return filed as reply to the same and the reasons recorded were supplied. During the reopening proceedings it was noticed that the assessee has reported long term capital gain (LTCG) taxable under section 112 (non STT) to the tune of Rs.55,00,000 on sale of shares of M/s. Visagar Polytex Ltd. on 05.02.2010 and shares were
ITA No.1620/M/2023 3 M/s. Nipra Trading Private Limited allotted to the assessee company on 11.02.2010. The warrants issued in favour of the assessee were converted into equity shares on 19.04.2010 which were subsequently sold on 14.03.2011 and thereby computed the LTCG after claiming indexed cost of acquisition on the ground that the shares were held by it for more than 12 months. Declining the contentions raised by the assessee the Assessing Officer (AO) proceeded to hold that the gain arising on the sale of the shares in question is taxable under STCG and not under LTCG declared by the assessee and thereby assessee earned LTCG of Rs.70,00,000/- on the shares of M/s. Visagar Polytex Ltd. The AO thereby made an addition of Rs.70,00,000/- to the total income of the assessee.
The assessee carried the matter before the Ld. CIT(A) by way of filing appeal who has partly allowed the same. Subsequently Ld. CIT(A) on the application moved by the assessee seeking rectification on the ground that Ld. CIT(A) has made an error in holding that the shares of M/s. Visagar Polytex Ltd. are not listed on any stock exchange the same would not be covered by the 1st proviso to section 2(42A) of the Act and thus any period of holding less than 36 months would result in the assets being treated as STCG. Declining the contentions raised by the assessee that shares of the M/s. Visagar Polytex Ltd. brought in question are listed on the stock exchange and as such this is an error apparent on record the Ld. CIT(A) dismissed the application moved by the assessee under section 154 of the Act. Feeling aggrieved with the impugned order passed by Ld. CIT(A) under section 154 read with section 250 of the Act assessee has come up before the Tribunal by way of filing present appeal.
ITA No.1620/M/2023 4 M/s. Nipra Trading Private Limited
We have heard the Ld. Authorised Representatives of the parties to the appeal, perused the orders passed by the Ld. Lower Revenue Authorities and documents available on record in the light of the facts and circumstances of the case and law applicable thereto.
Undisputedly the assessee has purchased the share warrants of M/s. Visagar Polytex Ltd. on 05.02.2010. It is also not in dispute that allotment of share warrants of M/s. Visagar Polytex Ltd. was made on 11.02.2010 for an amount of Rs.1,20,00,000/-. It is also not in dispute that the conversion of the share warrants into equity shares was made on 19.04.2010. it is also not in dispute that the assessee has sold the equity shares in question on 14.03.2011 for an amount of Rs.1,90,00,000/-.
In the backdrop of the aforesaid facts and circumstances of the case the short question arises for determination in this case is: "As to whether the Ld. CIT(A) has erred in holding that equity shares of M/s. Visagar Polytex Ltd. in question are hit by 1st proviso to section 2(42)(A) for the purpose of computing the period of holding and consequently treating the gain as STCG?"
The Ld. CIT(A) has rejected the claim of the assessee company for treating the gain as LTCG on the shares of M/s. Visagar Polytex Ltd. in question on the ground that the shares in question being not listed on any stock exchange thus denied the benefit of 1st proviso to section 2(42A) of the Act by returning following findings: “5.2.2 In present case, the warrants were purchased on 05.02.2010 which were allotted on 11.02.2010, converted into equity shares on 19.04.2010, and subsequently such shares were sold on 14.03.2011. In such case, the holding period of shares would be considered between 05.02.2010 to 14.03.2011, which is little above 13 months. The
ITA No.1620/M/2023 5 M/s. Nipra Trading Private Limited appellant has claimed the gain on such sale of shares as Long Term Capital Gain. However, since the said shares of M/s Visagar Polytex Ltd. are not listed on any stock exchange, the same would not be covered by the exclusion in first proviso to section 2(42A), which reads as under: “Provided that in the case of a security (other than a unit) listed in a recognized 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 an equity oriented fund or a zero coupon bond, the provisions of this clause shall have effect as if for the words "thirty six months", the words "twelve months" had been substituted." Since the appellant's shares sold were not listed on any stock exchange, the period of holding up to 36 months would be considered to classify it as short term capital asset. 5.3 In view of above, no interference is required in the assessment as short term capital gain of Rs.70,00,000/- on sale of said shares. Therefore, the ground of appeal is dismissed. (Ground: Dismissed)”
To challenge the aforesaid findings returned by the Ld. CIT(A) the Ld. A.R. for the assessee drew our attention towards annual report for the financial year 2010-11 of M/s. Visagar Polytex Ltd. which shows that its shares were listed at the stock exchange, Mumbai. For facility of reference operative part of the annual report available at page 8 which is extracted as under:
ITA No.1620/M/2023 6 M/s. Nipra Trading Private Limited 9. Ld. A.R. for the assessee also drew our attention towards the market value of the shares of M/s. Visagar Polytex Ltd. available at page 11 of the paper book which is extracted for perusal as under:
Bare perusal of the annual report of the M/s. Visagar Polytex Ltd. for A.Y. 2010-11 goes to prove that shares in question held by the assessee company were listed on the Mumbai stock exchange having code No.506146 and ISIN No.INE370E01029. It is also proved from market value of the shares of the M/s. Visagar Polytex Ltd. extracted above that the same are traded in the ordinary course. When it is proved that the shares of M/s. Visagar Polytex Ltd. held by the assessee were listed with the stock exchange,
ITA No.1620/M/2023 7 M/s. Nipra Trading Private Limited Mumbai the assessee has rightly claimed the gain on the shares by treating the same as LTCG. When the period of holding warrants is to be included for calculating the holding period of the shares allotted on conversion of the warrants the assessee has rightly claimed the LTCG by selling the shares after a period of one year.
In view of what has been discussed above the Ld. CIT(A) has erred in confirming the addition made by the AO by treating the gain earned by the assessee on sale of the shares in question as STCG. So the AO is directed to delete the addition subject to verification of annual report of M/s. Visagar Polytex Ltd. referred to in the preceding para number 8.
Resultantly, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 08.09.2023.
Sd/- Sd/- (GAGAN GOYAL) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 08.09.2023. * Kishore, Sr. P.S.
Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The DR Concerned Bench //True Copy//
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.