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Income Tax Appellate Tribunal, “C’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by assessee is directed against order of CIT(A)-12, Bangalore for the assessment year 2012-13 dated 10.2.2022. The only ground in this appeal is with regard to invoking the provisions of 115E of the Income-tax Act,1961 ['the Act' for short] and charging tax at 20% instead of 10% on capital gain derived from the specified assets, which are acquired out of convertible foreign exchange.
The assessee had filed the return of income declaring an income of Rs.94.57,110/-. The case was selected for scrutiny. During the relevant FY the assessee had claimed relief u/s. 90/91 of the IT Act. However, the AO has noted that assessee's
IT(IT)A No.244/Bang/2023 Pawan Kumar Agarwal, Doddenkundi
Page 2 of 6 AR has not produced any substantial evidence in support of the same during the assessment proceedings. This has been added back to the income of assessee. Further, the assessee has transferred unlisted shares of Indian company and offered the capital gain of Rs.64,32,000/- to tax at the rate of 10%. However, the AO has noted that the rate of taxation in respect of this transaction as per section 115E r.w.s. 115C of the Act should be 20% and has computed the taxation accordingly and passed the order assessing the taxable income amounting to Rs.97,62,867/-. Against this assessee went in appeal before ld. CIT(A) and the ld. CIT(A) confirmed the order of AO observing that long term capital gain as arisen to the assessee on sale of shares of an unlisted India company. To this extent it falls well within the definition of specified asst. However, assessee has confessed that the specified asset has not been purchased with any convertible foreign exchange. To this extent the LTCG which has arisen to the assessee does not fall within the LTCG definition given in section 115C of the Act and made applicable to section 115E of the Act. On account of this assessee failed in being eligible to the concessional 10% tax rate on his capital gains. The capital gain is liable to be taxed at regular 20% bracket only. Against this assessee is in appeal before us.
2.1 Before us the ld. A.R. submitted that as per section 115E of the Act, concessional rate of tax t 10% is appliable in respect of capital gains derived from the specified assets which are acquired out of convertible foreign exchange. According to the ld. A.R., in the present case, assessee earned the long term capital gain out of transfer of specified assets, which were acquired out of convertible foreign exchange and the said
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Page 3 of 6 specified assets acquired from the non-resident external account with the Axis Bank bearing “Customer No.052029200, Scheme SB NRE Normal Currency INR” and it certified all the requirements of provisions o section 115E o the Act and assessee entitled for concessional rate of tax at 10% on long term capital gain earned from the specified assets. He further submitted that the ld. A.R. admitted before the lower authorities that these specified assets have not been purchased with any convertible foreign exchange which was the mistake of fact and may be verified at the end of the AO.
2.2 Further he submitted that in order to get the benefit of rate of concession u/s 115E of the Act, the asset will have to fall under the definition of foreign exchange asset which means that the asset should have been purchased or acquired by way of inward remittance of foreign exchange. According to the assessee, the assessee acquired shares through foreign exchange/NRE account and fulfills the definition of foreign exchange asset u/s 115C of the Act. Hence, the benefit of section 115E of the Act is to be provided. For this purpose, he relied on the order of the Hyderabad Tribunal in the case of Shashi Parvatha Reddy Vs. DCIT in dated 31.10.2017.
The ld. D.R. strongly opposed the argument of ld. A.R. and submitted that the entire money into SB account cited (supra) has been deposited in Indian rupees and it is not in foreign exchange currency, as such, the concessional rate of 10% on the long term capital gain earned from specified assets is not applicable to assessee’s case.
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Page 4 of 6 4. We have heard the rival submissions and perused the materials available on record. We have gone through the Axis Bank bearing “customer No.052029200, Scheme SB NRE Normal Currency INR” which is reproduced herein below:
IT(IT)A No.244/Bang/2023 Pawan Kumar Agarwal, Doddenkundi 4.1 As seen from the above, the money into this bank account has been deposited in the Indian currency and from that account assessee said to be purchased specified assets. As per section 115E of the Act, the concessional rate of 10% on the capital gain derived from the specified assets, which are acquired out of convertible foreign exchange is available to the assessee. However, as seen from the above SB account, it shows that assessee has deposited Indian rupees to that account and consequently purchased the specified assets and it is not on convertible foreign exchange. It is also mentioned at the right hand top corner of the statement that the currency is in Indian rupees and it is not convertible foreign exchange account. Being so, there is no merit in the argument of ld. A.R. that the assessee has acquired the specified assets out of convertible foreign exchange.
4.2 With regard to placing reliance on the order of the Tribunal in the case of Shashi Parvatha Reddy cited (supra), which is not applicable to the facts of the present case. The issue considered in that case is applicability of concessional rate of tax u/s 115E of the Act on the sale of the bonus shares which has been acquired at free of cost from overseas though original shares were bought by assessee in convertible foreign exchange and the issue was not before the Tribunal with regard to buying of assets through NRE normal currency account in Indian rupees. Accordingly, we do not find any IT(IT)A No.244/Bang/2023 Pawan Kumar Agarwal, Doddenkundi
Page 6 of 6 merit in the argument of ld. A.R. and the same is rejected. The grounds raised by the assessee are accordingly rejected.
In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 14th July, 2023