DCIT, NEW DELHI vs. ANAND PERSAD JAISWAL, NEW DELHI

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ITA 4961/DEL/2014Status: DisposedITAT Delhi10 February 2017AY 2010-115 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s direction, stating that the proviso to Section 112(1) is applicable to long-term capital gains arising from the transfer of listed securities. The excess tax beyond 10% of capital gains (before indexation) should be ignored.

What were the facts?

The assessee, a non-resident, sold shares of a listed company, M/s Jagatjit Industries Ltd. The Assessing Officer computed capital gains tax at 20% without allowing indexation benefit. The CIT(A) directed to consider the benefit of the proviso to Section 112(1).

What were the issues?

Whether the benefit of the proviso to Section 112(1) of the Income Tax Act is available on the sale of equity shares of a listed company for a non-resident assessee.

Which sections of the Income-tax Act were involved?

Section 112(1),Section 48

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL

Before: SHRI G.D. AGRAWALG.D. AGRAWAL & AND BEFORE SHRI G.D. AGRAWALG.D. AGRAWAL & AND SHRI KULDIP SINGH SHRI KULDIP SINGHSHRI KULDIP SINGH SHRI KULDIP SINGH

For Appellant: Shri S.K. Jain, DR
For Respondent: Shri D.C. Garg, CA
Hearing: 09.02.2017Pronounced: 10.02.2017

PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP :- PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP This appeal by the Revenue for the assessment year 2010-11 is directed against the order of learned CIT(A)-XXIX, New Delhi dated 9th June, 2014.

2.

The Revenue has raised the following ground :-

1.

Whether on the facts and in the circumstances and of the case and law, the ld. CIT(A) has erred in holding the assessee entitled to the benefit of proviso to section 112(1) of the Act on sale of equity shares of M/s Jagatjit Industries Ltd., a listed company.

3.

We have heard the arguments of both the sides and perused the material placed before us. The facts of the case are that during the year under consideration, the assessee has sold the shares of M/s Jagatjit Industries Ltd. (hereinafter referred to as “JIL”). The assessee

2 ITA-4961/Del/2014 is admittedly a non-resident. JIL is admittedly a listed company. The Assessing Officer, while computing the capital gain from the sale of shares of JIL, computed the capital gain without allowing the benefit of indexation while considering the cost of acquisition and charged capital gains tax at the rate of 20%. On appeal, learned CIT(A) issued following directions :-

16.2 I find force in contention of the appellant that in respect of long term capital gains arising from transfer of shares acquired by utilizing INR, of Jagatjit Industries Ltd., a company listed on Bombay Stock Exchange, taxation shall be as per proviso to section 112(1) which says that if tax exceeds 10% of capital gains before giving benefit of indexation under 2nd proviso to section 48, then such excess shall be ignored. However, at the same time, the appellant has also sought benefit of indexation vide ground of appeal no.3(b) supra which has been partly allowed as per para 10.2 supra. The AO is directed to work out tax payable as per proviso to section 112(1) before allowing indexation and if it comes out to be lower than tax payable @ 20% after allowing indexation, then lower tax shall apply. In that situation, ground of appeal no. 3(b) shall become infructuous. The ground no.5(a) is disposed off accordingly.

4. After considering the facts of the case and material placed before us, we do not find any infirmity in the above direction of learned CIT(A). Section 112 and proviso thereof read as under :-

“112. Tax on long 112. Tax on long 112. Tax on long-term capital gains.

112.

Tax on long term capital gains. term capital gains.- (1) Where the term capital gains. total income of an assessee includes any income, arising from the transfer of a long-term capital asset, which is chargeable under the head “Capital gains”, the tax payable by the assessee on the total income shall be the aggregate of,— (a) in the case of an individual or a Hindu undivided family, being a resident,— (i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been 3 ITA-4961/Del/2014 his total income ; and (ii) the amount of income-tax calculated on such long- term capital gains at the rate of twenty per cent :

Provided that where the total income as reduced by such long-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such long-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such long- term capital gains shall be computed at the rate of twenty per cent ; (b) in the case of a domestic company,— (i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income ; and (ii) the amount of income-tax calculated on such long- term capital gains at the rate of twenty per cent :

(c) in the case of a non-resident (not being a company) or a foreign company,— (i) the amount of income-tax payable on the total income as reduced by the amount of such long-term capital gains, had the total income as so reduced been its total income ; and (ii) the amount of income-tax calculated on such long- term capital gains [except where such gain arises from transfer of capital asset referred to in sub-clause (iii)] at the rate of twenty per cent ; and (iii) the amount of income-tax on long-term capital gains arising from the transfer of a capital asset, being unlisted securities [or substantially interested], calculated at the rate of ten per cent on the capital gains in respect of such asset as computed without giving effect to the first and second proviso to section 48;]] (d)] in any other case of a resident,—

4 ITA-4961/Del/2014 (i) the amount of income-tax payable on the total income as reduced by the amount of long-term capital gains, had the total income as so reduced been its total income ; and (ii) the amount of income-tax calculated on such long- term capital gains at the rate of twenty per cent.

Explanation.— Provided that where the tax payable in respect of any income arising from the transfer of a long-term capital asset, being listed securities or unit or zero coupon bond, exceeds ten per cent of the amount of capital gains before giving effect to the provisions of the second proviso to section 48, then, such excess shall be ignored for the purpose of computing the tax payable by the assessee.”

5.

From the proviso, it is evident that where the tax payable in respect of the transfer of a long term capital asset in the case of a listed company exceeds 10% of the amount of the capital gain before giving effect to the provisions of second proviso to Section 48, then such excess shall be ignored for the purpose of computing the tax payable by the assessee. In the case under appeal before us, admittedly, the assessee is a non-resident and JIL is a listed company. Therefore, proviso to section 112(1) was squarely applicable and learned CIT(A) rightly directed to Assessing Officer to give benefit of proviso to Section 112(1). We, therefore, find no infirmity in the order of learned CIT(A). The same is sustained.

6.

In the result, the appeal of the Revenue is dismissed. Decision pronounced in the open Court on 10.02.2017.

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