ITO- (INTERNATION TAXATION),, NAGPUR vs. SMT. URMILA SHARAN RAMPAL,, NAGPUR

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P.K. BANSAL, VICE PRESIDENT AND SHRI AMARJIT SINGH, JUDICIAL MEMBER

ITA no.63/Nag./2015 (Assessment Year : 2007–08)

Income Tax Officer (I.T), Nagpur …………… Appellant v/s Smt. Urmila Sharan Rampal 401, Drarkamai, 133, Farmland ..…….………. Respondent Ramdaspeth, Nagpur 440 010 ALBPR6823Q C.O. no.21/Nag./2015 (Arising out of ITA no.63/Nag./2015) (Assessment Year : 2007–08) Smt. Urmila Sharan Rampal 401, Drarkamai, 133, Farmland …………… Cross Objector Ramdaspeth, Nagpur 440 010 ALBPR6823Q v/s Income Tax Officer (I.T), Nagpur ..…….………. Respondent Assessee by : Shri Manoj Moryani a/w Shri Mahesh Torani Revenue by : Shri A.R. Ninawe

Date of Hearing – 22.06.2017 Date of Order – 27.06.2017

O R D E R PER AMARJIT SINGH, J.M.

The Revenue has filed the present appeal against the impugned order dated 18th November 2014, passed by the learned Commissioner (Appeals)–I, Nagpur, relevant to the assessment year 2007–08.

“1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that the assessee derived long term capital gain on sale of shares.

2 Smt. Urmila Sharan Rampal

2008. Thereafter, notice under section 148 of the Act was issued on 27th March 2012. In response to the notice, the assessee submitted

the return of income. Notice under section 143(2) of the Act was

issued and served upon the assessee. The assessee has shown her

income from capital gain during the year. The notice under section 148

was disposed of after getting the reply of the assessee. In the previous

year, the assessee sold 29131 shares of Unique Waste Plastic

Management & Research Pvt. Ltd. for ` 1,94,94,000 to Smt. Usha S.

Shah (Shah Group). The shares were purchased in the month of

February 2006 @ ` 10 per share totaling to the tune of ` 2,91,310. The assessee sold the shares on 29th March 2009 (in the 13th month),

therefore, the assessee shown gain from the sale of shares as long

term capital gain. The assessee claimed exemption under section 54F

of the Act on account of purchase of flat in sum of ` 1.25 crore. The

other members of the family (daughter Ms. Nishi Rampal and husband

Shri Sharan Rampal) also entered into similar transaction in respect of

Unique Waste Plastic Management & Research Pvt. Ltd., with Smt. Ushal S. Shah. Agreement to sell the shares dated 21st November

2006 was taken into consideration and accordingly the sale was

3 Smt. Urmila Sharan Rampal treated within the period of nine months. Income from the sale of

shares was assessed as business income, therefore, the claim of

section 54F fo the Act was declined and the income of the assessee

was assessed to the tune of ` 1,92,22,192 and accordingly taxed.

Feeling aggrieved, the assessee filed an appeal before the learned

Commissioner (Appeals) who allowed the appeal of the assessee.

Therefore, the Revenue has filed the present appeal before us.

ISSUE no.1 AND 2

together for adjudication. Learned Departmental Representative has

argued that the Assessing Officer has rightly decided the matter of

controversy and the income of the assessee was treated as business

income, therefore, the assessee was not entitled to get exemption

under section 54F of the Act but the learned Commissioner (Appeals)

has wrongly considered the income of the assessee as long term

capital gain and allowed the claim of the assessee under section 54F of

the Act. Therefore, the finding of the learned Commissioner (Appeals)

is wrong against law and fact and is liable to be set aside.

assessee is duly covered by the decision of the Co–ordinate Bench of

the Tribunal, Nagpur Bench, in the case of Nishi Rampal v/s CIT, ITA

4 Smt. Urmila Sharan Rampal no.71/Nag./2012, dated 30th November 2012, therefore, finding of the

learned Commissioner (Appeals) on this issue is quite correct and in

accordance with law which is not liable to be disturbed at the stage of

appeal. It is also argued that the said order of the Tribunal was

challenged by the Revenue but the Hon’ble Jurisdictional High Court,

Nagpur Bench, decided the matter of controversy in favour of the assessee by virtue of order dated 25th August 2016, therefore, finding

of the learned Commissioner (Appeals) is quite correct. It is also

argued that since the case of the assessee is fully covered with the

above mentioned case, therefore, in the said circumstances, the

learned Commissioner (Appeals) has rightly decided the matter of

controversy in favour of the assessee and requested to dismiss the

appeal of the Revenue.

available on record. Before going further, it is necessary to advert the

findings of the learned Commissioner (Appeals) on the said issue.

“9.0 I have carefully gone through the assessment order, the submissions of the AR of the appellant, the aforesaid decision relied on by the AR of the appellant and the material on record.

9.1 The appellant has contended that the AO grossly erred in holding the difference realized as a result of sale of part of the shares as an adventure in nature of trade / business income instead of Long Term Capital Gains without appreciating the vital facts that the appellant had all along held her interest in UNIQUE as an investment only and the investment thus qualified as a Capital Asset. The appellant is a Doctor by profession residing in US for the last many years. Moreover, the appellant's family had

5 Smt. Urmila Sharan Rampal advanced an amount of Rs.10,50,000/- in the year 2003 to M/s. Unique Waste Plastic Management & Research Pvt. Ltd. hereinafter referred to as Unique) a private limited company promoted by Zadgaonkar family. The lady of the family Smt. Alka Zadgaonkar is a professor of Chemistry and after much scientific research had worked out a formula for conversion of waste plastic into hydrocarbons like petrol, diesel etc. The amount advanced by the appellant was an investment and also was with the intention of supporting Zadgaonkar's in a noble project which conserves and protects the environment. There is substantial force in the submissions of the AR of the appellant.

9.2 The appellant, against the advance so given acquired the shares of M/s Unique in the month of February 2006 and the shares were allotted as a consequential equity in the project. Thus the appellant held shares purely as investment. Suresh Shah Group of Mumbai, looking at the bright prospects of M/s. Unique, decided to acquire controlling interest in M/s Unique with a purpose of refining the research and developing its marketability. The proposal was accepted by the management and shareholders of M/s Unique and accordingly an agreement was entered into on 21.11.2006 (Copy at page 67-91 of the paper book) setting the terms and conditions of the transfer of part of the shares of all shareholders.

9.3 The appellant thus, all along held the initial investment and resultant shares as investment and now also retains balance shares and accretions thereon by way of dilution of equity as an investment only. The AR has placed reliance on the following judgements:

Reliance placed on :

> CIT Vs. Gopal Purohit 228 CTR 582 (Bombay HC) > CIT v Consolidated Finvest and Holding Ltd. (2011) 337 ITR 264 (Delhi)

10.0 Keeping in view of the submissions of the AR of the appellant and the decision of the Hon'ble High Court of Mumbai cited supra, the transactions in shares are treated as investment in shares.

10.1 The Hon'ble ITAT, Nagpur Bench, in the case of Ms. Nishi Rampal, daughter of the appellant as cited supra has quashed the order passed u/s 263 by the CIT-I, Nagpur. The CIT-I, Nagpur set aside the order passed u/s 143(3) by the AO by invoking the provisions of Section 263 of the Act. The issue involved in that case was identical and pertains to the transactions of shares of the same company. The section 263 does not empower the CIT to thrust upon his view on the Assessing Officer. Based on such finding, the

6 Smt. Urmila Sharan Rampal Hon'ble ITAT set aside the order passed u/s 263 by the CIT–I, Nagpur.

10.2 The contentions of the AR of the appellant that, the Hon'ble ITAT, Nagpur Bench in the case of Ms.Nishi Rampal, has held the transactions in shares as LTCG is found to be correct. The Hon'ble ITAT in that case has delivered its judgement on merits on the issue of revisionary power of the CIT u/s 263 of the Act and transactions in Shares after examination of the material facts, the ITAT has given a verdict that the revisionary powers exercised by the CIT u/s 263 are beyond jurisdiction for the reason that the AO has taken one of the possible views, holding the transaction in shares as investment.

10.3 It is, thus seen from the above that the issue whether the transaction of - sale of shares amounts the LTCG or STCG was there before the Hon'ble ITAT, Nagpur Bench for adjudication. The extracts of decision of the Hon'ble ITAT on identical issue of transaction of shares, in the case of Ms. Nishi Rampal, are reproduced below for better appreciation of facts:

“The shares were handed over by the escrow agent to the purchaser on 30.03.2007 and the full consideration has also been received by the assessee by that date. In our opinion, escrow agent Shah & Singhvi Associates, Advocates, Solicitor and Notary was representing as an Agent of the assessee and the sale of the share has actually taken place on 30.03.2007 when the shares were handed over by the escrow agent to the seller's account against the receipt of the total consideration. Accordingly, receiving of an advance, in our opinion, will not tantamount to sale of shares. Thus, the shares were held by the assessee for more than 12 months and CIT, in our opinion, was not correct in law in holding that the profit on sale of shares could have been assessed as Short Term Capital Gain under Para 19.2. To that extent we do not find any error in the order of the Assessing Officer. Even we may mention that where there are two views possible as to the interpretation of any transaction and the Assessing Officer has taken one of the view favourable to the assessee, the order cannot be said to be erroneous unless the view taken by the Assessing Officer is unsustainable in law. Same view has been taken by the Hon'ble Supreme Court in case of Malabar Industrial Co. Ltd. Vs. Commissioner of Income Tax 243 ITR 8. We noted on the basis of the evidence and the facts on record and the enclosures to the order of CIT Passed u/s 263, the shares were held by the assessee for 13 months and sales has taken place thereafter."

10.4 The decision of the Hon'ble ITAT, Nagpur in the case of Ms.Nishi Rampal, the daughter of the appellant relating to the transaction of sale of shares is squarely applicable to the present

7 Smt. Urmila Sharan Rampal case of the appellant. Therefore, respectfully following the decision of Hon'ble ITAT, Nagpur, the investment in shares is held to be long term investment, and accordingly the appellate is eligible to claim deduction u/s 54F as the appellant has invested Rs.1.25 Crores in purchase of a residential house out of total sale consideration. Hence, ' the AO is directed to treat the sale of shares as LTCG and allow the deduction u/s 54F of the Act. Hence, this ground is allowed.

assessee is similar to the case of Nishi Rampal (supra), daughter of

the appellant. In the case of Nishi Rampal (supra), the order passed

under section 263 of the Act by the CIT–I, Nagpur, was quashed by the Tribunal by virtue of order dated 30th November 2012, in ITA

no.71/Nag./2012. IN the case of Nish Rampal (supra), it was held that

the Assessing Officer has taken one possible view, therefore, the case

of Nishi Rampal (supra) was not required to be taken up in view of the

provisions of section 263 of the Act by taking another possible view by

the CIT. The matter of controversy is in connection with treating the

long term capital gain / short term capital gain or income from

business was duly decided in the case of Nishi Rampal (supra), in

which the income from the sale of share was treated as long term

capital gain. The finding of the Tribunal in the case of Nish Rampal

(supra) was duly upheld by the Hon’ble Jurisdictional High Court in case of ITA no.33/2013 dated 25th August 2016. On the basis of the

finding of the Tribunal and the finding confirmed by the Hon’ble

Jurisdictional High Court in the case of Nishi Rampal (supra), the

present appeal of the assessee was allowed by the learned

8 Smt. Urmila Sharan Rampal Commissioner (Appeals). No distinguishable material has been placed

before us to deviate the finding of the learned Commissioner (Appeals)

in question. In view of the aforesaid, we are of the view that the

learned Commissioner (Appeals) has decided the matter of controversy

judiciously and correctly which is not required to be interfered with at

this appellate stage. We confirm the findings of the learned

Commissioner (Appeals) on the above said issue. Accordingly, these

issues are decided in favour of the assessee and against the Revenue.

C.O. no.91/Nag./2015

did not wish to press this cross objection to which the learned

Departmental Representative has not raised any objection.

Consequently, this cross objection filed by the assessee is dismissed as

“not pressed”.

dismissed.

Order pronounced in the open Court on 27.06.2017

Sd/- Sd/- P.K. BANSAL AMARJIT SINGH VICE PRESIDENT JUDICIAL MEMBER

NAGPUR, DATED: 27.06.2017

9 Smt. Urmila Sharan Rampal

Copy of the order forwarded to:

(1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Nagpur City concerned; (5) The DR, ITAT, Nagpur; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary

(Dy./Asstt. Registrar) ITAT, Nagpur