Concessional Rate u/s 115 not Applicable when Money Deposited in Indian Rupees and not in Foreign Exchange Currency: ITAT [Read Order]

The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) has held that the concessional rate under Section 115 of the Income Tax Act 1961 is not applicable when the money deposited is in Indian Rupees and not in foreign exchange currency.

The assessee, Pawan Kumar Agarwal had filed the return of income declaring an income. The case was selected for scrutiny. During the relevant FY the assessee had claimed relief under Section 90/91 of the Income Tax Act. However, the AO had noted that assessee had not produced any substantial evidence in support of the same during the assessment proceedings.

This had been added back to the income of the assessee. Further, the assessee had transferred unlisted shares of Indian company and offered the capital gain to tax at the rate of 10%.

However, the AO had noted that the rate of taxation in respect of this transaction as per Section 115E read with Section 115C of the Income Tax Act should be 20% and had computed the taxation accordingly and passed the order.

Navakanth, on behalf of the assessee submitted that as per Section 115E of the Income Tax Act, concessional rate of tax to 10% was applicable in respect of capital gains derived from the specified assets which were acquired out of convertible foreign exchange.

He also submitted that these specified assets had not been purchased with any convertible foreign exchange which was the mistake of fact and may be verified at the end of the AO.

According to the assessee, the assessee had acquired shares through foreign exchange/NRE account and fulfilled the definition of foreign exchange asset under Section 115C of the Income Tax Act and the benefit of Section 115E of the Income Tax Act was to be provided.

A. Ramesh Kumar on behalf of the revenue submitted that the entire money into SB account had been deposited in Indian rupees and it was not in foreign exchange currency, as such, the concessional rate of 10% on the long-term capital gain earned from specified assets was not applicable to assessee’s case.

The two-member Bench of Chandra Poojari, (Accountant Member) and Beena Pillai, (Judicial Member) observed that the money into this bank account had been deposited in the Indian currency and from that account assessee said to be purchased specified assets. As per Section 115E of the Income Tax Act, the concessional rate of 10% on the capital gain derived from the specified assets, which were acquired out of convertible foreign exchange was available to the assessee.

The Bench dismissed the appeal filed by the assessee pointing out from the SB account, that the assessee had deposited Indian rupees to that account and consequently purchased the specified assets and it was not on convertible foreign exchange.

To Read the full text of the Order CLICK HERE

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