The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ) upheld the Commissioner of Income Tax (Appeals) [CIT(A)] decision regarding determining capital gains. The tribunal confirmed the calculation of the holding period for capital gains including the date of sale and transfer of shares.
Kuwait Investment Authority, the assessee filed its income tax return reporting a Long-Term Capital Gain (LTCG) of Rs.12.1crores on the sale of certain equity shares held for exactly 12 months.
The assessing officer scrutinized the assessment and questioned why the shares were reported as long-term capital gain (LTCG) when it was short-term ( STCG). The assessee replied that section 2(42A) of the Income Tax Act, 1961, is silent on the inclusion of the date of purchase and date of sale in computing the 12 months for STCG. The assessee relied on the Delhi High Court ruling in the case of Bharti Gupta Ramole vs. CIT, 2012, and claimed that the gain was LTCG.
Unfortunately, the AO was not satisfied and completed the assessment by computing the gains as STCG taxable at 15% as per section 111A of the Income Tax Act. The aggrieved assessee appealed before the Commissioner of Income Tax (Appeals). After considering the assessee’s submissions, the CIT(A) directed the AO to consider the capital gain from the sale of shares as Long Term Capital Gain. The assessing officer appealed before ITAT, Mumbai claiming CIT(A) erred in determining the capital gain.
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The two-member bench comprising Narendra Kumar Billaiya (Accountant Member) and Rahul Chaudhary (Judicial Member) observed the Commissioner of Income Tax (Appeals) computation of capital gains and the submissions.
Further noted that in the case of Bharti Gupta Ramole (supra), the Delhi High Cout held the date of acquisition and the date of sale are included in determining the holding period for capital gains tax purposes. For example, the asset acquired on 1st January 2023 would complete 12 months at the end of the year i.e. 31st of December,2023.
The tribunal also observed that CBDT Circular No. 704 dated 28/04/1995 and CBDT Circular No. 768 dated 24/06/1998 where it was clearly stated the determination of the date of transfer and the period of holding of securities held in dematerialised form under section 45(2A) qua transactions in securities. The tribunal found no error or infirmity in the CIT(A) findings. Thus, the appeal was dismissed.
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