LTCG Derived Exclusive from Equity Shares and Equity-Oriented Mutual Funds only Exempted u/s 10(38): ITAT Remits Matter [Read Order]
Considering that the CIT(A) only examined part of sample contract notes, the tribunal held that it could not be ruled out that the assessee had also transferred derivatives or unlisted shares.
The Delhi Bench of the Income Tax AppellateTribunal (ITAT) held that Long-Term Capital Gains (LTCG) derived exclusively from Equity Shares and Equity-Oriented Mutual Funds can only be exempted under section 10(38) of the Income Tax Act.
Vireet Investments Pvt. Ltd. (assessee) filed Income Tax Return declaring Nil income, which included an exempt LTCG of ₹8,90,66,252. The case was selected for scrutiny, and the Assessing Officer (AO) completed the assessment by making various additions and disallowances.
The AO denied the exemption claim under Section 10(38) and held that the assessee failed to demonstrate that the shares on whose transfer the LTCG was derived were equity shares and the units of mutual funds were of equity-oriented funds. The AO taxed the amount as income from other sources.
Aggrieved by the assessment order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) granted relief for the assessee.
The assessee contended before the CIT(A) that the details provided at the time of filing the return and during assessment clearly stated the gains were on securities where Securities Transaction Tax (STT) was paid, and STT is only payable on equity shares or equity-oriented mutual funds.
The CIT(A), after examining the documentary evidence, including sample contract notes, found that STT had been paid and the units were covered under equity-oriented mutual funds. The CIT(A) granted exemption under Section 10(38) and deleted the addition. Aggrieved by the CIT(A)’s order, the revenue appeal before the ITAT.
The two-member bench comprising Yogesh Kumar U.S. (Judicial Member) and Avdhesh Kumar Mishra (Accountant Member), noted that the CIT(A)'s finding was based on two core facts which was STT was paid on all transactions, and samples of contract notes showed the shares and units were equity shares and units of equity-oriented mutual funds.
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