CAPITAL GAINS ON SUBRAMANIAN & ASSOCIATES PARTNER CA SUBRAMANIAN.R

Transcription

1 CAPITAL GAINS ON PARTNER CA SUBRAMANIAN.R 1

2 Exemption for Transfer of Urban Agricultural Land (Sec 54B) Applicability Asset Transferred Nature of the Asset New Asset to be acquired Amount to be invested in New Asset Amount of Exemption Time Limit of Investment Individual, HUF Urban Agricultural Land used for Agriculture by an Individual or his parents or HUF (w.e.f AY ) for 2 years immediately prior to the date of transfer Long term or Short term Capital Asset Agricultural Land Capital Gain on Transfer Least of: a) Amount invested in New Agricultural Land, or b) Capital Gain Within 2 years from the date of transfer 2

3 Exemption for Transfer of Urban Agricultural Land (Sec 54B) Unutilised Amount Holding period of New Asset Sale of New Asset within holding period a) Amount not utilized before the due date of filing return shall be kept in Capital Gain Account Scheme of a Nationalised Bank b) The amount should be utilized within the prescribed period c) Amount not utilized within the prescribed period shall be treated as Short term or Long term Capital Gains of the previous year,according to the expiry of the prescribed period. 3 years from the Date of Acquisition Short term Capital Gain computed as follows: Sale consideration of new asset Less: Cost of Acquisition reduced by Capital Gains exempted u/s 54B 3

4 Exemption for Transfer of Urban Agricultural Land (Sec 54B) Exemption u/s 54B cannot be denied solely on the grounds that the new agricultural land purchased is not wholly owned by the Assessee but also by the Assessee s son as a Co-Owner as per Sale Deed [CIT Vs Gurnam Singh (2010) 327 ITR 278 (P&H)] 4

5 54B Issues 1. CIT V Smt. Savita Rani (2003) Tax LR 713 (P & H) In this case, it was held that once the user of the land was for agricultural purposes and it was proved beyond any doubt, then the facts that the land was situated in the midst of commercial area, that a portion of land was used for nonagricultural purposes and that the purchaser of the land has used it for non-agricultural purposes are irrelevant and the assessee can claim the exemption under section 54B. 2. Tek Chand V ITO (1998) 60 TTJ (Del) 31 In this case, it was held that once the fact of the land being agricultural land is proved, exemption under s 54B cannot be denied just because the land was sold to different members of a society. But it is advisable to exercise some caution in this regard. Normally in such cases, due to restrictions placed by the State Governments on non-agriculturists acquiring agricultural land in that State, the prospective purchasers persuade the land owners themselves to apply to the Sate Government for conversion of the land in to nonagricultural land and then the same is sold either in one lot or in several lots. In such cases, there is every possibility of the assessing officer taking the view that it is an instance of adventure in the nature of trade. 5

6 54B Issues 3. CIT V Lalsingh(2010) 325 ITR 588 (P&H) - In this case, it was held that the fact that it is an agricultural land has been certified by a report of the Tehsildar on an application from the assessing officer has to be accepted and the exemption under s 54 B should be allowed. 6

7 54B Issues 4. In case of Smt.Asha George v ITO(2013) 351 ITR 123 (Ker), the assessee could not factually prove with acceptable documentary evidence that the impugned land was ever used for agricultural activities or any agricultural income there from was earned and included in the return of income. Only a photograph was produced during the first appeal proceedings showing some coconut trees and water tank. Consequently, it was held that the assessee is not eligible to claim reinvestment exemption under s 54B. As against this, in the case of Asstt. CIT V N.Raghu Verma (2013) 142 ITD 421 (Hyd), it was found that the assessee was ubable to cultivate the agricultural land due to nonavailability of resources and its bona fide case of land not being put to agricultural use and based on such facts, the exemption was allowed. 7

8 54B Issues 5. There have also been issues as to what are the items including the agricultural land which has been acquired will qualify for reinvestment exemption. In that respect, in the case of CIT v Janardhan Das (Late) (2008) 299 ITR 210 (All), it was held that apart from the cost of agricultural land which was acquired, the cost of sinking tubewells as well as the trees thereon, should also be included and exemption should be allowed. In the same context, it can also be stated that the cost of development of the agricultural land by changing the soil composition, raising its level etc. Should also qualify for exemption. 8

9 Exemptions for Capital Gains on Compulsory Acquisition of Land and Building used for Industrial Purpose (Sec.54D) Applicability Asset Transferred Nature of Asset New asset to be acquired Purpose of Investment Amount to be invested in new asset All Assessees Compulsory acquisition under any law of land or building or any right in land or building used by an Industrial undertaking and such land or building were used for business undertaking during the two years before the date of transfer Long Term or Short Term Capital Asset Purchase of land or building or any right in any land or building for Industrial Purpose or Purchase or Construction of any land or building or having any right over any land or building for shifting or re-establishing the said undertaking or setting up another undertaking Capital Gain on Transfer 9

10 Exemptions for Capital Gains on Compulsory Acquisition of Land and Building used for Industrial Purpose (Sec.54D) Amount of Exemption Time limit for Investment Unutilized amount Least of: (a) Amount invested in New land or Building or any right in any land or building (b) Capital Gain Within Three Years from the date of transfer a) Amount not utilized before the due date of filing shall be kept in Capital Gain Account Scheme of a Nationalised Bank b) The amount should be utilized within the prescribed period. c) Amount not utilized within the prescribed period shall be treated as Capital Gains of the previous year in which prescribed period expires

11 11 Exemptions for Capital Gains on Compulsory Acquisition of Land and Building used for Industrial Purpose (Sec.54D) Holding period of New Asset Sale of New Asset within holding period Three Years from the date of acquisition Short term Capital Gain computed as follows: Sale consideration of new asset Less: Cost of acquisition reduced by capital gains exempted u/s 54D

12 54D Issues 1. Issue regarding meaning of Industrial undertaking The first issue which can arise in respect of this exemption is regarding the term industrial undertaking. This term has been defined and interpreted in several cases under s 80-I/80-IA. Hence, those decisions can be taken as precedent. Considering the fact that this is a beneficial provision, it should refer to any undertaking which carries on organised industrial activity including the servicing of equipment and products. P.Alikunji CIT (1987) 166 ITR 804 (Ker). The honourable high court explained the concept of industrial undertaking elaborately. It also held that running of a lodge by the assessee can be treated as an industrial undertaking within the meaning of Sec 54D 12

13 54D Issues 2. Time limit within which reinvestment should be made The second issue could be regarding the time lime within which the reinvestment should be made in the new location. The section uses the phrase the date o which the transfer took place. Fortunately, this issue is settled by s 54 H which automatically links the time limit for reinvestment to the date of receipt of the compensation/enhanced compensation and not the date of transfer. 3. Applicability to leasehold and possessory rights Since the section refers to rights in land and building, it should include all types of rights especially, leasehold and possessory rights as well. This should be very much useful for small industrial establishments like machine shops, repair workshops, etc. whose premises (whether freehold or leasehold) are acquired by Government for road widening and other purposes. If such business establishments use the compensation for relocating the business undertaking in a different location, the amount invested in such relocation should qualify for exemption. 13

14 Exemptions for all Long Term Capital Gains available (Sec.54EC) Applicability Asset transferred Nature of the Asset New asset to be acquired All Assessees Any Long Term Capital Asset Long Term Capital Asset a) Notified bonds w.e.f , Three years redeemable bonds issued after by National Highway Authority of India (NHAI) and Rural Electrification Corporation Limited (RECL) (w.e.f ) any bond notified by the Central Government b) W.e.f A.Y Bonds redeemable after 3 years issued on or after but before by National Highway Authority of India (NHAI) and Rural Electrification Corporation Limited (RECL)

15 Exemptions for all Long Term Capital Gains available (Sec.54EC) 15 c) Such investment will not be eligible for deduction u/s 80C Amount to be invested in New Asset Amount of Exemption Time limit for Investment Long Capital Gain on Transfer (w.e.f amount that can be invested by the Assessee cannot exceed Rs. 50 Lakhs) Note: w.e.f Investment u/s 54EC in the year of transfer or subsequent Financial year cannot exceed Rs. 50 Lakhs Least of: a) Amount invested in Bonds, or b) Capital Gain Within 6 months from the date of transfer

16 Exemptions for all Long Term Capital Gains available (Sec.54EC) Holding period of New Asset Sale of new asset within holding period 3 years from the date of acquisition The long-term capital gain so exempted u/s 54EC shall be deemed to be income under LTCG of the assessee in the year of transfer or converted into Money or created charge on the specified Asset 16

17 54EC Issues 1.Mr.X sold one property. The consideration received from the sale of property used for repayment of loan/housing loan. After 5 months the assessee raised some loan & invested in bonds u/s 54EC and claimed the exemption. The assessing officer rejected the exemption u/s 54 EC. Since the consideration for sale of property not used for investment u/s 54EC. The Tribunal held that this is not acceptable because the primary conditions for claiming exemption is that the amount of sale consideration of asset has to be invested in the specified securities. Gaylord Investments & Trading Company (P) Ltd (2008) 21 SOT 407 (Mum) 2.Capital Gains arising from conversion of capital asset into stock-in-trade shall be invested in specified assets u/s 54EC within 6 months from the date of such stockin-trade is sold or otherwise transferred in terms of Sec.45(2) [C No.791/ ] 3.54EC for Depreciable Asset: Capital Gains received by an Assessee on the transfer of depreciable asset is eligible for exemption u/s 54EC provided the conditions mentioned under that section are satisfied. [Ace Builders P Ltd. 144 Taxman 855, Assam Petroleum Industries P Ltd. 131 Taxman 699 (Gauhati)] 17

18 54EC Issues 4. If capital gain invested within the period of 6 months from the date of transfer, exemption u/s 54EC cannot be denied merely because the Bond was issued after expiry of 6 months [Hindustan Unilever Limited Vs DCIT 325 ITR 102] 18

19 54EC Issues 5.Investment made in the name of wife or joint name of assessee and her son. Is the exemption allowable u/s 54EC? Yes exemption is allowable i)smt.saraswati Ramanathan 114 TTJ (Del) 803 ii)jennifer Bhide (2011) 203 Taxman 208 (Karnataka) iii)vijay S. Shirodkar (2012) 69 DTR (Mum) (Trib) 6. Exact date of investment Investment made within 6 months from the date of transfer. Assessee has tendered the payment for the bonds within six months but the bond certificate were issued on a later date. For the reason that the bond certificate were issued subsequently exemption was denied. Exemption allowed i)hindustan Unilever Ltd 325 ITR 102 (Bom) ii)nirmal Textiles 224 ITR 378 (Guj) 19

20 54EC Issues 7. Mr.X entered into joint development of property wherein the agreement was entered on for a consideration of Rs2.50 Cr. The same was registered on Again the assessee entered the correction deed on by which the sale consideration was increased to Rs.4.90 Cr as against initial agreed consideration of Rs.2.50 Cr. The assesssee invested u/s 54EC within 6 months from the correction deed namely whether the assessee is entitled for exemption u/s 54 EC? Yes. Mahesh Nemichandra Vs ITO (ITA no.594 to 597 dt ) 20

21 54EC Issues 8.Mr.X invested in 54EC bonds after the delay of 59 days after the expiry of six months. The assessee aged 94 years and also suffered from illness. In the case of K Parthasarathy Vs ITO (2014) 49 taxmann 50 (Chennai), eventhough the investment in the bonds was made after a delay of 59 days after the expiry of six months, considering the old age of 94 years of the assessee and also his illness, as a special case, the Tribunal allowed the exemption 21

22 54EC Issues 9. Mr.X wanted to invest u/s 54 EC to claim exemption but the bond was not available for investment. So the assessee did not invest with in the time limit. Will the time limit stand extended automatically until the bonds are available for subscription Yes. Cello Plast 209 Taxmann 617 (Bom) 22

23 54EC Issues 10. The next issue which arose was whether the capital gains bonds in which reinvestment should be made, acquired only by way of direct subscription from the respective entities like REC, NHAI, NHB, etc. who are authorised to issue such bonds or whether they can be acquired by way of transfer from another person who is already holding those bonds. No. Mayank J Shah Vs Dy.CIT (2007) 11 SOT 704 (Mum) 23

24 Clubbing issue 54EC Issues 11. When the capital gain arises for father as well as his minor children simultaneously and such a capital gain accruing to the minor is required to be clubbed in the income of father by virtue of sec 64 (1). In such cases what is the maximum amount which can be reinvested in a financial year u/s 54EC? The father and the minor son each can claim Rs.50 Lakhs. The issue was decided in the favour of assessee in the case of Shankar Sharma (ITA No.963/Kol/2011) 24

25 54EC Issues 12. Is the assessee is entitled to relief u/s 54 EC for the purpose of computation of tax u/s 115JB Yes. Metal & Chromium Plates (P) Ltd 76 Taxmann 229 (Madras) 13. Assessee company was engaged in business of running hotel. Assessee claimed deduction u/s 54 EC by claiming that sue proceeds of hotel building had been invested in NABARD Bonds. Assessing officer took a view that since hotel building was a depreciable asset hence it is a short term capital asset as per Sec 50. Hence the assessee is not eligible. Is it correct? Assessee is eligible for exemption u/s 54EC i)tra Votel (India) Pvt.Ltd ii)ace builders (P) Ltd 281 ITR 210 iii)united Paper Industries (42 Taxmann 79) iv)bharat Enterprises (14 taxmann 110) v)himalaya Machinery (P) Ltd 29 Taxmann 360 (Gujarat) 25

26 54EC Issues 14. For the A.Y when the assessee sold his property on Investment u/s 54EC made on Whether the assessee entitled for deduction u/s 54EC Investment not made within six months (i.e) on or before Month is not defined in the act. The month has to be recokened as per the British Calender month, as per sec 3 (35) of the General Clause Act. Six months from the end of the month has to be taken. So the assessee satisfying the condition. Niamat Mahroof Virji 77 taxmann 174 (Mum) 26

27 Exemptions for Capital Gains on shifting of Industrial undertaking from Urban Area (Sec. 54G) Applicability Asset transferred Nature of the asset New asset to be acquired All assessees Land and building, Plant and Machinery or any right in land/building used by industrial undertaking and transfer is effected in the course of or in consequence of shifting of such undertaking from Urban Area to Nonurban area Any Capital Asset a) New machinery or plant for the purpose of the business of the industrial undertaking in Non-urban area b) Acquired building/land or constructed building for the purpose of the business of the industrial undertaking in Nonurban area c) Shifting of the undertaking d) Expenses incurred for such purposes as specified by under the scheme by the Central Government are also eligible for claiming exemption

28 Exemptions for Capital Gains on shifting of Industrial undertaking from Urban Area (Sec. 54G) Amount to be invested in new asset Amount of Exemption Time limit for investment Unutilised Amount Capital Gain on Transfer Least of: a) Amount invested in Land & building or new plant & machinery, or b) Capital Gain Within 1 year prior to the date of transfer or within 3 years after the date of transfer a) Amount not utilised before the due date of filing return shall be kept in Capital Gain Account Scheme of a Nationalised Bank b) The amount should be utilized within the prescribed period c) Amount not utilized within the prescribed period shall be treated as capital gain of the previous year in which the prescribed period expires 28

29 Exemptions for Capital Gains on shifting of Industrial undertaking from Urban Area (Sec. 54G) Holding period of new asset Three years from the date of acquisition Sale of new asset within holding period Short term capital gain computed as follows Sale consideration of new asset Less: Cost of acquisition reduced by capital gains exempted u/s 54G 29

30 Exemption to undertaking which shifts its base to a Special Economic Zone and makes gain on transfer of assets (Sec. 54GA) Applicability Asset transferred Nature of the Asset New Asset to be acquired All assessee Land & building, Plant & Machinery or any right in Land or Building used by Industrial undertaking and shifting of such undertaking from Urban Area to Special Economic Zone (which may be situated in Urban or Any other area) Any Capital Asset a) Plant, Machinery for the purpose of business of the Industrial Undertaking in the SEZ b) Acquired Land and Acquired/constructed building for purpose of business in SEZ c) Shifted the original asset and transferred the establishment of such undertaking to the SEZ d) Expenses incurred for purpose as specified under the scheme by the Central Government is also eligible for exemption

31 Exemption to undertaking which shifts its base to a Special Economic Zone and makes gain on transfer of assets (Sec. 54GA) Amount to be invested in new asset Capital Gain on transfer Amount of exemption Least of a)amount invested in land & building or plant or machinery and expenses incurred in relation to transfer or b)capital Gain Time limit for investment Unutilised amount Within 1 year prior to the date of transfer or within 3 years after the date of transfer a) Amount not utilised before the due date of filing return shall be kept in Capital Gain Account Scheme of a Nationalised Bank b) The amount should be utilized within the prescribed period c) Amount not utilized within the prescribed period shall be treated as Capital Gain of the previous year in which the prescribed period expires 31

32 Exemption to undertaking which shifts its base to a Special Economic Zone and makes gain on transfer of assets (Sec. 54GA) Holding period of new asset Sale of new asset within holding period Three years from the date of acquisition Short-term Capital Gain computed as follows- Sale consideration of new asset Less: Cost of acquisition reduced by Capital Gains exempted u/s 54GA 32

33 Extention of time limit for acquiring new asset 54H) (Sec. Section 54 H provides that where the transfer of the original asset is by way of compulsory acquisition under any law and the amount of compensation awarded for such acquisition is not received by the assessee on the date of such transfer, the period of acquiring the new asset under sec 54,54B,54D,54EC and 54F by the assessee or the period for depositing or investing the amount of capital gain shall be extended in relation to such amount of compensation as is not received on the date of transfer. The extended period shall be reckoned from the date of receipt of the amount of compesation 33

34 Exemption for CG on transfer of residential property & acquisition of equity shares of eligible Co. (Sec. 54 GB) ( ) Applicability Asset transferred Nature of the asset Investment in Equity Shares Amount to be invested in equity shares of eligible Co. Time limit for investment in equity shares of eligible Co. New asset to be purchased by the eligible company Individual/HUF Residential property being a house or a plot of land Long term capital asset Subscription in the equity shares of an eligible company (see note) Net consideration on transfer. (Full value of consideration as reduced by expenses incurred in connection with transfer) Before due date of furnishing return of income u/s 139 (1) New plant & machinery. It does not includea) Plant/machinery which, before its installation by the assessee, was used either within or outside India by any other person, Subramanian & Associates 34

35 Exemption for CG on transfer of residential property & acquisition of equity shares of eligible Co. (Sec. 54 GB) ( ) b) Plant/machinery installed in any office premises or any residential accomodation, including accomodation in the nature of a guest house, or c) Any office appliances including computer or computer software d) Any vehicle e) Plant/Machinery the whole of actual asset is allowed as a deduction (whether by way of depreciation or otherwise) in computing the Business Income of any previous year Note: The cost of new asset shall be the amount already utilised by the company for the purpose of the new asset together with the amount deposited with the capital gain account scheme Subramanian & Associates 35

36 Exemption for CG on transfer of residential property & acquisition of equity shares of eligible Co. (Sec. 54 GB) ( ) Time limit for investment in new asset by eligible company Exemption Unutilized amount by the eligible company Within 1 year from the date of subscription in equity shares by the assessee a) Net consideration > Cost of new asset, then Capital Gains x (cost of new asset / net consideration) b) Net consideration <_ cost of new asset, then whole of the capital gains a) If the company does not utilize the amount for purchase of new asset before the due date of filing of return by the assessee u/s 139(1), it shall deposit the unutilized amount in bank or institution as may be specified or in any scheme framed by the Central Govt. in this regard before the said due date b) The return furnished by the assessee shall be accompanied by proof of such deposit having been made. 36 Subramanian & Associates

37 Exemption for CG on transfer of residential property & acquisition of equity shares of eligible Co. (Sec. 54 GB) ( ) Holding period of new asset by the eligible company & equity shares by the assessee Sale of equity shares/ new asset within holding period c) Taxable LTCG on non-utilization of deposit- =unutilised amount*long term capital gain/net consideration 5 years from the date of acquisition a) Capital gain on equity shares/ new asset shall be taxed separately b) Long-term capital gain exempted u/s 54GB shall be chargeable to tax as longterm capital gain in the year of transfer Subramanian & Associates 37

38 Exemption for CG on transfer of residential property & acquisition of equity shares of eligible Co. (Sec. 54 GB) ( ) Note: Eligible company meansa) Company incorporated in India during the pervious year in which the capital gain arises to the due date of furnishing return of income u/s 139(1) by the assessee, b) It is engaged in the business of manufacture of an article or thing, c) The assessee holds more than 50% of the share capital / voting rights of the company after the subscription in shares, and d) The company qualifies to be a small of medium enterprise under the micro, small and medium enterprises Act, 2006, e) W.e.f eligible setup and eligible business shall have the meaning assigned in the explanation below sec 80 IAC (4) 38 Subramanian & Associates

39 Exemption for Capital gain on transfer of agricultural land Sec.10(37) [w.e.f.a.y ] 1.Applicability: Individuals and HUF. 2. Conditions: a) Specified area : Agricultural Land is situated in area referred to u/s 2(14)(iii)(a)/(b). 2(14) (iii) Agricultural land in India, not being land situatea) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committe, town area committee, town committee or by any other name) or a contonment board and which has a population of not less than ten thousand; or b) in any area within the distance, measured aeriallyi) not being more than two kilometres, from the local limits of any municipality or contonment board referred to in item (a) and which has a population of more than ten Subramanian & Associates 39

40 Exemption for Capital gain on transfer of agricultural land Sec.10(37) [w.e.f.a.y ] ii) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or iii) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh b) Used for agriculture: During the two years preceding the date of transfer, the land was being used for agriculture purposes by such individual/ his parent/huf by such transfer is determined by central government or RBI. 40

41 Exemption for Capital gain on transfer of agricultural land Sec.10(37) [w.e.f.a.y ] c) Compulsory Acquisition: Transfer is by way of compulsory acquisition under any law or the consideration for such transfer is determined by Central Govt. or RBI d) Date of receipt of compensation: Compensation/ consideration (including compensation/consideration enhanced or further enhanced by any Court/Tribunal/other authority) received on or after

42 10(37) Issues 1.Assessee s agricultural land was acquired under the land acquisition act. The compensation was fixed by land acquisition collector. The assessee not accepted the compensation. After some negotiation it was agreed by the party for whom the property in question was acquired to pay an enhanced amount of compensation. The assessee received some enhanced amount of compensation. Assessing officer denied exemption u/s 10 (37) holding that it was not a compulsory acquisition but that of voluntary sale to a concerned party. 80 taxmann 84 SC Balakrishnan Vs Union of India wherein the honourable Supreme Court had held that it is only a compulsory acquisition as entire procedures prescribed under land acquisition act was followed and merely because assessee negotiated with the party for whom the property was acquired and arrived at a amicable settlement to receive enhanced amount of compensation it would not change characters of acquisition. 42

43 10(37) Issues 2. Merely because assessee was not residing close to land and also pursuing some other business would not by itself be sufficient to hold land was not used for agricultural purpose by assessee Amrutbhai S. Patel 41 taxmann.com 430 (Gujarat) 43

44 10(37) Issues 3. Assessee received a compensation awarded by the court on compulsory acquisition. The assessing officer denied exemption u/s 10 (37) on ground that agricultural land was not cultivated by himself. Jasubhai Somabhai Patel 47 taxmann.com 406 (Gujarat) Wherein the High Court held that the assessee was entitled to exemption even if agricultural land was not cultivated by him but by hired labourer or through his family members. 44

45 Long Term Capital Gain on Transfer of Securities subject to Securities Transaction Tax: Sec. 10(38) 1. Income should be from transfer of a long-term capital asset being a Equity Share in a company or a unit of an Equity Oriented Fund or w.e.f Unit of Business Trust. 2. The sale transaction should be entered into after The transaction should be chargeable to Securities Transaction Tax under Chapter VII of Finance Act, Equity Oriented Fund means a fund: a) Where the investible funds are invested by way of Equity shares in Domestic Companies to the extent of more than 65% of the total proceeds of such fund, and b) Which has been set up under a scheme of Mutual Fund specified u/s 10 (23D) 5. The percentage of Equity Shareholding of the fund will be determined with reference to the Annual Average of the monthly averages of the opening and closing figures 6. The income by way of long term capital gain of a company shall be taken into account for company book profit u/s 115JB 45 Subramanian & Associates

46 10(38) Issues 1.Income arising from transfer of long term securities (Applicability of) - Assessment year When shares of group entity which was a listed company were sold by assessee in off market transaction, no STT was paid, and provisions of section 10(38) were not to be applied set off of loss arising on sale of those shares against long term capital gains arising on sale of unquoted shares could not be denied Yes In favour of assessee Asara Sales & Investments (P.) Ltd. 79 taxman 170 (Pune-Trib) 46

47 10(38) Issues 2. Income arising from transfer of long-term securities (Bogus transactions) - Assessment year Assessee purchased 3000 shares of company 'T' through a stock broker - These shares were transferred to assessee's demat account - However, said stock broker submitted before authorities that he was providing accommodation entries for taking profit or loss by showing purchase or sales of shares and securities commission from beneficiary parties and that assessee was one of beneficiary of such accommodation entries - Assessing authorities reopened assessment of assessee - Whether since shares of said company was listed in BSE/NSE and these were also transferred to demat account of assessee, assessee's claim of exemptions of long-term capital gain on sale of shares could not be denied on basis of submission of said broker Yes in favour of assessee Pratik Suryakant Shah 77 taxmann (Ahmedabad Trib)

48 10(38) Issues 3. Loss arising on sale of capital asset covered u/s 10 (38) could not be included in computation of assessing income and therefore could not be available for setoff against capital gain. In favour of revenue - Kishorebhai Bhikhabhai Virani 55 taxman 91 (Gujarat) 48

49 10(38) Issues 4. The assessee during the relevant A.Y. has disclosed the income from the Long Term Capital Gain Rs.6,17,14,300 and claimed an exemption u/s 10(38). The assessee brought forward capital loss of Rs.17,97,196. The assessing officer set off the brought forward loss of unquoted shares against the long term capital gain. Whether the action of the assessing officer correct? Yes. In favour of assessee ANG Securities Ltd 37 taxmann 123 (Punjab & Haryana) 49

50 10(38) Issues 5. Income arising from transfer of long term securities, exemption of (Business Income vs. Capital gain) - Assessment years and Whether where assessee-company held shares as long term investment, profit on sale of share was to be treated as long term capital gain and not as business income; assessee was entitled for exemption under section 10(38) Where assessee-company held shares as long term investment, profit on sale of share was to be treated as long term capital gain and not as business income; assessee was entitled for exemption under section 10(38) Stargate Investments (P.) Ltd. 55 taxmann 193 (Madras) 50

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