2025 (7) TMI 1432 - AT - Income Tax

Gain on sale of shares - STCG v/s LTCG - disallowing the exemption u/s 10(38) shares were received from parents of the assessee - HELD THAT - From the above reconciliation as well as the transmission certificate submitted by the assessee it is clear that the he has indeed earned LTCG on the shares sold during the year which have been received earlier from his parents. The assessee is therefore entitled to claim LTCG exemption u/s. 10(38) of the Act. Accordingly addition made by the Ld. AO on account of short-term capital gains from these transactions is hereby deleted. Appeal of the assessee is allowed.

Summary

ISSUES:

Whether the entire sales consideration from the sale of equity shares should be treated as Short-Term Capital Gains (STCG) or Long-Term Capital Gains (LTCG) under the Income-tax Act, 1961.Whether the exemption under section 10(38) of the Income-tax Act, 1961 is applicable to the gains arising from the sale of shares received by transmission from parents.Whether the assessee is required to furnish documentary evidence to prove the holding period and transmission of shares to claim LTCG exemption.

RULINGS / HOLDINGS:

The court held that the assessee has indeed earned Long-Term Capital Gains on the shares sold during the year which were received earlier from his parents, thereby entitling the assessee to claim exemption under section 10(38) of the Act.The addition made by the Assessing Officer treating the entire sales consideration as Short-Term Capital Gains is deleted.The absence of documentary evidence before the lower authorities was remedied by the submission of the transmission certificate and reconciliation chart before the Tribunal, which sufficed to establish the holding period and transmission of shares.

RATIONALE:

The legal framework applied is the Income-tax Act, 1961, specifically section 10(38) which provides exemption on Long-Term Capital Gains arising from the transfer of equity shares held for more than one year.The court relied on the demat account statements and the transmission certificate to establish the continuity of shareholding and holding period, which is essential to classify gains as LTCG rather than STCG.The decision reflects the principle that shares received by transmission from parents retain the original acquisition date for the purpose of determining the holding period under capital gains provisions.The Tribunal exercised discretion to admit fresh evidence (transmission certificate and reconciliation chart) at the appellate stage to enable a just determination of the issue.