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2017 (3) TMI 195 - AT - Income TaxProfit on sale of shares - whether assessed as long term capital gains exempt u/s. 10(38)? - CIT(A) has given a finding that the assessee firm has been formed as a Partnership firm - Held that:- We notice that the AO has not examined the provisions of Partnership Deed before coming to the conclusion that the status of the assessee cannot be taken as partnership firm in AY 2007-08. Hence the view taken by the AO is against the Partnership Deed as well as the assessment record relating to AY 2007- 08. In any case, the AO has not disturbed the assessment relating to AY 2007-08, i.e., the status of the assessee has been accepted as Partnership firm in AY 2007-08. In that case, it would not be proper for the AO to take the view that the holding period of the shares of M/s Assam Company Ltd can be recognized from 1.4.2007 only. AO has taken the view that M/s Reliance Capital Ltd has formed this assessee firm only to generate long term capital gains and he has further observed that the same income would have been assessed as business profits, had it purchased the shares of M/s Assam Company Ltd on its account. The Ld A.R furnished copies of Profit and Loss account as well as the assessment order of M/s Reliance capital Ltd to show that M/s Reliance capital Ltd has declared Short term capital gains and also Long term capital gains in purchase and sale of shares, meaning thereby, the presumption entertained by the AO has been proved to be wrong. Accordingly the Ld A.R submitted that there was no restriction for M/s Reliance Capital Ltd to hold the shares as its Investment. Regarding the observation made by the AO that the assessee was the major share holder in “Public shareholding” category and further the assessee has invested in shares of M/s Assam company Ltd, the assessee has submitted that it did not get any controlling interest in the above said company and further the shares have actually been sold within 15 months. Hence, in our view, the above said factual position cannot change the character of the shares. On the contrary, in our view, it may support the case of the assessee that it had actually made investment in the shares of M/s Assam Company Ltd. CIT(A) was correct in holding that the gain arising on sale of shares of M/s Assam Company Ltd should be assessed as Long term capital gain. - Decided against revenue
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