TMI Blog2007 (3) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of 40,000 shares. This is not the case here. Therefore, we are of the considered opinion that this was not a conditional sale as was also understood by the parties at the time when resultant capital gains on sale of shares was included in the original return filed by the assessee. Therefore, the case of the assessee is fully covered by the aforesaid circular of the Board as the date of transfer for the purpose of section 45 would be March 17, 1998 and not April 23, 1998. Thus, we are of the considered opinion that the authorities below were justified in taking the date of transfer of shares as March 17, 1998, falling in the accounting period relating to the assessment year under consideration. Accordingly, we confirm the order of the CIT (A) and reject the various grounds of appeal of the assessee. In the result, the appeal of the assessee is dismissed. - Joginder Pall Accountant Member And A. D. Jain Judicial Member For the Assessee : Ajay Bahl and Satish Bansal For the Department : Kuldip Singh ORDER 1. Joginder Pall (Accountant Member). This appeal of the assessee has been filed against the order of the Commissioner of Income-tax (Appeals), L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TL ) on March 8, 1996 and November 8, 1996. The said company was engaged in the business of providing telecommunication services, namely, cellular and paging services and was granted the licence to provide cellular services in Bombay and paging in 7 cities in the year 1994. The assessee entered into an agreement titled share purchase agreement with Telecom Investments India P. Ltd. (In short TIP ) on March 17, 1998, for sale of 40 lakhs equity shares of Rs. 10 each for a consideration of Rs. 5,49,51,32,184. In the return of income filed for the assessment year 1998-99, the assessee had shown capital gains arising on the sale of 40 lakhs equity shares to M/s. TIP. However, the assessee had claimed exemption in respect of such capital gains under section 10(23G) of the Income-tax Act, 1961 (In short the Act ). The assessment was taken up under scrutiny. During the course of assessment proceedings, the assessee filed a revised return of income on October 29, 1999, with a note stating that the long-term capital gain on the sale of shares was disclosed in the return as an abundant precaution. However, the agreement for sale of shares contained certain conditions to be complied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s followed up by actual delivery of shares and the transfer deeds. Accordingly, the Assessing Officer held that the material date for sale of shares was March 17, 1998, i.e. when a contract document was executed by all the parties concerned. In this manner, the Assessing Officer held that the capital gain arising on sale of shares was taxable in the assessment year under consideration. As regards the claim of the assessee for exemption under section 10(23G), the Assessing Officer held that since project for providing telecommunication services came into existence prior to March 31, 1995, the assessee was not entitled to such exemption. He, therefore, disallowed the claim of the assessee. 7. Being aggrieved, the assessee filed an appeal before the Commissioner of Income-tax (Appeals). It was submitted before the Commissioner of Income-tax (Appeals) that the agreement to purchase made on March 17, 1998, was conditional and was contingent upon complying with certain conditions. The conditions were subsequently complied with on April 23, 1998, when share certificates and transfer deeds were delivered to the purchaser and sale consideration was received. Thus, it was contended that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sale is not a sale contract, has to fail also. Admittedly, the said contract was not followed by another contract of sale, instead the contract dated March 17, 1998, was straightaway performed by delivery. The intention of the parties is clear that the transfer is on March 17, 1998 and specific rights have been created in favour of both the appellant and TIP. More importantly, between November 24, 1998, the date of original return of income and October 24, 1999, the date of the revised return, the appellant itself made a declaration that the date of transfer is March 17, 1998. Between those dates, the appellant has also contended before the learned Commissioner of Income-tax (Appeals) that the capital gains arose in this year and was exempt under section 10(23G) of the Act. The ordains clearly the date of sale is March 17, 1998. Both the Assessing Officer and the learned Commissioner of Income-tax (Appeals) had acted on this declaration, so far as the year of assessment of the capital gains is concerned. As such, the appellant is estopped from the specious plea that the agreement of March 17, 1998, did not complete the sale, in order to withdraw the capital gains from this year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer were reiterated before the Commissioner of Income-tax (Appeals). These were not accepted by the Commissioner of Income-tax (Appeals) on the ground that the Central Board of Direct Taxes Circular No. 704 was applicable and, therefore, the date of agreement was to be considered as the date of transfer of shares for the purpose of computing the capital gains. He particularly drew our attention to the findings recorded by the Commissioner of Income-tax (Appeals) on page 26 of the impugned order. He referred to page 112 of the paper book which is a copy of the Central Board of Direct Taxes Circular No. 704, dated April 28, 1995. He submitted that as per this circular it was provided that where transactions for sale and purchase of shares took place directly between the parties and not through stock exchanges, the date of contract of sale as declared by the parties shall be treated as the date of transfer provided it is followed up by actual delivery of shares and the transfer deeds. He submitted that the transactions between the parties covered under this circular were those where the agreement was not subject to fulfilment of certain conditions. He stated that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t approvals of the Government agencies required in terms of agreement were no doubt received during the accounting year relevant to the assessment year under consideration. However, certain other conditions were yet to be complied with. These were completed and share certificates along with transfer deeds were handed on April 23, 1998, and the sale consideration was received. He referred to a copy of the balance-sheet as on March 31, 1998, where all the shares including sold as per agreement to sell were shown as the assets of the company. Thus, he submitted that the agreement was subject to fulfilment of the conditions and, therefore, it was a conditional sale. The effective date for sale was April 23, 1998, when all conditions were fulfilled and delivery of shares along with share certificate was given. Therefore, the capital gain arising on transfer of shares accrued to the assessee only in the subsequent assessment year when transfer of the shares took place. He submitted that the Board' s circular was applicable only to those transactions on sale of shares where there were no conditions attached to such transactions. In this regard, he referred to section 4 of the Sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HMTL of face value of Rs. 10 each through share purchase agreement dated March 17, 1998. The terms and conditions for sale including the sale considerations were duly spelt out in the said agreement. This agreement was followed by delivery of share certificates along with the transfer deeds to the purchaser and was also acted upon. In addition to this agreement, no further deed was executed. The said agreement was signed by all the parties concerned. The Assessing Officer considered the date of transfer of shares as March 17, 1998, for the reason that the transaction for purchase and sale of shares was direct among the parties and not through stock exchange. For taking such view, the Assessing Officer referred to Board' s Circular No. 704, dated April 28, 1995, as per which in case the transactions took place directly between the parties and not through stock exchange, date of contract of sale as declared by the parties shall be treated as the date of transfer provided it is followed by actual delivery of shares and transfer deeds. The only contention of the assessee is that since share purchase agreement stipulated certain conditions to be fulfilled, the Central Board of D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the definition of sale under the Sale of Goods Act, 1930. In the case of CIT v. Tata Iron and Steel Co. Ltd. [1993] 113 CTR 99; [1994] 206 ITR 196, the hon' ble Bombay High Court has held that the word transfer in section 2(47) of the Act has a very wide meaning. Its meaning cannot be narrowed down by referring to the provisions of other statutes which are quite different and applicable in different contexts. Thus, reliance of the assessee on section 4 of the Sale of Goods Act, 1930, is misplaced and not correct and, therefore, it is not applicable to the facts of the present case. 13. Now, the next issue that requires to be considered by this Bench is whether the date of transfer of shares in this case should be reckoned as March 17, 1998, i.e., the date of execution of the agreement for sale of shares on April 23, 1998, i.e., when delivery of share certificates along with transfer deeds were handed over to the purchaser. The provisions of the Act draw a distinction between a short-term capital gain and long-term capital gain and accord different treatment for the purpose of levy of tax on such gain. The issue whether a particular asset is a long-term asset or shor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of August in the agreement. No doubt, the conditions stipulated in the agreement were mostly procedural in nature and did not affect the transfer of shares. The agreement itself conferred rights and obligations of the parties concerned. The mere fact that there was a clause to rescind the agreement but the same did not make the transfer conditional. In this regard, we would like to rely on the judgment of the hon' ble Kerala High Court in the case of K. N. Narayanan v. ITO [1988] 173 ITR 61; [1988] 69 CTR 160. The facts of that case before the hon' ble High Court were that N entered into a contract on behalf of himself and his relatives and nominees whereby he agreed to sell a total of 1,19,760 shares not later than March 31, 1979, at an agreed price. The sale of shares was conditional upon the vendor obtaining the necessary sanction of the Government of India and other authorities. The contract laid down that in the event of failure to sell the totality of shares, the shares already sold had to be resold to the original vendor and the money had to be returned to the original vendee. 40,000 shares could not be sold for want of sanction of the concerned authorities. The a ..... 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