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TMI Blog2015 (2) TMI 778X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee sold 10,000 shares of Tata Chemicals Ltd. received by him as bonus shares. The shares were sold after obtaining permission from the Reserve Bank of India. The original shares on which the aforesaid bonus shares had been received was purchased by RespondentAssessee in the year 1997 in convertible foreign exchange. 5 In its return of income for the Assessment Year 199293, the RespondentAssessee claimed the benefit of Chapter XIIA of the Act in respect of the shortterm capital gains made on sale of 10,000 bonus shares of Tata Chemicals Ltd. This was claimed on the ground that any income earned out of investment would be covered by Section 115E of the Act chargeable to income tax at a concessional rate of 20%. However the Assessing Officer by his order dated 19th August 1993 did not accept the Respondent's contention and held that the benefit of concessional rate of income tax is not available to income earned by way of shortterm capital gains. Thus bringing to tax the shortterm capital gains on sale of bonus shares to tax at regular rates. 6 Being aggrieved, the RespondentAssessee carried the matter in appeal to Commissioner of Income Tax (Appeals) ('CIT(A)'). By ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of such income." 9 Mr. Suresh Kumar, learned Counsel for revenue in support of the petition submits as under: (a) the benefit of Section 115E is available only when there is investment income or income by way of longterm capital gains. In this case, there is no investment income nor income on account of longterm capital gains. Thus the benefit of Section 115E cannot be extended to the respondentassessee; and (b) the decision of the ITAT in Smt. Trishala Jain (supra) has not been followed by the subsequent decision of the ITAT (after noticing Smt. Trishala Jain) in Sunderdas Haridas Vs. Assistant Commissioner of Income Tax reported in 67 ITD 89. It is the subsequent decision of the ITAT which lays down the correct position in law. Thus, it is submitted that the appeal be allowed. 10 On the other hand, Mr. Ravi Rattsar, learned Counsel for the respondent in support of the impugned order submitted as under: (a) shortterm capital gains also falls within the definition of Income under Section 2(24) of the Act. Thus, the amount received on sale of shares is income received on investment and it would be covered by scope of Section 115E of the Act; (b) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxing statute. One more settled principle of interpreting taxing statute is that whenever there is an ambiguity or a doubt with regard to a construction of a particular taxing provisions, then the doubt or ambiguity must be resolved in favour of the assessee. Keeping these above broad well settled principles of interpretation of statute in mind, we shall now examine the issue arising for our consideration. 14 Section 115E which is part of Chapter XIIA of the Act at the relevant time granted benefit of concessional rate of tax at 20% to the extent the income of the Nonresident consists of 'Investment Income' or 'Income by way of long term capital gains' or both arising out of assets specified in Chapter XIIA of the Act. A plain reading of Section 115E of the Act would thus indicate that the benefit of concessional tax would be available to a Nonresident on specified assets only to the following extent: (a) Investment Income; and (b) Income by way of long term capital gains. Admittedly, the RespondentAssessee has earned short term capital gains and not long term capital gains. However, it is the case of the RespondentAssessee that income by way of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Supreme Court dealt with 1922 Act with specific reference to clubbing of income for the purposes of avoidance of taxes and/or reducing the incidence of tax. The Tribunal in Sunderdas Haridas (supra) also observed that in Sevantilal Sheth (supra) had interpreted the provision to advance the remedy in a different context. Thus, the Tribunal in Sunderdas Haridas (supra) on reading Section 115E of the Act concluded that the income earned on short term capital gains would not be entitled to concessional tax thereunder. 18 Investment income it is contended by the RespondentAssessee would be a genus and include all income arising out of investment, including the sale of the investment. This for the reason that although sale of investment would normally be on capital account , yet in view of the artificial definition of income under Section 2(24)(vi) of the Act, capital gains chargeable to tax under Section 45 of the Act would be income for purposes of the Act. If the aforesaid interpretation to Section 115E of the Act as canvassed by the RespondentAssessee is accepted, then the explicit mentioning of the words "income by way of long term capital gains" would not have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industrial Company Ltd v/s. CIT 113 ITR 84. In the above case, the Apex Court held that the expression "attributable" to wider then the expression "derived from". Thus, the sale of old machinery was held not to be a profit and gains derived from the conduct of the business of generation of electricity. It was held in the above case that whenever Parliament wanted to give a restricted meaning, they use the word 'derived from'. This also support the Revenue's contention that any income earned by the sale of the investment cannot be said to be derived from a Foreign Exchange Assets. The words 'derived from' would normally indicate in case of shares, the dividend received on shares and not the sale of the shares. The amount received on sale of shares is not derived from it as it is received on the transfer of shares leading to extinguishment of all rights in the shares so sold. Thus the interpretation by the Revenue also find support from the fact that Section 115E of the Act specifically indicates income by way of long term capital gains to be entitled to the benefit of Section 115E of the Act as it is not considered to be an income derived from an investment. Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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