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2015 (5) TMI 922 - ITAT DELHI

2015 (5) TMI 922 - ITAT DELHI - TMI - Receipt from demutualization of stock exchange - whether receipt did not constitute long term capital gain? - issue of notice U/S 143(2) beyond the period of 12 months - Held that:- CIT(A) has dismissed this ground of appeal holding that the notice was issued within the prescribed period of time. He has not mentioned about service of the said notice, therefore, we deem it appropriate to set aside this ground or appeal to the office of A.O. who on the basis o .....

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ved an amount of ₹ 25 lacs on account of sale of membership card and, therefore, the Tribunal had held that membership card to be capital asset and therefore had decided the issue holding that the assessee was liable to pay capital gain tax. However, in the present case, the assessee had not sold the membership card but had received the amount on account of demutualization of stock exchange and, therefore the facts of the present case are distinguishable from the facts of the case for the .....

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i Stock Exchange or from other members of stock exchange who also must have received similar amounts regarding taxability of such amounts in their cases. The A.O. should also examine the claim of assessee that Delhi Stock Exchange was a charitable organization. Needless - Decided in favour of assesse for statistical purposes. - I.T.A. No. 4799/Del/2011 - Dated:- 8-5-2015 - Shri G. C. Gupta And Shri T. S. Kapoor,JJ. For the Appellant : Shri M.L. Nanda, Assessee For the Respondent : Shri P. Dam .....

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stock exchange. The assessee represented himself for arguments in his case. Before Ld. CIT(A) also, the assessee appeared in person. The assessee has been arguing before Ld. CIT(A) and before us also that there was no service of notice u/s 143(2) and on merits, the assessee argued that the amount was received on account of demutualization of Delhi Stock Exchange which was a charitable association and therefore, the receipt did not constitute long term capital gain. However, Ld. CIT(A) has rejec .....

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led the return on 25/07/2008 and as such the AO was justified to issue the notice by the end of September 2009 as provided in the proviso u/s 143(2). It is submitted that as per the amended provisions of the proviso u/s 143(2) w.e.f. 01/04/2008. The AO is entitled to issue the notice within six months from the end of the FY in which the return is filed. 4.4. I have considered the order of the AO, remand report of the AO and the submissions of the assessee and I do not find any merit in the submi .....

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of notice u/s 143(2) in the case of Amit Jain Vs ACIT Circle- 30(l) ITA No. 309/De1l2010 (A- Bench) for the A Y 2006-07 vide the order dated 30/0612011 and has given the similar contentions raised by the assessee. He has filed the return on 29th July 2007 declaring finding referring to the Board's Circular and has held in Para-2 of the order as under :- "As far as the first fold of grievance is concerned, we do not find much force in the contention raised by the assessee. He has filed t .....

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y of 12 months from the end of the month in which the return was furnished. However, after the amendment which was given effect from 1.4.1988, no notice under sec. 143(2) can be served after the expiry of the six months from the end of the financial year in which the return is furnished. The Board has also explained that amended proviso of sub-section (2) of section upon the assessee. Thus, the time limit for issuance of a notice in the case of assessee is available up to 30th September 2008 i.e .....

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issued the notice in time and accordingly, the appeal of the assessee on this ground is dismissed and the action of the AO is confirmed. 2. Ld. CIT(A) has decided the issue on merits by holding as under: 5.2. The assessee was having the membership ticket of erstwhile the Delhi Stock Exchange Ltd (D E) which was later on dissolved and the assessee received the amount of ₹ 44,00,000/- for the membership card of the DSE which was not declared by the assessee as income in the income tax retur .....

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d equity shares and trading rights. 5.3. The assessee is in appeal against the order of the AO and it is submitted that the AO is not justified to make the addition as the DSE was charitable organization and the income was exempt U/S 11 of the IT Act, 196 l . The assessee also filed large numbers of papers which are of 19 volumes 0n 19 different occasions and the same are basically the repetition of the one another. The submissions of the assessee are almost illegible as the same are typed in ol .....

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ealing with the staff of this office and at the same time, losing his cool during the course of appellate -proceedings also. While the high age of the assessee is respected but with age comes maturity and wisdom but it was found during the course of appellate proceedings that the assessee has been rough in his behaviour and used to use rough language while attending this office and while interacting with the officers and the staff and sometime using filthy language also. However, the case of the .....

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ed on the Special Bench decision of Chennai In the case of R M Valliappan Vs ACIT. 287 ITR .203 r20061 (ITAT Chennai SB) Vide Para-13 of the order. 5.6. Further, the Hon ble Special Bench decision of Chennai in the case of R M Valliappan Vs ACIT, 287 ITR 203 [2006] (IT AT Chennai SB) has distinguished the case of Stock Exchange Ahmedabad Vs ACTT. 2-1-8 ITR 209 (SC) [2001] and held in the head-note as under "that the membership card is a valuable property which entitles the members to deal i .....

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ties. It cannot apply to cases of continuing membership. Accordingly, in the present case, the transfer of membership card by the assessee to A Ltd. was a transfer of a capital asset within the meaning of section 2(14) of the Act and consequently the consideration for the transfer is exigible to capital gains tax (Note) - The membership card of stock exchange was treated as a capital asset, so that any amount in realization on transfer of the membership card would be liable to capital gains tax .....

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the case of membership which had ceased. This decision cannot, therefore, apply 10 continuing membership. The definition or capital asset under section 2( 14) is wide. The fact that a member has got right of nomination cannot be overlooked. It is only where a member has defaulted in payments that such membership gets forfeited. Liability cannot, therefore, be avoided on the amount received by a member for surrender of his membership in favour of another." 5.7. After considering all the fac .....

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18.11.2014 the Bench had passed order in the order sheet by which it required certain information from A.O. in the form of a remand report. At the time of hearing before us, the assessee appeared in person and argued that the amount received by him was not taxable and also argued that notice was not served upon him within the prescribed period of time and, therefore, it was not liable to pay any tax. 4. Ld. D.R. on the other hand submitted that the amount was received from Delhi Stock Exchange .....

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d to file the same as and when it is received. 5. We have head rival parties and have gone through the material placed on record. Ld. D.R. field a copy of remand report dated 19.03.2015 on 23.03.2015. In the remand report, the A.O. has replied to the questions as raised by the Bench vide order sheet dated 18.11.2014. The remand report as sent by A.O. is reproduced below: Office of the Income Tax Officer, Ward 48 (5), Room No.217, Drum Shape Building, New Delhi. Ph.No.011-3370124 IF. No.ITO/ Ward .....

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s is as under: i) How cash was given by DSE to assessee? In this regard it is submitted that the above amount was received by the assessee by two cheques of ₹ 20 lac and 24 lac respectively. ii) Whether cash was given to other members also on demutualization of DSE? On perusal of the records, no such information as to whether cash was given to other members also on demutualization of DSE is available. iii) A.O. to examine the applicability of section 56(2)(vi)(g) after bringing relevant as .....

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stered u/s 12AA.shall be exempt. In this case, the assessee has claimed DSE as a charitable organization and the income was treated as exempt u/s 11 of the I.T. Act, 1961. The submission of the assessee that DSE is a charitable Associates is incorrect because as per definition in clause 2 of DSE Association Ltd. Demutualization DSE Scheme 2005. "The Delhi Stock Exchange Associates Ltd. means the company incorporated on June 25th 1947 as a corporate body with limited liability for the purpos .....

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this regard it is submitted that no such information is available on record in respect of other membership ticket holders. v) In case the provisions of section 56(2)(vi)(g) are not applicable, whether conditions of section 47(xiii a) have been fulfilled or not? Conditions of section 47(xiii)(xiiia) have been fulfilled. The sale of the allotted equity share and trading right/clearing right is taxable under the head capital gains. vi) The A.O. to examine the applicability of section 55(2)(ab) rea .....

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was passed vide order sheet entry dated 01.04.2015 and a copy of which was handed over o Ld. D.R. with a direction that remand report be submitted by 20th April, 2015 but till the passing of this order, remand report has not been received. Therefore, this appeal has been disposed off on the basis of material available on record. We find that the issue before us is as to whether the notice u/s 143(2) was served upon the assessee within the prescribed period of time. Ld. CIT(A) has dismissed this .....

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hi Stock Exchange, on account of demutualization DSE scheme 2005, we find that Ld. CIT(A) has dismissed this ground of appeal relying upon the earlier order of the tribunal in the case of assessee itself in I.T.A. No. 4645/Del/2009 for Assessment Year 1997-98 which was pronounced on 14.05.2010. However, while going through facts of that case in Assessment Year 1997-98 we find that during that year, the assessee had received an amount of ₹ 25 lacs on account of sale of membership card and, .....

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