TMI Blog2011 (7) TMI 1201X X X X Extracts X X X X X X X X Extracts X X X X ..... Short Term Capital Gain. (2) Ld. CIT(A) has wrongly relied on Board s Circular No.704 dated 28/04/1995 and SEBI guidelines without verifying actual date of allotment and wrongly taken the date of approval of board of directors for allotment of shares as the date of allotment of shares. 2. Facts in brief as emerged from the corresponding assessment order passed u/s.143(3) of the I.T. Act, 1961 dated 26/12/2008 were that the assessee individual has shown long-term capital gain at ₹ 76,56,954/- on sale of shares of Nagarjuna Construction Company Ltd. (in short NCL). As per the Demat statement, the shares of NCL were credited on 05/02/2005. Those shares were later on splitted into the ratio 1:5, hence sold 41750 shares on 8/12/2005. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain of ₹ 76,56,954/-. The date of sale was 08/12/2005. The date of my cost of acquisition was 01/12/2004 and the date of sale was 08/12/2005, this is a transaction of period exceeding 12 months and therefore, long term capital gain has arisen. 3. On one hand, the assessee has claimed that the shares were acquired on 01/12/2004, however, on the other hand, the Assessing Officer has held that the shares were received when credited in Demat account on 05/02/2005. The objection of the Assessing Officer was that the assessee was in a position to hold the shares only when they were credited in the DMAT account on 05/02/2005. As per Assessing Officer, since the shares were held for a period of less than 12 months, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the company M/s.Nagarjuna Construction Company allotted preferential shares to the appellant on 1-12-2004. These shares are subject to lock-in-period of one year upto 30-11-2005 as per SEBI Guidelines. Companies issuing preferential shares also send intimations to the respective stock exchange regarding the fact of allotment of shares. As the shares are subject to lock in period of one year, the same could not have been sold by the appellant within one year from the date of its allotment. The fact that the appellant could sell these shares in the stock exchange clearly shows that the appellant held the shares for more than one year. I, therefore, have no hesitation in holding that in this case date of allotment is to be taken as the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore explained the cost of acquisition, i.e. 25000 x ₹ 278/- which comes to ₹ 69,50,000/-. Facts have further revealed that on 29/10/2005, there was split of the equity shares in the ratio of 1:5, accordingly, on every equity share of ₹ 10/- assessee got 5 equity shares of ₹ 2/- each. Therefore, due to the said split the holding of 25000 equity shares had gone up and converted into it 125000 shares. Out of the said holding, assessee has sold on 08/12/2005 41750 shares at ₹ 99,78,254/- and earned capital gain of ₹ 76,56,954/-. As per the definition of shortterm capital asset as defined in section 2 (42A) of the I.T.Act means a capital asset held by an assessee for not more than 36 months(as per fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be reckoned from the date of the broker s note for purchase on behalf of the investors. In case the transactions take 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. 7.1 From the above, it is thus clear that date of contract is the date of purchase. It is not the date on which shares were demated because that can be said to be the date of delivery of shares. The relevant consideration is the date of acquisition of rights on the shares. When the shares are allotted to an investor, then the said investor has right to exercise his domain ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oportion of their respective holdings. Till then, it could not be said that the bonus shares came in existence. An important observation was made by the Hon'ble Court that the bonus shares could not be said to be acquired by a shareholder before they come into existence by allotment. Meaning thereby, the allotment of a share is a day when an investor acquired the domain over the shares and the date of allotment is therefore is the date of acquisition. Therefore in totality this judgment also supports the view expressed hereinabove, with the result this ground of the revenue stands dismissed. 8. In the result, the appeal of the Revenue is dismissed. Order signed, dated and pronounced in the Court on 29th July, 2011. - - TaxTMI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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