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Tax authorities must change attitude of doubting –causing litigation lot of wastage of public money and resources and harassment of tax payers – a discussion about gains or loss in security transactions

Income Tax - Direct Tax Code - DTC - By: - CA DEV KUMAR KOTHARI - Dated:- 23-8-2016 - Security transaction tax (STT)- was to simplify: Security transaction tax (STT) was introduced to simplify taxation of gains arising in transactions of securities. This should have been implemented in right spirit. However, due to doubts and disbelief, lot of litigation and harassment have already taken place and lot of litigation is still going on. Changes in legislative intention on introduction of Security T .....

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ons of the Finance (No. 2) Bill, 2004 relevant portions are at 268 ITR (196- 197) (St.) under the heading Levy of Transaction tax and exemption / concession on capital gain arising from securities entered in a recognized stock exchange . On page 197 it is stated as follows in para 2: With a view to simplify the tax regime on securities transactions, it is proposed to levy a tax at the rate of 0.15 per cent. On the value of all the transactions of purchase of securities that take place in a recog .....

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-exchange. It is also proposed to insert a new section 111A and amend section 115AD of the Income-tax Act,1961, so as to provide that short-term capital gains arising from sale of such securities to an investor including FIIs shall be charged at the rate of ten per cent. These amendment will take effect from 1st April,2005 and will, accordingly, apply to assessment year 2005-06 and subsequent years. {Chapter VI, and clauses 5,24,25}. The purpose of levy of STT and corresponding concessions under .....

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l assets. This is so particularly in view of S.45(2). The options and privileges granted under law may not be considered in a manner so as to burden tax payer with more taxes and litigation. In this regard ruling in case of CIT V Mahindra Mills and others (2000 (3) TMI 3 - SUPREME Court in context of S. 32 relating to depreciation is important. Therefore, there should not be an attempt to disregard transactions merely because STT levied is less than Income-tax which could be levied if the capita .....

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o complexities and litigation. In large number of cases wrong approach was adopted by tax officers in just taking a contrary view from the view taken by assesse. For example when assesse treated a gain as capital gain, AO tried to treat it as business income. When assesse claimed a business profit or loss, AO tried to treat it as capital gain or loss. INVESTMETN RESULTING INTO CAPITAL GAINS OR LOSS: Investment in shares are made based on expectation in future. A company may be on death bed but i .....

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ment policies and change in market price for sugar. Within last 15-18 months we observe very bad time and now improving fortunes of sugar companies. If a company is active and is listed, there are chances that it may turnaround and give good results in price of its shares. A company may be listed, delisted again listed. It may become sick, then healthy and again go sick. Just like in case of living being, in case of companies also health chart vary. In fact health variations are more prominent i .....

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th of global economy, national and regional economic factors related with its business. factors effecting its revenue and costs etc. A good decision can improve prospects of company whereas a bad decision can ruin the company. The price of shares of a listed company depends on fundamentals of working and prospects of improvement, global factors, local factors, and also technical aspects of its share price behaviour. We can find price of any share increasing and falling in a pattern or even witho .....

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any companies had seen status of penny stock (price being very low trading volumes being low) as well as blue chip (good price and trading volumes). Please see the table attached, in which price of shares of some renowned PSU, and data of many other widely traded companies and thinly traded companies are provided. Even from amongst PSU companies we find some companies becoming a penny company and then blue chip company. Even companies under category of NAV RATNA faced situation of beig penny sto .....

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later became penny stock. For example, we can recall case of SAIL, share price has tumbled to about 4/- , then rose to about ₹ 300/- and came down to about ₹ 15/- and is now ruling in range of 40-55 with some exceptions of higher or lower price.. In list of many now widely traded shares at higher price we find that at some time they were also like penny stock. For example, Infosys Ltd, Wipro Ltd, Vedanta Ltd , Bharati Airtel, Biral Corpn. To name a few such companies. This shows that .....

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s. Suppose a luckiest person had purchased shares of a PSU MMTC @ 50 paise per share and sold them @ 2846/- per shares. This is quite possible, and one should not have any doubt merely because at some time MMTC was a real penny stock traded even below one rupee per share. We also find cases of companies suspended by S/E then regularized on S/E and on such regularization there can be huge appreciation in price of shares. We also find cases of delisting and again listing resulting into appreciatio .....

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heard from others or on TV in news, read on websites, newspapers, social groups, discussion forum etc. A fortunate person may gain substantially, whereas an unfortunate person may suffer loss. There should not be a doubt on these. Doubts and disbelief by tax authorities: Unfortunately the tax authorities have attitude of doubting and disbelieving everything. If a person has suffered loss, they call it as bogus loss, if a person has gained, they call it not genuine and try to treat as income by w .....

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sallowance made by tax authorities merely on presumption, doubt and conjectures. The blatant way in which tax authorities have adopted practice of calling transactions as bogus, not genuine really casts a serious doubt on honesty of tax authorities. This forces tax payers to recall a famous proverb choro ko sare najar aate he chor . Public feeling is that tax authority might have made addition or disallowance due to some ulterior motive. Otherwise there should not be a reason to doubt, when tax .....

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ps confessional statement might have been made by some people for gaining some personal advantage from tax authorities like reward or soft corner towards such persons making confession which can avoid harassment of such people. It is not clear as to what action has been taken by department against such persons who made some confession which is being used as a tool by tax authorities against other assesses. Threatening practices must come to an end: Threatening practices adopted by tax authoritie .....

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knowingly doing wrong additions, disallowance, and in not disposing off matters which they should in a reasonable time. Author feels that there has been some gradual reduction in threatening practices, adopted by tax authorities directly or indirectly, in comparison to situation which prevailed 25-30 years ago, still threatening practices are being adopted and applied in different manner like raising un-necessary demands, commencing un-necessary penalty proceedings even in respect of issues on .....

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uch stocks and trying to brand them bogus or not genuine. We find that even some of NAVRATNA and MAHARATNA PSU have been traded at very low price some times and where penny stock , if the price or ratio between high and low price is considered from the point of view as adopted by tax authorities in relation to many such stocks. Favourable judgments of High Court and Tribunals: We find that in litigation, in majority of cases, properly represented by assesse, relief was allowed. In some cases ass .....

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ptions and bias of tax authorities and is coming to right conclusion. PRICE OF COMPANIES - ALL TIME HIGH / LOW The following table shows life time high and low price of shares of some companies in different segment of business. These companies are PSU / some companies have become Private sector companies but still stake of government is quite high. Company life time high price Life time low price H/ L times CMP Some public sector companies/ old PSU these include some navratna** and maharatna* as .....

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5.87 30 TIMES 241 GAIL * 551.35 22.67 24 times 364 INDIAN OIL CORPORATION LIMITED* There seems some mistake in high price shown at 488.35 at ICICI so taken 52 week high from BSE 593.00 (bse 52WEEK H) 34.02 17 times 566 INDIAN PETROCHEMICALS COR * 486.00 31.50 15 times 481 Scooters India ltd 53.85 1.50 36 times 34 BHARAT HEAVY ELECTRICALS LTD * 585.00 6.63 88 times 142 BHARAT ELECTRONICS LTD 1416.70 5.75 246 times 1233 BEML LIMITED 1849.95 12.65 146 times 1039 NATIONAL FERTILIZERS LIMITED 149.25 .....

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s in different segment of business. This table shows some of prominent companies - now or at some time in past: Company life time high price Life time low price H/ L times VEDANTA LIMITED 494.30 0.96 515 HINDALCO INDUSTRIES LIMITED 251.90 36.90 7 TATA STEEL LIMITED 969.80 85.50 11.34 FEDERAL BANK LTD 79.73 11.50 7 RELIANCE INDUSTRIES 1626.05 31.75 51 INFOSYS LTD 1278.00 0.28 4564 TATA CONSULTANCY SERVICES LTD 2834.00 209.00 14 TECH MAHINDRA LIMITED 749.50 50.93 15 WIPRO LTD 980.00 0.52 1885 GREA .....

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