DDIT, Trust Circle-IV, New Delhi. Vs. The Ajay G. Piramal Foundation, 40-Community Centre, 3rd Floor, Zamrudpur, New Delhi.
July, 30th 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : H : NEW DELHI
BEFORE SHRI R.S. SYAL, AM AND SHRI A.T. VARKEY, JM
Assessment Year : 2006-07
DDIT, Vs. The Ajay G. Piramal
Trust Circle-IV, Foundation,
New Delhi. 40-Community Centre,
3rd Floor, Zamrudpur,
PAN : AABTT1789N
Assessee By : Shri Ronak Doshi, CA &
Ms Varsha Shah, CA
Department By : Shri R.S. Meena, CIT, DR
PER R.S. SYAL, AM:
This appeal by the Revenue is directed against the order
passed by the CIT (A) on 24.01.2013 in relation to the assessment
2. The only grievance raised through two grounds is against the
holding of profit on sale of shares as long-term capital gain
instead of short-term capital gain as held by the AO.
3. Briefly stated, the facts of the case are that the assessee
Trust received 16,50,000 shares of Nicholas Piramal India Ltd. as
donation on 3rd August, 2005. Out of such shares, the assessee
sold 4 lac shares of during the period 20th December, 2005 to 3rd
January, 2006 for a total consideration of ` 11,41,95,430/-. Cost
of these shares on the basis of their fair market value on the date
of donation was worked out at ` 10,28,20,000/-. The assessee
declared to have earned long-term capital gain of ` 1,13,75,430/-
which was claimed as exempt u/s 10 (38) of the Act. The AO held
the receipt of such shares in the nature of income. He did not
accept the assessee's contention that in so far as the sale of
shares was concerned, the provisions of section 49(1)(ii) were
attracted for the purpose of computing cost of shares by
considering the cost for which previous owner acquired such
shares. The reason given by the AO for not accepting the
assessee's contention of applicability of section 49(1)(ii) was that
the shares were received as donation and, hence, could not
constitute `gift' within the meaning of section 49(1)(ii) of the Act.
He, therefore, treated gain from the transfer of shares amounting
to ` 1.13 crore as short-term capital gain and accordingly brought
the same to tax. The ld. CIT(A) overturned the assessment order
on this point and held the gain to be arising from transfer of the
long-term capital asset and, thus, exempt u/s 10(38) of the Act.
4. We have heard the rival submissions and perused the
relevant material on record. Here it is relevant to mention that
the AO treated the receipt of shares by the assessee Trust as
chargeable to tax, which action was upheld in the first appeal.
The assessee challenged the decision of the ld. CIT(A) before the
Tribunal. Vide order dated 30.09.13, the Tribunal accepted the
assessee's contention by holding that the assessee received such
shares as corpus donation and, hence, the amount was not
chargeable to tax. In this order, a copy of which is available in
the paper book, the Tribunal also dealt with sections 11(1)(d),
12(1), 13(1)(d)(iii) along with proviso (iia) to section 13(1)(d).
Now, the short question before us is as to whether the shares
were received by the assessee as gift. If the answer to this
question comes in affirmative, then, the provision of section
49(1)(ii) would be attracted and the cost of acquisition of such
shares to the previous owner will be considered as cost of
acquisition of the assessee on the relevant date. In this regard,
the ld. CIT(A) has relied on a judgment of the Hon'ble Bombay
High Court in the case Nirmala Keshawlal A/P of late Parvatibai P.
Dabrai vs. Controller of Excise Duty (1982) 138 ITR 604 (Bom) in
which it has been held that gift and donation are not mutually
exclusive and, in fact, donation is only a type of gift. From this
judgment, it is apparent that the donation is to be construed as a
form of gift. No contrary precedent has been brought to our notice
by the ld. DR. In such a situation, there can be no question of
treating the receipt of shares by the assessee as donation
independent of gift. Section 49(1)(ii) provides that where the
capital asset became the property of the assessee under a gift or
will, the cost of acquisition of the asset shall be deemed to be
cost for which the previous owner of the property acquired it as
increased by cost of improvement, etc., incurred by the previous
owner or the assessee, as the case may be. The shares of
Nicholas Piramal India Ltd. were acquired by the donor in 1997
which were transferred to the assessee by means of donation in
December, 2005/January, 2006. Since the shares constitute a
capital asset, it is but natural that on their transfer, the provisions
of section 49(1) would be attracted. If such provisions are
applied, the resultant gain would partake of the character of long-
term capital gain and, hence, exempt u/s 10(38) of the Act. We,
therefore, uphold the impugned order.
5. In the result, the appeal is dismissed.
The order pronounced in the open court on 24.07.2014.
[A.T. VARKEY] [R.S. SYAL]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated, 24th July, 2014.
Copy forwarded to:
4. CIT (A)
5. DR, ITAT
AR, ITAT, NEW DELHI.