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DDIT, Trust Circle-IV, New Delhi. Vs. The Ajay G. Piramal Foundation, 40-Community Centre, 3rd Floor, Zamrudpur, New Delhi.
July, 25th 2014
               DELHI BENCHES : H : NEW DELHI


                       ITA No.1980/Del/2013
                     Assessment Year : 2006-07

DDIT,                            Vs.   The Ajay G. Piramal
Trust Circle-IV,                       Foundation,
New Delhi.                             40-Community Centre,
                                       3rd Floor, Zamrudpur,
                                       New Delhi.

                                       PAN : AABTT1789N

  (Appellant)                             (Respondent)

            Assessee By      :    Shri Ronak Doshi, CA &
                                  Ms Varsha Shah, CA
            Department By    :    Shri R.S. Meena, CIT, DR



     This appeal by the Revenue is directed against the order

passed by the CIT (A) on 24.01.2013 in relation to the assessment

year 2006-07.
                                                     ITA No.1980/Del/2013

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
                                                      ITA No.1980/Del/2013

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
                                                   ITA No.1980/Del/2013

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

                                                            ITA No.1980/Del/2013

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.

               Sd/-                                          Sd/-

       [A.T. VARKEY]                                    [R.S. SYAL]
     JUDICIAL MEMBER                                ACCOUNTANT MEMBER

Dated, 24th July, 2014.


Copy forwarded to:

     1.   Appellant
     2.   Respondent
     3.   CIT
     4.   CIT (A)
     5.   DR, ITAT

                                                     AR, ITAT, NEW DELHI.

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