ACIT v.
Kotak Mahindra Bank Ltd.
ITA No. 2672/Mum./2006
A.Y. : 2000-01. Dated : 2-2-2009
Facts :
The assessee company had purchased 2,06,000 equity shares
of M/s. Trumac Engineering Company Ltd. on 7-11-1994. In the financial year
1995-96, the entire lot of 2,06,000 shares were transferred by the assessee to
its 100% wholly-owned subsidiary, M/s. Hamko Financial Services Ltd., (‘the
subsidiary’). In the financial year 1998-99, the subsidiary transferred back
the said shares to the assessee. During the financial year 1999-2000, the
assessee sold 1,56,000 shares out of the said 2,06,000 shares for a
consideration of Rs.70,20,000. The assessee in its return of income for A.Y.
2000-01 claimed loss on sale of these shares at Rs.14,55,72,296 by adopting
the indexation from 1994-95 i.e., the initial date of acquisition by
the assessee. The AO while passing order u/s.143(3) r.w.s. 147 of the Act held
that the assessee was entitled to indexation from the date the shares were
retransferred by the subsidiary to the assessee i.e., financial year
1998-99. Accordingly, the AO computed the indexed cost of acquisition of
shares sold by the assessee to be Rs.11,25,96,594 as against Rs.15,25,92,296
computed by the assessee.
The CIT(A) relying on the decision of the Mumbai Bench of
the Tribunal in the case of DCIT v. Meera Khera in ITA No. 5258/M/1998
of A.Y. 1995-96 and the decision of the Chandigarh Bench of the Tribunal in
the case of Mrs. Pushpa Sofat v. ITO, 81 ITD 1 (Chd.) upheld the
contention of the assessee.
Aggrieved, the Revenue preferred an appeal to the Tribunal.
Held :
The Tribunal after referring to S. 48, S. 49(1)(e),
Explanation to S. 2(42A) and second proviso to S. 48 held that on a conjoint
reading of these provisions it is evident that in calculating long-term
capital gain on sale of shares of Trumac Engineering Company Ltd., the indexed
cost has to be calculated with reference to the cost, holding period and
indexation factor of the first owner i.e., from 1994-95. It held that
the cost has to be indexed from the date the shares were originally acquired
by the assessee company. It stated that the transfer from the assessee to its
subsidiary and retransfer from the said company has got to be ignored, as
provided in the above provisions of the Act. The Tribunal held that there was
no mistake in the capital gain disclosed by the assessee. Accordingly, it held
that the AO was not justified in denying the benefit of indexation from the
initial date of acquisition. It, accordingly, dismissed the appeal of the
Revenue.
