Commissioner Of Income Taxchennai v. M/S.stargate Investments Pvt. Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAMTHE HONOURABLE MR. JUSTICE R.SUDHAKARANDTHE HONOURABLE MR. JUSTICE R.KARUPPIAH Commissioner of Income TaxChennai... Appellant/Appellant- Vs - M/s.Stargate Investments Pvt. Ltd.9, Cathedral RoadChennai 600 086... Respondent/Respondent Appeal filed against the order dated 13.08.2010 passed by theIncome Tax Appellate Tribunal, Madras ' C' Bench in ITANo.1400/Mds/2009. against the Order of the Commissioner of Income Tax Appeals V,Chennai -600 034 in ITA No.153/2008-09 dated 29.01.2009 Aggrieved against the order of the Income Tax Appellate Tribunalin dismissing the appeal filed by it, the Revenue is before thisCourt challenging the said order by filing the present appeal, byraising the following questions of law :- “1) Whether on the facts and in the circumstances ofthe case, the Tribunal was right in holding that shareof India Cements Ltd. Held by the assessee companywere in the nature of capital assets and transfer ofsuch share would result in long term capital gainswhich was exempt in terms of Section 10 (38) of theIncome Tax Act, 1961? 2) Whether on the facts and in the circumstances ofhttps://hcservices.ecourts.gov.in/hcservices/ the case, the Tribunal was right in deleting theaddition of Rs.227.37 crores made by the assessingofficer by treating the income on transfer of sharesas income from business only?” 2. The respondent/assessee is engaged in the business ofinvestment in shares and securities. The assessee filed return ofincome for the assessment year 2006-2007 on 25.10.2006. The assesseecompany sold shares of India Cements Ltd., and claimed exemptionunder Section 10 (38) of the Income Tax Act as Long Term CapitalGains for the assessment years 2006-2007. The Assessing Officerpassed an order on 24.12.2008 and held that profit on sale of sharesto be taxed as business income and not as long term capital gains asthe sale constitutes adventure in the nature of trade. 3. Aggrieved against the said assessment, the assessee preferredan appeal before the Commissioner of Income Tax (Appeals). TheCommissioner of Income Tax (Appeals), on consideration of the matter,allowed the assessee's claim holding that the assessee is entitled toclaim exemption under Section 10 (38) of the Act. The Commissionerof Income Tax (Appeals) was of the view that the shares held by theassessee were in the nature of capital asset and not stock in trade. 4. Aggrieved against the said order of the Commissioner ofIncome Tax (Appeals), the Revenue filed appeal before the AppellateTribunal. The Tribunal held that the shares held by the assesseewere long term investment and there was no basis to treat it asstock-in-trade of the assessee company. The Tribunal, by followingthe decision of the Supreme Court in the case of Raja BahadurVisheshwara Singh (deceased) & others v CIT, further held that theshares were held as long term investment and, therefore, the same isentitled to long term capital gains and, thereby, upheld the order ofthe Commissioner of Income Tax (Appeals). 5. Aggrieved against the said order of the Tribunal, the Revenueis before this Court by filing the present appeal raising the above-mentioned substantial questions of law. 6. Heard Mr.T.Ravikumar, learned standing counsel appearing forthe appellant and perused the materials placed before this Court. 5. Aggrieved against the said order of the Tribunal, the Revenueis before this Court by filing the present appeal raising the above-mentioned substantial questions of law. 6. Heard Mr.T.Ravikumar, learned standing counsel appearing forthe appellant and perused the materials placed before this Court. 7. It is seen from the order of the Tribunal that the assesseehas not purchased any new shares from India Cements Ltd., from theopen market. It has only increased the quantity of shares of IndiaCements Limited on account of amalgamations and mergers between groupconcerns. The said increase was also on account of rights issue ofthe shares of India Cements Limited for which loan amounts have beenutilized. The sale of shares of India Cements Limited by theassessee was to the assessee's group concerns only. Hence, it isevident that the assessee has no intention to trade in shares ofIndia Cements Limited but to retain the control of the company.https://hcservices.ecourts.gov.in/hcservices/ Hence, the shares held by the assessee is in the nature of sale ofcapital asset and not in the nature of stock-in-trade. Accordingly,the order of the Tribunal stands confirmed. 8. It is relevant to note that in an identical issue, in respectof the very same assessee, for the assessment year 2008-09, thisCourt, by order dated 03.12.2014 in T.C.(A)No.638 of 2014, confirmedthe order of the Tribunal, thereby dismissed the appeal filed by theRevenue. 9. In the light of the above, this Court is of the consideredview that no questions of law, much less substantial questions of lawarise for consideration in this appeal. Finding no merits warrantinginterference with the order of the Tribunal, the appeal is dismissed.No costs. Sd/- Assistant Registrar //True Copy// Sub Assistant RegistrarslTo 1. The Income Tax Appellate Tribunal, Madras ' C' Bench, Chennai. 2. The Commissioner of Income Tax (Appeals) V, Chennai.3. The Assistant Commissioner of Income tax, Company Circle-VI(4),Chennai.4.The Commissioner of Income Tax, Chennai.1 cc to Mr.T.Ravikumar ,Advocate, SR.No.63341 T.C.A. NO. 1025 OF 2014 MG(CO)PMK.19.1.2015