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Madhu Mittal (Director)     28 March 2018

Intepretation of case of deputy commissioner of income tax v

An case named  DEPUTY COMMISSIONER OF INCOME TAX vs. GIRNAR INVESTMENT LTD. ITAT, DELHI ‘F’ BENCH  Sikander Khan, A.M. & Y.K. Kapur, J.M. ITA No. 4330/Del/1998 17th July, 2003 (2005) 92 TTJ (Del) 711 :(2004) 88 ITD 419 (Del)  that belongs to Section 45, 48, 55(2)(iiia), Asst. Year 1995-96, in which it was stated in last para:

“This brings us to the last submission of the assessee that the amendment carried

out in s. 55 by incorporation of sub-s. (iiia) clarifies the grey area as by virtue of the amendments the cost of bonus shares has been mandated to be taken as nil. The submission of the assessee was that on account amendment which has been carried out to clear doubt, the benefit of same should be given to the assessee. When we examined this contention of the assessee, we found that the amendment is operative from 1st April, 1996. It has no retrospective effect.”

From this can it be easily deduced  that if  the A.y. had been 1997-98 or later years, the benefit must have been given to assesse and there will not be any tax on short term capital gain on shares in the said Girnar Case?


 1 Replies

R.Ramachandran (Advocate)     28 March 2018

Your understanding is totally wrong.

As per the amendment, in the Assessment year 1997-98, the cost of acquisition of the bonus shares will be taken as NIL and consequently the entire sale proceeds will form part of the Capital Gains and will be taxed accodingly.  The question of non-taxing such a capital gain simply does not arise, unless it happens to be a long term capital gain on account of sale of shares.

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