Case Note & Summary
The Revenue appealed against the order of the Income Tax Appellate Tribunal which allowed the assessee's claim of indexation on long term capital gains from sale of shares (other than bonus shares of Infosys Technologies). The assessee, Anuj A. Sheth HUF, had entered into eight sale transactions involving shares of four companies during Assessment Year 2001-02. The bonus shares of Infosys Technologies were sold for Rs.6.13 Crores with nil cost of acquisition, resulting in long term capital gains of Rs.6.13 Crores. In other transactions, the assessee reported a long term capital gain of Rs.9.47 lacs with indexation and a loss of Rs.2.78 Crores with indexation. The assessee set off the loss against the gains and paid tax at 10% on net gains of Rs.3.45 Crores. The Assessing Officer denied indexation on the other shares, computing gains without indexation at Rs.4.34 Crores. The CIT(A) upheld the assessment, but the Tribunal reversed, holding that each transfer is a separate capital asset under Section 48 and that the Revenue cannot deny indexation on other shares merely because no indexation was claimed on bonus shares. The High Court framed the question of law and, after hearing both sides, dismissed the Revenue's appeal, affirming the Tribunal's order. The Court held that the assessee's computation was in consonance with the proviso to Section 112(1) and other provisions of the Act.
Headnote
A) Income Tax - Capital Gains - Indexation - Section 112(1) proviso, Section 48 - The issue was whether the assessee is entitled to indexation benefit on sale of shares (other than bonus shares) when no indexation was claimed on bonus shares with nil cost. The Tribunal held that each transfer is a separate capital asset under Section 48, and denial of indexation on one asset does not justify denial on another. The High Court upheld the Tribunal's view, holding that the assessee's computation was in consonance with the proviso to Section 112(1) and other provisions. (Paras 1-4)
Issue of Consideration
Whether the assessee's claim of computation of long term capital gains on the sale of shares, other than the bonus shares of Infosys Technologies, after giving the benefit of indexation is in consonance with the proviso to Section 112(1) and the other provisions of the Act?
Final Decision
Appeal dismissed. The Tribunal's order is affirmed. The assessee's computation of long term capital gains on sale of shares (other than bonus shares) after giving benefit of indexation is in consonance with the proviso to Section 112(1) and other provisions of the Act.
Law Points
- Indexation benefit is available on each capital asset separately
- denial of indexation on one asset does not justify denial on another
- proviso to Section 112(1) does not override Section 48
