Sh Uday Punj, New Delhi v. DCIT, New Delhi

ITA 1689/DEL/2010 | 2006-2007
Pronouncement Date: 30-09-2011 | Result: Dismissed

Appeal Details

RSA Number 168920114 RSA 2010
Assessee PAN AAAPP1309F
Bench Delhi
Appeal Number ITA 1689/DEL/2010
Duration Of Justice 1 year(s) 5 month(s) 15 day(s)
Appellant Sh Uday Punj, New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 30-09-2011
Date Of Final Hearing 09-09-2014
Next Hearing Date 09-09-2014
Assessment Year 2006-2007
Appeal Filed On 15-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H DELHI BEFORE SHRI A.D. JAIN AND SHRI K.G. BANSAL ITA NO. 1689(DEL)/2010 ASSESSMENT YEAR: 2006-07 SHRI UDAY PUNJ D EPUTY COMMISSIONER OF 55 SULTANPUR FARMS VS. INCOME -TAX CIRCLE 14(1) NEW DELHI. NEW DELHI. PAN: AAAPP1309F (APPELLANT) (RESPON DENT) APPELLANT BY : SHRI RAHUL KHARE ADVOCATE RESPONDENT BY: MS. REENA S. PURI CIT DR DATE OF HEARING : 14.09.2011 DATE OF PRONOUNCEMENT: 30.09.2011. ORDER PER K.G. BANSAL : AM THE ASSESSEE HAS TAKEN TWO GROUNDS IN THE APPEAL THAT ON THE FACTS AND IN LAW THE LD. DEPUTY COMMISSIONER OF INCOME-T AX ERRED IN -(I) TREATING SALE OF SHARES OF PUNJ LLOYD LTD. (PLL FOR SHORT) AS A TAXABLE TRANSACTION ON ACCOUNT OF ITS BEING A TRANSACTI ON OF UNLISTED SECURITY IN STEAD OF NON-TAXABLE TRANSACTION IN LISTED SECU RITY THEREBY RESULTING IN ADDITION OF RS. 39 50 10 566/-; AND (II) CHARGING TAX @ 20% APPLICABLE IN RESPECT OF LONG-TERM CAPITAL GAIN (LTCG FOR SHORT ) INSTEAD OF 10% ASSUMING BUT NOT ADMITTING THAT IT IS A LONG-T ERM TAXABLE SECURITY. IT MAY ITA NO. 1689(DEL)/2010 2 BE MENTIONED THAT THE APPEAL HAS BEEN FILED AGAINS T THE ORDER OF CIT(APPEALS)-XVII NEW DELHI DATED 10.03.2010 AN D THEREFORE THE DESIGNATION OF THE AUTHORITY DCIT MENTIONED IN THE GROUND IS TAKEN AS CIT(APPEALS). 2. THE FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PROMOTER-DIRECTOR OF THE COMPANY PLL WHOSE SHARES WERE NOT QUOTE D OR LISTED ON ANY STOCK EXCHANGE. THE COMPANY ISSUED SHARES FOR PUBLIC SUBSCRIPTION THROUGH THE INITIAL PUBLIC OFFER (IPO) AS PER SEBI GUIDELIN ES. THE GUIDELINES PERMITTED EXISTING SHARE-HOLDERS ALSO TO SELL T HEIR SHARE IN THE IPO FOR DILUTING THEIR EQUITY HOLDING. THE ASSESSEE OFFE RED 599693 SHARES FOR SALE AND RECEIVED AN AMOUNT OF RS. 39 78 86 740/- AS SALE CONSIDERATION. NO SECURITIES TRANSACTION TAX (STT) WAS PAID ON THE SALE OF THE SHARES. THE GAINS ARISING ON THE SALE WERE CLAIMED TO BE NO T INCLUDIBLE IN THE TOTAL INCOME U/S 10(38) OF THE INCOME-TAX ACT 1961 (T HE ACT FOR SHORT) ON THE GROUND THAT THE TRANSACTION WAS EXIGIBLE TO THE LEVY OF THE STT. THE AO HELD THAT THE AFORESAID PROVISION IS NOT APPLICA BLE TO THE FACTS OF THE CASE OF THE ASSESSEE AS THE STT HAD NOT BEEN PAID. IT WAS FURTHER HELD THAT THE SHARES WERE NOT LISTED ON ANY STOCK EXCHANGE ON THE DATE OF SALE AND ITA NO. 1689(DEL)/2010 3 THEREFORE THE LTCG WAS LIABLE TO BE TAXED @ 20 % AS PER THE PROVISION CONTAINED IN SECTION 112 OF THE ACT. 2.1 THE LD. CIT(APPEALS) CONSIDERED THE FINDINGS FURNISHED IN THE ASSESSMENT ORDER AND VARIOUS SUBMISSIONS MADE BE FORE HIM. IT HAS BEEN HELD THAT THE TRANSACTION HAS NOT BEEN CONDUCTED THROUGH A RECOGNIZED STOCK EXCHANGE. STT WAS ALSO NOT CHARGED ON THE TRANSACTION. THEREFORE IT HAS BEEN HELD THAT THE PROVISION CONTAINED IN S ECTION 10(38) IS NOT APPLICABLE TO THE FACTS OF THE CASE. 2.2 IN REGARD TO THE RATE OF TAX IT HAS BEEN M ENTIONED THAT THE SHARES OF THE COMPANY WERE LISTED ON THE BOMBAY STOCK EXC HANGE (BSE FOR SHORT) ON 01.01.2006. A NOTIFICATION TO THIS EFF ECT WAS ISSUED BY THE BSE ON 01.01.2006. THE SHARES OF THE ASSESSEE WERE LYING IN THE ESCROW ACCOUNT ON 28.12.2005. THIS ACCOUNT WAS DEBI TED ON 29.12.2005. THE CONFIRMATION REGARDING TRANSFER FROM THE DEPOSI TORY WAS RECEIVED ON 30.12.2005. THUS THERE IS NO DISPUTE THAT THE ASSESSEE SOLD HIS SHARE AT THE TIME WHEN THESE WERE NOT LISTED ON ANY RECOG NIZED STOCK EXCHANGE. THE PROVISIONAL LISTING APPROVALS FROM THE BS E AND NATIONAL STOCK EXCHANGE (NSE FOR SHORT) ON 04.11.2005 AND 14. 11.2005 DO NOT ADVANCE ITA NO. 1689(DEL)/2010 4 THE CASE OF THE ASSESSEE THAT THE TRANSACTION W AS OF LISTED SHARES BECAUSE THE IN-PRINCIPLE APPROVAL WAS ALLOWED ONLY FOR THE PURPOSE OF USING THE NAMES OF THE BSE AND THE NSE FOR GETTI NG APPROVAL OF THE IPO FROM THE SEBI. ACCORDINGLY IT HAS BEEN HELD T HAT THE AO WAS JUSTIFIED IN APPLYING THE RATE OF TAX OF 20%. 3. BEFORE US THE ASSESSEE FILED ADDITIONAL EVID ENCE IN THE FORM OF CIRCULAR DATED 19.01.2006 ISSUED BY THE SEBI RE GARDING IPOS- ISINS TO BE ACTIVATED AFTER COMMENCEMENT OF TRADING ON T HE STOCK EXCHANGES. IT IS MENTIONED THAT HAVING REGARD TO DEVELOPMENT RELATING TO TRANSACTION IN SHARES OF IPOS DURING PRE-LISTING PERIOD THE D EPOSITORIES ARE ADVISED THAT IN CASE OF IPOS THEY SHALL ACTIVATE THE ISINS ONLY ON THE DATE OF COMMENCEMENT OF TRADING ON THE STOCK EXCHANGE. I T IS FURTHER MENTIONED THAT THE CIRCULAR IS BEING USED IN EXERCISE OF P OWERS CONFERRED U/S 11(1) OF THE SECURITIES & EXCHANGE BOARD OF INDIA ACT 1992 TO PROTECT THE INTEREST OF INVESTORS IN SECURITIES AND TO PROMOTE THE D EVELOPMENT OF AND TO REGULATE THE SECURITIES MARKET. AS THIS CIRCU LAR IS IN PUBLIC DOMAIN THE SAME IS ADMITTED AND IT BE TAKEN INTO CONSIDERATI ON FOR DECIDING THE APPEAL. ITA NO. 1689(DEL)/2010 5 4. BEFORE US THE LD. COUNSEL FURNISHED A BRIEF BACKGROUND OF FACTS. THE ASSESSEE IS A PROMOTER-DIRECTOR OF THE PLL . THE COMPANY WAS CONTROLLED BY VARIOUS FAMILY MEMBERS OF THE ASSE SSEE. IN THE MONTH OF OCTOBER 2005 THE COMPANY OBTAINED APPROVAL OF T HE SEBI FOR SUBSCRIPTION OF SHARES THROUGH THE IPO. ALONG W ITH THE SUBSCRIPTION THE ASSESSEE WAS ALLOWED TO PARTIALLY SELL HIS SHARE HOLDING IN THE OFFER. HE DECIDED TO SELL 599693 SHARES HELD BY HIM IN THE COMPANY. AS A CONDITION OF THE PUBLIC ISSUE APPLICATIONS WERE MADE TO TH E BSE AND NSE FOR LISTING THE SHARE. THE BSE GRANTED IN-PRINCIPLE APPROVA L ON 04.11.2005 AND THE NSE ALLOWED SIMILAR APPROVAL ON 14.11.2005 V ALID FOR 90 DAYS. FOR THE SALE OF SHARES AN ESCROW ACCOUNT WAS OPENED WITH THE REGISTRAR OF THE ISSUE AND THE SHARES WERE TRANSFERRED TO THIS ES CROW ACCOUNT. THE ISSUE OPENED ON 05.12.2005. IT IS SEEN THAT AS PER PAG E NO. 51 OF THE PAPER BOOK IT CLOSED ON 16.12.2005. CORPORATE ACTION REGAR DING CREDIT OF SHARES TO THE ALLOTTEES WAS TAKEN ON 29.12.2005. THE CONFIRMA TION FROM THE DEPOSITORY REGARDING CREDIT OF SHARES WAS RECEIVED ON 30.1 2.2005. THE LISTING APPROVAL WAS OBTAINED ON 04.01.2006 AND THE TR ADING APPROVAL WAS RECEIVED ON 05.01.2006. ACTUAL TRADING ON THE ST OCK EXCHANGE STARTED ON 06.01.2006 AND ON THIS DATE THE ASSESSEE ALSO RECEIVED PAYMENT FROM THE BANKERS TO THE ISSUE IN RESPECT OF SALE PROCEEDS . AT THE TIME OF PAYMENT ITA NO. 1689(DEL)/2010 6 THE REGISTRAR CHARGED COMMISSION OF 7.25% OF THE SA LE PROCEEDS. IT IS THE CASE OF THE LD. COUNSEL THAT THE SHARES HELD BY T HE ASSESSEE IN PHYSICAL FORM WERE DE-MATERIALIZED ON THIS DATE. THERE I S NO EVIDENCE TO THIS EFFECT ON THE RECORD. 4.1 COMING TO THE MAIN GROUND OF APPEAL REGARDI NG EXCLUSION OF GAIN ON SALE OF SHARES FROM THE TOTAL INCOME OUR ATT ENTION HAS BEEN DRAWN TOWARDS THE PROVISION CONTAINED IN SECTION 10(38). THE PROVISION TO THE EXTENT REQUIRED FOR OUR PURPOSE IS REPRODUCED HEREUNDER:- (38) ANY INCOME ARISING FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET BEING AN EQUITY SHARE IN A COMPAN Y OR A UNIT OF AN EQUITY ORIENTED FUND WHERE- (A) THE TRANSACTION OF SALE OF SUCH EQUITY SHAR E OR UNIT IS ENTERED INTO ON OR AFTER THE DATE ON WHICH CHAPTE R VII OF THE FINANCE (NO. 2) ACT 2004 COMES INTO FORCE; AND (B) SUCH TRANSACTION IS CHARGEABLE TO SECURITIE S TRANSACTION TAX UNDER THAT CHAPTER: 4.2 THE PROVISION CONTAINS TWO CONDITIONS WHI CH HAVE TO BE CUMULATIVELY SATISFIED. THE FIRST CONDITION IS THAT THE TRANSACTION OF SALE OF EQUITY SHARE IS ENTERED INTO ON OR AFTER THE DATE ON WHICH CHAPTER VII OF THE FINANCE (NO. 2) ACT 2004 COMES INTO FORCE. THIS CONDITION IS OBVIOUSLY SATISFIED IN THIS CASE. THE SECOND C ONDITION IS THAT THE ITA NO. 1689(DEL)/2010 7 TRANSACTION IS CHARGEABLE TO STT UNDER THE AF ORESAID CHAPTER VII. A GREAT STRESS HAS BEEN LAID ON THE WORD CHARGEABL E. IN THIS CONNECTION IT IS SUBMITTED THAT THE ASSESSEE HAS NOT PAID THE ST T. IT IS ALSO ADMITTED THT THE REGISTRAR HAS NOT PAID THE STT. HE CHARGED COMMISSION OF 7.25% OF THE SALE PROCEEDS. HOWEVER PAYMENT OR NON-PAYM ENT OF STT IS NOT THE CRUX OF THE MATTER. WHAT IS TO BE SEEN IS WHETH ER THE STT IS PAYABLE. THIS TAX IN NORMAL CIRCUMSTANCES IS PAYABLE BY THE BROKER WHO PASSES IT ON TO THE BUYER OR SELLER OF THE SECURITY AS THE CASE MAY BE. IN THIS CASE THE BASIS OF ALLOCATION OF SHARES HAD BEEN DEC IDED ON 29.12.2005 AS PER EVIDENCE ON PAGE NO. 27 OF THE PAPER BOOK. THE TRADING APPROVAL WAS RECEIVED ON 05.01.2006 AS PER PLL POST ISSUE A CTIVITY TIMELINE PLACED IN THE PAPER BOOK ON PAGE NOS. 49 AND 50. THE SALE PROCEEDS WERE CREDITED TO THE ACCOUNT OF THE ASSESSEE ON 06.01.2006 AS PER EVIDENCE PLACED ON PAGE NO. 41 OF THE PAPER BOOK. THE SALE PROCEED S WERE RECEIVED AFTER DEDUCTION OF THE COMMISSION CHARGEABLE BY THE RE GISTRAR. ON THIS DATE THE ISIN WAS ALSO ACTIVATED. THEREFORE THE TR ANSFER OF SHARES TOOK PLACE ON 06.01.2006 WHEN THE SHARES HAD BEEN LISTED. ACCORDINGLY IT IS ARGUED THAT THE SECOND CONDITION HAS ALSO BEEN FULFILL ED IN THIS CASE. IN THIS VERY CONNECTION RELIANCE HAS BEEN PLACED ON THE ADD ITIONAL EVIDENCE THAT ISINS SHOULD BE ACTIVATED ONLY ON COMMENCEMENT OF TRADING. AT THIS ITA NO. 1689(DEL)/2010 8 STAGE THE LD. COUNSEL WAS APPRAISED OF THE LEGA L POSITION THAT PROPERTY IN SHARES BEING MOVABLE PROPERTY STANDS TRANSFERR ED ON THE DAY WHEN THEY ARE HANDED OVER ALONG WITH REQUISITE TRANSFER M EMO AND THE RECEIPT OF SALE PROCEEDS IS NOT THE CRUX OF THE MATTER. THE CASE OF THE LD. COUNSEL IS THAT BECAUSE OF SEBI GUIDELINES THE REGISTRAR COULD NOT HAVE TRANSFERRED THE SHARES TO THE ACCOUNTS OF THE ALLOTTEE. 4.3 IN REPLY THE LD. CIT DR DISTINGUISHED BE TWEEN PRIMARY AND SECONDARY MARKET IN RESPECT OF TRANSACTIONS IN SH ARES. THE PUBLIC OFFER FOR SUBSCRIPTION INVOLVES INCREASE IN CAPITAL BY ISSU ING FRESH SHARE. IT MAY ALSO INVOLVE OFF-LOADING THE SHARES BY THE EXIS TING SHAREHOLDERS FOR DILUTING THEIR HOLDINGS. THE IPO INVOLVES A TRA NSACTION IN PRIMARY MARKET. IT DOES NOT TAKE PLACE THROUGH THE RECOGNIZED ST OCK EXCHANGES AS THE TRANSACTION IN SHARES ISSUED OR SOLD IN THE IPO STARTS WHEN THE SHARES ARE LISTED AND FIRST BELL IS RUNG FOR TRANSACTION S THEREIN. PLL WAS NOT A LISTED COMPANY WHEN THE SHARES WERE SUBSCRIBED T O OR PURCHASED. THE BASIS OF ALLOCATION OF SHARES TO THE ALLOTTEES IN THIS CASE WAS DECIDED ON 29.12.2005. ON THIS DATE THE SUBSCRIBERS AND T HE BUYERS AS THE CASE MAY BE ARE COMPLETELY IDENTIFIED. ACCORDING T O HER THIS IS THE DATE OF SALE OF SHARES AND SUBSCRIPTION TO SHARES. ON THIS DATE THE SHARES WERE NOT ITA NO. 1689(DEL)/2010 9 LISTED. THE STT IS LEVIABLE ON TAXABLE TRAN SACTION IN SECURITIES. FOR THIS PURPOSE THE TRANSACTION HAS TO BE ENTERED INTO THROUGH A RECOGNIZED STOCK EXCHANGE. SINCE THE SHARES WERE TRANSFERRED ON 29.12.2005 THERE WAS NO LIABILITY ON ANY ONE TO PAY STT. THEREFORE IT IS ARGUED THAT THE PROVISION CONTAINED IN SECTION 10(38) IS NOT APPLICABLE TO T HE FACTS OF THE CASE. 4.4 WE HAVE CONSIDERED THE FACTS OF THE CASE AND S UBMISSIONS MADE BEFORE US. WE HAVE ALREADY FURNISHED RELEVANT DATES WHICH ARE NECESSARY FOR DECIDING THE CONTROVERSY AT HAND. THE BSE PERMITTED THE USE OF ITS NAME IN THE OFFER DOCUMENT ON 04.11.2005 AFTER SCRUTINIZING THE SAME. IT WAS CLARIFIED THAT SUCH PERMISSION DOES NOT C ERTIFY ETC. THE CORRECTNESS OF OFFER DOCUMENT OR THAT SECURITIES WILL BE LIS TED OR WILL CONTINUE TO BE LISTED ON THE EXCHANGE AND REFUSED TO UNDERTAKE ANY RESPONSIBILITY FOR THE FINANCIAL OR OTHER SOUNDNESS OF THE COMPANY ETC. OBVIOUSLY THIS LETTER CANNOT BE TAKEN TO BE AN APPROVAL OF LISTING T HE SECURITY ON THE EXCHANGE ON 04.11.2005. SHARES WERE ALSO NOT LISTED ON THE EXCHANGE ON THIS DATE. SIMILAR IS THE POSITION IN RESPECT OF THE LETTE R DATED 14.11.2005 ISSUED BY THE NSE. SINCE THESE LETTERS DO NOT LEAD TO THE CONCLUSION OF THE LISTING OF THE SECURITY ON THE STOCK EXCHANGES ON THE RE SPECTIVE DATES SUBSEQUENT APPROVAL CANNOT RELATE BACK TO THIS DATE. THE B ASIS OF ALLOTMENT WAS ITA NO. 1689(DEL)/2010 10 ADMITTEDLY DECIDED ON 29.12.2005. THE SHARE OF T HE COMPANY HAD NOT BEEN LISTED ON THIS DATE ON ANY STOCK EXCHANGE. THIS DECISION IN THE MATTER FREEZES THE NAMES OF ALLOTTEE OR BUYER AND NU MBER OF SHARES ALLOTTED OR SOLD TO THEM THEREFORE THIS IS A RELEVANT D ATE TO CONSIDER THE ISSUE OF DATE OF SALE. ADMITTEDLY THE CORPORATE ACTIO N FOR DEBIT OF PROMOTER ACCOUNT WAS TAKEN ON THIS DATE. THIS MEANS THAT THE ASSESSEE LOST ANY CONTROL OVER HIS SHARES TRANSFERRED TO THE ESCR OW ACCOUNT ON THIS DATE. CORPORATE ACTION FOR CREDIT OF ALLOTTEES ACCOU NT WAS ALSO TAKEN ON THIS DATE. THIS IS ALSO AN ADMITTED FACT. THIS MEA NS THAT THE SHARES WERE TRANSFERRED TO THE ACCOUNT OF ALLOTTEES ON 29.12 .2005. THIS AMOUNTS TO HANDING OVER THE SHARES TO THE ALLOTTEES ON THI S DATE EVEN IF PHYSICAL POSSESSION WAS NOT GRANTED TO THEM WHICH WAS NOT NECESSARY ALSO. THE REASON IS THAT FROM THIS DATE ONWARDS THE REGIS TRAR HELD THE SHARES ON ACCOUNT OF THE ALLOTTEES AND THE BUYERS. THE CONFI RMATION OF SUCH CREDIT WAS MADE BY THE DEPOSITORY ON 30.12.2005. IN O THER WORDS THE ASSESSEE CEASED TO HOLD ANY PROPERTY IN THE SHARES ON 29. 12.2005 AS THE SHARES PASSED ON TO THE ALLOTTEES AND THE BUYERS. AS ON THIS DATE THE SHARES WERE NOT LISTED ON ANY RECOGNIZED STOCK EXCHANGE . THE LISTING APPROVAL WAS OBTAINED ON 04.01.2006 AND TRADING APPROVA L WAS RECEIVED ON 05.01.2006. THE LISTING APPROVAL ADMITTEDLY HAS BEEN GRANTED AFTER ITA NO. 1689(DEL)/2010 11 TRANSFER OF PROPERTY IN SHARES. THE TRADING APPR OVAL IS ONLY FOR THE FACILITY OF BUYERS ALLOTTEES EXISTING SHAREHO LDERS AND THE DIRECTORS IN RESPECT OF SHARES NOT OFFERED FOR SALE. THE LIS TING APPROVAL ON 04.01.2006 CANNOT BE RELATED BACK TO 04.11.2005 OR 14.11.20 05 AS PROVISIONAL APPROVAL WAS ONLY FOR USING THE NAME OF THE EXC HANGES IN THE OFFER DOCUMENT WITHOUT ANY OBLIGATION ON THE PART OF THE EXCHANGES. AS MENTIONED EARLIER THE DATE OF RECEIPT OF SA LE PROCEEDS IS NOT THE SINE QUA NON OF THE MATTER REGARDING THE DATE OF SALE. H OWEVER IT IS ALSO CLEAR THAT FROM THE DATE OF SALE STATED TO BE 30.12.2005 IN THE LETTER WRITTEN BY THE ASSESSEE TO THE BANKERS THEY HELD THE CORRESPONDING MONEY RECEIVED FROM THE SUBSCRIBERS AND BUYERS ON ACC OUNT OF THE COMPANY AND THE ASSESSEE. PAPER BOOK PAGE NOS. 30 TO 39 CONTA IN CORRESPONDENCE ADDRESSED BY THE ASSESSEE TO THE REGISTRAR AND TH E BANKERS. IN THE LETTER ADDRESSED TO THE BANKERS IT IS STATE THAT HIS DEMAT ACCOUNT HAS BEEN DEBITED ON 30.12.2005 BUT THE SALE CONSIDERATION H AS NOT BEEN CREDITED TO HIS BANK ACCOUNT. AS PER THE ESCROW AGREEMENT T HE BANKERS ARE REQUIRED TO REMIT THE FUNDS LESS ESTIMATED 7.63% TO COVE R PUBLIC OFFER EXPENSES TO THE NOMINATED BANK ACCOUNT OF THE OFFERER AS PER ESCROW AGREEMENT WHICH READS AS UNDER:- UPON THE RECEIPT OF LISTING AND TRADING APPROVA LS FROM THE STOCK EXCHANGES AND FOLLOWING THE RECEIPT OF MO NIES IN THE ITA NO. 1689(DEL)/2010 12 PUBLIC OFFER ACCOUNT EACH BANKER TO THE OFFICER SHALL TRANSFER UPON RECEIPT OF APPROPRIATE INSTRUCTIONS IN WRITING FROM THE COMPANY OR ANY OF THE SELLING SHAREHOLD ERS FROM THE PUBLIC OFFER ACCOUNT TO THE PUBLIC OFFER EXPENS ES ACCOUNT A SUM EQUAL TO 7.63% OF THE AMOUNT OUTST ANDING IN THE PUBLIC OFFER ACCOUNT OF SUCH BANKER TO THE OFFER. FOLLOWING SUCH TRANSFER BY EACH OF THE BANKERS T O THE OFFER TO THE PUBLIC OFFER EXPENSE ACCOUNT THE REMAINDE R IN THE PUBLIC OFFER ACCOUNT SHALL BE REMITTED OR DISTRIB UTED TO THE COMPANY AND EACH SELLING SHAREHOLDER IMMEDIATELY AND IN ANY EVENT WITHIN TWO DAYS OF RECEIPT BY THE BANKER S TO THE OFFER OF WRITTEN INSTRUCTIONS FOR DISBURSEMENT FR OM THE COMPANY OR ANY OF THE SELLING SHAREHOLDERS AS TH E CASE MAY BE. 4.5 THEREFORE IT CAN BE VERY WELL HELD THAT THE SALE PROCEEDS WERE CONSTRUCTIVELY RECEIVED BY THE ASSESSEE ON 29.12 .2005 OR AT BEST ON 30.12.2005. THEREFORE IT IS HELD THAT THE SALE WAS EFFECTED ON 29.12.2005. COMING TO SEBIS CIRCULAR DATED 19. 01.2006 THE DEPOSITORIES HAVE BEEN ADVISED TO ACTIVATE ISINS ONLY ON THE D ATE OF COMMENCEMENT OF TRADING ON THE STOCK EXCHANGE BEING 06.01.2006 I N THIS CASE. THIS HAS BEEN DONE TO PROTECT THE INTEREST OF THE INVESTORS AND REGULATION AND DEVELOPMENT OF THE MARKET. AS MENTIONED EARLIER THIS IS FOR THE FACILITY OF BUYERS EXISTING SHAREHOLDERS AND DIRECTORS IN R ESPECT OF SHARES NOT OFF- LOADED BY THEM. NON-ACTIVATION OF ISIN DOES NOT MEAN THAT THE SHARES OF PLL COULD NOT HAVE BEEN SOLD PRIOR TO THIS DATE. THE ASSESSEE HAD IN FACT SOLD HIS SHARES ON 29.12.2005. THE DIRECTIVE I S ONLY TO PROTECT THE ITA NO. 1689(DEL)/2010 13 INVESTORS ESPECIALLY RETAIL INVESTORS BETWEEN THE DATE OF SALE AND THE DATE OF COMMENCEMENT OF TRADING THROUGH STOCK E XCHANGE. ACCORDINGLY IT IS HELD THAT THE TRANSACTION UNDERTAKEN BY THE ASSESSEE WAS NOT CHARGEABLE TO STT. CONSEQUENTLY THE ASSESSEE IS NOT ENTITLED TO EXCLUDE THE GAINS FROM HIS TOTAL INCOME. THE RESULT IS THAT GROUND NO. 1 IS DISMISSED. 5. IN REGARD TO THE RATE OF TAX PAYABLE BY THE A SSESSEE IT HAS BEEN SUBMITTED BY THE LD. COUNSEL THAT THE LISTING AP PROVAL SHOULD RELATE BACK TO IN-PRINCIPLE APPROVAL GRANTED ON 04.11.2005 AN D 14.11.2005 BY THE BSE AND THE NSE RESPECTIVELY. THUS THE TAX IS PAY ABLE @ 10%. THIS DATE HAS BEEN APPLIED BY THE AO OF ANOTHER DIRECTOR. HOWEVER THERE IS NO EVIDENCE TO THIS EFFECT ON RECORD. AS AGAINST T HE AFORESAID THE LD. DR SUBMITTED THAT THE SHARES WERE UNLISTED SECURI TIES ON THE DATE OF SALE AND THEREFORE THE BENEFIT OF LOWER RATE OF TAX IS NOT APPLICABLE TO THE ASSESSEE. 5.1 WE HAVE CONSIDERED THE IMPUGNED ORDER AND THE SUBMISSIONS MADE BEFORE US. THE LD. CIT(APPEALS) HAS GIVEN A FINDI NG THAT THE CONFIRMATION FROM DEPOSITORY REGARDING TRANSFER OF SHARES MA DE ON 29.12.2005 WAS ITA NO. 1689(DEL)/2010 14 RECEIVED ON 30.12.2005. ON EITHER OF THESE DATES THE SHARES WERE NOT LISTED ON ANY RECOGNIZED STOCK EXCHANGE. THE APPR OVALS GRANTED ON 04.11.2005 AND 14.11.2005 WERE IN-PRINCIPLE APPRO VALS FOR ALLOWING THE NAME OF THE STOCK EXCHANGES TO BE USED IN THE IP O FOR PROPOSED LISTING SUBJECT TO THE APPROVAL OF THE SEBI. THE APPROVAL WAS HINGED ON FULFILLMENT OF MANY CONDITIONS. ACTUAL LISTING APPROVAL WAS GRANTED ON 04.01.2006. THEREFORE THE BENEFIT OF LOWER RATE OF TAX IS NOT AVAILABLE TO THE ASSESSEE. WE HAVE ALREADY HELD THAT THE SH ARES WERE TRANSFERRED ON 29.12.2005 OR AT BEST ON 30.12.2005. THE SHARE S OF PLL WERE NOT LISTED ON ANY RECOGNIZED EXCHANGE TILL THEN. PROVISO T O SECTION 112 REGARDING TAX ON LONG-TERM CAPITAL GAINS USES THE WORDS BEING LISTED SECURITIES. FOR THE SAKE OF READY REFERENCE THE RELEVANT PR OVISION IS REPRODUCED BELOW:- PROVIDED THAT WHERE THE TAX PAYABLE IN RESPECT OF ANY INCOME ARISING FROM THE TRANSFER OF A LONG-TERM CAPITAL ASSET BEING LISTED SECURITIES OR UNIT OR ZERO COUPON BOND EXCE EDS TEN PERCENT OF THE AMOUNT OF CAPITAL GAINS BEFORE GIVI NG EFFECT TO THE PROVISIONS OF THE SECOND PROVISO TO SECTION 48 THEN SUCH EXCESS SHALL BE IGNORED FOR THE PURPOSE OF COMPUTI NG THE TAX PAYABLE BY THE ASSESSEE. 5.2 THE SHARES OF PLL HAD NOT BEEN LISTED ON TH E DATE OF SALE OF SHARES BY THE ASSESSEE ON ANY RECOGNIZED STOCK EXCHANGE. THE APPROVAL FOR LISTING WAS OBTAINED ON 04.01.2006. WE HAVE ALSO HELD ABOVE THAT THIS ITA NO. 1689(DEL)/2010 15 APPROVAL DOES NOT RELATE TO THE DATE OF SO CALLED IN-PRINCIPLE APPROVAL. ACCORDINGLY IT BECOMES CLEAR THAT THIS TRANSACT ION OF SALE WAS NOT THE TRANSFER OF LONG-TERM CAPITAL ASSET BEING A LIST ED SECURITY. IT FOLLOWS AUTOMATICALLY FROM THIS FINDING THAT THE ASSESSEE IS NOT ENTITLED TO CONCESSIONAL RATE OF TAX @ 10% ON LTCG. THUS T HIS GROUND IS ALSO DISMISSED. 6. IN THE RESULT THE APPEAL IS DISMISSED. SD/- SD/- (A.D.JAIN) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- SHRI UDAY PUNJ NEW DELHI. DCIT CIRCLE 14(1) NEW DELHI. CIT(A) CIT THE DR ITAT NEW DELHI. ASSISTANT REGISTRAR.