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2024 Supreme(Online)(ITAT) 2135
INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)
Shri SaktiJit Dey, VP
Nikesh Arora – Appellant
Versus
Income Tax Department – Respondent
Income Tax Appeal No.1008/Del/2022
For the Appellants/Petitioners: [Not mentioned]
For the Respondents: [Not mentioned]
Capital gains from shares are classified as short-term when legal ownership is not established prior to transfer, despite beneficial ownership; taxation depends on geographic situs of the rights.
Headnote:(A) Income-tax Act, 1961 - Sections 2(42A), 9(1), 49(2AA), 17(2)(vi) - Assessment year 2017-18 - Nature of capital gains arising from transfer of shares - Court held that capital gains must be classified as short term capital gain since shares were not legally transferred to the assessee before 20.05.2015 - Assessee's claims related to short term capital gains on sale of Compulsorily Convertible Preference Shares (CCPS) of Snapdeal and Ola were denied by the Assessing Officer - Both Employment Agreements and Assignment Deed identified rights acquired but did not confer legal ownership - Supreme Court precedent was cited to illustrate holding period meaning and geographic situs of assets - Appeal allowed, but with claims constrained to those made in the return. (Paras 4, 10, 30, 41, 45)
(B) Assessment - Legitimacy of employment agreements and implications for capital gain taxation - Legal ownership versus beneficial ownership is crucial - Legal ownership of shares not established as per 2023 assessments leading to short term classification. (Paras 24, 30, 41)
(C) Taxation Authority Jurisdiction - Issuance of refund and taxation according to domestic law must follow international jurisdiction terms - Taxation is determined by ownership and rights in the financial instruments. (Paras 38, 42)
| Table of Content |
|---|
| 1. complaint regarding tax evasion allegations. (Para 1 , 2) |
| 2. court's analysis on complaints not requiring action. (Para 3 , 4 , 10) |
| 3. tax implications of capital gains and disallowance. (Para 5 , 6 , 7 , 8 , 9) |
| 4. assessee's argument on acquisition date implications. (Para 11 , 12 , 13 , 14) |
| 5. legal ownership and asset transfer tax considerations. (Para 18 , 19 , 20) |
| 6. court's finding on rights acquisition vs. ownership. (Para 23 , 27 , 28) |
| 7. legal ownership and situs of asset conclusion. (Para 30 , 32 , 34) |
| 8. taxability of foreign interests in india. (Para 37 , 39 , 41) |
| 9. final order on assessment appeal. (Para 43 , 45) |
ORDER
PER SAKTIJIT DEY, VICE-PRESIDENT
Captioned appeal has been filed by the assessee challenging the final assessment order dated 14.03.2022 passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (in short ‘the Act’), pertaining to assessment year 2017-18, in pursuance to directions of learned Dispute Resolution Panel (DRP).
2. Before we proceed to deal with the substantive issues arising in the appeal, it is necessary to observe, a complaint dated 07.04.2023 addressed to the President, Income Tax Appellate Tribunal was received from one Sh. Babloo Chawhan, wherein, he has alleged bogus evasion and fraudulent transaction by the assessee concerned and bogus refund claimed on misrepresentation of facts. Copy of the complaint was handed over both to the assessee and the Revenue to offer their comments. While the assessee has completely denied the allegations made in the complaint, the Assessing Officer has furnished a report through letter dated 22.05.2023 addressed to learned CIT(DR). The report furnished by the Assessing Officer is in two parts. The first part contains the details of assessment proceedings, whereas, in the second part, the Assessing Officer has offered para-wise comments on the complaint, which read as under:
”Bogus refund claim of Rs.102 crores and misrepresentation of facts by Nikesh Arora:- In this para the applicant stated the brief history of Sh. Nikesh Arora, his employer and transactions related to shares of M/s Jasper Infotech Pvt. Ltd. (SNAPDEAL) and ANI Technologies Pvt. Ltd. (Ola). Therefore, no comments are required.
1. Transaction in the shares of ANI through SIMI PACIFIC:- The main contention of the applicant in this para is that the transactions related to acquiring shares of ANI Technologies are covered u/s 2(42A) of the Income Tax Act, 1961 and gain accrued is short term capital gain. In this regard, it is to state that while passing the assessment order, the AO disallowed the claim of the assessee and held gain on transactions of shares as short term capital gain which is stated above in brief facts of the case.
2. Fraudulent nature of the share transaction and evasion on tax in USA by Nikesh and Soft Bank:- In this para, the applicant alleged for tax evasion by the assessee and Soft Bank in USA which is out of jurisdiction. Therefore, no comments are required.
3. Evasion of tax by SIMI PACIFIC in India :- In this para, the applicant has made allegations on SIMI PACIFIC for tax evasion in India for said transactions which is not related to the assessee. Therefore, no comments are required.
4. Transaction by Nikesh in Jasper (SNAPDEAL) Shares :- The main contention of the applicant in this para is that the transactions related to acquiring shares of Jasper (SNAPDEAL) are covered u/s 2(42A) of the Income Tax Act, 1961 and gain accrued is short term capital gain. In this regard, it is to state that while passing the assessment order, the AO disallowed the claim of the assessee and held gain on transactions of shares as short term capital gain which is stated above in brief facts of the case.
5. Fradulent nature of transaction in JASPER (SNAPDEAL):- In this para, the applicant alleged for tax evasion by the assessee in USA which is out of jurisdiction. Therefore, no comments are required.
6. Income Tax evasion by STARFISH1PTE Ltd. Singapore :-
