Axis Bank Limited Vs ACIT (ITAT Ahmedabad)
Gains arising from sale of strategic investments and unlisted shares by a banking company were assessable as capital gains not as business income: ITAT Ahmedabad
Conclusion: Gains arising from sale of strategic investments, promoter holdings, unlisted shares and similar long-term capital assets held by a banking company were assessable under the head “Capital Gains” and not as business income, where the investments were not held as stock-in-trade or for trading purposes.
Held: Assessee sold shares of Max New York Life Insurance Co. Ltd., investments in venture capital funds/Yes Bank and offered the gains as long-term capital gains. AO treated the gains as business income relying upon the Supreme Court decision in Nawanshahar Central Cooperative Bank Ltd. on the premise that investments of a banking company constituted business assets. Assessee contended that the investments were strategic and long-term capital investments and not trading assets; the investment in Max New York Life conferred significant influence and board representation and was held as a promoter investment ; Investments in venture capital funds and Yes Bank were made for long-term appreciation and under statutory reconstruction schemes, and not for trading; CBDT Instruction dated 2-5-2016 specifically mandated that gains on transfer of unlisted shares are assessable as capital gains. and the decision in Nawanshahar Central Cooperative Bank Ltd. applied only to statutory SLR investments and had no application to strategic investments. Revenue submitted that all investments of a banking company formed part of its banking business and, therefore, gains arising on their sale were taxable under the head “Profits and Gains of Business or Profession”. Reliance was placed upon Nawanshahar Central Cooperative Bank Ltd.. Tribunal held that a banking company could simultaneously maintain investment and trading portfolios. Strategic investments made for acquiring significant influence, promoter participation or long-term capital appreciation cannot automatically be regarded as stock-in-trade merely because assessee carried on banking business. Further, CBDT’s binding instruction regarding taxation of gains on unlisted shares also supported the assessee’s stand. The ratio of Nawanshahar Central Cooperative Bank Ltd. was confined to statutory banking investments and was distinguishable on facts.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
