Date of transfer of share is date of contract and not date of agreement: ITAT Mumbai

Citicorp International Finance Corporation Vs ADIT (International Taxation) (ITAT Mumbai)

ITAT Mumbai held that the date of the agreement by no stretch of imagination could be the date of sale of the shares by the assessee. As date of contract of sale would be date of fulfilment of conditions specified in share purchase agreement, date of contract will be treated as date of transfer.

Facts- The assessee has challenged the order of the ld. CIT(A) in upholding that the capital gain of Rs.428,96,85,892/- on sale of equity shares in Progeon Ltd. is short term capital gain (STCG for short) as held by the ld. A.O. without considering the fact that the said shares were held by the assessee for more than 12 months preceding the date of transfer.

AO observed that the assessee has computed LTCG on sale of shares of Progeon Ltd. amounting to Rs.428,96,85,892/- and had paid tax on the same @ 20.91%. AO held that date of sale is date of agreement to sale which was entered on 20.04.2006 and, therefore, shares are held for less than 12 months, so it is short term capital gain referring to section 2(29B) of the Act.

Conclusion- Held that the date of the agreement by no stretch of imagination could be the date of sale of the shares by the assessee to the purchaser. As per the decision of Bharti Gupta Ramola v. CIT [2012] 20 taxmann.com 762 the date of transfer is 30.06.2006 for computing the holding period of assets from both the date, i.e., of acquisition and sale are not to be excluded. We would also like to draw our support from the decisions relied upon by the ld. AR where in case of Mrs. Hami Aspi Balsara (supra), the co-ordinate bench on identical facts have decided that the date of contract of sale would be the date of fulfillment of the conditions specified in the share purchase agreement and only upon the fulfillment of the said conditions, the date of contract of sale is said to have crystallized.

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