Whether date of purchase of shares is to be taken as date of contract note or entry in demat a/c?
Respected Members
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Short note of today's case law for quick reference:
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[2024] 469 ITR 543 (Cal)
[In The Calcutta High Court]
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Nawal Kishore Kejriwal
V.
Commissioner Of Income-Tax
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T. S. Sivagnanam and Hiranmay Bhattacharyya JJ.
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February 17, 2023.???
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1. Section 45(2A) of the Income-tax Act, 1961 deals with the determination of the date of transfer of securities.
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2. In terms of Circular No. 704, dated April 28, 1995, it is the date of broker's note that should be treated as the date of transfer in cases of sale transactions of securities provided such transactions are followed up by delivery of shares and the transfer deed.
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3. Similarly, in respect of purchase of securities the holding period shall be reckoned from the date of the broker's note for purchase on behalf of the investors.
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4. In case the transactions take place directly between the parties and not through stock exchanges the date of contract of sale as declared by the parties shall be treated as the date of transfer provided it is followed up by actual delivery of shares and transfer deeds.
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5. The CBDT issued another Circular No. 768 dated June 24, 1998 for determination of date of transfer and the period of holding of securities held in dematerialised form under section 45(2A).
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6. On a reading of this circular it is seen that there is nothing to indicate that the circular excludes cases of securities sold in physical form.
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7. In fact the circular deals with securities held in physical form as well as those in dematerialised form.
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8. Furthermore, the circular has also clarified the position as to the applicability of the earlier Circular No. 704 dated April 28, 1995.
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9. The only issue when securities are held in dematerialised form is that the distinct trail linking every share to a certificate and its unique distinctive number linking it with its subsequent sale is not available.
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10. Section 45(2A) stipulates that in the case of securities held in dematerialised form, for determining “date of transfer” and “period of holding” the FIFO method would be applicable.
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11. However, once a sale is linked with an earlier purchase, for determination of their date of transfer and period of holdings, board circular no. 704 would be applicable.
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12. That is to say that the relevant contract notes as explained in circular no. 704 will have to be referred to for ascertaining the cost of the security sold and the date of transfer.