Holding period of previous owners included for gifted shares; Asset treated as Long-Term for Section 54F

By | December 9, 2025
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Holding period of previous owners included for gifted shares; Asset treated as Long-Term for Section 54F

Issue

Whether shares received by an assessee as a gift from a relative (who had also received them as a gift) should be treated as Short-Term or Long-Term Capital Assets, considering the provisions of Section 49(1) regarding the inclusion of the previous owner’s holding period, for the purpose of claiming deduction under Section 54F.

Facts

  • Assessment Year: 2021-22.

  • Mode of Acquisition: The assessee received shares as a gift from a relative.

  • Chain of Title: The donor (relative) had himself acquired these shares as a genuine gift from another relative.

  • AO’s Stand: The Assessing Officer (AO) calculated the holding period only from the date the assessee received the gift. Consequently, the AO treated the shares as Short-Term Capital Assets and denied the claim for deduction under Section 54F (which is available only on Long-Term Capital Gains).

  • CIT(A)’s Ruling: The Commissioner (Appeals) accepted the documentary evidence proving the genuineness of the gift chain. He held that under the law, the holding period of the previous owners must be included.

Decision

  • Aggregation of Holding Period: The Tribunal upheld the CIT(A)’s view. It relied on Section 2(42A) read with Explanation 1, which states that where an asset is acquired by gift (a mode specified in Section 49(1)), the period for which the asset was held by the previous owner shall be included in determining whether the asset is short-term or long-term.

  • Chain of Gifts: Since the shares passed through multiple hands via genuine gifts, the holding period is calculated from the original purchase date by the first owner in the chain.

  • Eligibility for 54F: Once the aggregated holding period exceeded the threshold (12 months for listed shares/24 months for unlisted), the asset qualified as a Long-Term Capital Asset.

  • Conclusion: The assessee was rightfully entitled to the deduction under Section 54F on the capital gains arising from the sale.

Key Takeaways

Inherited/Gifted Assets: For assets acquired via gift, will, or inheritance, the “Date of Acquisition” for tax purposes is deemed to be the date the original paying owner acquired it. Both the Cost of Acquisition and the Period of Holding of the previous owner are transferred to the current owner.

Section 54F Benefit: To claim exemption on the sale of assets (like shares or land) by investing in a house property, proving the asset is “Long-Term” is crucial. This judgment confirms that gift recipients can easily meet this tenure requirement by tagging onto the donor’s holding period.

IN THE ITAT DELHI BENCH ‘A’
Deputy Commissioner of Income-tax
v.
Archit Aggarwal
SATBEER SINGH GODARA, Judicial Member
and S. Rifaur Rahman, Accountant Member
IT APPEAL No. 4384 (Delhi) of 2024
[Assessment year 2021-22]
NOVEMBER  25, 2025
Jitender Singh, CIT (DR) for the Appellant. Manish Upneja, Adv. for the Respondent.
ORDER
Satbeer Singh Godara, Judicial Member.- This Revenue’s appeal for assessment year 2021-22, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2024-25/1066954880(1), dated 24.07.2024 involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).
Heard both the parties. Case file perused.
2. The Revenue pleads the following substantive grounds in the instant appeal:
1. Whether on fact and circumstances of the case, the CIT(A) has erred on facts in deleting the addition of Rs.15,84,78,027/-.
3. We next note with the able assistance coming from both the parties that the learned CIT(A) has accepted the assessee’s lower appeal vide the following detailed discussion:
“7. Having addressed the admissibility issue for additional evidence, I now move on to address each ground of appeal raised by the appellant in the appeal. The appeal’s first ground is a general one that doesn’t need adjudication, so it’s dismissed.
7.1 The appellant contends in ground No. 2.1 of the appeal that the AO was incorrect in determining that shri Viney Prakash Agarwal bought 6,51,000 equity shares of Viney Corporation Pvt Ltd from Mrs. Sudesh Kumari. The detailed observations of the AO and the appellant’s submission regarding the purchase of the shares in question by Shri Viney Prakash Agsrwal from Sudesh Kumari have been discussed above and do not need to be repeated here. The appellant’s initial submission to the AO was that Viney Prakash Agarwal provided him with 6,51,000 shares as a gift and that Shri Agarwal acquired the shares in question on 10/11/2010. Subsequently, the appellant provided a document to the AO that detailed Viney Prakash Agarwal’s acquisition of VCL shares from 1995.
7.2. In the assessment order, the AO reproduced the document submitted by the appellant in table form, which had information about the movement of Viney Prakash Agarwal’s shares since 1995.Viney Prakash Agarwal’s share acquisition from Sudesh Kumari is depicted in the ath row of the table. As indicated in the chart, Shri Agarwal acquired 9,23,826 shares of VCL from Sudesh Kumar on 02/07/2019. In the column concerned, Rs 2,16,683/- was mentioned as the consideration for the acquisition of shares. Taking note of the discrepancy in the appellant’s submission regarding the mode, date, and cost of acquiring the shares in question, the AO requested clarification from the appellant through a show cause notice.
7.3. In response, the appellant submitted to the AO that Shri Viney Prakash Agarwal provided him with 6,51,000 shares as a gift from the 9,23, 826 shares he received from Sudesh Kumari as a gift. The appellant presented a copy of the gift deed executed on 02/07/2019 by Sudesh Kumari as evidence of his claim. According to the appellant, the chart displaying Viney Prakash Agarwal’s share movements, which was given by Vinney Corporation Ltd and filed in the assessment proceedings, had a blank remarks column for Sudesh’s 9,23,826 shares gift on 02/07/2019. The appellant stated that Sudesh Kumari bought 24,46,590 shares of VCL before 31/03/2016, and 9,23,826 of these shares were given to Viney Prakash Agarwal as a gift. Furthermore, the appellant provided copies of VCL’s return of income from 2016 that showed the share holdings of Sudesh Kumari and Viney Prakash Agarwal, as well as a statement indicating that Sudesh Kumari transferred 9,23,826 shares from her demat account maintained with Pee Arr Securities Ltd to the demat account of Viney Prakash Agarwal. The appellant asserted before the AO that Sri Viney Prakash Agarwal didn’t buy 9,23,856 shares of VCL from Sudesh Kumari, but received them as a gift, a1S per the detailed clarification and documents produced in the assessment proceedings.
7.4 The appellant’s clarification and the supporting documents were not convincing to the AO. The AO noted that the gift deed submitted by the appellant was executed following a show cause notice to conceal the transfer of shares without adequate consideration in a family settlement, and this was merely an afterthought. In addition, the AO stated that the gift deed was only notarized. Taking into account the above observations and the documents relating to Viney Prakash Agarwal’s share movements that the appellant had originally submitted, the AO concluded that the documents were authentic and that Agarwal purchased 9,23,826 shares of VCL on 02/07/2019 for a price of Rs. 2,16,683/-.
7.5 In the appeal, the appellant reiterated his assertion that Viney Prakash Agarwal did not acquire 9,23,836 shares of VCL through a purchase, but rather obtained them as a gift on 02/07/2019, contrary to what the AO held. In the appeal, the appellant has provided another paper book, which contains a clarification letter dated 01/02/2024 sent by Vinny Corporation Pvt Ltd to Shri Viney Prakash Agarwal, as well as revised extracts of the shares movements in Viney Prakash Agarwal’s case. To reiterate, the appellant’s submitted documents in the additional paper book are additional evidence which was sent to the AO for verification and findings. The AO’s remand report has been placed on record, and I will address it later.
7.6. The AO raised doubts about the authenticity of the gift deed signed by Sudesh Kumari on 02/07/2019 due to apparent inconsistencies in the appellant’s presentation regarding the mode, date, and cost of Viney’s acquisition of 9,23,826 shares of VCL. Moreover, the AO observed that the gift deed was executed after the show cause notice, and it was merely a means of concealing transfer shares in without adequate consideration in a family settlement. The appellant’s submission had inconsistencies, but that is not enough to question the authenticity of the gift deed without evidence. The AO’s observation was simply based on suspicion without any tangible evidence. To determine the exact date of execution of the gift deed, the AO could have investigated the genuineness of the deed before concluding that it was executed after the show cause notice. The authenticity of the gift deed cannot be doubted unless it is otherwise proven.
7.7. In the assessment proceedings, the appellant submitted copies of VCL’s Income Tax returns to demonstrate that Sudesh Kumari had 24,46,590 shares of VCL prior to 31/03/2016, and that 9,23,826 shares were transferred from her demat account to the demat account of Shri Viney Prakash Agarwal. The appellant also made a clarification that the VCL left the remarks column blank when it recorded the transfer of shares from Sudesh Kumari to Viney Prakash Agarwal, which were submitted as an extract during the course of assessment.
7.8. In addition, the appellant provided a sworn affidavit in support of his contention from Sudesh Kumari confirming that VCL shares were gifted to Viney Prakash Agarwal. The AO ignored the affidavit without giving plausible reasons. The statements contained in a sworn affidavit should be accepted as correct unless they are challenged by evidence. The Hon’ble Supreme Court in the case of Daulat Ram Rwatumall v. CIT (1973) 87 ITR 349(SC) held that once an affidavit is furnished, it should be presumed to be correct statement of facts. If these facts are to be controverted, either the deponent must be examined or evidence contrary to facts must be led. In the absence of these the affidavits could not be ignored. The AO determined that Viney Prakash Agarwal purchased the shares in question from Sudesh Kumari on 02/07/2019 purely because of inconsistencies in both his submission and initial documents, disregarding further clarification, a gift deed, and sworn affidavits.
7.9. In regards to the additional evidence, the AO was asked to verify and comment on the revised extract that includes Viney Prakash Agarwal’s movement shares. In his remand report, the AO stated that –

“9) When comparing these two statements of movements of shares as filed in the assessment proceedings and appellate proceedings, it seems there are additional details and information provided by the assessee that are:-

1. The detail filled in blank space in front of share transfer from Smt. Sudesh Kumari on 02.07.2019. “9,23,826 equity shares of Mis. Smt gifted Viney Corporation Pvt.Ltd. Sudesh Kumari on 02.07.2019”

1. Clarification given about Amount/value mentioned in movements of shares as filed in the assessment proceedings and stated that (a) where total considgration paid by the VPA mentioned thDd m€1(Jn that purvhatJe amount of the share holder cost and where that is gift then than cost to the doners whereas in share movement statement composite amount mentioned. (b)total consideration received by VPA means the amount of sales Consideration and, when gifted, the cost to the Donor, whereas the composite amount is mentioned.

The above clarifications have been given in the share movement statement.”

7.10. In his rejoinder, the appellant stated as follows:

“b) Your honour, Ld. The Jurisdictional Assessing Officer (submitted in para no 6 to 9 of para no 2 on page no 3 of the remand report) has mentioned additional evidence. In 7 and 8 para, the Ld. The AO has listed the additional evidence and, in para no 9, submitted that comparison of share movement detail submitted in the assessment and submitted in appellate proceedings. The Ld. AO has accepted in para no 9 that in the shares movement detail, there is only a change about the filling of the blanks and clarification about the amount/value etc. The Ld. Assessing officer has not given any adverse inference on those documents, information and clarification.”

7.11. According to the AO’s remand report, the assessee only provided a notarized copy of the Article 4 Affidavit during the remand proceedings, not a registered copy. In his rejoinder, the appellant states that the Affidavit is a testamentary document and does not need to be registered, It only needs to have its notarization done by a Notary as per the Code of Civil Procedure, 1908. Immovable property gift documents must be registered in accordance with section 17(1(a) of the Registration Act, 1908, but it is not obligatory for gifts of movable property under section 18(d) of the same Act. It should be pointed out that a notarized affidavit is based on the above discussion and evidence given by the appellant in the assessment and appeal proceedings, it is determined that Sudesh Kumari gifted Viney Prakash Agarwal 9,23,826 VCL shares, but they were not bought by Shri Agarwal, valid in terms of its content unless it is refuted by new evidence.
7.12. Based on the above discussion and evidence given by the appellant in the assessment and appeal proceedings, it is determined that Sudesh Kumari gifted Viney Prakash Agarwal 9,23,826 VCL shares, but they were not bought by Shri Agarwal.
8. In ground no. 2.2, the appellant claims that the AO made an error when he determined that Viney Parkash Aggarwal bought 6,51,000 shares of Viney Corporation Pvt Ltd for Rs 2,16,683/-. In this order, it has been concluded that Viney Prakash Agarwal was given 9,23,826 shares of VCL by Sudedh Kumari on 02/07/2019. Section 49(1) of the Act stipulates that if a property is gifted, the cost of acquiring it in the hands of the donee is the cost that the donor of the property acquired it. According to Explanation 1(b) of Section 2(42A) of the Act, the period of holding of the property in the hands of the donee should be reckoned from the date of the donor’s acquisition of the property. Therefore, the cost of acquiring 9,23,826 shares in Viney Prakash Agarwal’s possession should be determined based on the cost at which Sudesh Kumari acquired them.
9. Ground no. 3 is about the appellant’s claim that the Assessing Officer made an error in categorizing the capital gain from the sale of 6,51,000 equity shares of Viney Corporation Pvt Ltd as short-term capital gains, despite the appellant’s claim of long-term capital gains. As per the assessment order, Shri Viney Prakash Agarwal purchased 9,23,826 shares of VCL from Sudesh Kumari on 02/07/2019 and then transferred 6,51,000 shares as a gift to the appellant on October 27th, 2020.
9.1. As previously decided, Shri Viney Prakash Agarwal was given 9,23,826 shares as a gift by Sudesh Kumari on 02/07/2019. The holding period of those shares in the hands of Shri Aggarwal was over 24 months because she acquired them before 31/03/2016. Consequently, those shares were long-term capital assets, and the gains resulting from the sale of those shares should be treated as long-term capital gains.
10. According to the appellant’s ground 4 claim, the AO made an error in calculating the cost of acquiring 6,51,000 equity shares of Viney Corporation Pvt Ltd when computing capital gain, which caused noncompliance with the provisions of section 49 read with section 45 (2A) of the Act. As already stated, the AO held that Shri Viney Prakash Agarwal purchased 9,23,826 shares of VCL from Sudesh Kumari on 02/07/2019 and consequently treated the appellant’s receipt of 651,000 shares from Shri Agarwal as a gift as short-term capital asset. According to the share movement extract of Viney Prakash Agarwal submitted by the appellant, Sudesh Kumari transferred 9,23,826 VCL shares to Viney Prakash Agarwal with a consideration of Rs 2,16,683/-. Consequently, the AO did not adhere to the provisions of section 49A of the Act.
10.1. If Viney Prakash Agarwal had bought 9,23,826 for Rs. 2,16,683/-, the cost of 6,51,000 would have been Rs.1,52,457/-. While following section 49 of the Act, the AO calculated short-term capital gains properly, but he incorrectly calculated the cost of 6,51,000 shares at Rs. 2,16, 683/- instead of Rs. 1,52,457/-. It seems that the AO failed to comply with the provisions of section 45 (2A) of the Act because he classified 6,51,000 shares as short-term capital assets.
11. The issues brought up by the appellant in grounds S(a) to 5(g) have already been discussed and addressed previously in this case, so it is not necessary to discuss them again. Consequently, the points brought up by the appellant have been resolved.
12. In ground 6, the appellant contends that the Assessing Officer’s rejection of claim of deduction for Rs. 15,86,84,364/- under 54F of the Act was Incorrect. In order to address this appeal ground, it is crucial to emphasize that the primary matter around the appellant’s holding period and the cost of acquisition of the subject shares. I will begin by addressing the cost of acquiring shares involved.
12.1. In order to calculate the capital gains on sales of 6,51,000 shares of VCL given as a gift, the appellant took into account the cost and the indexed cost of acquisition at Rs.5,740/- and Rs.10,345/-respectively. The appellant claimed to the AO that Viney Prakash Agarwal, who gave him 6,51,000 shares as gifts, acquired the shares in 2010, but he presented documents that showed Viney Prakash Agarwal had acquired the shares in question from 13/01/1995 to 27/03/2020. Upon finding an inconsistency in the appellant’s submission about Viney Prakash Agarwal’s purchase of shares and the date mentioned in the document, as well as other inconsistencies mentioned in the assessment order, the AO sent the appellant a notice of show cause.
12.2 In response, the appellant submitted before the AO that out of all.the shares held by Viney Prakash Agarwal, the 6,51,000 shares transferred to the appellant were out of 9,23,826 shares received by Viney Prakash Agarwal on 02.07.2019. The appellant further claimed that these 9,23,826 shares were received by Viney Prakash Agarwal as a gift from his sister-in-law, Mrs. Sudesh Kumari, on 02.07.2019. He submitted a copy of the gift deed in support of his contention. The appellant asserted that Mrs. Sudesh Kumari bought 24,46,590 shares, which included 9,23,826 shares, before 31.03.2016 and presented copies of the ITR of Mis Viney Corporation Limited to demonstrate that the company’s shareholding hasn’t changed since 31.03.2016. In accordance with the submission, the appellant asserted to the AO that Mrs. Sudesh Kumari purchased these 6,51,000 shares before 31.03.2016. Therefore, the shares qualify as long-term capital assets and should be eligible for a 54F deduction to the assessee.
12.3 The authorized representatives of the appellant did not provide a satisfactory explanation to the AO regarding the basis behind determining the cost of acquiring shares at Rs 5,470/-.The authorized representatives were unable to furnish specific information to the AO regarding the acquisition date of Sudesh Kumari’s shares, which were claimed to have been given to Viney Prakash Agarwal. Although he was not sure, he mentioned that shares in question might have been allotted to Sudesh Kumari following the merger of some company with VCL. Yet again, he was unable to provide precise information about the merger. The appellant’s explanation of the cost of acquisition of the shares failed to convince the AO. Thus, the assessment order failed to resolve the cost of acquisition the shares in question.
12.4. During the appeal proceedings, the appellant acknowledged that he mistakenly calculated the acquisition cost of Rs. 5,740/-, which was stated as the cost of the acquisition of shares in the assessment proceedings. The appellant has also stated that the actual price of purchasing the shares in question is Rs. 52,54,790/-. The basis for determining the cost of acquisition of shares in question at Rs. 52,54,790/- has been provided by the appellant in the appeal proceedings and has been reproduced in paragraph 9 of the SoF above. The appellant has also provided actual circumstances that led to the incorrect calculation of the cost of buying shares, as mentioned in paragraph 13 of the Sof. Therefore, it is not necessary to repeat them here. Since the appellant did not claim the cost of acquisition submitted in the appeal proceedings in the return of income or in the appeal proceedings, he cannot benefit from it.
13. The following issue is about the length of time the appellant held the shares, which resulted in capital gains. It is important to note that the appellant’s contradictory claims during the assessment proceedings resulted in the entire confusion surrounding the holding period of the shares in question. The AO’s observations above provide a description of the appellant’s contradictory claims that were mentioned in the assessment order.
13.1 During the appeal proceedings, the appellant has given the cost of acquisition and the period of holding the shares in question, which is included in paragraph 9 of his submission in this order. Shri Viney Prakash Agrawal, as mentioned in the submission, gave a gift of 6,51,000 shares of VCL to the appellant and acquired them at a cost of Rs. 52,54,790/- between 13/01/1995 and 28/03/2011. When a gift is made, the cost of the acquisition of capital asset for the donee is calculated based on the cost of the donor’s shares acquisition. The appellant has calculated the cost of acquisition of shares in terms of Section 49 read with 45(2) of the Act at Rs. 52,54,790/-, which was the cost at which Viney Prakash Agrawal acquired those shares. The appellant has based its determination of the period of holding the shares in question on Section 49(1) and Explanation 1(b) to Section 2(42) of the Act. The appellant has classified those shares as long-term capital assets under section 2(29M) since their holding period was over 24 months. The appellant has classified the gains from the sale of the shares in question as long term capital gains under section 2(29AB) of the Act. The appellant’s submission in the appeal is in conformity with the document (extract of movement of shares of Viney Prakash Agarwal) submitted in the assessment proceedings and the revised document (extract of movement of shares of Viney Prakash Agarwal) submitted in the appeal proceedings, as can be inferred.
13.2 It may be recalled that the appellant stated in his initial submission before the AO that his uncle, Viney Prakash Agarwal, gifted him 6,51,000 shares of VCL, even though the acquisition date was mentioned as 2010-11. Except for the acquisition date, the appellant’s submission mentioned above is in line with his initial submission before the AO. It’s clear that the submission appellant discussed above has rendered the appellant’s submission before the AO that his uncle Viney Prakash Agarwal gave him 6,51,000 shares out of the 9,23,826 shares he received from Sudesh Kumari insignificant. It has been decided that Shri Viney Prakash Agarwal received 9,23,826 shares of VCL from his sister-in-law on February 7th, 2019 as gift.
As per records, Sudesh Kumari had obtained 24,46,590 shares before 31/03/2016, and she gave 9,23,826 shares to Viney Prakash Agarwal from them as a gift. Even assuming that Viney Prakash Agarwal gifted 6,51,000/- to the appellant out of the 9,33,826 shares he received from Sudesh Kumari, the shares would be a long-term capital asset in the hands of the appellant in terms of section 49 read with section 2(42A) of the Act.
13.3 According to the appellant in the appeal proceedings, the Assessing officer either failed to understand or misinterpreted the factual matrix of the appellant’s share acquisition and legal provisions, which resulted in the assessment order issued under section 143(3) of the Act which resulted in denial of exemption under section 54F of the Act. The appellant cannot blame the AO because he was equally responsible for making contradictory claims that caused confusion about the holding period and cost of acquiring shares in the assessment proceedings.
13.4. The exemption under section 54F of the Act was denied by the AO because he considered the gains from shares sales as short-term capital gains. The record indicates that the appellant bought the residential property at Rs. 15,62,55,510/- on 25.03.2021. Furthermore, he paid consultants’ fees and commissions of Rs 7,25,000/- and 17,11,000/-, as per the details. According to the record, the investment in the residential property was made using the sale proceeds of shares, and it was made within two years of the sale of the shares in question.
14. In summary:
(i)Viney Prakash Agarwal presented the appellant with 6,51,000 shares of VCL as a gift on 27/10/2020, which is supported by the gift deed presented by the appellant.
(ii)The appellant sold 6,51,000 Equity Shares of Viney Corporation Pvt Ltd (VCL shares) on 23.11.2020 for the consideration of Rs 22,99,20,180/- to M/S Synergy Metals Investment Holding Limited, Dubai.
(iii)During the time span of 13/11/1995 to 28/03/2011, Vinay PraKash Agarwal acquired VCL shares at a cost of Rs. 52,54,790/-
(iv)As the period of holding is determined by when the donor acquired the shares, the appellant held those shares for more than 24 months, which qualifies them as long-term capital assets under section 2(29AA) of the Act.
(v)The appellant’s share acquisition costs Rs.52,54,790/- as per section 49 of the Act. For the reason mentioned earlier in this order, the appellant is not permitted to benefit from the cost of acquisition determined above.
(vi)The profit from the sale of those shares is categorized as long-term capital gain.
(vi)All the conditions specified in section 54F of the Act have been met by the appellant, making him eligible for exemption.
15. Based on the discussion and evidence above, it is concluded that the shares worth 6,51,000 that were given to the appellant by his uncle were long term capital assets, thus, the profit made by the appellant from selling those shares was long term capital gains. The exemption specified in section 54F of the Act is available to the appellant as well. Therefore, the AO is directed to treat the gains disclosed in the income return as long-term capital gains and allow the exemption under section 54F as claimed in the return.
16. The last ground of appeal is regarding levying of interest u/s 234A, 2348 and 2340 which are as per Act and hence the same are allowed accordingly. ccording
17. In the final result, the appeal filed by the appellant is treated as allowed.”
4. We notice in this factual backdrop that the sole substantive issue which arises for our apt adjudication as per the Revenue’s pleadings herein is as to whether the assessee’s holding period of the shares in question would qualify the same as a long-term capital asset(s) u/s 2(29AA) of the Act or not. The Revenue’s endeavour all along in light of the assessment discussion is that the Assessing Officer had rightly treated the same as short-term capital assets not entitled for any consequential deduction of section 54F qua reinstatement of capital gains arising therefrom in a residential house. The assessee, on the other hand, has filed before us his detailed paper-book running into 289 pages right from his revised income tax return filed under section 139(5) of the Act dated 23rd March, 2022 running upto his last rejoinder dated 17.07.2024 to the Assessing Officer’s remand report dated 11.07.2024 submitted in the lower appellate proceedings.
5. Be that as it may, the relevant facts herein admittedly raise the foregoing sole issue of the assessee’s holding period only. We further clarify here that the assessee Sh. Archit Aggarwal had been gifted shares by Sh. Viney Prakash Aggarwal, who in turn, admittedly received 9,23,826/- shares from his relative Smt. Sudesh Kumari for inadequate consideration which once again form subject matter of transfer without adequate consideration in the relevant previous year.
6. The Revenue vehemently argues in this factual backdrop that the assessee’s holding period of the above shares could not be treated as resulting in long-term capital gains since not derived from sale/transfer of a long-term capital asset. We find no merit in the Revenue’s instant contention as section 49(1)(ii) makes it clear that in an instance involving gift or will; the cost of acquisition thereof is deemed to be the cost for which the previous owner had acquired the same at the first instance for adequate consideration. There is indeed no quarrel between the parties that be it the assessee or his transferor/donor Sh. Viney Prakash Agarwal or Smt. Sudesh Kumari as having purchased/allotted the same right from 21st March, 1997 onwards. And that, section 2(29AA) r.w.s. 2(42A) r.w. Explanation 1(i) of the Act, holding period of the previous owner u/s 49(1) is also included as well. We thus conclude in this factual backdrop that in light of CIT v. Manjula Shah (Bombay) that the CIT(A) has rightly treated the assessee’s shares as long-term capital assets giving rise to consequential long-term gain of sale/transfer thereof as eligible for section 54F deduction relief in very terms. The Revenue’s vehement submissions/substantive grounds raised herein fail accordingly.
7. This Revenue’s appeal is dismissed in above terms.