Raunaq Prakash Jain v. ITO

Case snapshot

Sections / provisions: 2(14); 2(47A); 45; 54F

Questions before the Court / Tribunal

• Pre-2022 crypto/Bitcoin gains as capital gains and section 54F: The reported Tribunal judgment treats Bitcoin held for the requisite period before the Finance Act 2022 VDA regime as property/capital asset and the gain as capital gains rather than income from other sources, with section 54F examined on the facts.
• Crypto treated as capital asset before specific VDA amendment: A second ITATOnline discovery record reports the same underlying crypto judgment and emphasises that pre-amendment cryptocurrency falls within the broad statutory concept of property. It should be consolidated into the same canonical judgment rather than published as a duplicate.

Material facts and background

[2024] 169 taxmann.com 298 (Jodhpur - Trib.)[28-11-2024] INCOME TAX : Gain on sale of crypto currency held by assessee for more than 3 years was to be taxed under head capital gain and not under head income from other sources ■■■ [2024] 169 taxmann.com 298 (Jodhpur - Trib.) IN THE ITAT JODHPUR BENCH Raunaq Prakash Jain v. Income-tax Officer* DR. S. SEETHALAKSHMI, JUDICIAL MEMBER AND RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER IT APPEAL NO. 1 (JODH) OF 2024 [ASSESSMENT YEAR 2021-22] NOVEMBER 28, 2024 Section 2(14), read with sections 2(47) and 56, of Income-tax Act, 1961 - Capital gains Capital asset (Virtual digital asset) - Assessment year 2021-22 - Assessee was an individual and salaried person - Assessee purchased Bitcoin (crypto currency) during financial year 2015-16 and sold it during financial year 2020-21 - He invested sale consideration in purchase of property - Assessee filed return declaring long-term capital gain on sale of Bitcoin and also claimed exemption under section 54F - Assessing Officer held that crypto currency was not a capital asset under section 2(14) and made it taxable under section 56 as income from other sources - It was noted that only source of...

■ On appeal: HELD ■ The brief facts related to the dispute is that the assessee is a Bachelor of Engineering, had worked with IT company Mind Tree Ltd. as well as Infosys Ltd. While in service in 2015-16 he invested a sum of Rs. 5.05 lakhs out of his regular income. So the source of investment is not in dispute. The regular source of income of assessee is income from salary, income from other source and income from capital gain on sale of shares/ mutual funds. During the year under consideration assessee offered long-term capital gain on sale of bitcoin at Rs. 6.63 crores and after claiming deduction under section 54F of Rs. 4.95 crores, declaring total income of Rs. 1.74 crores for tax purpose. The return of income was filed on 30-12-2021. Thereafter, the case of the assessee was selected for complete scrutiny through 'Computer Assisted Selective Scrutiny (CASS)'. The reason for selection in complete scrutiny was 'capital gains deduction claimed' by issuing notice under section 143(2) on 28-6-2022. Notices were issued from time-to-time and were complied by the assessee. The Assessing Officer in the assessment proceeding noted that the assessee has purchased bitcoin (crypto...

Appellant / assessee submissions

As per the facts of the case, during the course of assessment proceedings, the Ld. AO observed that assessee had purchased Crypto Currency (Bitcoins) during F.Y.2015-16 amounting to Rs.5,05,155/- and sold the same during the F.Y.2020-21 at a consideration of Rs.6,69,49,620/- after claiming indexed cost of Rs.5,75,953/- on the purchase of Bitcoin, having also taken the set off of losses from shares of Rs.2,331/-. The appellant further claimed an exemption u/s 54F of the Act amounting to Rs.4,95,68,910/-, thereby offering Rs. 1,66,54,702/- as Long Term Capital Gains on the sale of Bitcoins at the tax rate of 20%. The Ld. AO contended that Crypto Currency (Bitcoins) was not an asset as per section 2(14) of the Act, hence, the transfer as per section 2(47) as Long Term Capital Gain was not applicable in the case of the appellant. The Id. AO accordingly disallowed the claim of exemption u/s 54F of the assessee and made the impugned addition thereof under the head 'Income From Other Sources'. The facts of the case and the submission of the appellant have been considered. Section 2(14) of the Act which defines "Capital Asset" as it stood at the time of both the purchase and the sale of...

6. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee is salaried employee. Assessee after completing the B. E. in Computer science worked in Mind tree 2004-2009 and thereafter when he completed his MBA he joined Infosys. While in service in 2015-16 he invested a sum of Rs. 5,05,155/- out of his regular income. So the source of investment is not in dispute. In the assessment proceeding the assessee filed a detailed submission stating that as to how this transaction is chargeable to tax under the head Capital Gain. The ld. AR of the assessee stated that in the amendment made in the law has given the transaction name as Virtual Digital Assets[VDA]. So till the law amendment even the law makers consider that as the VDA. So merely the law has been amended subsequently that law does not apply retrospectively and the intention of the assessee was to invest his tax paid as an investment and the gain which he has offered cannot be considered as other income and thereby denial of benefit of capital assets is not in accordance with law. To drive home to this contention ld. AR of the assessee invited out attention to the...

Revenue / respondent submissions

6. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee is salaried employee. Assessee after completing the B. E. in Computer science worked in Mind tree 2004-2009 and thereafter when he completed his MBA he joined Infosys. While in service in 2015-16 he invested a sum of Rs. 5,05,155/- out of his regular income. So the source of investment is not in dispute. In the assessment proceeding the assessee filed a detailed submission stating that as to how this transaction is chargeable to tax under the head Capital Gain. The ld. AR of the assessee stated that in the amendment made in the law has given the transaction name as Virtual Digital Assets[VDA]. So till the law amendment even the law makers consider that as the VDA. So merely the law has been amended subsequently that law does not apply retrospectively and the intention of the assessee was to invest his tax paid as an investment and the gain which he has offered cannot be considered as other income and thereby denial of benefit of capital assets is not in accordance with law. To drive home to this contention ld. AR of the assessee invited out attention to the...

Court / Tribunal analysis and reasoning

within the terms of section 2(14) of the Act. Since the Act does not define the term 'property', it must be construed in its plain natural meaning, subject to the context in which that expression occurs (ref. to JK Trust v. CIT/EPT, 23 ITR 150, Bom). While a capital asset is meant to be defined in a wide sense, it yet needs to be a property in the ordinary sense of the word, to then fall within the definition of a capital asset. In its ordinary sense, a property needs to have inherent benefits, which endows it with value. (c) It is trite knowledge, that with property or a real asset class, you actually own something of value eg. * Stocks-give an equity Interest in a company and a share in its future earnings. * bonds-give a promise from a company to pay a certain amount plus interest. * real estate - gives a building/structure or a piece of land. * gold-is a precious metal. * commodities - have utility andsvalue (suchmas oil, gas, metals etc.) While the market determines what these assets are worth on a given day, but they are real things/property that anyway have value, and independent of what the market says, they have inherent value at any moments That is not so with a crypto...

As per the facts of the case, during the course of assessment proceedings, the Ld. AO observed that assessee had purchased Crypto Currency (Bitcoins) during F.Y.2015-16 amounting to Rs.5,05,155/- and sold the same during the F.Y.2020-21 at a consideration of Rs.6,69,49,620/- after claiming indexed cost of Rs.5,75,953/- on the purchase of Bitcoin, having also taken the set off of losses from shares of Rs.2,331/-. The appellant further claimed an exemption u/s 54F of the Act amounting to Rs.4,95,68,910/-, thereby offering Rs. 1,66,54,702/- as Long Term Capital Gains on the sale of Bitcoins at the tax rate of 20%. The Ld. AO contended that Crypto Currency (Bitcoins) was not an asset as per section 2(14) of the Act, hence, the transfer as per section 2(47) as Long Term Capital Gain was not applicable in the case of the appellant. The Id. AO accordingly disallowed the claim of exemption u/s 54F of the assessee and made the impugned addition thereof under the head 'Income From Other Sources'. The facts of the case and the submission of the appellant have been considered. Section 2(14) of the Act which defines "Capital Asset" as it stood at the time of both the purchase and the sale of...

4. The Ld. CIT(A), NFAC observed that section 2(14) as it stood at the time of purchase & sale of crypto currency (bitcoins) does not described it as a capital asset either implicitly or explicitly. The VDA is defined u/s 2(47A) only w.e.f. 01.04.2022 and therefore, the income falling under residuary status has to be taxed u/s 56 of the Act. Further the assessment order in case of Ashok Kumar Asawa and Prakash Chandra Jain where gain from crypto currency was taxed under the head capital gain, since these assessment orders were passed by a different AO and not a matter of appeal, he refrained from offering any comment. Accordingly the order passed by AO is upheld. Submission:1. The only issue in the present case is whether crypto currency (bitcoin) is a capital asset or not. The capital asset is defined u/s 2(14) of the Act to mean "Property of any kind held by an assessee, whether or not connected with his business or profession." Explanation 1 to this sections reads as under:For the removal of doubts, it is hereby clarified that "property" includes and shall be deemed to have always included any right in or in relation to an Indian company, including right of management or...

3. As per section 45(1), any profit or gain arising from the transfer of capital assets shall be chargeable to tax as Capital Gains. Since crypto currency is specifically incorporated in the statute as an asset, it means that even before 01.04.2022 it was an asset and therefore gain on sale of crypto currency has to be taxed under the head capital gain and not under the head income from other sources. 4. The Ld. CIT(A) has referred to section 56 of Income tax Act which provides that "Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E (i.e. Salaries, Income From house property, Profit and gains of business or profession, Capital Gain). In the present case, gain on sale of crypto currency is chargeable to tax under the head Capital Gain and therefore it cannot be charged to tax under the head income from other sources. 5. We may further submit that the only source of income of assesse is from salary and he has invested his savings in shares/ crypto currency. He is not...

Operative decision and relief

6. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee is salaried employee. Assessee after completing the B. E. in Computer science worked in Mind tree 2004-2009 and thereafter when he completed his MBA he joined Infosys. While in service in 2015-16 he invested a sum of Rs. 5,05,155/- out of his regular income. So the source of investment is not in dispute. In the assessment proceeding the assessee filed a detailed submission stating that as to how this transaction is chargeable to tax under the head Capital Gain. The ld. AR of the assessee stated that in the amendment made in the law has given the transaction name as Virtual Digital Assets[VDA]. So till the law amendment even the law makers consider that as the VDA. So merely the law has been amended subsequently that law does not apply retrospectively and the intention of the assessee was to invest his tax paid as an investment and the gain which he has offered cannot be considered as other income and thereby denial of benefit of capital assets is not in accordance with law. To drive home to this contention ld. AR of the assessee invited out attention to the...

Authorities and precedents appearing in the judgment

• Raunaq Prakash Jain v. Income-tax Officer
• CIT v. Vegetable Products Ltd. 88 ITR 192
• Chief Commissioner of CGST v. M/s Safari Retreats Pvt. Ltd
• JK Trust v. CIT/EPT
• Supreme Court in case of CIT v. Vegetable Products Ltd
• Chief Commissioner of CGST v. M/s Safari Retreats Pvt. Ltd. Civil Appeal No. 2948 of 2023 order dt
• Ref. to JK Trust v. CIT/EPT
• Chief Commissioner of CGST v. M/s

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Pre-2022 crypto/Bitcoin gains as capital gains and section 54F; Crypto treated as capital asset before specific VDA amendment. The operative result is classified as Assessee appeal allowed; historical virtual-currency capital-asset treatment accepted for the year in issue. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Pre-2022 crypto/Bitcoin gains as capital gains and section 54F; Crypto treated as capital asset before specific VDA amendment. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Maintain a date-and-payment matrix for transfer, agreement, possession, investment and construction; capital-gains exemptions commonly turn on this chronology.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

Read / download the clean local judgment copy

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