ITAT Delhi allows appeal on capital loss disallowance, citing lack of factual basis and genuine transaction The ITAT Delhi allowed the appellant's appeal against the disallowance of a capital loss on the sale of shares to his wife. The ITAT found that the ...
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ITAT Delhi allows appeal on capital loss disallowance, citing lack of factual basis and genuine transaction
The ITAT Delhi allowed the appellant's appeal against the disallowance of a capital loss on the sale of shares to his wife. The ITAT found that the Assessing Officer lacked factual basis for disallowing the loss and that the sale price was supported by evidence from the company's financial statements. It concluded that the transaction was genuine and not a sham, directing the Assessing Officer to allow the capital loss. The decision was pronounced on 27th September 2013.
Issues: Disallowance of capital loss on sale of shares to wife.
In this case, the appellant appealed against the order disallowing a capital loss of Rs. 7,84,979 on the sale of shares to his wife. The Assessing Officer disallowed the loss, considering it a related party transaction where the shares were transferred between family members, leading to an artificial loss. The appellant argued that the sale was genuine, based on the breakup value of shares as per the company's balance sheet. The appellant contended that the sale price was logical as per the financial statements of the company. The appellant also highlighted the lack of dividend declaration by the company and the decrease in net book value of the shares. The CIT(A) rejected the appellant's submission, considering the transaction a sham to book an artificial loss. The CIT(A) found no logic in selling shares to a family member at a loss without a convincing reason. However, the ITAT Delhi disagreed with both the Assessing Officer and the CIT(A). The ITAT noted that the Assessing Officer provided no factual basis for disallowing the loss, while the appellant presented evidence supporting the sale price based on the company's financials. The ITAT found no evidence to support the claim that the sale of shares was a sham transaction. The ITAT concluded that there was no justification for disallowing the capital loss and directed the Assessing Officer to allow the same. Consequently, the appeal was partly allowed, and the decision was pronounced on 27th September 2013.
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