2014 (3) TMI 625

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.... raised by the assessee are treated as not pressed. 3. We have heard both the sides and perused the material placed before us. The Assessing Officer has disallowed the capital loss of Rs. 7,84,979/- with the following finding:- "The reply was considered but not found to be satisfactory as in M/s Karma Lakelands Pvt.Ltd. the assessee and his wife both are Directors. During the years M/s Karma Lakelands has grown many folds and thus the sale of shares on book value between related parties is wrong. Since it is a related party transaction in which the shares have been merely transferred between the family members and thus the assessee has booked an artificial loss. Thus the capital loss of Rs.7,84,979/- is being disallowed. This added ba....

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....en here.   As on 31/03/2003 (Rs.) As on 31/03/2004 (Rs.) Share Capital  90,20,320/- 1,00,00,000/- Reserve & Surplus 11,56,354/- --   1,01,76,674/- 1,00,00,000/- Less : Deferred Tax Assets 2,78,680/- 16,84,275/- Less : Profit & Loss A/c -- 13,30,597/- Net Book Value 98,97,994/- 69,85,128/- No. of issued share 9,02,032 10,00,000 Breakup value per share 10.97 6.98   So, as calculated above the breakup value of share comes Rs.10.97 as on 31/3/2003 and Rs.6.98 as on 31/3/2004. Since appellant is a Pvt.Ltd. Company and no dividend declared till date etc. The breakup value if reduced by 20% comes to Rs.8.78 as on 31/03/2003 and Rs.5.58 as on ....

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....e facts it is apparent that this transaction is a sham perhaps to book an artificial loss. There seems no logic to transfer/sale shares to a family member that too on loss. I find no force in the argument of the appellant for distress sale of shares on loss to wife without any convincing reason or exigency. I, therefore, reject this ground of appeal." 6. After considering the arguments of both the sides and the facts of the case, we are unable to agree with the finding of the Assessing Officer as well as CIT(A). The Assessing Officer has observed that during the years, M/s Karma Lakelands Pvt.Ltd. has grown manifolds and thus, the sale of shares on book value between the related parties is wrong. However, in support of the above contenti....