TaxTMI 
TaxTMI 
2010 (7) TMI 1099
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....ppeals as all the three appeals are inter-connected, the three appeals are being disposed of by this common order. 2. Shri S. Sridhar, Advocate represented on behalf of the assessees and Shri P. B. Sekaran, CIT-DR represented on behalf of the Revenue. 3. It was submitted by the learned authorised representative at the time of hearing that all the three appellants are brothers and are the founder shareholders of companies under the KPR group, namely M/s. KPR Mills P. Ltd., M/s. KPR Spinning Mills P. Ltd. and M/s. KPR Cotton Mills P. Ltd. It was the submission that the said companies were engaged in the manufacture and sale of yarn and knitted garments. During the year 2005-06 M/s. KPR Mills P. Ltd. and M/s. KPR Spinning Mills P. Ltd. got amalgamated with M/s. KPR Cotton Mills P. Ltd. and the name of the company was thereafter changed to M/s. KPR Mills Ltd. M/s. KPR Mills Ltd. was converted into a public limited company and the shares were also listed in the Stock Exchange. During the year 2006-07 the promoters decided to admit a private equity partner into the company and consequently sold 9.17% of their holding in the company for an aggregate value of Rs. 44,77,78,962/-. The ....
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....Ltd. and the assessees against the establishment of the sugar factory at Almel by the assessee in accordance with the Sugarcane (Control) (Amendment) Order 2006 was even today pending before the Hon'ble Supreme Court and all the monies invested by M/s. KPR Sugar Mills P. Ltd. in respect of the acquisition of the machinery has gone to waste and only a foundation in respect of the factory remains and that too in a dilapidated condition. The possibility of recovering anything from M/s. KPR Sugar Mills P. Ltd. is remote, more so impossible. It was the submission that as a consequence of the forfeiture of the partly paid up shares the appellants had claimed the loss arising on account of the forfeiture of the shares as a capital loss which has been claimed for set off against the long term capital gains generated by the assessees on account of the sale of the 9.17% of their share-holding in M/s. KPR Mills Ltd. The learned authorised representative drew our attention to page 56 of the paper book which is the copy of the Certificate of Incorporation and Articles of Association of M/s. KPR Sugar Mills P. Ltd. As per the said certificate M/s. KPR Sugar Mills P. Ltd. was incorporated on ....
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.... vacated on 27-03-2008. In the mean time High court has ordered (dated24-0108) the Commissioner of Sugar canes to file a report on the effective steps taken by both the partners of the case and the Commissioner of Sugar canes has submitted the report on 27-02-2008. 5. M/s. SRS Limited have approached Supreme Court against the order of the High court dated 27-03-08 and got the stay on 22.04.08 to maintain "Status Quo". 6. The writ Appeal No. 743/2007 (writ petition No.: 1102/2007) was transferred to the circuit bench of the High Court of Karnataka of Gulbarga and the circuit Bench has passed an order on the writ appeal on 16-04-2009 with a direction to the Under Secretary, Directorate of Sugars, Government of India, New Delhi to conduct a personal hearing with the parties of the case to verify the relevant documents in support of their case and to decide on the issue. 7. But M/s. SRS Limited have filed SLP (c) (No. 11773 of 2009)before the Supreme Court of India against the order of the circuit Bench of Gulbarga. The Supreme Court of India has granted stay on 24-08-09 and stayed the operation of the order of the High Court dated 16.04.2009. The case is pending till date bef....
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....nd decide the issue. It was thus the submission that at every stage the assessee had to lift the stay obtained by M/s. Shree Renuka Sugars Ltd. and another stay was obtained from higher judicial forum and every attempt made by M/s. KPR Sugar Mills P. Ltd. to set up the factory was successfully sabotaged by M/s. Shree Renuka Sugar Mills Ltd thereby forcing the appellants to give up any hope of setting up the sugar factory. It was the further submission that the learned Assessing Officer was also of the view that the appellants had planned the transaction in such a way so as to claim the short term capital gains on account of the forfeiture taking shelter under the cited decision in the case of DCIT v. BPL Sanyo Finance Ltd. reported in 312 ITR 63 (Kar). It was the further submission that the learned Assessing Officer had also held that the forfeiture of the shares was a colourable device and had invoked the decision of the Hon'ble Supreme Court in the case of McDowell & Co. v. Commercial Tax Officer (1985) 59 STC 277. It was the submission that the learned CIT(A) did not consider the submissions of the assessee and had upheld the order of the Assessing Officer. It was the furthe....
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....e Hon'ble Supreme Court. The litigation issues are not disputed. The correspondence from the various suppliers of the machinery clearly shows that the process of the setting up of the factory has been put on hold and the supplier has also specifically mentioned that only after lifting of the hold the re-negotiation of the delivery and price implications would be discussed. This is as early as in March, 2007. Further the letter dated 02-07-208 by M/s. KPR Sugar Mills P. Ltd. to M/s. Pratibha Constructions Engineers wherein the assessee has invoked the force majeure clause in respect of the compensation demanded by the contractors for the construction of the sugar mill or the act of the appellants taking a conscious decision to permit the forfeiture of the partly paid up shares invested by them in the shares of M/s. KPR Sugar Mills P. Ltd. cannot be said to be a colourable device. One should appreciate that the three appellants are the permanent directors in M/s. KPR Sugar Mills P. Ltd. and they very well knew that the possibility of M/s. KPR Sugar Mills P. Ltd. setting up the factory, going into production and getting out of the legal entanglements is a remote possibility. Th....