TaxTMI 
TaxTMI 
2017 (3) TMI 1049
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.... value of investment in the property was appreciating and as she invested in the property only for the purpose of earning profit, the sale of shares seven months before the sale of apartment, to the company controlled by herself and her family members and incurring loss thereon is nothing but a contrived transaction to unjustly claim the benefit of long term capital losses; iii) directing the Assessing Officer to allow the brokerage expenses while computing the capital gains on sale of apartment ignoring the fact that the assessee surrendered back the apartment to the builder and not sold it in the open market which is evidenced from the fact that the instrument of evidencing sale is only a letter dated 01.03.2006 from the builder and no separate agreement or sale deed was entered into which substantiate the fact that expenditure was not actually incurred by the assessee on account of brokerage. The appellant craves the right to alter, amend , add or substitute the grounds of appeal." 2. Facts in brief of the case are as follows: (i) that during the year under consideration the assessee, who is an individual, sold 3,00,000/- preference shares of three companies, i.e., 1,00....
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...., observed which is summarized as under: a) the assessee purchased the preference shares by making payment through cheque. The sale consideration was also received by the assessee through cheque and the shares were delivered physically to the transferee. b) The preference shares were unquoted and there was no market available for the same and therefore the assessee could not have realised anything more than the consideration for which the shares were sold considering that no dividend was declared by the said company and there was no premium payable on sale of shares. c) The purchase price and sale price of the shares sold was not disputed by the Assessing Officer and there was no finding by the Assessing Officer that consideration received by the assessee was not the actual consideration received. d) The loss was on account of the indexation of the cost of the shares. e) The sale of apartment in the same year in which the shares are sold would not result in denying the claim of set off of long-term capital loss to the assessee. (vi) In view of above observations, the learned Commissioner of Income Tax (Appeals), set-aside the order of....
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....n any transaction of transfer of the apartment during the relevant previous year, the assessee would have been eligible to carry forward the capital loss arising on sale of preference shares to future years in accordance with law and claims set off of the same in future years against any long-term capital gain. 3.3 It was alternatively submitted that even it was a calculated transactions resulting in low tax outflow and tax saving to the assessee, even then the same could not be held to be non-genuine as such a transaction may at the best be regarded as a tax planning measure, which is legally permissible under the Act and there can be no allegation of any colourable device to evade the tax. In support of the contentions, the learned counsel relied on the following case laws: (i) decision of the Bombay High Court in the case of CIT Vs. Hede consultancy company private limited reported in 266 CTR 594. (ii) decision of the Bombay High Court in the case of CIT versus Enam securities private limited reported in 345 ITR 64 (iii) decision of the Chennai bench of the Tribunal in the case of DCIT versus Parry and company limited in ITA No. 2139/Mds/2007 3.4 We have heard the....
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....screen. We find that the suspision of the Assessing Officer is solely based on the ground that the assessee had the knowledge about purchasing back of its share by M/s. Bush Boake Allen (I) Ltd. and therefore the assessee sold the share of PCL to its sister concern and booked the capital loss with a view to avoid tax on capital gain arising out the prospective sale of share of M/s. Bush Boake Allen (I) Ltd. But factually the Assessing Officer was not correct and the view of the Assessing Officer was passed purely on estimation without any substantial evidence. It is worthwhile to mention that the sale of PCL shares took place on 26.3.02 and the Government permission was obtained for purchasing of its share by M/s. Bush Boake Allen (I) Ltd. was only on 20.5.02. Thereafter the board resolution of assessee was passed for selling of shares of M/s. Bush Boake Ltd, at a price of Rs. 3.90 per share on 28.5.02. Similarly M/s. Bush Boake Allen (I) Ltd. also passed a resolution as regards purchase of shares from the assessee company at a price of Rs. 3.90 per share on 29.5.02. The parties entered into an agreement for transfer of shares on 6.6.02. Therefore it is clear that the Assessing Off....
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....n appreciating the material on record, has come to the conclusion that the .price at which the respondents had purchased the shares and thereafter has sold the shares, is not in dispute. The learned CIT(A) has also noted that the transaction in respect of the sale of shares of Hede Navigation btd., resulting in long-term capital loss had preceded the transaction invoking the short-term capital gains selling the shares of Mackhinon & Mackenzie Co. Ltd. The CIT(A) also noted that the loss transactions therefore cannot be said to have been influenced by the gain transactions. The CIT(A) has also noted that the AO has not disputed about any of the transactions that have been duly completed' under the law nor that the consideration received was not the market price. It is further noted that the shares of Mackhinon & Mackenzie Co. Ltd. were Sold at the price quoted at the stock exchange whereas low price of M/s Hede Navigation Ltd.'s shares @ 10 paisa per share stands explained by the fact admitted by the AO that the said company was in red. The CIT(A) also noted that even in case the second transaction had not taken place, the long-term capital loss would have been accepted by the A....
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.... Privy Council or by the Federal Court, or (4) the issue is not free from difficulty, and (5) it calls for a discussion for alternative view. There is no scope for interference by the High Court with a finding recorded when such finding could be treated to be a finding of fact." 3.7 In the case of CIT Vs. Enam Securities Private Limited (supra) also the issue of sale of preference shares was involved and the Assessing Officer held that there was no transfer and the assessee was not entitled to indexation on the redemption of non-cumulative redeemable preference shares. The Hon'ble Bombay High Court in the case observed as under: "4. The assessee had subscribed to the purchase of 4 lakh preference shares each of Rs. 100/- of an aggregate value of Rs. 4 crores from a company by the name of Enam Finance Consultants Pvt. Ltd. in 1992. The preference shares were to carry a dividend of four percent per annum and were to be redeemable after the expiry of ten years from the date of allotment. During the course of Assessment Year 2001-02, the assessee redeemed three lakh shares at par and claimed a long term loss of Rs. 2.73 crores after availing of VBC 4 itxa5372.10-27.4 the benefit ....
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....tion has been carried out to neutralize, the long-term capital gain on transfer of apartment. We are not agreed with the contention of the learned Senior Departmental Representative supporting the order of the Assessing Officer. The learned Commissioner of Income Tax (Appeals) has observed that the assessee purchased the shares through cheque payment and also received the payment through cheque on sale of shares. The CIT(A) has further observed that shares were delivered physically to the purchaser company and thus the assessee has transferred the shares in accordance with law. In our opinion, the transaction is within the parameters of law and in such circumstances the Assessing Officer cannot hold the transaction as a contrived transaction merely because the sale was to a company in which the assessee and her family members are having controlling stake. Further, it cannot be also considered as contrived transaction because the transaction of sale of shares was done prior to sale of apartment and assessee was aware of increasing prices of the apartment. The assessee can plan to reduce its tax liability through legitimate means. Before the Commissioner of Income Tax (Appeals), the ....
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....d was declared by the said company and there was no premium payable on sale of shares. The appellant has sold the above shares to realize its investment by transferring the shares at book value. l. In these circumstances, in my considered opinion, it would not be correct to hold the transaction as non genuine merely because the shares were transferred to a group company. It has been noticed that the purchase price and sale price of various shares sold during the relevant assessment year 2006-07 was not disputed by the assessing officer. There was no finding by the assessing officer that the consideration received by the appellant was not the actual consideration received. The cost incurred by the appellant in the year of acquisition is also not in dispute.The appellant had sold the shares at the book value and as a result of cost inflation index provided in the statute to compute indexed cost of acquisition, the actual cost of Rs. 3,00,000/- was indexed and indexed cost of acquisition of Rs. 5,30,60,499/- was arrived at by the annellant which resulted in long term capital loss. m. It is further the case of the assessing officer that the set off of the long term capital loss a....
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....an apartment with the builder M/s. DLF Ltd at Gurgaon and entered into an agreement with the builder on 26/07/2003. The assessee made payment of Rs. 2,30,02,130/- to the builder from 17/02/2003 to 05/09/2005. The assessee claimed to have sold the apartment back to the builder on 01/03/2006 for a sum of Rs. 4,63,40,378/- and earned long-term capital gain on the sale of apartment. In the computation of the long-term capital gain, the assessee claimed brokerage commission of Rs. 10,21,342/- out of sale consideration. According to the Assessing Officer, the assessee surrendered back this apartment to the builder and not sold in the open market and therefore it was not a case where brokerage was paid to the broker for any services rendered by him. Before the learned Commissioner of Income-tax (Appeals), the assessee claimed that the services of the broker were essential for facilitating the sale, negotiating the rate & terms of sale etc and it was only as a result of the efforts of the broker, the transaction resulted in sale of flat to M/s DLF Universal Ltd. The learned Commissioner of income tax allowed the ground of the assessee. 4.2. Before us, the learned Sr. Departmental Repres....