TaxTMI 
TaxTMI 
2020 (2) TMI 1370
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....capital) loss claimed by the assessee is not allowable?" 2.The Income Tax Appellate Tribunal, Ahmedabad 'A' Bench, Ahmedabad passed a common order dated 05.01.2007 in respect of all these appeals for the A.Y. 19921993 in cross-appeals filed in case of each of the assessee. 3.Tax Appeal No. 194 of 2008 is arising out of the order in ITA No. 763/AHD/1997 dated 05.01.2007 filed by the revenue in case of Smt. Sulochana V. Gupta. 4.Tax Appeal No. 195 of 2008 is filed against the order passed in ITA No. 631/AHD/1997 filed by the revenue in case of late Shri Vijaykumar Gupta. 5.Tax Appeal No. 196 of 2008 is filed against the order passed in ITA No. 671/AHD/1997 filed by late Shri Vijaykumar Gupta. 6.Tax Appeal No. 211 of 2008 is filed against the order passed in ITA No.672/AHD/1997 filed by Smt. Sulochana V. Gupta. 7.For the sake of convenience, Tax Appeal No. 194 of 2008 is treated as a lead matter. 8.1. The assessee filed return of income for A.Y. 1992-93 on 30.07.1993 declaring total income of Rs. 3,02,099/. During the course of assessment proceedings, the Assessing Officer found that assessee had claimed short term loss of Rs. 16,88,750/on the following transactio....
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.... loss, and hence, the same cannot be given set off against regular income of the assessee except to be adjusted with speculation profit, if any, arising to the assessee in business. 8.4. The Assessing Officer therefore refused to give set off of the loss of Rs. 16,88,750/paid by the assessee against the regular business for capital gain. 8.5. The assessee, being aggrieved and dissatisfied with the assessment order, filed an appeal before the CIT (A) contending that the entire loss has wrongly been denied to be set off against the other incomes of the assessee. The assessee made several submissions before the CIT (A). The CIT (A) thereafter allowed the loss claimed by the assessee except to the tune of Rs. 75,000/in respect of the shares of Mysore Cement by holding as under: "11. After going through rival contentions and after personally hearing Shri P.S. Vasava, I am of the opinion that the claim of the assessee with respect to short term capital loss cannot be rejected, this find is supported by following accepted / acceptable facts: (i) The purchases have been made through a share broker, which establishes the purchase along with its purchase value. The As....
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....parties. As per bills of share brokers, full details of the shares involved are available which goes on to prove that the transactions were of specific shares. Once actual delivery is proved, followed by full payments, transactions are just not speculative by any stretch of imagination. I therefore, hold that the short term capital loss is not speculative, either as claimed by the assessing officer. Before the question of sale of shares, whether on market rate or otherwise is decided, it is desirable to reproduce the chart indicating rates pertaining to sale of shares, which is as under: A. Rates at which shares have been sold: Name of Script No. of shares Date of sale Rate of sale Mysore Cement 10000 8.1.92 110.50 UTI Master 85000 16.1.92 28.00 L & T 15000 21.1.92 142.00 B. Actual Prevailing Rates as per B.S.E.: Name of Script Date Opening Rate Highest Rate Lowest Rate Closing Rate Average Rate Mysore Cement 8.1.92 120.00 125.00 117.05 123.75 121.50 UTI Master 16.1.92 27.25 29.00 26.00 27.50 27.56 L & T 20.1.92 134.00 140.00 132.0....
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....rds UTI master and L & T shares, no rate adjustment is called for and loss as claimed of Rs. 15,31,250/is to be allowed in full. Thus, total short term capital loss of Rs. 15,31,250/+ 82,000 ( Rs. 16,13,250/) is directed to be allowed against the claim of Rs. 16,88,250/only." 8.6. Being aggrieved and dissatisfied by the order of the CIT (A), revenue as well as assessee filed appeals before the Tribunal. The Tribunal after considering the submissions and material on record held that the CIT has committed an error by allowing the short term loss claimed by the assessee, though the assessee could not establish the factum of sales made to the associate concern and the transactions were without the intervention of the broker. The tribunal therefore allowed the appeal filed by the revenue rejecting the appeal filed by the assessee, holding as under: "21. We have carefully considered the rival submissions in the light of material placed before us. The assessee is engaged in the activity of sale and purchase of shares. The loss claimed in respect of UTI Master shares and L & T shares is doubted on the ground that without having possession of those shares assessee had sold these....
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....on, the assessee was under an obligation to bring on record the evidence to prove conclusively that shares in particular were actually delivered to GAFL. Not only such evidence of delivery is absent but there is no evidence on record to prove the sale of those shares on alleged dates by the assessee to GAFL. The shares are identifiable items and if they change hands i.e. if their ownership is transferred to somebody else, it is necessary that evidence should be there to prove that change in hands. Thus it cannot be claimed by the assessee that he/ she does not have evidence to prove the factum of sale or purchases. Therefore, producing evidence in this regard was not physically impossible for the assessee and if the same is not produced or no reason has been given for non production of evidence then according to well established principle of law, it will be presumed that assessee's claim is not genuine particularly in the circumstances when onus is on assessee who is claiming the loss to be set off against other income." 8.7. The Tribunal thereafter, referred to the decisions, i.e. (i) in the case of CIT v. Ganga Prasad Birla (HUF) reported in 199 ITR 173 (Cal.), (ii) C....
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....ely established that as assessee had subsequently purchased shares to satisfy the transaction of sale to his/ her sister concern and absence of that quantity of shares in balance sheet or closing stock is indicative of certainty of assessee having delivered the similar quantity of shares to sister concern. Therefore, this contention of assessee is also liable to be rejected. 25. The contention of assessee that GAFL had earned profit on the shares purchased by it from assessee and thus the gain has suffered tax in the hands of GAFL has nothing to do with the loss claimed by the assessee as it has been held, that the sale by the assessee is not supported by conclusive evidence. More so, in case of Patel Chemical Works Vs. CIT (Supra) a decision relied upon by Ld. DR, similar contention was raised on behalf of assessee. The contentions of assessee as recorded by their Lordships of Jurisdictional High Court are as under:- " The learned advocate, Shri J.P.Shah, appearing for the assessee, has submitted that in the instant case the Tribunal has not considered that the amount of tax which is alleged to have been avoided by the assessee; has already been paid by ....
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....cerns had paid tax and if so, how much tax was paid by the sister concerns. We are also of the view that it was not necessary for the revenue to look at the overall effect with regard to receipt of tax by the Revenue before coming to the conclusion whether payment of tax was avoided by the assessee. Thus, in our opinion, the tribunal was right when it came to the conclusion that tax was avoided and for coming to the said conclusion it was not necessary for the tribunal to ascertain whether any loss was caused to the Revenue on account of non-inclusion of income in question in the assessee's assessment and it is inclusion in the assessment of the sister concerns". Viewing the present case in the light of above observations of their Lordships, the contention of assessee that his/ her associate concern had paid tax on the gains, accrued by sales of relevant shares, is irrelevant for deciding the allowability or otherwise of loss shown by the assessee on alleged sale of these shares, as sales have not been conclusively established by the assessee. 26. In view of above discussion, we hold that as assessee could not establish the factum of sales made to his/her associat....
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....ct of shares of Ambuja Port Ltd, he pointed out that assessee had sold 25,000 shares on 29.11.91@ Rs. 45/per share against which purchase were made on 27.12.91 of 23,900 shares @ Rs. 10/and 1100 shares on 1.3.90 @ Rs. 10/. Thus he pleaded that assessee had earned a sum of Rs. 38,500/as long term profit and Rs. 8,36,500/as short term profit. He contended that if Assessing Officer is treating loss as not allowable arising to assessee out of shares of UTI Master Shares and L & T Shares on the ground that sale proceeded the purchase then Assessing Officer cannot treat the profit arising on similar transaction on different footing as the same will be discriminatory." Referring to the above submissions made before the Tribunal, it was pointed out that while considering the issue, the Tribunal has ignored this fact. 9.3. Learned advocate further submitted that, the GAFL has shown profit on sale of shares on which the assessee claimed loss, which has been denied by the Assessing Officer. He referred to the following submissions recorded by the Tribunal in the impugned order made on behalf of the assessee as under: "14. Further he contended that GAFL has shown profit....
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.... aforesaid findings, it was pointed out that, in view of such finding of facts arrived at by the CIT (A), the Tribunal could not have given different finding of facts contrary to record, which is based on the findings arrived at by the Assessing Officer. 9.6. Learned advocate for the appellant placed reliance upon the decision of the Coordinate Bench of this Court in case of Assistant Commissioner of Income-tax v. Biraj Investment (P.) Ltd. reported in (2012) 24 taxman.com 273 (Guj.) to submit that the Court in similar situation has held that simply because the assessee had sold shares to group company at loss during previous year by itself would not mean that it was a colourable device and the loss cannot be allowed to be set off. Reliance was placed upon the following findings of the Court which reads thus: "17. We are not inclined to accept the Revenue's contention that this was a colourable device and that the entire arrangement was a paper arrangement. Firstly, there is no provision in the Act which would prevent the assessee from selling loss making shares. Simply because such shares were sold during the previous year when the assessee had also sold s....
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.... extent the income of the assessee would be diminished and his tax liability reduced. This cannot be regarded as a case of tax avoidance even if the motive of the assessee in making the gift was to save tax on the income from shares at a higher rate applicable to him. 18. Under the circumstances, even without referring to the decision of the Apex Court in the case of Azadi Bachao Andolan (supra)and the observations made in the later decision in the case of Vodafone (supra), we do not find that this a case which would fall within the parameters of the decision in the case of McDowell & Company Ltd (supra)." 10.1. On the other hand, learned advocate for the revenue Mr. Varun K. Patel submitted that the Tribunal has arrived at finding of fact, considering that the copies of vouchers which are self-prepared by the assessee giving the particulars of credit amount, number of shares, rate of sale and name of the company does not inspire confidence, as neither distinctive number nor names of the persons in whose names the shares which were sold were mentioned on such vouchers. It was submitted that, apart from these debit notes and vouchers, there is no material on rec....
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....usiness or profession; (ii) personal effects, that is to say, movable property (including wearing apparel and furniture) held for personal use by the assessee or any member of his family dependent on him, but excludes- (a) jewellery; (b) archaeological collections; (c) drawings; (d) paintings; (e) sculptures; or (f) any work of art. Explanation 1.-For the purposes of this subclause, "jewellery" includes- (a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semiprecious stone, and whether or not worked or sewn into any wearing apparel; (b) precious or semiprecious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel. Explanation 2.-For the purposes of this clause- (a) the expression "Foreign Institutional Investor" shall have the meaning assigned to it in clause (a) of the Explanation to section 115AD; (b) the expression "securities" shall have the meaning assigned to it in clause (h) of ....
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....hereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment; or (iva) the maturity or redemption of a zero coupon bond; or (v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a cooperative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. Explanations: 1. For the purposes of subclauses (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA. 2. For the removal of doubts, it is hereby clarified that "transfer" includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or....
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....uld be corresponding sales or the shares should form part of the closing stock and because the shares are not part of the closing stock, the inference was drawn that corresponding sale is also genuine. As against that, the Tribunal has relied upon only the evidence which is debit note prepared by the assessee which was produced on record. On perusal of such debit note, it was found by the Tribunal that the same were self-prepared giving only the particulars of the credit amount, number of shares, rate of sale and name of the company, without there being any particulars of shares i.e. distinctive number or names of the persons in whose names those shares were standing, etc. Moreover, the Tribunal has also found as a matter of fact that there is no material on record to prove that the shares were actually delivered by the assessee to the GAFL even subsequently as there is total absence of any document to remotely indicate such fact. The Tribunal has also found that there is no matching of the shares which were sold and purchased subsequently through some share brokers. It was also found that, even in the broker's voucher, distinctive numbers of those shares were not given and the ....
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....ed, even if otherwise unobjectionable, was inoperative to assign any interest to the respondent and his two coassignee's." 13. Therefore, in view of the aforesaid dictum of law and considering the provision of Sections 2(14) r/w. 2 (47) of the Act, 1961, if the estate or interest which it purported to assign had at the date of the deed did not exist, it is well settled that neither at law nor in equity can the assignment of such an interest operate according to its tenor. Similarly, in the facts of the case, when the shares were not in existence on the date of sale, then the same could not have been considered as capital asset, so as to fall within the definition of transfer under Section 2 (47) of the Act. 14. The Madras High Court in the case of Chief Controlling Revenue Authority, Madras, Referring Officer v. Sudarsanam Picture, Madras18 reported in AIR 1968 Madras 319, in the context of Transfer of Property Act has held as under: "(5) The word "conveyance" is used in this definition in a wide sense so as to include sale, mortgage, charge, lease, etc. As will be seen presently, it is settled law that while a transfer of property may take place not only in the ....
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....there can be no transfer of property which is not in existence at the date of the transfer." If there can be no transfer in praesenti of property not in existence, it stands to reason and follows that there can be no creation of a right over, or in respect of such property. In our view, the principles that govern the construction of the word 'transfer' in relation to property under the Transfer of Property Act, would equally apply to the transfer or creation of right provided under the definition "mortgage deed" in Sec. 2(17) of the Stamp Act. The Lahore High Court in Miran Baksh v. Emperor, AIR 1945 Lah 69 (SB) on a Stamp Reference observed: "A transfer of property that is not in existence operates as a contract to be performed in future which may be specifically enforced as soon as the property comes into existence, but it does not operate as a transfer. I am of opinion that the same principles must govern the construction of the words 'transfer' and 'property' used in Section Page 32 of 41 Downloaded on : Wed Nov 11 12:06:32 IST 2020 C/TAXAP/194/2008 JUDGMENT 2(17) of the Stamp Act, and in order that a document by which property is trans....
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....nsfer of Property Act. Apart from the stock-in-trade, there were other items of properties and immoveable property comprised in the transaction, all one and indivisible, and the instrument was unattested. While holding, in the circumstances, that there was no mortgage, their Lordships pointed out that to make a document liable to stamp duty as a mortgage deed it was not enough if the document purported to effect a transfer, but that it must transfer. Authority for the view that stock-in-trade is 'specified property' under Sec. 2(17) is not authority for the position that future property could be the subject of immediate transfer. Stock-in-trade is not future property. If stock-in-trade is mortgaged, there is existing property for the transfer to act upon, the security takes in all the effects then available as stock-in-trade. No doubt substituted property may be effectually included in the security by apt words, which can be found and are usually found in mortgages of stock, machinery, plant and the like where the subject-matter may change from day to day. It is a matter of construction of the deed whether effects subsequently brought in on the promises for the pur....
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....ards becomes possessed of property answering the description in the contract, there is no doubt that a Court of Equity would compel him to perform the contract, and that the contract would, in equity, transfer the beneficial interest to the mortgagee or purchaser immediately on the property being acquired." The equitable principle flowing from the above that equity treats as done what ought to be done does not make out any new contract between the parties or alter the true character of the original instrument." 15. Similarly, in the case of Patel Brass Works v. Commissioner of Income Tax reported in (2006) 286 ITR 598 (GUJ.), in case of claim of capital loss on cancellation of order of supply of machinery, it was held that, the claim of the assessee for loss on account of cancellation charges as business loss or in alternative as short term capital loss cannot be allowed as there was no capital asset existing in the hands of the assessee and there was no transfer within the meaning of Section 2 (47) of the Act, 1961, as under: "6. The Scheme of the Act envisages a conjoint reading of provisions of Sections 45, 2(47) and 2(14) of the Act. Under section 45 of the....
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.... to perform its part of the contract, the only right that could come into existence would be a right to sue for specific performance, and in the alternative, claim damages. However, in the present case, it was the assessee who was not willing to perform its part of the contract. Therefore, to claim that the assessee was in possession of a right which could be termed to be a capital asset within the meaning of section 2(14) of the Act, cannot be accepted and the Tribunal was justified in holding that the assessee was not in possession of any capital asset. 9. As already seen hereinbefore, the assessee was not holding any capital asset so as to enable the assessee to claim extinguishment of any rights in such a capital asset. Whether extinguishment per se is sufficient or whether it could operate as distinct and independent of transfer of a capital asset is not the issue in the present case, and hence, the decision in case of C.I.T. v. Mrs. Grace Collis (supra) relied upon by the learned advocate for the assessee, cannot carry the case of assessee any further. Even if the contention that extinguishment by itself is sufficient to constitute transfer is accepted, none....
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....al share certificates to its purchaser along with the duly signed transfer forms, but by itself it would not establish that the sale of shares was only a paper transaction and a device contrived by the assessee to claim loss which it did not suffer. However, in the facts of the case, the assessee was not having either the possession or the ownership of the shares which were sold to GAFL. Moreover, it is also finding of fact arrived at by the Tribunal that there is no evidence as to the actual delivery or the time of receipt of sale consideration by the assessee. In such circumstances, in view of the settled legal position as held by the Supreme Court in case of Omar Salay Mohamed Sait v. Commissioner of Income Tax, Madras reported in (1959) 37 ITR 151 (SC), the Tribunal which is a fact finding authority, has arrived at its own conclusion of facts after due consideration of the evidence before it, therefore, this Court will not interfere. The Supreme Court held as under: "34. We are aware that the Incometax Appellate Tribunal is a fact finding Tribunal and if it arrives at its own conclusions of fact after due consideration of the evidence before it this court will no....