TaxTMI 
TaxTMI 
2023 (4) TMI 153
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.... of Ld.CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored. 3. The appellant craves leave to amend or to alter any ground or add a new ground, which may be necessary." 3. The only grievance of the Revenue, in the present appeal, is against the allowance of Short term capital loss on the sale of shares of M/s I Dream Production Pvt. Ltd. 4. We have considered the rival submissions and perused the material available on record. The brief facts of the case are that the assessee is an individual and for the year under consideration, the assessee filed her return of income on 07/07/2010 declaring a total income of Rs.1,43,63,702. During the assessment proceedings, it was observed that the assessee has withdrawn Rs.26.50 crores deposited in the Capital Gains Deposit Scheme under section 54F of the Act in Union Bank of India, Mumbai, and Dena Bank, Mumbai. However, the commensurate tax was not paid before the end of the relevant financial year. It was further observed that the assessee had incurred huge short-term capital loss in dealing in shares of M/s I Dream Production Pvt. Ltd. in which the assessee has held nearly 99.99% of shares except one sha....
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....d the price at which shares have to be issued, which is the prerogative of the board of directors of the company. Thus it is the case of the Revenue that the assessee had manipulated her accounts and the losses so generated were nothing but a colourable device for lowering of the tax burden, which tantamount to tax evasion. Accordingly, the AO assessed the total income of the assessee at Rs.24,87,91,087, after ignoring the short-term capital loss of Rs.24,88,84,703 on sale of shares of M/s I Dream Production Pvt. Ltd. 5. The learned CIT(A) agreed with the submissions of the assessee and vide impugned order allowed the appeal filed by the assessee, by observing as under:- "15. I have carefully considered the submissions made by the appellant and the enclosures along with it. I have also gone through the findings made by the AO in his order. My observations are as under- 16. The AO has primarily rejected the claim of the appellant regarding short term capital gain as he found investment in the shares of M/s I. Dream Production Pvt. Ltd. at a premium of Rs. 90 per share i.e., @ Rs. 100 per share, a colourable device to save the tax knowing fully well that the net worth of the sai....
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....ers of the company for AYS 2009-10 and 2010-11 that the company was regularly assessed to tax and huge losses incurred in these years were duly accepted in the scrutiny assessments by the respective AOs. Therefore, there is no merit in the findings of the AO that there were manipulations in the accounts of the said company. It is highlighted by the appellant that her claims made in the preceding 3 years have been regularly accepted in the scrutiny assessments made in her own case. 19. Now coming to the applicability of the decision of Supreme Court decision in the case Mc Dowell & Co. Ltd. vs. Commercial Tax officer (1985) 154 ITR 148(SC) to the facts of the instant case, I find that the observation of the AO that artificial loss in capital gain was created by the appellant was not correct. It is actual loss suffered by the appellant while subscribing to the shares of the company. In this regard, the appellant has relied upon a no. of judgments which touches on the core issue of this case. Para 215 of the Hon'ble Supreme Court decision in the case of Vodafone International Holding BV vs UOI (341 ITR 1) (SC) is worth reproducing here. "Revenue cannot tax a subject without a ....
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....ntroduce the funds in the aforesaid company by way of subscribing to the additional share capital, out of which the liabilities were cleared. Accordingly, the assessee withdrew Rs.26.50 crores from the Capital Gains Deposit Scheme and invested in the aforesaid company by way of subscribing to the preferential shares. It is undisputed that as on 31/03/2010 the current liabilities of the company, including bank overdraft, which stood at Rs.20.35 crores as on 31/03/2009, were reduced to Rs.60.82 lakhs. Even if AO's own findings are accepted that the value of shares was increased from (-) Rs. 1858 as on 01/04/2009 to (-) Rs. 0.48 as on 31/03/2010, the benefits of funds, infused by the assessee, to the financial position of the company are clearly evident. 7. As noted above, the allegation of the Revenue is that the assessee by investing a huge amount in a loss-making entity and thereafter selling the shares at a meagre amount has tried to take advantage of her position in the aforesaid company to reduce her tax liability and thus the entire transaction is a colourable device. In this regard, it is pertinent to note that M/s I Dream Production Pvt. Ltd. is a private limited company, wh....