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| The Tax Publishers2019 TaxPub(DT) 7955 (Ahd-Trib) INCOME TAX ACT, 1961
Section 45
It was not the case of revenue that shares were sold at a price lower than market rate. If that be so, the question of inflating loss by transferring shares to group company did not arise not really suffer. In the instant case, it was not even the case of revenue that shares were sold at a price lower than market rate. If that be so, the question of inflating loss by transferring shares to group company did not arise. Thus, it was clear that only because of the reason that shares were sold to related parties, the transaction was held to be colourable device in order to evade tax though entire books of accounts were placed before AO, where entire transaction was reflected. There is no provision in the Act which would prevent assesee from selling loss making share even in the facts and circumstances of the instant case. Accordingly, AO was directed to allow long-term capital loss to assessee.
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Capital gains - Long-term capital loss on sale of shares to group companies below cost of acquisition of shares - AO held the transaction to be colourable device to evade tax -
Assessee sold certain shares to its group companies and claimed capital loss. AO noticed that there was a huge difference between purchase and sale price of the above shares and transactions involved in such sale and purhcase of shares were off-market transactions. Also, assessee had not entered into any agreement with group companies nor any timeline was decided for puchase of concerned shares and not even the number of shares and prices at which shares were required to be transferred. Accordingly, AO held that transaction of purchase and sales of shares within the group was a mere artifice or device so as to reduce tax liability of assessee-company and hence capital loss could not be allowed. Assessee's case was that shares were acquired by assessee with a view to earn profit in future on sale but due to bad economic condition in western countries more particularly USA which had contributed significantly portion of revenue for the investee company, assessee thought it fit to sale such shares even at loss. Further valuation was done by way of negotiations having regard to the financial position of company, and its future.Held: Under ordinary circumstances, it is always open to assessee in his own wisdom to either hold on to certain bunch of shares or to sell the same to avoid further loss, if he finds that market value of shares is fast diminishing. As long as revenue could not doubt sale price of shares, it would not be open for revenue to contend that assessee had shown loss which it did not really suffer. In the instant case, it was not even the case of revenue that shares were sold at a price lower than market rate. If that be so, the question of inflating loss by transferring shares to group company did not arise not really suffer. In the instant case, it was not even the case of revenue that shares were sold at a price lower than market rate. If that be so, the question of inflating loss by transferring shares to group company did not arise. Thus, it was clear that only because of the reason that shares were sold to related parties, the transaction was held to be colourable device in order to evade tax though entire books of accounts were placed before AO where entire transaction was reflected. There is no provision in the Act which would prevent assesee from selling loss making share even in the facts and circumstances of the instant case. Accordingly, AO was directed to allow long-term capial loss to assessee.
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