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The Tax Publishers2020 TaxPub(DT) 0717 (Ahd-Trib) INCOME TAX ACT, 1961
Section 263
Sale of shares at face value was out of mutual understanding and by consent of all the directors because 'fellow Director Mr. 'A', i.e., the vendee was instrumental in getting the investor who contributed a lot for benefit of company. Accordingly, there was no illegality in transfer of shares at face value, i.e., Rs. 10 per share and order passed by Pr. CIT under section 263 was set aside.
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Revision under section 263 - Erroneous and prejudicial order - Pr. CIT alleging understatement of long-term capital gain on sale of shares to fellow director -
Assessee was a director of Eris Life Sciences Pvt. Ltd. a closely-held company. He sold 3025 shares of Eris Life Sciences Pvt. Ltd to Mr. 'A' who was also a promoter of Eris Life Sciences Pvt. Ltd. The date of sale was 29-8-2011 and shares were sold @ face value, i.e., Rs. 10. However, on the same date, assessee sold 2021 shares to M/s Botticelli a company incorporated in Mauritius, at Rs. 87,217 per share. Pr. CIT invoked jurisdiction under section 263 on the ground that shares sold to fellow director were highly undervalued, and long-term capital gains on sale of 3025 shares to 'A' was under stated, thereby led to under-reassesmsent of long-term capital gain.Held: Sale of shares at face value was out of mutual understanding and by consent of all the directors because 'fellow Director Mr. 'A', i.e., the vendee was instrumental in getting the investor who contributed a lot for benefit of company. Accordingly, there was no illegality in transfer of shares at face value, i.e., Rs. 10 per share and order passed by Pr. CIT under section 263 was set aside.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2012-13
IN THE ITAT, AHMEDABAD C BENCH
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