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Issues:
1. Validity of transfer of shares of a sick mill to a finance company for claiming capital loss. 2. Legality of share transfer without entry in company's share register. Analysis: The case involved a dispute regarding the transfer of shares of a sick mill to a finance company and the subsequent claim of capital loss by the assessee. The Income Tax Officer (ITO) initially rejected the claim, considering the sale transaction as a sham due to the low value of the shares and lack of entry in the share register. The Appellate Assistant Commissioner (AAC) also denied the claim, emphasizing the absence of entries in the share registers of the companies. However, the Tribunal ruled in favor of the assessee, citing the Supreme Court's decision in Shelat v. Thakar, which established that the transfer of shares is complete between the parties even without registration in the company's books. The Tribunal held that the assessee was entitled to the capital loss adjustment based on this principle. The Revenue challenged the Tribunal's decision by raising two questions for the High Court's opinion. The Revenue argued that the transfer of shares cannot be considered complete without registration in the company's share registers, relying on legal precedents and company law principles. However, the High Court referred to the Supreme Court's ruling in Shelat v. Thakar, which clarified that the transfer of shares is valid between the transferor and transferee once all formalities are fulfilled, even if not registered with the company. The High Court noted that in the present case, the transfer forms were signed and handed over to the transferee, who sought registration, indicating a valid transfer process. As the company did not refuse to recognize the transfer and only cited temporary unavailability of registers, the High Court upheld the Tribunal's decision based on the Supreme Court's precedent. In conclusion, the High Court dismissed the Revenue's petition, affirming the Tribunal's decision to allow the assessee's claim for capital loss adjustment. The judgment clarified that as per the legal principles established by the Supreme Court, the transfer of shares can be considered complete between the parties even without immediate registration in the company's share registers, as long as all necessary formalities have been fulfilled.
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