2015 (8) TMI 1424 - HC - Income Tax

Bogus transactions - loan was converted into OCPS - Held that - The court finds that the Income-tax Appellate Tribunal has given cogent reasons why in the facts and circumstances the transaction in question cannot be held to be bogus as Tribunal pointed out that with no significant event having taken place, except redemption of the 2 per cent. RCPS, there was no basis for the Assessing Officer to have concluded that the entire transaction to be bogus. The Income-tax Appellate Tribunal further noted that the Assessing Officer called for information from JPL under section 133(6) of the Act but was unable to find any material to conclude that the transaction between the respondent-assessee and the JPL was bogus. - Decided against revenue.

Summary

Issues:
Assessment of long-term capital loss on redemption of shares without STT payment and listing on stock exchange.

Analysis:
The appeal under section 260A of the Income-tax Act, 1961 challenged the order passed by the Income-tax Appellate Tribunal regarding the assessment year 2006-07. The respondent-assessee, a non-banking finance company, claimed carry forward of a long-term capital loss of &8377; 41,81,03,448 on the sale of 2 per cent. Redeemable Convertible Preference Shares (RCPS) of a sister concern, Jindal Polyfilms Ltd. The shares were not listed on any stock exchange, and no Security Transaction Tax (STT) was paid on them.

The Tribunal reversed the finding of the Commissioner of Income-tax (Appeals) and held that the transaction in question could not be deemed bogus. It was noted that previous transactions involving the conversion of shares were not considered sham or bogus by the authorities. The Tribunal highlighted that the Assessing Officer did not find any material to conclude that the transaction was bogus, even after seeking information from Jindal Polyfilms Ltd. under section 133(6) of the Act.

After considering the submissions and orders of the authorities, the High Court found that the Tribunal provided valid reasons for not deeming the transaction as bogus. The Court concluded that there was no perversity in the Tribunal's order and dismissed the appeal, stating that no substantial question of law arose for determination in this case.