9911796707
|
Home
Issues:
Appeal against deletion of disallowance of long term capital loss incurred on sale of shares. Analysis: The case involved an appeal by the revenue against the deletion of disallowance of long term capital loss incurred by the assessee on the sale of equity shares in a sister concern. The Assessing Officer disallowed the loss based on the Official Liquidator's opinion and the Companies Act, stating the transfer of shares was void. The assessee argued that the transfer was genuine, involving property rights, and relied on previous ITAT decisions. The CIT(A) allowed the long-term capital loss, citing the ITAT decision in another case. The ITAT noted the winding-up order of the sister concern and the Companies Act provisions that rendered the transfer void. The definition of 'contributory' under the Companies Act was discussed, emphasizing the rights of fully paid-up shareholders in a winding-up scenario. The ITAT concluded that the transfer of shares was not valid in the eyes of the law, reversing the CIT(A)'s decision. The ITAT highlighted that the transaction involved encumbered shares and residuary rights, which could not be quantified under the Income-tax Act. Referring to legal precedents, the ITAT emphasized the need for transactions to align with the provisions of the law. The ITAT differentiated the present case from previous judgments where full property rights were transferred. The ITAT upheld the Assessing Officer's decision, disregarding the loss from the share transfer. The ITAT also noted the absence of discussion by the CIT(A) on the potential tax-saving aspect of the transaction, considering it a possible subterfuge. Despite this, the ITAT did not delve into this aspect further due to the already rendered decision. The ITAT allowed the revenue's appeal, emphasizing the peculiar circumstances of the case involving a sick company undergoing liquidation. In conclusion, the ITAT ruled in favor of the revenue, reversing the CIT(A)'s decision to allow the long-term capital loss. The judgment highlighted the legal provisions of the Companies Act, the nature of the share transfer, and the need for transactions to align with the law. The potential tax-saving motive behind the transaction was acknowledged but not explored further due to the already decided outcome.
|
