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TMI Blog2016 (4) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... al or HUF. Since the assessee in question is an AOP and not any individual or HUF, who received a sum of ₹ 1.60 crore without consideration, such a receipt in our considered opinion cannot be included in its total income within the framework of section 56(2)(vi). We, therefore, set aside the impugned order on this score and order for the deletion of this addition. - Decided in favour of assessee Disallowance of loss - AO has disallowed the loss by treating the transactions of sale of shares by the assessee to its trustees as sham and tax avoidance device - Held that:- loss arising from transfer of shares etc., held as long term capital assets, on which no STT is paid because of off-market sale transaction, does not fall within purview of section 10(38) and consequently becomes eligible for set off and carry forward as per the other relevant provisions. This is a lacuna in the provision which has been lawfully exploited by the assessee by transferring shares held as long-term capital assets through off market transactions resulting into genuine loss and thus escaping the rigor of the exemption provision contained in section 10(38), which would have otherwise disentitled it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Mridul Hari Dalmia; mother of Shri Gaurav Dalmia and Smt. Kanupriya Somani; and grandmother of Km. Devanshi Dalmia, Master Aryman Hari Dalmia and Km. Ananya Priya Dalmia. He noticed the beneficiaries of the trust to be the relatives of the donor. Provisions of section 56(2)(vi) of the Act were invoked. In this regard, the assessee was found to be admittedly a beneficiary trust assessed in the status of AOP and, hence, neither a firm nor a company. The AO further noticed that the assessee received a gift of ₹ 1.60 crore through cheque from Mrs. Abha Dalmia, which was not a property. As the transaction of gift was executed on 18.9.2009, i.e., prior to the date of 1st June, 2010, the AO held that the claim of exemption by the assessee u/s 56(2)(vi) was not acceptable. After analyzing the provisions of section 56(2)(vi), the AO held that exemption of a gift depended upon fulfillment of certain conditions, viz., firstly the recipient of the gift should be an individual or HUF, secondly, the donor should be covered in the list of persons mentioned in the proviso and covered by the Explanation thereof and, thirdly, the gift should be made on the occasion of marriage or receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to income-tax under any of the heads specified in section 14, items A to E. Then comes subsection (2) of section 56 which provides in particular and without prejudice to the generality of the provisions of sub-section (1) that the incomes discussed under various clauses of this sub-section shall be chargeable to income-tax under the head Income from other sources. Clause (vi), which is relevant for our purpose, reads as under : - (vi) where any sum of money, the aggregate value of which exceeds fifty thousand rupees, is received without consideration, by an individual or a Hindu undivided family, in any previous year from any person or persons on or after the 1st day of April, 2006 but before the 1st day of October, 2009, the whole of the aggregate value of such sum: Provided that this clause shall not apply to any sum of money received- (a) from any relative; or (b) on the occasion of the marriage of the individual; or (c) under a will or by way of inheritance; or (d) in contemplation of death of the payer; or (e) from any local authority as defined in the Explanation to clause (20) of section 10; or (f) from any fund or foundation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived as gift from any relative as defined in the Explanation, that shall not be chargeable to tax u/s 56(2)(vi). Coming back to the aforenoted four conditions bringing receipt within the charging provision, we find that the first condition, namely, receipt of money in excess of ₹ 50,000/- is satisfied. The second condition is that such amount should be received without consideration. This condition is also satisfied because the assessee trust received a sum of ₹ 1.60 crore from Smt. Abha Dalmia as gift, which is obviously without any consideration. The fourth condition about the receipt of such amount from any person or persons before the designated date is also satisfied. Now we espouse the third condition as per which the receipt of such sum should be by an individual or HUF. This condition is obviously wanting because as per the AO s own version the status of the assessee is association of persons, which is other than an individual or HUF. Section 2(31) defines person as including (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not,(vi) a local authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res were sold happened to be the trustees and also the beneficiaries of the assessee trust, the AO came to hold that such off-market sale transactions were done intentionally to claim benefit of long-term capital loss. On being called upon to justify the claim, the assessee submitted that these shares were purchased and held for a period of more than one year and, hence, were long-term capital assets, which the AO did not dispute. The assessee then argued that such shares, held as investment, were sold at prevailing market rates. In support of this contention, the assessee furnished copies of Quotations of these shares for the dates on which such transfers were made. These quotations have been reproduced on page 5 of the assessment order. The AO observed that the shares were sold at the `Closing price rather than the Highest price of the day . The assessee s contention that the shares were transferred on the respective dates from the demat account of the assessee trust to the demat accounts of the buyers, who made payment of the requisite sale consideration through banking channel, did not convince the AO to accept the genuineness of the transactions. He felt that if these transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing rate of ₹ 690.45. Similarly, for shares of Reliance Communications Ltd., quotation as on 7.12.2009, being the date of sale, had the highest price of ₹ 182/- as against the closing price of ₹ 178.95. It is further noticeable that the lowest quotation of Bajaj Hindustan Ltd. on that day was ₹ 47.50; that of Tata Consultancy Ltd. at ₹ 660/-; and that of Reliance Communications Ltd. at ₹ 175.85. We fail to understand any logic behind the AO considering the highest rates as relevant and ignoring the lowest or the opening or closing rates. As the assessee sold the shares at the closing rates of the respective sale dates, which lie somewhere between the highest and lowest rates of the day, the same cannot be considered as unreasonable by any standard. This demonstrates that the shares were sold by the assessee at the prevailing market rates. It is further evident that even though these were offmarket sale transactions, but, the actual transfer of shares took place on respective dates from the demat account of the assessee trust to the demat accounts of the transferees. It is further undisputed that payment of sale price was made by transferees which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and thus neither qualifies for set off against other chargeable incomes nor can be carried forward for a future set off against any other income chargeable to tax. This is on the principle of equality that if positive income from a source is not to be taxed, then on parity, the negative income from the same source should also not get an advantage of set off or carry forward. On the other hand, in the case of a deduction provision, the positive income from the designated source first enters into computation of income, but is then deducted in terms of the eligibility of deduction. In the like manner, if there is a negative income from that designated source, then such loss after entering into computation of income becomes eligible for set off against the other positive incomes subject to other relevant provisions. Here again the principle of equality applies. The essential difference between an exemption and a deduction provision thus lies in the fact that whereas income (both positive and negative) from an exemption provision does not enter into computation of income at all and is totally ignored, income (both positive and negative) from a deduction provision enters into computati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant provisions. This is a lacuna in the provision which has been lawfully exploited by the assessee by transferring shares held as long-term capital assets through off market transactions resulting into genuine loss and thus escaping the rigor of the exemption provision contained in section 10(38), which would have otherwise disentitled it to claim set off and carry forward of such a loss. The AO has held these off-market sale transactions as a colorable device and tax avoidance scheme adopted by the assessee to evade payment of legitimate tax due to the exchequer. In our considered opinion, this is a glaring example of tax planning rather than the tax avoidance as has been held by the AO. In view of the fact that the assessee entered into valid transactions of transfer of shares of Bajaj Hindustan Ltd., Tata Consultancy Ltd. and Reliance Communications Ltd. to Shri M.H. Dalmia and Smt. Abha Dalmia, we hold that the loss suffered on such transactions is a genuine loss which cannot be disallowed as it does not fall within the ambit of section 10(38) because of non-payment of STT. Overturning the impugned order on this issue, we direct the allowing of carry forward of loss amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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