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TMI Blog2018 (4) TMI 382X X X X Extracts X X X X X X X X Extracts X X X X ..... ve rise to the presumption that the transaction was in the nature of colourable device. We notice that the assessee has taken indexed case of acquisition of share at ₹ 30,40,400/-. AO has not examined the same and accordingly direct him to verify the computation given by the assessee and allow set off of correct amount of Long Term Capital Loss against Long Term Capital Gain. - Decided in favour of assessee. - ITA No. 7410//Mum/2012 - - - Dated:- 9-3-2018 - SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER For The Assessee : Sh. Harish M. Kapadia Advocate For The Revenue : Sh. V. Vidhyadhar (Sr.DR) Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee under section 253 of Income-tax Act is directed against the order of Commissioner (Appeals)-35 Mumbai dated 4th September 2012, which in turn arises from assessment order passed under section 143(3) on 26 December 2008 for assessment year 2006-07. The assessee has raised following grounds of appeal; ( 1) The Hon ble Commissioner of income tax (Appeals) erred in confirming the order of learned assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner (Appeals), (page No. 74 of PB). It was submitted that transactions is genuine, merely because the assessee has claimed setoff of capital loss against the capital gain earned during the same period, which cannot be said to be a colourable device or method adopted by assessee to avoid the tax. Transactions of sale of share were genuine and transacted at a proper valuation. The lower authority has not disputed the genuinity of transaction. All the transactions carried by assessee are valid in law, and cannot be treated as non-est merely on the basis of some economic detriment or it may be prejudicial to the interest of revenue. The learned AR of the assessee further submits, mainly because the period co-existed or permitted the assessee to set off her capital loss against the capital gain earned itself would not give rise to the presumption that the transaction was in the nature of colourable device. In support of his submission his submissions the reliance is made on the following case law ; ( i) CIT Vs George Henderson Co Ltd 66 ITR 622 (SC ) ( ii) K.P. Verghese versus ITO 131 ITR 597(SC) ( iii) Union of India versus Azadi Bachao Andolan 263 ITR 706(S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Rules 1957. Total asset of Company as on 31.03.2005 Rs.1,55,69,651/- Less: Total liability of the company as on31.03.2005 Rs.509,68,050/- Rs. (-) 35368050/- Total no. of Shares 25,000 Value of the Equity Shares (-) Rs.141/95/- per shares Breakup value per share being 80% of above (-) ₹ 1699/13/- As against the same, the assessee has sold the shares @ ₹ 100/- per shares which is face value of each equity share. 6. The assessee also furnished the copy of Income tax return of her son showing the investments in shares, copy of share transfer form and share certificate and copy of bank statement to substantiate the genuinity of transaction. The ld CIT(A) confirmed the action of the assessing officer on similar lines. We have noted that the lower authorities have not disputed the working of valuation of shares. The grounds for denial of set off of Long-term capital loss against the long- te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell s decision leave us in no doubt that the principle enunciated in the above case has not affected the freedom of the citizen to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs with circumspection, within the framework of law, unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a subterfuge clothed with apparent dignity. 18. The aforesaid discussion would show that once the transaction is disqualification. Hon ble the Supreme Court in the concluding paras of its judgment in Azadi Bachao Andolan s case (supra) has rejected the as non est merely on the basis of some underlying motive supposedly as per the perception of the revenue. The aforesaid view looks to be the correct view. It has ready support from the Division Bench judgment of this Court rendered in the case of Satya Nand Munjal ( supra) and the Division Bench judgment of Orissa High Court in the case of Industrial Development Corpn. of Orissa Ltd. (supra) and various other judgments of Delhi and Madras High Courts (supra). 20. When the principles laid down in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rket value' to 'full value of consideration'. These used in the Income Tax Act and fair market value cannot be substituted in place of full value of consideration, unless it is specifically empowered by the Act. The AO has also wrongly relied on section 2(22B)(i), which is as under: the fair market value, in relation to a capital assets, means - (i) the price that the date . This fair market value substitution is applicable only to the situation where the AO is empowered to determine the fair market value under the Act. for the full value of consideration.. 16. The Hon'ble Supreme Court in CIT vs. George Henderson and Co. Ltd. (1967) 66 ITR 622 (SC) on the issue that the market value of the shares which were allotted at ₹ 136/- per share was ₹ 620/- per share considered the expression full value of consideration as occurring in section 12B(2) of the has held as under:- ............ It is manifest that the consideration for the transfer of capital asset is what the transferor receives in lieu of the asset he parts with, namely, money or money's worth and, therefore, the very asset transferred or parted with cannot be the consideration fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indirectly connected with the transferee, and(2) that the transfer was effected with the object of avoidance or reduction of the liability of the assessee under section 12B. If the conditions of this proviso are not satisfied the main part of section 12B(2) applies and the Income-tax Officer must take into account the full value of the consideration for the transfer. 17. In CIT vs. Gillanders Arbuthnot Co. (1973) 87 ITR 407 (SC) Their Co. Ltd. supra has observed and held as under ( page 419):- Now let us see what is the impact of section 12B(2) on the transaction? Under that provision, the amount of capital gains has to be computed after making certain deductions from the full value of the consideration for which the sale is made. What exactly is the meaning of the expression full value of the consideration for which sale is made ? It is the consideration agreed to be paid or is it the market value of the consideration ? In the case of sale for a price, there is no question of any market value unlike in the case of an exchange. Therefore, in case of sales to which the first proviso to sub-section (2) of section 12B is not attracted, all that we have to see is what i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. It is, therefore, clear that sub-section (2) cannot be invoked by the revenue unless there is understatement of the consideration in respect of the transfer and the burden of showing that there is such understatement is on the revenue. Once it is established by the revenue that the consideration for the transfer has been understated or, to put it differently, the consideration actually received by the assessee is more that what is declared or disclosed by him, sub-section (2) is immediately attracted, subject, of course, to the fulfillment of the condition of 15 per cent or more difference, and the revenue is then not required to show what is the precise extent of the understatement or, in other words, what is the consideration actually received by the assessee. That would in most cases be difficult, if not impossible, to show and hence sub-section (2) relieves the revenue of all burden of proof regarding the extent of understatement of concealment and provides a statutory measure of the consideration received in respect of the transfer. It does not create any fictional receipt. It does not deem as receipt something which is not in fact received. It merely provides a statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no concealment or suppression of the consideration........... 19.. In Rupee Finance Management (P) Ltd. (2008) 22 SOT 174 (Mum); (2009) 120 ITD 539 (Mum) it has been held in penultimate para of the order that: As already held in the order of Rupee Finance Management Pvt. Ltd. there is no allegation much less, any evidence to show that these assesses before us have received monies in excess of amounts of sale consideration recorded and disclosed in the transaction for the sale of shares. The first appellate authority has rightly noted that under section 48 the starting point for computation of capital gains is the amount of full value of consideration received or accruing as a result of transfer of the capital asset. The Hon'ble Supreme Court in the case of K.P.Varghese (supra) held that sub-section (2) of section 52 can be invoked only when the full value of the consideration is received in respect of a transfer is shown at a lesser figure than that which is actually received by the assessee. It further laid down that the burden of proving such understatement of consideration is on the revenue and that the sub-section has no application in the case of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ull value of the sale price received by the assessee was only ₹ 0.10p Per share and, hence, the short term capital loss shown by the assessee at ₹ 5,21,28,059/- is accepted and the order passed by the Assessing Officer and the ld. CIT(A) in this regard are set aside. The grounds taken by the assessee are, therefore, allowed and the grounds taken by the revenue are rejected. 21. In view of the above, we have no hesitation in allowing the grounds raised capital gains or losses accordingly. The orders of the AO and the CIT(A) to that extent are modified. Ground is allowed. 11. The coordinate bench of the Tribunal on similar facts in ACIT Vs Turner Morrison Co. Ltd [1993] 47 ITD held as under ( we are extracting the entire fact as the fact of the case is almost similar) ; 2. The appeal arises this way. During the year, the assessee sold a flat in Bombay and there was a capital gain of ₹ 35,70,661. On 24-12-1985 the assessee sold two lakh equity shares of M/s. Grahmas Trading Co. (I) Ltd. and 10,500 equity shares of M/s. Shalimar Works Ltd. The cost price of these shares (Rs. 10 face value) was ₹ 24,05,332 and ₹ 13,40,514. These shares we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been said against it. No facts have been brought on record to impeach the genuineness of the sale of shares. If so much is granted, there is nothing liability in respect of the capital gains. The doctrine laid down in MeDowell does not apply to the cases like the present one in M.V. Valliappan v. ITO [1988] 170 ITR 238, the Madras High Court held that McDowell Co. Ltd. s case ( supra ). In that case a partial partition section 171(9) of the Act. any partial partition effected after 31-12-1978 cannot be recognised by the ITO. The provisions of section 171(9) were challenged as being violative of Article 14 of the Constitution of India. McDowell s case. It was while repelling the above defence that the Justice M.N. Chandurkar, held that a real and genuine transaction which of McDowell Co. Ltd. ( supra ). In Union of India v. Play world Electronics (P.) Ltd. [1990] 184 ITR 308 the Supreme Court has held that the law. In the present case it can hardly be suggested that the assessee cannot take advantage of the provisions of the Income-tax Act to claim set off of the capital loss against the capital gain. The department would transaction if it were to so suggest. But ..... X X X X Extracts X X X X X X X X Extracts X X X X
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