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TMI Blog2018 (6) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... has not in any manner shown that the consideration disclosed by the respondent assessee to the revenue is not the correct consideration received by them and that the same should be replaced. Long term loss on sale of shares cannot be allowed to be non-genuine and therefore, we direct the AO to allow the set off such loss against the long term capital gain on compensation received by the assessee upon surrender of tenancy rights by setting aside the order of CIT(A) on this issue.- Decided in favour of assessee. Penalty u/s 271(1)(c) - Held that:- Since, we have allowed the long term capital loss on sale of shares to be genuine and allowable to be set off against the compensation received from surrender of tenancy rights and thus allowed the appeal of the assessee in quantum appeal. Consequently, the penalty as levied u/s.271(1)(c) does not survive. X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 341700 1771231 1429531 Total 9388440 1877688 9733156 7855468 4. According to AO, the assessee has sold its share holdings in the group concerns to Vishal Amusement Pvt. Ltd, and was of the opinion that said transactions of sale of shares were sham transactions and these were carried out in the group companies and accordingly asked the assessee to furnish the method of valuation of shares of private limited companies which were sold to Vishal Amusement Pvt. Ltd. The AO also observed that the Vishal Amusement Pvt. Ltd is holding beneficial interest in the share capital of the assessee to the tune of 15% of the total paid up capital and thus, the company pertaining to the assessee's group. The AO observed that since the transaction took place on 21/03/2005 at the fag end of the year and therefore, the said transactions are nothing but a sham transaction entered into by the assessee intended to generate long term capital loss which could be set off against the compensation received. The AO further observed that sale proceeds on sale of shares had been credited in the bank account of the assessee on 15/04/2005 whereas the sale of shares took place on 21/03/2005 and thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars and the shares in the said companies were valued on the basis of balance sheets of the said companies though the learned AR candidly admitted that no valuation was obtained from any professional valuer. 7. Learned AR contended that the AO has failed to bring on record any adverse material/evidences on the basis of which the said transactions could be described as sham transactions and merely reached a conclusion on the basis that this long term capital loss on sale of shares was set off against the compensation received from surrender of tenancy rights. Learned AR relied on series of decision in defence of his arguments viz. CIT vs. Special Paints Ltd. (2013) 356 ITR 404 (Guj.), CIT vs. Tainwala Chemicals & Plastics India Ltd. (2013)215 Taxman 153(Bom), CIT vs. M/s. B Arunkumar & Co Order dated 08/03/2016 of the Bombay High Court, B Arunkumar & Co ITA No.2337 of 2013, Order dated 24/5/2013 passed by ITAT, Mumbai and CIT vs. Gillette Diversified Operations (P) Ltd. (2010) 324 ITR 226 (Del). 8. Learned DR on the other hand while relying heavily on the orders of the authorities below submitted that all the five companies the shares whereof were sold were the group companies and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The case of the Revenue is that the transactions entered into by the assessee by way of sale of shares to M/s. Vishal Amusement Ltd., were sham transactions intended and designed to circumvent the tax due on the long term capital gain on compensation as received by the assessee on the surrender of tenancy rights. We observe from the records that the sale of shares were duly authorised in the Board of Directors meeting of the assessee company on 18/03/2005 and was executed on 21/03/2005. The share transfer forms duly executed and affixed with the requisite stamp fee were also filed by the assessee in the paper book from page No.17 to 28. The copy of the Board resolution is filed at page No.15. The balance sheets of the various entities, copies of shares transfer forms and certificates were also placed in the paper book evidencing the fact that all these companies were loss making over the years and valuation was done on the basis of these balance sheets. Fairly admitting that no valuation was carried out for arriving at the value of the shares, however, ld AR the assessee submitted before us that the same were valued on the basis of balance sheets of the respective entities. We ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mp value duty in case of transfer of land or buildings. Similarly, Section 45(2) and 45(4) of the Act in cases of conversion of the investment into stock in trade or transfer of shares on dissolution of a firm to its partners respectively has to be at market value. In this case computation of capital gain is governed by Section 48 of the Act and it only refers to full value of consideration received. The reliance upon the decision of the Apex Court by the Tribunal was therefore appropriate. 12. In the case of CIT(A) vs. Special Paints Ltd., the Hon'ble High Court of Gujarat has held that even if the assessee has consciously entered into the transactions on sale of shares with an object of earning and set off as the part of tax planning, revenue cannot object to the same as long as said planning is achieved through legitimate means. In this case, the AO disallowed the set off of the loss on the ground that transaction was a coulourable devise but the Tribunal has reversed the order. 13. In the case of CIT vs. Tainwala Chemicals & Plastics India Ltd., the Hon'ble Bombay High Court has held that it is not sufficient, however, Revenue has merely allowed that assessee had infact recei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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