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TMI Blog2018 (10) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... y merit in the Departmental Appeal. - Decided against revenue - ITA.No.3661/Del./2014 - - - Dated:- 1-10-2018 - Shri Bhavnesh Saini, Judicial Member And Shri L.P. Sahu, Accountant Member For the Revenue : Smt. Shefali Swaroop, CIT-D.R. For the Assessee : Shri Ved Jain, Advocate and Shri Ashish Goel, C.A. ORDER PER BHAVNESH SAINI, J.M. This appeal by Revenue has been directed against the Order of the Ld. CIT(A)-XVIII, New Delhi, Dated 31.03.2014, for the A.Y. 2009-2010, challenging the Order of the Ld. CIT(A) in deleting the short term capital loss disallowed by A.O. amounting to ₹ 30,14,64,010/-. 2. The facts of the case are that the assessee is a Company filed return of income declaring loss of ₹ 11,75,90,460/-. The case was selected for scrutiny. Statutory notices were issued and duly complied with by the assessee by furnishing the required details in response to the queries raised by the A.O. during the assessment proceedings. The assessee-company is engaged in trading in beverages, ice cream, financing and investment etc. The A.O. noted that during the year, the assessee had capital gain of ₹ 33,92,84,278/- from the sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany instead of paying the capital gain liabilities, has created a web of transactions in order to create a short term capital loss. The assessee-company has not given the details of bank statements of the various concerns and also the application of funds which were invested in the form of share application money. The purchase of shares have been made at a high premium despite net worth of the company of which shares are purchased has not matching value as compared to the investments are made. The A.O, therefore, noted that capital loss have been shown to set-off the capital gain liability. Therefore, short term capital loss amounting to ₹ 30,14,64,010/- was disallowed. 3. The assessee-company challenged the above addition before Ld. CIT(A). Detailed written submissions of the assessee-company is reproduced in the appellate order, in which, the assessee-company reiterated the facts submitted before A.O. It was also briefly submitted that A.O. conducted independent enquiries from the concerned parties by issuing notice under section 133(6) of the I.T. Act and all the transactions are confirmed by the respective companies along with required documents were filed. The A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consideration paid by the assessee-company. All the details reproduced in the written submissions. All the parties confirmed transactions with the assessee-company in response to the notice of the A.O. under section 133(6) of the I.T. Act. All the documentary evidences were also filed directly before A.O. by all the parties who have confirmed the transactions with the assessee-company. The documents filed by the parties have not been disputed by the A.O. The assessee-company also prayed for admission of the following additional evidence under Rule 46A of the I.T. Rules, 1961. 1. Copy of statement showing the market value of equity shares of M/s. Cryobanks India International Private Limited as per its Audited Balance Sheet as on 31.03.2009 along with copy of Audited Balance Sheet for Financial Year 2008-09. 2. Copy of Statement showing the market value of equity shares of M/s. Universal Airways Private Limited as per its Audited Balance Sheet as on along with copy of Audited Balance Sheet for Financial Year 2008-09. 3. Copy of Statement showing. the market value of equity shares of M/s. Devyani Food Industries Private Limited as per its Audited Balance Sheet as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O disallowed the shortterm capital loss of ₹ 30,14,64,010/- claimed by the appellant company, observing the following in the assessment order. 3.4) In view of the above facts, it is very clear and apparent that the assessee and the group entities have acted in concert and used the process of share subscription and its sale thereof as an instrument to create a capital loss in order to set off the capital gain liability of the assessee and thereby, to evade taxes accordingly. The above is therefore a sham and a colourable transaction and a device which has been used by the assessee by taking active partnership of the associate concerns in order to evade taxes. Therefore, the shortterm capital loss, as highlighted above, of amount of ₹ 30,14,64,010/- is hereby disallowed accordingly. 6.1. I have gone through the submissions made by the learned AR of the appellant company and the observations of the AO made in the assessment order. The appellant company during the year under appeal was engaged in the business of trading in beverages, ice13 cream, financing and also engaged in investment activities. During the relevant year, the appellant company earned long term ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer on 03.07.2013 e) CIT(A) - 18/Remand Report/2013-14/630 dated 24.12.2013 duly received by Assessing Officer on 27.12.2013 f) CIT(A) - 18/Remand Report/2013-14/701 dated 16.01.2014 duly received by Assessing Officer on 20.01.2014 - Remand Report. 6.4. On going through the chart give above, it will be clear that numerous reminders have been sent to the AO to furnish the remand report but the same has not been received by me till date i.e. last day of Financial Year ending 31-03-2014. The AR of the appellant company filed letter dated 20.12.2013 before me wherein it was mentioned that the additional evidence was primarily the Audited Balance Sheet of the various companies whose shares were sold by the appellant company at a loss during the year under appeal. The learned AR submitted that the aforesaid documents were already on record of the AO before passing the assessment order, as the aforesaid documents were directly filed by the investee companies pursuant to notice u/s 133(6) issued by the AO. 6.5. I had called for the assessment file for Assessment Year 2009-10 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. D.J. Agri Industries Private Limited. Paper Book page No. 47 (refer para 5) e. Universal Dairy Products Pvt. Ltd. Paper Book page No. 58 (refer para 5) Thus your honour will find that audited Balance Sheets were already filed by the respective companies before the Assessing Officer pursuant to his specific requirement as per notice u/s 133(6) and factually the same does not amounts additional evidence. 6.7. Further such additional evidence is essential to compute the value of the shares which have been sold by the appellant company which according to the AO is very low. As per decision of the Hon ble Delhi High Court in the case of CIT vs. Virgin Security and Credits Pvt. Ltd., Reported in 332 ITR 396 it has been held as under :- The aforesaid contention appears to be devoid of any merit. It is a matter of record that before admitting the additional evidence, the CIT (A) had obtained remand report from the Assessing Officer. While submitting his report, the Assessing Officer had not objected to the admission of the additional evidence, but had merely reite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be said that the purchase of shares and sale thereof at a loss was merely a colorable device to offset the profit made on sale of shares of M/s. Krizm Hotels Pvt. Ltd. as the payments for the shares was made in preceding years i.e., much before the sale of shares of M/s. Krizm Hotels Pvt. Ltd. 6.9. I have also gone through the payments made for purchase/allotment of shares and verified that the full payment for such shares and have been duly made before the allotment of shares. 6.10. In this regard, it is seen in the case of Universal Airways Pvt. Ltd. @ ₹ 14/- per share, that where shares are allotted to the appellant company, then such shares are allotted to other entities also at the same date and the same price and in the case of Devyani Food Industries Pvt. Ltd. @ ₹ 40/- per share which is lower than ₹ 44.50 being shares purchased from other parties in earlier period. Therefore, it cannot be said that the shares have been purchased at price which is higher than the market price. Further it is seen that in the cases Cryobank D.J. Agri, the shares have been allotted to the appellant company at a face value of the shares i.e. ₹ 10/- per sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares of the respective investee companies. c) Copy of audited Balance Sheet of the investee company supporting the market value of the shares. d) Copy of bank statements evidencing the fact that the sale consideration of the shares has been duly received by the appellant company before the end of the relevant financial year by way of account payee cheques. e) Copy of share certificates and register of members of the investee company showing that the shares have been duly transferred in favour of the parties to whom the shares have been sold by the appellant company 6.15. As regards the market value of shares of the investee companies at the time of sale of such shares by the appellant company, a summarized position of the market value of the shares have been provided by the appellant company and the same have been verified from the audited Balance Sheet of the investee companies and the chart is as under : Name of Investee company Market value of shares as per Balance Sheet for FY 2008-09 Parties at whichshares were sold by appellant company Date of Sale Cryobanks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction of purchase and sale of shares undertaken by the appellant company. Merely because the purchase and sale of shares have been made in the same financial year does not vitiate the genuineness of the transaction undertaken on the basis of commercial parameters and it cannot be said that there was an attempt to evade taxes. 6.21. I find that the following judicial pronouncement relied upon by the appellant company squarely cover the case of the appellant company. a) ACIT vs Biraj Investment (P) Ltd. (210 Taxman 418) b) CIT vs M/s. Karam Chand Thapar and Brothers (P) Limited (176 ITR 535) c) CIT vs. Gillette Diversified Operations (P) Ltd. (324 ITR 226) d) CIT vs. Special Prints Ltd. in Tax Appeal No. 332 of 2013 dated 15.04.2013. 6.22. Applying the ratio of the aforementioned decisions to the facts of the present case, it is not justified for the AO to conclude that merely because the shares under consideration have been sold by the appellant company to a group entity or that the shares under consideration belong to a group entity or that the purchase and sale of shares have been undertaken in the same financial year does not vitiate the genui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the cases of Laxmi Feeds Exports Ltd. v. Asstt. CIT [1997] 62 ITD 315 (Mum.); VIP Growth Fund Ltd. v. Asstt. CIT [1997] 95 Taxman 313 (Delhi)(Mag.) and Mysore Rolling Mills (P.) Ltd. v. CIT [1992] 63 Taxman 416/195 ITR 404 (Kar.) also supports the above view. 6.27. Therefore, I am of the opinion that as in the case of the appellant company the shares have been held as investments and not as business activity therefore the Explanation to Section 73 of the Income Tax Act is not applicable in the present case. 6.28. Therefore, I conclude that the share transactions held as investments carried out by the appellant company resulting in short term capital loss of ₹ 301464010/- and not a speculation loss represents genuine transaction and I delete the disallowance of loss of ₹ 301464010/-. The appellant gets relief of ₹ 301464010/-. Thus, ground of appeal No.2 is allowed. 6. The Ld. D.R. relied upon the Order of the A.O. and submitted that Ld. CIT(A) has not seen whose shares were sold by assessee. The Ld. CIT(A) has not commented on the bank statement of the parties. 7. On the other hand, Learned Counsel for the Assessee reiterated the submissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions. All the concerned companies have confirmed transaction with the assesseecompany directly to the A.O. in response to the notice under section 133(6) of the I.T. Act. The parties have also filed all the documentary evidences before A.O. along with bank statements. The documentary evidences on record along with the reasons for sale have not been disputed by the A.O. and no discrepancy in any of the documentary evidences have been pointed out by the A.O. Copy of the statement showing market value of equity shares of the companies as per their audited balance-sheet, which were admitted as additional evidence, supported the claim of assessee that it had genuinely entered into purchase and sale of shares. Since the assessee-company is involved in investment in shares and has conducted actual transactions, therefore, it is not a case of speculation loss. The Ld. CIT(A) on verification of all the evidences on record and reproducing the details in his findings found that in most of the cases, the price at which shares have been sold by the assessee-company is substantially higher to the market value of such shares and in few cases, transaction of sale have been made at the price ..... X X X X Extracts X X X X X X X X Extracts X X X X
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