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TMI Blog2021 (2) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... dition was made in the hands of the assessee on protective basis and the addition was made on substantive basis in the hands of the company who forfeited the shares. In paragraph number 2 there was also an allegation of tax evasion tactic prohibited by law employed by the assessee. It is also the allegation in the impugned case. In paragraph number 12 14 clearly clinches the issue in favour of the assessee. The honourable High Court held that the issue as to whether the forfeiture of the convertible warrant amount to a transfer within the meaning of Section 2 (47) of the said act has now been made clear by the Supreme Court in the case of Grace Collis [ 2001 (2) TMI 9 - SUPREME COURT] as also by the Karnataka High Court in BPLSanyo finance Ltd [ 2008 (2) TMI 386 - KARNATAKA HIGH COURT] and the honourable High Court also followed the same. In paragraph number 14 the honourable High Court held that forfeiture of the convertible warrant has resulted in extinguishment of the right of the assessee to obtain a share in the issuer company. - ITA No. 3667/Del/2017 - - - Dated:- 28-1-2021 - Shri H.S. Sidhu, Judicial Member And Shri Prashant Maharishi, Accountant Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow Ratan India Power Ltd). 3. Brief facts of the case shows that that assessee is a company incorporated on 7 October 2010. The business of the company has been stated to be purchasing, selling, developing, constructing, hiring, or otherwise acquire and deal in all real estate. During the year, the assessee company had no business activity nor in the immediately preceding year, which is evident from the profit and loss account and noted by the learned assessing officer. On this facts, assessee has filed return of income on 26/9/2012 declaring loss of ₹ 1087529690/ . The case of the assessee was picked up for scrutiny and it was found by the assessing officer that assessee company has shown business loss of ₹ 29,690/ and short-term capital loss of ₹ 1,087,500,000. The above loss is claimed by the assessee stating that assessee has paid ₹ 1,087,500,000 as upfront amount for part payment against the 15 crore warrants of Indiabulls Power Ltd having equal number of equity shares of the face value of ₹ 2/- each. In addition, during the year ended on 31st of March 2012 the company has conveyed the unwillingness to the Indiabulls power limited to exercise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid amount of ₹ 108.75 crores to the assessee. The AO noted that the sum has also been received by the holding company of the assessee through a long-term the loan liability from another company. He noted that the holding company has only substance in its balance sheet of long-term liability of ₹ 108.75 crores, which is invested in the assessee company borrowed from another group company, and the investment in Assessee Company as loans and advances is shown at ₹ 108.75 crores. Thus, these are the only two items of substance in the books of the holding company. Therefore, the learned assessing officer noted that even the holding company has arranged funds for making investment in the subsidiary company as a loan from another party. The learned assessing officer further examined the bank statement of one company Chloris properties Ltd which shows that the amount of ₹ 304.50 crores have been received in the bank account of that company from India infrastructure Ltd on 29/11/2010. On the same date, it transferred the above sum of ₹ 304.50 crores in the name of four different companies. Out of them one of the company is holding company of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee the claim of short-term capital loss of ₹ 108.75 crores. The learned CIT A also held that that the contention of the learned assessing officer that the transaction is not genuine is not tenable as these transaction was affected through banking channels and all companies are being assessed to tax and filing the return of income regularly under income tax act as well as the companies act. They are separate legal entities and complying with the provisions of the income tax as well as the company law. He thereafter following the decision of the honourable Delhi High Court in case of CIT versus Chand rattan Bagri (supra) and of honourable Karnataka High Court in case of BPL Sanyo Finance Ltd (supra) allowed the claim of the assessee. Therefore, the revenue is in appeal before us. 6. The learned departmental representative vehemently supported the order of the learned assessing officer and submitted that the assessee has entered into as a conduit in the scheme of converting a tax free income/capital receipt in the hands of the Indiabulls Power Ltd without paying any taxes and assessee being a dummy company booked a capital loss of ₹ 108.75 crores. He furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 114 of the paper book stating the share price of M/s Indiabulls Power Ltd for the month of October 2010 may 2012 to show that it was not beneficial for the assessee to invest further in that particular company and therefore it was beneficial for the assessee to surrender and allowed to be forfeited the above sum of ₹ 108.75 crores. He therefore supported the order of the learned CIT A. 8. We have carefully considered the rival contention and perused the orders of the lower authorities. We have also considered the various judicial precedents cited by the learned CIT A and relied upon by the learned authorised representative as well as the judicial precedents relied upon by the learned assessing officer for making the above addition. The facts clearly shows that on October 20, 2010, India Bulls Power Ltd pursuant to the provisions of Section 192A of the Companies Act, 1956 made a preferential allotment of 42 crore as fully convertible warrants to 4 different companies which are the entities promoted by the promoters of Indiabulls real estate Ltd , which upon conversion would entitle them to acquire an equivalent number of equity shares of the company of the face v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee company and subsequently to another group company, booking loss in the assessee company. The assessee company is used as one of the layer for the above transaction. Therefore, the remedy for the whole transaction does not lie under The Income Tax Act but under some other law. The ground [1] stated by the learned assessing officer clearly shows the scheme of the things wherein a sum of ₹ 108.75 crores or originated from Indiabulls infrastructure and Power Ltd against issue of 15 crore warrants of Indiabulls Power Ltd, all group companies, forfeiting a sum of ₹ 304.50 crores by transferring through layers of conduit companies, clearly shows the scheme of things. During the course of hearing, on looking at the strange set of facts, the information was called from the assessee with respect to the corporate restructuring and business justification for layering of the funds. Assessee merely submitted that the issue is squarely covered in favour of the assessee by several decisions and once again relying on the decision of the learned CIT A. As far as the scheme of things goes, it is evident for everybody. Nothing is further required to be mentioned that who is the benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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