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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 ..... eputy Commissioner of Income Tax versus BPL Sanyo Finance Ltd 312 ITR 63. Therefore, the learned assessing officer is aggrieved and has raised the following grounds of appeal:- "1. On the facts and in circumstances of the case, Ld. C1T(A) has erred in law on facts in allowing Short term Capital Loss of Rs. 108,75,00,000/- ignoring the surrounding circumstances as under: i. The assessee company paid Rs. 108,75,00,000/- which originated from M/s Indiabulls 1 Infrastructure Ltd itself, as upfront amount as part payment against 15 Cr, warrants of Indiabulls Power Ltd (Now Ratan India Power Ltd) ii. The assessee company alongwith three other investors chose not to exercise the option to make full payment for purchase of warrants on 30.11.2010 even though the option was available upto the 29th May 2012. iii. The flow of fund clearly reveal that entire scheme of allotment of share warrant is a subterfuge to create loss, in group companies for ulterior purpose without incurring any cost. iv. The perusal of the audited accounts reveal that the assessee company is a paper company without any activity. v. Entire exercise was pre-meditated and movement of fund through banking chann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of grant of option and estimating the future profit, the assessee accepted the proposal and paid the upfront money to the company on 30 November 2010. However, in the year under consideration considering the market conditions and to safeguard its future interest, the assessee opted not to make further payment and accordingly conveyed its unwillingness to Indiabulls Power Ltd as per letter dated 18/11/2011. Consequently, Indiabulls Power Ltd forfeited the amount paid by the assessee and it has been claimed under the head capital gain as short-term capital loss. Assessee submitted in the form of resolution passed in the board meeting of India bulls power Ltd. The copy of the resolution passed in the board meeting of the assessee company for making investment in the warrants was also submitted. The learned assessing officer questioned the above loss and found that the assessee company has been incorporated only on 7/10/2010 and its shareholding pattern shows that it's hundred percent equity is owned by Valerian real estate private limited and its nominees holding 10,000 equity shares of face value of Rs. 10 each amounting to Rs. 1 lakh. Thus, the company is a wholly owned subsidiar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, he held that it is a colourable device created to camouflage the credit of the amount to Indiabulls Power Ltd as a capital receipt to avoid the application of Section 68 of the income tax act 1961. The assessee company along with its holding company acted as an operator and conduit to the transaction to provide ultimate benefit to Indiabulls Power Ltd was shown this amount of Rs. 304.50 crores as a capital receipt and thus avoids taxation on this sum. Therefore, he disallowed the above sum as a short-term capital loss claimed by the assessee and assessed the total income of the assessee at a business loss earned by the assessee of Rs. 29,690/- in the return of income. Consequently the assessment order u/s 143 (3) of the income tax act 1961 was passed on 20th of March 2015. 5. Aggrieved assessee preferred an appeal before the learned CIT - A who after considering the submission of the assessee and the reasons given by the learned assessing officer, considering the share price of India bulls power Ltd at the time of further payment of 75% of the face value of the warrants, the scheme of merger and amalgamation approved by the honourable Delhi High Court on 25 November 2011 wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the short-term capital loss. 7. The learned authorised representative submitted that the issue is squarely covered in favour of the assessee by the decision of honourable Delhi High Court in case of Sri Chand Ratan Bagri 329 ITR 356, the decision of the coordinate bench in case of CIT versus Pavitra Commercial Limited ITA number 782/D/2015 dated 14/10/2015, 108 taxmann.com 455 principal Commissioner of income tax versus Kanyalala M Sheth , 312 ITR 63 DCIT versus BPL Sanyo finance Ltd and Dynamic Foundations Private Limited versus CIT 232 taxmann 501. He further stated that the issue is also squarely covered by the several decisions of the coordinate benches. It was further stated that there is no tax evasion in this case as suggested by the learned assessing officer, as the aforesaid loss has not been set-off against any income of the assessee in subsequent years. For this proposition, he submitted the copy of the return of income for assessment year 2013 - 14 to 2019 - 20 and stated that now the issue is only academic as far as the assessee is concerned. He further referred to the written submission placed before the learned CIT - A which is part of the paper book submitted by h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce amount within two days from the effective date of scheme i.e. by 27/11/11. Naturally, the promoters of India Bulls group promote all the companies who applied for the warrant of the assessee. Therefore, at the time of framing of the scheme, it was within their knowledge that the companies who have applied for warrant, has initially for payment of 25% of the warrant price has borrowed money from its holding company, which in turn borrowed from another company and that another company also borrowed fund from India bulls infrastructure and Power Ltd which is one of the company involved in the scheme. Therefore, it is apparent that the whole scheme was created for transferring a sum of Rs. 304.50 crores in the name of India bulls Power Ltd by transferring it from another company without any tax consequence. The assessee is one of the layers used by the Indiabulls group for doing this. However as the case of the assessee is concerned it has incurred that loss on forfeiture of the share warrant to the extent of 25% amounting to Rs. 108.75 crores which was never claimed by the assessee or set of against any other income. Therefore, the appellant company was created only for the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X
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