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TMI Blog2022 (7) TMI 1255X X X X Extracts X X X X X X X X Extracts X X X X ..... stency also the assessee has made out a case in her favour. Therefore, we are inclined to uphold the order of the Ld. CIT(A) and dismiss the ground of appeal raised by the revenue. Long Term Capital Loss (LTCL) from the off-market share transactions - whether the LTCL claim of the assessee on sale of seven scrips in the off-market transactions can be allowed to be set off and carried forwarded as per the provisions of the Act? - allegation of the AO was that the De-mat accounts of certain buyers of these seven scrips were handled by the share broking company of which the assessee was one of the Director - HELD THAT:- DR could not point out how this allegation of AO has any material bearing in this case. Moreover, it was brought to our notice that the AO in the assessment year for A.Y.2014-15 has accepted the same transaction in the scrutiny assessment u/s 143(2) (except in-respect of three scrips, where the reasons given by AO was that same were executed at a price more than the prevailing market price on the relevant date). We note that the AO has accepted the other transaction carried out by the assessee in the off-market transaction where the price was as per the prevalent marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of treating the same as business income was reversed. Aggrieved by the aforesaid action of the Ld. CIT(A), the revenue is in appeal before us by preferring the aforesaid ground of appeal. 3. We have heard both the parties and perused the records. We note that the assessee is an individual who has earned substantial LTCG of Rs.17.02 crores which included capital gain on some shares held for as long as two to three years. Even though, the AO accepted the claim of LTCG from sale of shares, he didn't accept the claim of assessee about the STCG from sale of shares and treated it as business income. It was brought to our notice that the assessee is a high net worth individual having net worth of Rs.135.20 crores and invest in shares to the tune of Rs.107.78 crores as on 31.03.2013 (A.Y.2013-14). Even though, the AO accepted the LTCG claim of Rs.17.02 crores from sale of shares which means AO accepted the AO as an investor on this capital gain but he did not accept the STCG claim of the assessee of Rs.12,18,961/- on the ground that there is high volume, frequency and continuity of transactions. However, the AO has not taken into consideration, the high value of investment made by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's status as an investor and hence he did not treat the claim of STCG on sale of shares as business income. We also note that the assessee had been maintaining her books of accounts by showing the shares as investment which are reflected in the balance-sheet accordingly. We also note that the shares are always valued at cost and assessee never took any benefit of valuation loss for invested shares, even if the market value had fallen below the cost. We note that this accounting practice has been consistently followed by the assessee for several years and is a deciding factor in such matters as held by the Hon'ble Jurisdiction High Court in the case of CIT VS. Gopal Purohit (2011) 336 ITR 287 Mumbai. Considering the aforesaid facts as well as taking into consideration the CBDT Circular No.04/2007 dated 15.06.2007, we find that the assessee's intention of buying and selling of shares was that of an investor and therefore, the action of the AO to treat the consideration from sale of shares to the tune of Rs.12,18,961/- as business income has been rightly not agreed upon by the Ld. CIT(A). Taking into consideration the aforesaid facts, we find that there was no new facts before the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had purchased these shares by remitting STT & held them for more than 12 months therefore the assessee's was entitled to exemption u/s 10(38) of the Act for any LTCL provided the shares were sold on stock exchange. According to the AO if the assessee had incurred loss (LTCL) on sales of shares through the transaction through stock exchange, then it would have been adjusted against any such income and it could not have been carried forward. Therefore, the AO disallowed the claim of the assessee holding it as bogus. Aggrieved by the action of AO, the assessee preferred an appeal before the CIT(A) who was pleased to allow the claim of the assessee. Aggrieved by the aforesaid action of the Ld. CIT(A), the revenue is before us. 6. We have heard both the parties and perused the record. The issue for our consideration is whether the LTCL claim of the assessee on sale of seven scrips in the off-market transactions can be allowed to be set off and carried forwarded as per the provisions of the Act. We note that there is no prohibition of the assessee in sale of the shares in off-market. It was pointed out to us from the information downloaded from the website of NSDL that off-market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per-se for A.Y.2014-15, when the same was transacted off-market. Coming back to the relevant AY 2013-14, it was brought to our notice that all the transactions (except) the scrip of Baroda Rayon where shares were not traded for long and hence market price was not available. Considering the aforesaid facts as well as the case laws in similar case wherein the Tribunal has accepted the off-market transaction of an assessee who had also made the claim of set off of or carried forward, as the case may be was allowed by the Tribunal. We note that the Delhi Tribunal in the case of Mridu Hari Dalmia Parivar Trust Vs. Assessing Officer (2016) 68 taxmann.com 376 (Delhi- Trib) wherein the fact of the case has been briefly stated as head notes as under page no. 59 of the P.B. and the Tribunal on the aforesaid facts has held as under: - "The assessee suffered a long-term capital loss on share transactions, which amount was carried forward for future set off. The assessing officer observed that the assessee transferred those shares through off-market sale on loss without payment of Securities Transaction Tax (STT), and that if these transactions had been made through recognized Stock Exchan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision which has been lawfully exploited by the assessee by transferring shares held as long-term capital assets through off market transactions resulting into genuine loss and thus escaping the rigor of the exemption provision contained in section 10(38), which would have otherwise disentitled it to claim set off and carry forward of such a loss. The AO has held these off-market sale transactions as a colorable device and tax avoidance scheme adopted by the assessee to evade payment of legitimate tax due to the exchequer. In our considered opinion, this is a glaring example of tax planning rather than the tax avoidance as has been held by the AO. In view of the fact that the assessee entered into ITA No.1880/Del/2014 valid transactions of transfer of shares of Bajaj Hindustan Ltd., Tata Consultancy Ltd. and Reliance Communications Ltd. to Shri M.H. Dalmia and Smt. Abha Dalmia, we hold that the loss suffered on such transactions is a genuine loss which cannot be disallowed as it does not fall within the ambit of section 10(38) because of non-payment of STT. Overturning the impugned order on this issue, we direct the allowing of carry forward of loss amounting to Rs.1.86 crore. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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