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TMI Blog2022 (10) TMI 1109X X X X Extracts X X X X X X X X Extracts X X X X ..... the LTCL of Rs.2.69 crs.?" 2. "Whether on the facts and in the circumstances of the case and in law, the Ld CIT (A) is justified in allowing the appeal of assessee holding that assessee had made similar investment in another company which has yielded profit in assessment year 2017-18 without appreciating, that does not make losses of assessee genuine?" 3. The appellant craves leave to amend or alter or add a new ground which may be necessary. 3. We have heard rival submissions and perused the materials available on record. We find that assessee is deriving income from salary, capital gains and other sources. The return of income for the A.Y.2013-14 was filed by the assessee on 31/07/2013 declaring total income of Rs.36,70,750/-. The assessee claimed long term capital loss of Rs.2,68,26,678/- on sale of shares of Pyxis Systems Pvt. Ltd., The ld. AO sought to examine the veracity of these losses and sought to verify the details of purchase as well as sales of these shares during the course of assessment proceedings. The assessee submitted on 11/10/2011 & 02/12/2011 that she had invested in 1944599 shares of Pyxis Systems Pvt. Ltd., at a cost of Rs.2,99,46,827/- on the basis of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xis Systems Pvt. Ltd., as under:- "In FY 2011, the appellant has invested 19,44,599 shares of Pyxis Systems Private Limited at a cost of Rs. 2,99,46,827/- Pyxis was established in 2004 by Nandlal Bhatkar, Pyxis is a specialized player in technologies for Global Markets Front Office and Market Risk, related to cash and derivatives instruments. Pyxis delivers Derivatives and Risk Management services and KPO. It includes Domain and Technology Solutions, Independent Valuation/Hedge Accounting and front/Mid-office outsourcing. Pyxis is a platform based service provider to the Financial Services industry in areas such as equity, forex, commodities and interest rates. It started off from an IT product company by building an IT platform, RisKompass (an ERP for the risk management function it treasuries, banks and corporates), InoPot (IT platform for pricing and mark-to-market for equities and forex) and EMS (Exposure Management System) The appellant invested based on the performance at the time of purchase and the expected performance / profitability over the years on the basis of the business plan. In FY 2010-11, the total revenue of the company was Rs. 8.68 Crores with loss of Rs. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dec-06 1.38 19.50 3 Girish Kulkarni Nov-08 0.17 19.50 Brief profile of the above Investors is as under: 1.Mr. Arvind Sethi is a Director of Old World Hospitality India Pvt. Limited. Mr. Sethi is a Director of Rabo India Finance Limited, Rabo India Securities Pvt. Limited, and the Association of Mutual Funds in India. Previously, he was the Managing Director and Chief Executive Officer af Tata Asset Management Limited, also served as its Associate Director, Managing Partner at CAPM Consulting, Managing Director of Global Financial Markets at Bank of America, Treasurer at ANZ Grindleys, Head of Retail Banking at HSBC India, Associate in the firm's debt capital markets team and had also served as the Treasurer, Manager of Foreign Exchange at Grindlays Bank plc.Mr. Sethi earned an M.B.A. in Finance from INSEAD and an M.A. and a B.A. (Honors) degree in Philosophy, Political Science, and Economics from the Oxford University. 2. Janak Desai Janak Desai is the Country Head of Wholesale Banking. Previously head of Financial Markets, Mr Desal is now responsible for the overall Wholesale Banking platform including Corporate and Investment Banking, Emerging Corporates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed creditors & statutory liabilities. Post the transaction there would be no assets or Operating business left in the Company. i. As the company was not receiving positive feedback from other external Investors and was in dire need for funds, it was keen to accept the offer presented by Polaris. j. Despite being long term value investors, considering the financial position of the company and need of the hour, the investors including the appellant (based on the advice of its Investment Manager-Internal note dated 05.02.2013 enclosed along with other marquee investors like Janak Desai, Arvind Sethi & Girish Kulkarni agreed to sell their stake to Mr. Nandlal Bhatkar at NAV (Rs. 0.014/ Share) to facilitate this transaction. 3.4. Accordingly, it was submitted that assessee had proper rationale and justification for making investments in the shares of Pyxis Systems Pvt. Ltd., at Rs.15.40 per share considering the future potential of the said company. However, based on the macro factors and global turmoil experienced post 2012 which affected the start up companies like Pyxis Systems Pvt. Ltd., the said company was unable to achieve its target orders which lead to double reduction in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment for acquisition of shares has been made by the assessee out of disclosed sources and there is absolutely no element of any undisclosed income thereon. Now, the primary question that needs to be addressed in this regard is as to whether the Revenue could at all disturb the purchase price of acquisition of shares within the mandate provided in the Act. In our considered opinion, the answer is an emphatic 'no' in as much as there is no provision in the Act warranting to disturb the purchase price of shares by the assessee. What is required to be seen is whether the assessee had sufficient sources for making such investment in shares. As stated earlier, there is absolutely no dispute that payments for acquisition of shares at Rs.15.40 per share had been duly met out of disclosed sources of the assessee. Moreover, it is also pertinent to note that the said investment had been made by the assessee in A.Y.2012-13 i.e. the earlier year. We find that assessee had duly explained the rationale behind making investment in the shares of Pyxis Systems Pvt. Ltd., at a premium, based on the advice given by certain parties and after analysing the various reports that are made available to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Non Banking Financial Companies (NBFC) were required to concentrate on core financing business and exit from manufacturing and other activities. The assessee consequently wished to divest its shareholding in Shriram Auto Components (Madras) Limited (name changed to Rambal Limited) and Shripet Cybertech Systems Limited. The shareholding of the assessee in the aforesaid two companies was valued at the figure of Rs. 1/- per share and the sale resulted in a capital loss of an amount of Rs. 3.98 crores (Rs. 2.88 + 1.10 crores). 5. During the course of assessment, the Assessing Authority raised a query on the allowance of capital loss on the sale of shares, specifically on the valuation adopted. The justification provided by the assessee in respect thereof reads thus:- "The company is a manufacturer of Automobile components. We had acquired 10 lakhs shares in this company at a cost of Rs. 100 lakhs in the year ended 30.03.99. The company had been incurring losses every year and had not declared any dividend since its inception in 1996. The accumulated debit balance in Profit & Loss Account as on 31.03.04 amounted to Rs. 594 lakhs against the share capital of Rs. 1288 lakhs. There was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cceptable in the light of the justification offered by the assessee and also specifically noting that though the assessing officer rejected the valuation adopted by the assessee, he had not offered or arrived at any other alternative. The order of the CIT (A) was assailed before the Income Tax Appellate Tribunal, (in short, 'ITAT), which by order dated 26.03.2010 confirmed the same, reiterating the findings of the CIT (A) to the effect that the valuation was in order. The Tribunal particularly notes that though a suspicion had been raised by the Assessing Officer regarding the valuation of the shares, nothing was placed on record to substantiate such suspicion or provide a more acceptable alternative. It is, in this background, that the Revenue is now before this Court. 8. We are of the view that the Assessee had provided an acceptable justification for both transactions of sale of shares including the aspect of valuation of the shares. The Assessing Authority, while accepting the genuineness of the transactions, merely raises a vague suspicion relating to the valuation adopted by the assessee. This, by itself, is insufficient to reject the claim of capital loss. While the As ..... X X X X Extracts X X X X X X X X Extracts X X X X
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