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TMI Blog2024 (8) TMI 1044X X X X Extracts X X X X X X X X Extracts X X X X ..... ion it can be concluded that effectively money is lying with the assessee i.e. consideration paid by the partnership firm to the assessee, securities /shares are still with the assessee i.e. hold by the partnership firm of the assessee, on the other hand without any effective loss of control of the securities and artificial transfer of consideration, he made himself entitled to create a long term capital loss which is available for set off against the current years capital gain and also available for future long term capital gains. In these circumstances, the case laws relied upon by the assessee and Ld. CIT (A) is of no help as the facts of those judicial pronouncements vis-a-vis the facts of the assessee s case cannot be equate. he arrangement under scrutiny appears to lack commercial substance. It was noticed that the transaction under consideration created extraordinary rights and obligations that do not align with principles of fairness, suggesting it qualify as an impermissible avoidance arrangement. The court observed that in the facts of the present case, the evidence and facts suggests that the arrangement was designed primarily for tax evasion. In these circumstances and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forward and legal, on the ground that the AO failed to prove that assessee has been benefited during the year and in any manner and there is any arrangement whereby taxes have been evaded, completely failing to acknowledge the finding of the AO uncovering the 'apparent to identify the 'real' i.e. the admitted purpose of it being considered as legitimate and permissible tax planning, lifted by the AO as colourable device and in deciding the appeal based only from the 'apparent' and ignoring the 'real'. 5. The decision of the learned CIT(A) in acknowledging the loss from the sale to related party, controlled and managed by the assessee without losing control over the transferred assets, as genuine and as eligible for set off and carry forward even when the purpose of sale to related party, acknowledged and admitted as permissible tax planning and legitimate, based only on the 'apparent' and ignoring the 'real' uncovered by the AO as colourable device, is perverse and liable to be quashed and set aside on facts and in law. 6. the appellant craves the leave to add, amend, alters and/ or deletes any of the grounds of appeal as above. 2. The Br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t current year s gain on unlisted securities. 4. However, the AO observed that the Assessee had declared income from Long Term Capital Gain at Rs. 49,59,76,976, this income was claimed as exempt under section 10(38) of the Act. The AO thus held that the transaction of sale of shares of Ansal Properties and Infrastructure Ltd. and Welspun Enterprises Ltd. was a colourable device and artificial transaction done solely with the purpose to reduce the exempt LTCG income and increase the losses in the taxable category of capital gains to set them off against taxable income in future, the AO therefore held that the transactions of Rs. 16,15,92,430/- as incurred through transactions not done on the stock exchange and hence did not allow the LTCL to be set off against the current year s LTCG and further carried forward. 5. The Assessee being aggrieved by the order of the AO passed under section 143(3) of the Act, dated 28.12.2019 preferred an Appeal before the Ld. CIT (A), Mumbai, the appeal was subsequently migrated to the National Faceless Appeals Centre in terms of the notification issued by the CBDT. The Ld. CIT Appeals overturned the decision of the AO and held that since the Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in McDowell [(1985) 3 SCC 230: 1985 SCC (Tax) 391] held that: (SCC p. 254, para 45) 45. Tax planning may be legitimate provided it is within the framework of law. In the latter part of para 45, it held that: (SCC pp. 254-55) 45. Colourable devices cannot be [a] part of tax planning and it is wrong to encourage the belief that it is honourable to avoid payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes without resorting to subterfuges. The above observations should be read with para 46 where the majority holds: (McDowell case [(1985) 3 SCC 230: 1985 SCC (Tax) 391], SCC p. 255) 46. on this aspect one of us, Chinnappa Reddy, J., has proposed a separate opinion with which we agree. The words this aspect express the majority's agreement with the judgment of Reddy, J. only in relation to tax evasion through the use of colourable devices and by resorting to dubious methods and subterfuges. Thus, it cannot be said that all tax planning is illegal/illegitimate/impermissible. Moreover, Reddy, J. himself says that he agrees with the majority. 69. in the judgment of Reddy, J. in McDowell [(1985) 3 SCC 230: 1985 SCC (Tax) 391] there are re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les of fairness, suggesting it qualify as an impermissible avoidance arrangement. The court observed that in the facts of the present case, the evidence and facts suggests that the arrangement was designed primarily for tax evasion. 10. The question of substance over form consistently getting importance and has consistently arisen in the implementation of taxation laws. In the Indian context, judicial decisions have varied. While some courts in certain circumstances had held that legal form of transactions can be dispensed with and the real substance of transaction can be considered while applying the taxation laws, others have held that the form is to be given sanctity. The existence of anti-avoidance principles is based on various judicial pronouncements. There are some specific anti-avoidance provisions but general anti-avoidance has been dealt only through judicial decisions in specific cases introduced w.e.f. 01.04.2016 but deferred for A.Y. 2018-19. 11. In an environment of moderate rates of tax, it is necessary that the correct tax base be subject to tax in the face of aggressive tax planning and use of opaque low tax jurisdictions for residence as well as for sourcing capit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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