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2012 (8) TMI 805 - HC - Income TaxDisallowance of Capital Loss on Transfer of shares - invalid transfer of the shares which were pledged with the IDBI Bank - Held that:- The assessee did transfer whatever rights it had in the shares to the purchaser company. If such transfer is not recognized by the IDBI and there are other legal implications of breach of undertaking given to IDBI, such issue would have to be thrashed out between the concerned parties but insofar as income tax proceedings are concerned, that by virtue of section 2(47), the assessee was entitled to claim that upon transfer of shares or interest thereon, it had suffered long term capital loss which it was entitled to set off against the capital gain on sale of shares during the same previous year. In the present case, of course, there is a further angle of the shares in question being pledged to IDBI and therefore it would not be possible for the assessee to deliver the original share certificates to its purchaser along with the duly signed transfer forms. As already noted, such special angle in the present proceedings is not concerned by this court with such internal possible dispute between the assessee and the said financial institution. This, however, by itself would not establish that the sale of shares was only a paper transaction and a device contrived by the assessee to claim loss which it did not suffer and thereby seek set off against the capital gain received by it during the year under consideration as there is no provision in the Act which would prevent the assessee from selling loss making shares. Simply because such shares were sold during the previous year when the assessee had also sold some shares at profit by itself would not mean that this is a case of colourable device or that there is a case of tax avoidance - As long as the Revenue could not doubt the sale price of the shares, it would not be open for the Revenue to contend that the assessee had shown loss which it did not really suffer - in favour of assessee.
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