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2013 (7) TMI 543 - HC - Income TaxExemption u/s 10(38) - Sale of shares - Tribunal held it is a case of colourable device to evade payment of taxation on short-term capital gains - Held that:- DLFCDL paid the market value and purchased the shares from the assessee - Therefore, the transaction of shares is not a nominal one. It is not a sham transaction. It is a real transaction for valuable consideration. The effect of the transaction is DLFCDL having acquired the shares became entitled to enjoy the asset of the company which was held by BFSL - For effecting the said transfer, instead of trading those shares through Bangalore Stock Exchange, it was traded through Magadh Stock Exchange - For each share, the assessee wanted permission from SEBI without being made available to the open public. If BFSL has sold the shares by executing a registered sale deed and received the sale consideration, then, BFSL ought to have paid capital gains on the said consideration. That is one mode through which BFSL could have sold the property belonging to it. The law also provides for transfer of shares by the shareholders and this route the assessee has adopted in the instant case - By transferring 98.3% of shares held by the shareholders, virtually, the complete control of the company has been handed over to the BFSL and they have received the consideration for the shares held by them, may be proportionate to the value of the land on the date of transfer. But that does not make the transaction “colourable” or “unreal” or “sham.” - security transaction tax to Magadha Stock Exchange. Where all these three conditions stipulated under Section 10(38) of the Act are fulfilled, the assessee is entitled to the benefit flowing there from. If the share holder chooses to transfer the lands and part with the land to the purchaser of the shares, it would be a valid legal transaction in law and merely because they were able to avoid payment of tax, it cannot be said to be a colourable devise or a sham transaction or an unreal transaction - Decided in favour of assessee.
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