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2017 (3) TMI 1312 - ITAT PUNENon-adjustment of long term capital loss on sale of listed shares against taxable long term capital gains of sale of unlisted shares - STT was not paid and the transactions were outside the purview of section 10(32) - Held that:- The exercise undertaken by the assessee in selling the listed shares of its group concern GGDL in off market transaction is acceptable mode of selling the shares. Once the transaction has been undertaken by the assessee as business decision, then simply because the said transaction could be routed through Stock Exchange does not justify the stand of authorities below in not allowing the set off of loss arising from off market transaction on which no STT was paid against the gain arising on sale of unlisted group companies, on which also no STT is to be paid. Applying the rule of li teral interpretation to the provisions of the Act i.e. section 10(38) of the Act and section 88 of the Finance (No.2) Act, 2004, it is clear that STT is to be paid on such transaction which are entered into through recognized Stock Exchange. The Section does not provide that each transaction of sale of listed transaction is to be routed through Stock Exchange. Applying the said principle to the facts of the case, where the shares of group entity which was a listed company i.e. GGDL were sold in off market transaction, then no STT is to be paid and the provisions of section 10(38) of the Act are not to be applied and consequently, set off of loss arising on sale of GGDL against the income from long term capital gains arising on sale of unquoted shares cannot be denied. Whether the transaction to be a colourable device adopted by the assessee in order to adjust the loss against the gain arising in its hands during the year, wherein the shares were sold to sister concern? - Held that:- We have already referred to the factual aspects of the issue where the shares of GGDL were sold to sister concern BVHPL in order to settle the loan raised from the said concern, the said concern was not 100% subsidiary of the assessee but the assessee had only 24% shareholding in the said group company. In order to maintain the shares of listed group concern GGDL within group, the decision taken by the assessee to arrest the loss arising on account of liability to pay interest on the loan raised from BVHPL cannot be doubted. It is a business decision taken by the assessee to arrest the losses and the same cannot be called as colourable devise. Accordingly, we reverse the findings of Assessing Officer and CIT(A) in this regard. Colourable device - whether by selling the shares to its own subsidiary, at prices above or below the book value, the assessee was manipulating the income to reduce its tax liability? - Held that:- First of all, as decided in the paras hereinabove, the shares have not been sold to subsidiary of the assessee but to a concern from whom the assessee has raised loan to the extent of ₹ 18 crores and the decision was taken to repay the loan and arrest the payment of interest on such loans, the shares of the group concern were sold in off market transaction to BVHPL. The said transaction is not a colourable device. Further, the assessee has sold the shares on the market price prevailing on the date of sale and no fault can be found with such transactions undertaken by the assessee. In case as against the market value, the other concern had purchased the shares at a higher value, then it would be questionable, but it is not so, in the present case and hence, we find no merit in the orders of authorities below in holding that the loss claimed by selling the shares of GGDL to its 100% subsidiary below the book value should be ignored while setting it off against the other income, if any, in current year or for carry forward and set off in subsequent years. The loss was worked out at (-) ₹ 2,75,83,524/-. We reverse the orders of Assessing Officer and CIT(A) in this regard and hold that the total loss arising on the said transaction can be adjusted against the gain arising on sale of unquoted shares during the year and balance loss can be carried forward and set off against any other gain arising in the subsequent years. Assessee appeal allowed.
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