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2019 (8) TMI 923 - AT - Income TaxGenuineness of short term capital loss and set off with LTCG - set off of earlier year loss with LTCG - sale of compulsorily convertible debentures (CCD) on the ground that it is not bonafide in nature and is more of a colorable device, in the facts and circumstances of the case - related party transaction - brought forward LTCG and STCG aggregating to ₹ 938.04 - HELD THAT:- Documentary evidences for the purchase and sale of CCDs were not doubted by the revenue. The transactions of purchase of CCDs from related concern and sale of CCDs to related concerns are also not doubted by the revenue. Only the pricing is doubted by the revenue on the ground that it was carried out with related concerns and it had resulted in a loss. The professed intention and the real intention of the assessee is proved in the instant case in the various documents filed before the lower authorities. If the same are to be treated as different, then the onus is on the revenue to prove it, which in the instant case, in our considered opinion, has not been proved by the revenue. AR also made an oral submission that purchase transactions are not disbelieved for other assessee in the same flowchart and that the same is disbelieved only for the assessee herein. We find that the assessee had derived net long term capital gains on sale of equity shares and preference shares of ₹ 1007.40 crores. Out of this huge long term capital gains of ₹ 1007.40 crores, a meager amount of short term capital loss of ₹ 69.36 crores was sought to be set off by the assessee on sale of CCDs of ICSL. Even after this set off, there was substantial net taxable long term capital gains left with the assessee to the tune of ₹ 938.04 crores. This was however sought to be adjusted with the brought forward long term and short term capital losses of the assessee from the earlier years, which is totally different altogether and even after this set off of brought forward losses, there is substantial amount of long term and short term capital losses of earlier years available with the assessee which were also carried forward to subsequent years. Short term capital loss of ₹ 69.36 crores on sale of CCDs of ICSL to related concern is not available to the assessee , then also the net long term capital gains of ₹ 1007.40 crores would be set off with the brought forward long term and short term capital losses from earlier years. No arguments were advanced by the ld DR before us to rebut these facts with regard to the availability of brought forward capital losses of earlier years. It could be safely concluded that there is absolutely no intention on the part of the assessee to evade tax by booking bogus short term capital loss on sale of CCDs to related concern. Hence the transactions carried out by the assessee cannot be construed as a colorable device. Non-availability of brought forward losses from earlier years, we find that the appellate orders for earlier years were passed subsequent to carrying out of the transactions of purchase and sale of CCDs by the assessee, wherein the losses were allegedly converted into nil or into income. We hold that on the date of transaction of sale of CCDs by the assessee, there cannot be any colorable device or a malign intent to evade tax on the part of the assessee as these appellate orders for earlier years were passed subsequent to entering of impugned transactions of sale of CCDs by the assessee herein. We hold that the transactions carried out by the assessee in respect of sale of CCDs to related concern which had resulted in a short term capital loss of ₹ 69.36 crores is to be construed as a genuine loss and cannot be construed as a colorable device. Accordingly, the grounds raised by the assessee in this regard are allowed. Appeal of the assessee is allowed.
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