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2012 (7) TMI 72 - HC - Income TaxShort term Capital Loss arising from re-purchase and sale of shares - dis-allowance on ground that modus operandi adopted to purchase shares at high price and sale thereof at low price to a sister concern were all colourable device - shares of Premier Mills Ltd purchased from UTI for Rs 30/- per share when market rate was Rs 8.50 per share, subsequently sold within a short span of time to BIPL(sister concern of PML) at Rs. 8.50 - no involvement of the assessee in the negotiation process - no correspondence exchanged between the assessee and UTI - no movement of funds from the assessee for purchase of shares from UTI, paid by PML through adjustment against dues of assessee firm - incentive for the turnover given to the assessee firm by PML to make good the loss resulting from the share transaction, which was withdrawn after the share transactions were completed. Held that:- Premier Mills Limited merely used the assessee firm as a special vehicle for the purpose of achieving, what it would not be possible for it to achieve in a legal way. It was found that as PML could not purchase its own shares and in order to circumvent Section 77 of the Companies Act, it decided to repurchase the shares through the assessee herein, which subsequently sold the same to the sister concern, wherein the spouse of Managing Director of Premier Mills Limited was a Managing Director of the sister concern. In the absence of any material explained as regards the repurchase of shares at Rs. 30/- per share and subsequently sold it at Rs. 8.50 paise, same cannot be construed as genuine transactions. Further, there are hardly any material to show that the funds for the purchase of these shares really went from the assessee firm - Decided against assessee.
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