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2014 (9) TMI 164 - AT - Income TaxGenuineness of loss on sale of shares – Consideration of Cost of acquisition of shares sold against recomputed capital gain – Held that:- The assessee is engaged in the business of share broking, trading and dealing in shares and securities - without giving any justification, the CIT(A) has directed the AO to allow loss of ₹ 2 crore against capital gains earned on sale of BSE shares - CIT(A) has also mentioned merger of GDSS in the assessee company as one of the reason for sale of shares at a loss - this aspect was not stated before the AO nor there was any argument on this point - since the sales was to the close relative, the actual price of the share as on the date of sale is required to be seen for determining the true profit or loss on sale of shares - the GDSS is a private limited company, the value of share is to be determined as per the NAV, which has not been done by the CIT(A) - The finding of the CIT(A) was to the effect that since dividend was not declared by GDSS, the discount is to be allowed while valuing the price of shares at the time of sale, is not correct insofar as record shows that GDSS earned sold profit of ₹ 1.40 crores in the financial year 2005-06 and ₹ 1.95 crores in the financial year 2006-07 relevant to the AY 2007-08 - there was no justification in the order of CIT(A) for allowing any discounting factor while working out price of shares so sold – the order of the CIT(A) in directing the AO to allow bogus loss of ₹ 2 crores is set aside and the matter is remitted back to the AO for fresh adjudication after finding out value of share of GDSS as per NAV in the year of sale. Share allotted to the assessee by BSE in lieu of its membership card was sold by the assessee during the year - long term capital gain arose thereon was computed by the AO by taking the WDV of membership card so allotted - The CIT(A) deleted the addition so made by observing that u/s 55(2)(ab) was introduced by Finance Act, 2001, according to which in case of sale of capital asset being equity share allotted to the shareholder of a recognized stock exchange in India under scheme of demutualization, shall be the cost of acquisition of its original membership of the exchange - CIT(A) found that the original cost of acquisition of membership card at ₹ 91,23,000 - the CIT(A) directed the AO to recomputed the capital gain on sale of shares of BSE by taking the cost of acquisition at ₹ 91,23,000/- and allowing indexation thereon as per provisions of law – there was no infirmity in the order of CIT(A) for directing the AO to re-compute capital gain by taking cost of acquisition at ₹ 91,23,000/- Decided partly in favour of revenue.
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