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2016 (10) TMI 173 - AT - Income TaxChargeability of capital gains arising on sale of shares - assessment year selection - Held that:- The AO as well as the CIT(A) were driven by the fact that there was a change in the management and control of the company pursuant to share transfer of agreement between assessee and Shri G.Somashekara Reddy & others and also full consideration was received during the financial year relevant to assessment year under consideration. In our considered opinion, these are not conclusive to determine whether transfer of shares has taken place or not. The underlying purpose of share transfer agreement was only to transfer shares in the company STPPL. It is not the case of the AO that relevant share transfer Forms duly signed by the assessee were handed over to the buyer during the previous year relevant to assessment year under consideration. Needless to say shares are movable assets and therefore transfer thereof is guided by the Sale of Goods Act. The transfer took place as and when possession was handed over to the transferee and consideration was received. In this case, substantial amount of consideration was received during the previous year relevant to assessment year under consideration. But it is nobody’s case that possession of share certificates was handed over to the transferee. As in the present case since it is undisputed fact that share certificates were not delivered to the transferee during the previous year relevant to assessment year 2007-08, it cannot be said that transfer of shares is complete during the previous year. Accordingly, we hold that no capital gains are chargeable to tax on account of sale of shares in the company STPPL during the previous year relevant to assessment year under consideration. Therefore, we direct AO to delete the addition on account of sale of shares in STPPL. As regards other addition on account of interest-free loans given, the AO, though made a bald statement that the assessee incurred interest on borrowings, he has not rendered any categorical finding that the assessee has diverted interest-bearing funds to non-business purpose. As a matter of record, it is during the relevant assessment year the assessee has received a sum of ₹ 13.50 crores as advance for sale of shares. Therefore, presumption has to be drawn that the assessee has advanced loans to others out of his own fund and therefore, the question of any addition does not arise. Hence, we direct the AO to delete the addition made on account of interest free loan. Assessee appeal allowed.
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