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2017 (11) TMI 1283 - AT - Income TaxDisallowance of the claim of long term capital loss on account of sale of unquoted equity shares - claim of the of the assessee for set off long term capital gain on the sale of property against the long term capital loss on sale of unquoted equity shares has been rejected on the ground that the same is not genuine - Held that:- The investment in the two companies sold was made with a long-term view. These companies were venturing into mining in Goa and had plans to be listed in next 3 to 4 years. As the assessee wanted to exit earlier some differences arose with the majority shareholders who refused to give more than the face value ₹ 10/-. Assessee was therefore at the mercy of the Purchaser as the assessee was a minority shareholder. Hence assessee had no option but to exit at face value. Assessing Officer has not accepted the transaction as genuine since these companies were having decent profit. However Assessing Officer has not alleged that the assessee has received back cash on account of the sale. The Purchasers of the shares from the assessee are not related in any way to the assessee. The Purchaser have not been examined by the Assessing Officer to verify the genuineness of sale. The Assessing Officer has failed to appreciate that shares of private limited companies cannot be sold in the open market and hence the seller is at the mercy of the Purchaser. Merely because the assessee had sold the shares at face value in a distressed situation it cannot be presumed that the assessee had engineered the transaction is to manage its tax liability. The assessee states that the sale is genuine out of urgent financial needs and also on account of the fact that differences had arisen between the assessee and the majority shareholders. Assessee also produced even the date of payment for purchase of shares, which was made only at the time of purchase of shares. Also the assessee has transferred the shares back to the Ankola Paper Mills Private Limited and VRKP Steel Industries Private Limited and received the payment of ₹ 10,00,000/-. This ₹ 10,00,000/- was invested by the assessee in international export corporation of ₹ 32,00,000/-. It means that the assessee was in need of money and hence, for this purpose he sold the investments. As the transaction is genuine, we find that the lower authorities erred in disallowing the long term capital loss incurred by the assessee in the sale of unquoted equity shares. We allow the claim of the assessee and direct the AO to recompute the income accordingly - Decided in favour of assessee.
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