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2023 (10) TMI 1182 - ITAT MUMBAIExemption u/s. 54EA - surplus arising on transfer of 10,00,000 shares as the business receipt arising from transfer of shares held as stock-in-trade - whether the gain arising on transfer of shares of DSPML Sec should be assessed to tax under the head capital gains or as business income and, consequently, whether the assessee would be entitled to exemption in respect of the same u/s 54EA? - HELD THAT:- Equity shares of DSPML Sec is an unlisted shares and therefore, the principle laid down in the said Circular will apply to its case. The exceptions referred to paragraph of the said Circular will not apply as there is no doubt about the genuineness of the transfer, nor does the issue pertain to lifting of corporate veil. The third exception being transfer of shares along with the control and management of the underlying business is also not applicable to its case because, the AO has himself noted that Myrill Lynch had 4 members on the Board of Directors of DSPML when they held only 8.33% equity stake and there was no change in this position even after they acquired 40% stake. Even the ld. AO in the assessment report dated 01/01/2015 has accepted this position, accordingly, in view of the CBDT Circular itself, we hold that transfer of unlisted shares of DSPML is to be taxed under the head “capital gains” irrespective treating it as business income is set aside and the transfer of shares is treated as capital gains. Once, the gains arising of transfer of shares of DSPML is capital gains, then, the assessee is entitled for exemption u/s. 54EA - claim of deduction / exemption u/s. 54EA is allowed.
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