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2024 (8) TMI 1044 - AT - Income TaxLoss incurred through the off market sale of shares to a partnership firm -colorable device aimed at tax evasion - Sale of the two scrips as violated the Spirit of the Act and is a colorable device through which the Assessee on the one hand seeks to take advantage of the Statutory Provisions i.e. Section 10(38) by claiming exemption of Long-Term Capital Gains but on the other hand creates Long Term Capital Loss artificially by transfer the shares to his sister concern in order to offset current and future gains against losses as mentioned HELD THAT - Assessee should not be encouraged to avoid payment of tax by resorting to dubious methods through colourable devices and that such devices cannot be a part of tax planning. We came to this conclusion in view of the fact that assessee transferred the above mentioned two listed securities to its partnership firm which in turn no doubt passed the consideration also to the assessee. In nutshell if we analyse the whole transaction it can be concluded that effectively money is lying with the assessee i.e. consideration paid by the partnership firm to the assessee securities /shares are still with the assessee i.e. hold by the partnership firm of the assessee on the other hand without any effective loss of control of the securities and artificial transfer of consideration he made himself entitled to create a long term capital loss which is available for set off against the current years capital gain and also available for future long term capital gains. In these circumstances the case laws relied upon by the assessee and Ld. CIT (A) is of no help as the facts of those judicial pronouncements vis-a-vis the facts of the assessee s case cannot be equate. he arrangement under scrutiny appears to lack commercial substance. It was noticed that the transaction under consideration created extraordinary rights and obligations that do not align with principles of fairness suggesting it qualify as an impermissible avoidance arrangement. The court observed that in the facts of the present case the evidence and facts suggests that the arrangement was designed primarily for tax evasion. In these circumstances and facts on record we uphold the appeal and set aside the order passed by the Ld. CIT (A) and restore the decision passed by the AO keeping in view the ratio laid down in the cases of McDowell Co. Ltd. 1985 (4) TMI 64 - SUPREME COURT and Vodafone International Holdings BV v. Union of India 2012 (1) TMI 52 - SUPREME COURT
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