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2010 (4) TMI 110 - HC - Income TaxTransfer of shares due to amalgamation – capital gain / capital loss – tax evasion - The assessee company had purchased shares of WSIL on 4th April, 1996 for a sum of Rs.7,92,70,381/-. Those shares were sold on 30th December, 1999 for a consideration of Rs.7,88,76,000/-. However, due to application of cost index, the cost of these shares for the purpose of computation of capital gain worked out to Rs.10,11,02,224/-, thereby resulting in capital loss of Rs.2,22,26,224/-. - . The Assessing Officer disallowed the capital loss on sale of shares on the ground that these shares were purchased from the funds made available by the group companies and observing that the assessee company had entered into these transactions on the same day only to create capital loss of investment held by it. Held that: It is also immaterial as to who the purchaser of the shares was, so long as the shares are not sold at a price which was higher or lower than their fair price and there was no restriction on sale of such shares to a group company. All these factors could have been relevant had the Tribunal found that the transactions undertaken by the assessee company were a colourable device with a view to cause a loss to the Revenue. As noted by the Tribunal, neither the assessee company nor the amalgamated company adjusted the capital loss on account of sale of these shares against any long-term capital gain even till the assessment year 2002-2003. No tax benefit was, therefore, obtained by the assessee company for at least two years after the capital loss was booked by it. Hence, it cannot be said that the transactions in question were a colourable device, meant to gain some unfair tax advantage.
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