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2017 (3) TMI 1384 - AT - Income TaxDisallowance on account of forfeiture of shares warrants - loss claimed by assessee has not been offered to tax by ECL - Held that:- Firstly, the profit amount was not offered to tax by ECL. Secondly, the demand was raised by ECL to the original allottee of share warrant i.e. MDCPL by ECL. Admittedly, the loss incurred by assessee which was admitted by AO but the same was rejected on the ground that ECL has not offered to tax. Here, it is pertinent to note that what will be the tax treatment of the forfeited amount in the hands of ECL is not the concern of the AO whether it is taxable receipt or revenue receipt. The AO has to see the transactions and its effect in the hands of the assessee. Therefore, the tax treatment in the hands of ECL cannot be a deciding factor for the loss incurred and subsequently claimed by assessee. Therefore, the allegation framed by AO against the assessee is baseless and it was also seen that a notice was issued by the AO u/s 133(6) of the Act to ECL for the verification of loss incurred and claimed by assessee. The ECL in response thereto as clearly submitted that the original allottee was MDCPL but subsequently it was transferred to assessee. The copy of the letter is placed on page 6 and 7 of the paper book. Besides the above, ECL has duly recorded in its record the transfer of 50 lakh convertible warrants from MDCPL to assessee and the confirmation of the same is placed on pages 9 to 10 of the paper book. In view of the above, we are of the view that the impugned finding of Ld. CIT(A) that the letter has not been issued to the assessee but to MDCPL for the balance payment is not a valid reason for the impugned disallowance. Thus, after considering all the facts in totality, we are inclined to reverse the orders of authorities below. The assessee gets the relief accordingly.
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