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2022 (10) TMI 1109 - AT - Income TaxDisallowance of long Term Capital loss (LTCL) - Whether CIT(A) erred in not upholding the action of the AO in recalculating the purchase price of the shares? - Revenue seeking to disturb the purchase price of acquisition of shares paid by the assessee @15.40 per share in view of the fact that the company in which assessee had invested is a loss making company and did not command any investment at a premium - whether the Revenue could at all disturb the purchase price of acquisition of shares within the mandate provided in the Act? - HELD THAT:- The answer is an emphatic ‘no’ in as much as there is no provision in the Act warranting to disturb the purchase price of shares by the assessee. What is required to be seen is whether the assessee had sufficient sources for making such investment in shares. As stated earlier, there is absolutely no dispute that payments for acquisition of shares at Rs.15.40 per share had been duly met out of disclosed sources of the assessee. Moreover, it is also pertinent to note that the said investment had been made by the assessee in A.Y.2012-13 i.e. the earlier year. We find that assessee had duly explained the rationale behind making investment in the shares of Pyxis Systems Pvt. Ltd., at a premium, based on the advice given by certain parties and after analysing the various reports that are made available to her by her advisors and had also taken cognizance of the strength of the promoters of the said company and their capabilities. The assessee had also furnished the proper reasons for exiting out of her investment from the said company. None of these explanations furnished by the assessee were found to be false by the Revenue. Hence, it was only the failed investment deal of an assessee being a private equity investor, which had resulted in incurrence of loss for the assessee which is claimed as a long term capital loss by the assessee. There is absolutely no basis for the ld. AO to arrive at the revised book value per share at Rs.2.69 per share based on the financials as on 31/03/2011 of Pyxis Systems Pvt. Ltd., and concluding that the said rate should be the fair market value which the assessee ought to have paid for the purpose of making investment in shares. If this is to be accepted then what will happen to the remaining money paid by the assessee towards acquisition of shares? The order of the ld. AO is completely silent on this aspect. Hence, we conclude that the ld. AO does not have any power to substitute the purchase price of shares with a different value than the value at which actually it was paid. We hold that the ld. AR was justified in placing reliance on the decision of the Hon’ble Madras High Court in the case of CIT vs. Sriram Investments [2016 (12) TMI 673 - MADRAS HIGH COURT] - Decided against revenue.
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