TMI Blog2012 (10) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... r any consideration actually having passed between the parties. The assessee relied almost entirely on book entries made in that regard - thus as that amount was not brought to tax and the assessee’s claim of loss was not allowed to be set of against its business profits - in favour of revenue. - ITA 84/2010 - - - Dated:- 26-9-2012 - Mr. S. RAVINDRA BHAT AND MR. R.V. EASWAR JJ. Appellant: Sh. Sanjeev Sabharwal, Sr. Standing Counsel with Sh. Puneet Gupta, Jr. Standing Counsel and Ms. Gayatri Verma, Advocate. Respondent: Sh. Manoj Swaroop, Ms. Lalita Kohli, Sh. K. Chaturvedi and Sh. Abhishek, Advocates. MR. JUSTICE S.RAVINDRA BHAT 1. The Revenue which is in Appeal before the Court, is aggrieved by the order of the ITAT dated 13.03.2009 in ITA-2280/Del/2005. It urges the following substantial question of law for determination by this Court; Did the Tribunal err in law in finding that the loss declared by the assessee from the sale of shares of M/s J.P. Industries and Himachal Futuristic Company Ltd., could be treated as speculation loss enabling it to set off speculation loss against the profit available. 2. The facts briefly are that the assessee filed it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purchases/sales of shares were backed by actual delivery, the loss on the sale of shares of Himachal Futuristic is treated as speculation loss and not allowed to be set off against its business profits. 3. The assessee carried the matter in appeal, contending that the sale of shares of M/s J.P. Industries was neither a sham nor could it be characterized as a manoeuvre on its part. It was submitted that the sale price in the case of both the concerns i.e. Himachal Futuristic Company Ltd. as well as J.P. Industries was close to the average sale price in the Delhi Stock Exchange and Bombay Stock Exchange where the said company s share were traded. The CIT (A) did not accept the assessee s contentions and reasoned thus: - Regarding the sale of shares of M/s J.P. Industries, it is seen that on 26.3.01, the appellant sold the shares at Rs.35.95. On that date the rate being quoted on the BSE was 35.50 and on the DSE it was 36.50. The shares of M/s. J.P. Industries were quoted at a much higher figure during this period. On 8.1.01 they were quoted at Rs.45.45. On 8.2.01 they were quoted at Rs.53.10. If the assessee was interested in selling the shares of JP Industries it could have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as speculation loss. In view of the above reasons, the CIT (A) rejected the assessee s claims. 4. The Tribunal on an appeal by the assessee held that merely because there was some minor difference between the market price and the negotiated price which was natural having regard to the private nature of the sale, the transaction could not be termed as sham. The Tribunal was considerably influenced by the assessment order made in the case of M/s A. Nitin Capital Services. Apparently, it showed the turnover of Rs.71.98 crores on the sale of shares on its own account and the trading loss was accepted as speculative loss. The Tribunal held that the list of distinctive number of shares transacted by the assessee attached to the purchase and sale bills, tallied with the figures and the consideration specified. These were, in its opinion, available with the AO and were also reflected in the ledger account of M/s A. Nitin Capital Services. It was, therefore, held that once the transactions were accepted as genuine in the hands of M/s A. Nitin Capital Services, they could not be held to be bogus in the hands of the assessee. The Tribunal felt that Explanation to Section 73 also applie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d M/s A. Nitin Capital Services were common was contrary to the records. There was no material save the lone circumstance that one of the Directors was common to both the concerns. There was no finding of inter relationship between the two concerns in the sense that either the assessee or M/s A. Nitin Capital Services had interconnected share holdings. In these circumstances, there could not have been an assumption of inter relationship and a consequent finding that document and books were maneuvered to help the assessee. Learned counsel lastly relied upon the fact that the transaction insofar as it pertained to M/s Himachal Futuristic was treated by the authorities as a speculative loss. If such were the case, the facts pertaining to the J.P. Industries were no different. Having regard to these factors, it was urged that this Court should not disturb the Tribunal s findings. 8. In order to appreciate the controversy, it would be appropriate to reproduce in tabular form the details of the transaction with regard to shares undertaken by the assessee. The table is self-evident and explains the dates of purchase and sale, the purchase rate and the rate at which the shares were sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal was persuaded to rule in favour of the assessee on the ground that such sale price approximated the existing market price, the matter cannot be viewed in isolation. The fact remains that there was no delivery of the shares and on both occasions i.e. at the time of purchase as well as at the time of sale, it was only the sister concern M/s A. Nitin Capital Services which was involved in the transaction. 10. In the judgment reported as Union of India v. Play world Electronics Pvt. Ltd. (1990) 184 ITR 308, it was held as follows: - .It is true that tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges. It is also true that in order to create an atmosphere of tax compliance, taxes must be reasonably collected and when collected, should be utilized for proper expenditure and not wasted. It is not necessary, in the facts of this case, to notice the change in the trend of judicial ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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