TMI Blog2015 (5) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... mption u/s.10(38) of the Act was not to be allowed. The assessee had carried the matter to the Hon’ble High Court of Karnataka. The Hon’ble High Court of Karnataka was pleased to set aside the order of the Tribunal and held that the transaction of sale of shares were real, genuine and for valuable consideration and were within the framework of law. Consequently, exemption u/s. 10(38) of the Act had to be allowed. It is not in dispute that the facts in the case of assessee are identical with that of the case of Bhoruka Engineering Industries Ltd., (supra) and therefore the decision of the Hon’ble High Court of Karnataka will squarely apply to the facts of the present case. We are therefore of the view that the order of the CIT(Appeals) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances similar to the that of the Assessee in the present appeal and in whose assessment also the revenue refused to accept the claim of exemption of capital gain u/s.10(38) of the Act and had proceeded to treated the capital gain in question as Short term capital gain on identical reasons as are given in the case of the Assessee in the present appeal. According to the Revenue the decision of the Hon ble Karnataka High Court has not been accepted by the Revenue and an SLP has been preferred before the Hon ble Supreme Court against the said decision. Incidentally, the assessee has also filed Cross Objection in which he has challenged the validity of initiation of reassessment proceedings u/s. 147 of the Act in which the aforesaid additions w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49,83,11,717/- earned on sale of BFSL shares as exempt from taxation under section 10(38) of the Act since the shares transferred were quoted shares and having suffered Securities Transaction Tax and further the shares having been held for more than 12 months, exemption under section 10(38) was claimed. 6. In the reassessment proceedings, the AO found that BFSL belongs to Bhoruka Group of Companies and most of the shares in this company are held by Shri. S.N. Agarwal and his family members, either in their individual capacity or as partners of the concerns. From the records of BFSL, the AO noticed that BFSL had, for a large period of its existence as one of Bhoruka Group Company carried on the business of financial investment of the grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per share for a total consideration of ₹ 88.97 crores. By virtue of this deal the promoters of BFSL have sold their stakes to DLFCDL. 9. According to the AO, the directors and promoters of BFSL disposed off all the other assets held by BFSL except land before the shares were sold to DLFCDL. The intention of the directors and promoters of BFSL is to transfer the underlying asset, being land to the buyer company DLFCDL. If the intention of the directors and promoters of BFSL was to transfer BFSL along with all its assets and liabilities, then all assets and liabilities belonging to BFSL would have remained as such and no change would have taken place in the Balance Sheet of BFSL. The sale of all other investments and reduction of loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpts of the assessee company finally culminated in selling a non-competitive stock for ₹ 4,490/- per share by stripping out all the assets and investments of BFSL, except the land it was reduced to a shell company. This shell company was used to transfer a red asset and promoters took the fruits of the transaction. BFSL and its promoters made deliberate attempt to structure deal to avoid tax implication. 11. For all the above reasons, the AO held that the assessee was not eligible for claim of exemption u/s. 10(38) of the Act and that the transaction in question in substance attracts tax invoking the ruling of the Hon ble Supreme Court in the case of McDowell Co., 154 ITR 148 (SC). The AO held that gain on sale of shares of BFSL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue raised by the AO in the order of assessment has already been decided by the Hon ble Karnataka High Court by judgment dated 09.04.2013 in ITA No.120/2011, in the case of Bhoruka Engineering Industries Ltd. (supra). The Hon ble ITAT in the case of Bhoruka Engineering Industries Ltd. in ITA No.1139/Bang/2010, had upheld the order of the AO holding that the sale of shares by the various entities of Bhoruka group was a colorable device to evade tax and the capital gain on sale of shares was to be regarded as short term capital gain and exemption u/s.10(38) of the Act was not to be allowed. The assessee had carried the matter to the Hon ble High Court of Karnataka. The Hon ble High Court of Karnataka was pleased to set aside the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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