TMI Blog2016 (6) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 614/- lakhs for the A.Y. 2010-11) and also paid advance-tax of ₹ 15/- lakhs for the A.Y. 2011-12. Thus in consideration of all these undisputed facts, ld. CIT(A) rightly observed that the purchase of these shares by the appellant cannot be considered as non-genuine or paper transactions. Assessee produced necessary evidence that Inter Active i.e. company furnished necessary information and no any infirmity was indicated by the ROC qua the impugned purchase and sale of shares and in maintenance of other records relating to share transactions. Thus the adverse inference drawn by ld. Assessing Officer that there were alleged interpolation in the registers of the company are not tenable. The shares were sold by assessee due to crash of the share market adversely resulting in the cascading effect on other investments. In order to minimise the losses as the Inter Active’s net worth was reduced from ₹ 800 lakhs to ₹ 400 lakhs. The book value of share of the company slided down to ₹ 38.21 as on 27/03/2008. This was a conscious business decision of the assessee. Besides, the payments for purchase of shares were made by account payee cheques, similarly the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RDER Per R. P. Tolani, Judicial Member This appeal filed by the Revenue and Cross-objection thereon by the assessee are directed against the order of the Commissioner of Income-Tax (Appeals)-XVI, Ahmedabad dated 28.09.2011 for Assessment Year 2008-09. 2. Following grounds are raised in Revenue s appeal:- 1. The Ld. CIT(A) has erred in law and on facts in directing to allow the Short Term Capital Loss on sale of unquoted share of ₹ 1,82,10,800/-. 2. The ld. CIT(A) has erred in law and on facts in deleting the disallowance of interest payment of ₹ 9,87,264/- being excess of interest received. 3. On the facts circumstances of the case, the ld. CIT(A) ought to have upheld the order of the Assessing Officer. 3. Following grounds are raised in assessee s cross-objection:- 1. Ld. CIT(A) has erred in law in confirming the action of ld. AO in disallowing transfer cost of ₹ 5.50 lacs and ₹ 2.05 lacs incurred wholly and exclusively in connection with the transfer of Shella land while working out short term capital gain u/s 48 of the Act. 2. Both the lower authorities have erred in law and on facts in not properly appreciating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally nearer to STCG on land sale amounting to ₹ 1,81,50,000/-, which was set off. In this connection, the assessee vide letter dated 18/12/2010 submitted a detailed reply explaining that the genuineness of loss and its allowability. However, the ld. Assessing Officer without appreciating the facts disallowed the loss of ₹ 1,82,10,800/- holding the sale to be paper transaction on following counts:- (i) The assessee has made investment by acquiring 8,43,600 shares in such company @ ₹ 100/- per share on 31/12/2007 and 56,400 share on 09/01/2008 (ii) Out of total 9,99,998 shares, the assessee has sold 343,600 shares @ ₹ 47/- per share to Shri Ugarchand P. Gadhecha (HUF) on 27/03/2008. 7.1 Ld. Counsel further contends that during the course of assessment proceedings, the assessee filed submission dated 18.12.2010 before the Assessing Officer and explained that, the shares Interactive Technologies were purchased in earlier year also beside purchase and sale in current year about 2/3rd share holding continued in subsequent years. The earlier and subsequent share holding in Interactive Technologies have been accepted by the department; therefore, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dolaln and Another, reported in (2003) 263 ITR 706 (SC). It is further submitted that, the expression full value of consideration neither refers to the adequacy or inadequacy of the price nor to the market value of the capital asset. Reliance is placed on following authorities:- CIT vs. Gillanders Arbuthnot Co. [1973] 87 ITR 407; CIT vs. George Henderson Co. Ltd. 66 ITR 622 (SC) 7.4 During the course of appellate proceedings, a remand report was called for by the ld. CIT(A). After considering the material available on record, AO s remand report and submissions of the assessee ld. CIT(A) held that the impugned transaction of purchase and sale of shares as genuine, by observing as under:- 2.16 The Assessing Officer had not controverted the contention of the appellant for purchase of shares of the aforesaid company @ ₹ 100 per share (at a premium of ₹ 90 per share) neither during the course of assessment proceedings nor while sending the remand report. It is evident from the submission dated 18.12.2010 of the appellant before the Assessing Officer that the shares at high premium were purchased to save the company from liquidation and to re-str ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to show downwards. After the crash in the market, the company's networth was reduced from ₹ 800 lakhs to ₹ 400 lakhs. The book value of share of the company came down to ₹ 38.21 as on 27/03/2008. The appellant thereby, took a conscious decision to sale 1/3rd of his total shareholding in the company so as to reduce heavy losses and liquidated his funds to that extent. Accordingly, the Appellant sold 3,43,600 shares at ₹ 47/- per share which is higher than the book value of ₹ 38.21 per share as on 27/03/2008. As regards the sale of shares to the close relative it was submitted before the Assessing Officer by the appellant that as per the Companies Act, 1956, the closely held company cannot invite or transfer the equity share of the company to the general public and therefore, the shares were transferred to the HUF of assessee's father. However, by merely transferring the shares to a relative cannot be considered as a non-genuine transaction where the shares with distinctive numbers were actually delivered and the amount was received by the assessee by account payee cheques. The Assessing Officer had no where controverted this submission of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Assessing Officer was not justified in applying FIFO method instead of adopting specific distinctive numbers of shares for the purchase and sale of shares while computing capital loss for ₹ 99,10,980/-. However, the Assessing Officer himself had not computed the income by adopting the loss of short-term capital loss of ₹ 99,10,980/-, the aforesaid finding of the Assessing Officer remained academic and the same is hereby rejected. 2.25 Considering the facts of the case and respectfully following the decisions of the Hon ble Supreme Court in the case of Azadi Bachao Andolan , Hon'ble Gujarat High Court in the case of Banyan Berry and specifically the decision of the Hon'ble Calcutta High Court in the case of CIT vs. Oberoi Hotels P. Ltd. 334 ITR 293 (Cal.), I am of the opinion that the transactions of the purchase and sale of shares were genuine and therefore, the Assessing Officer was not justified in disallowing the short-term capital loss of ₹ 1,82,10,800/-incurred on account of sale of part of the shares of M/s Inter Active Technologies Pvt. Ltd. The Assessing Officer is directed to allow the aforesaid loss of ₹ 1,82,10,800/-. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersely resulting in the cascading effect on other investments. In order to minimise the losses as the Inter Active s net worth was reduced from ₹ 800 lakhs to ₹ 400 lakhs. The book value of share of the company slided down to ₹ 38.21 as on 27/03/2008. This was a conscious business decision of the assessee. Besides, the payments for purchase of shares were made by account payee cheques, similarly the consideration for sale of share was also received by account payee cheques. Assessee s reference to the CBDT Circular No.704, dated 28 April, 1995 [213 ITR St. 7] providing that FIFO method is only required to be applied where the dates of purchase and sale could not be correlated with specific numbers of the scripts. Ld. Assessing Officer was not justified in applying FIFO method instead of adopting specific distinctive numbers of shares for the purchase and sale of shares while computing the impugned STCG. 8.3 Respectfully following the decisions of the Hon ble Supreme Court in the case of Azadi Bachao Andolan , Hon'ble Gujarat High Court in the case of Banyan Berry and Hon'ble Calcutta High Court in the case of CIT vs. Oberoi Hotels P. Ltd. (supra), we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated as capital in nature. Since the contention of the Assessing Officer was without any basis, the alternative contention of the appellant has been rejected. The interest expenditure was actually incurred for earning the interest income and due to charging of lesser rate of interest on old loans and advances and advances given for shorter period. This contention of the appellant was not controverted by the Assessing Officer either during the course of assessment proceedings nor during remand proceedings. The Assessing Officer had indirectly admitted the contention of the appellant that the interest expenditure was incurred for earning the interest income as he had accepted the interest expenses upto interest income and only excess interest over interest income was only disallowed. Considering the facts of the case and the above discussion, I am of the view that the Assessing Officer was not justified in disallowing the excess interest expenditure over the interest income. The disallowance so made for ₹ 9,87,264/- is hereby deleted. 9.1 Ld. DR relied on the order of ld. Assessing Officer. 9.2 Ld. Counsel contends that ld. Assessing Officer observed that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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