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2016 (10) TMI 173

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..... lace as and when possession was handed over to the transferee and consideration was received. In this case, substantial amount of consideration was received during the previous year relevant to assessment year under consideration. But it is nobody’s case that possession of share certificates was handed over to the transferee. As in the present case since it is undisputed fact that share certificates were not delivered to the transferee during the previous year relevant to assessment year 2007-08, it cannot be said that transfer of shares is complete during the previous year. Accordingly, we hold that no capital gains are chargeable to tax on account of sale of shares in the company STPPL during the previous year relevant to assessment year under consideration. Therefore, we direct AO to delete the addition on account of sale of shares in STPPL. As regards other addition on account of interest-free loans given, the AO, though made a bald statement that the assessee incurred interest on borrowings, he has not rendered any categorical finding that the assessee has diverted interest-bearing funds to non-business purpose. As a matter of record, it is during the relevant assessme .....

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..... ansfer of shares in the year of transfer and thus there was no omission to offer the income for taxation to justify the surmise of transfer in the relevant year. 6) The learned CIT (Appeals) ought to have appreciated that the management of the company by the transferee was not a decisive incidence to decide the transfer of shares when the shares continued to be possessed by the Appellant in the relevant year and consequently upholding of levy of capital gains tax in the relevant year was opposed to law and the impugned addition is liable to be deleted. 7) Without prejudice, the learned CIT (Appeals) erred in upholding the sale consideration as made by the assessing officer. 8) The learned CIT (Appeals) erred in not giving a finding with regard to the arbitrary estimation of interest which has been included in the total income of the Appellant. 9) The learned CIT (Appeals) ought to have appreciated that when no interest has accrued to the Appellant or received by the Appellant, the estimation of interest and inclusion of the same in the ottal income was opposed to law and contrary to the provisions of the Act and thus the impugned addition is liable to be deleted. 10) .....

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..... ares. As regards addition made on account of interest-free loans given, the CIT(A) confirmed the addition on the ground that the assessee had failed to produce any evidence to show that he has filed any steps for recovery of interest-free loans. 5. Being aggrieved, the assessee is in appeal before us in the present appeal. 5.1 Learned counsel for the assessee argued that original Memorandum of Understanding entered on 16/6/2007 whereby assessee agreed to sell shares to Shri G.Somashekara Reddy and others had lost is validity in view of subsequent agreement of share transfer. In terms of subsequent agreement on 1/4/2013 amount of consideration originally agreed upon underwent change from ₹ 40 crores to ₹ 37.5 crores. This fresh agreement was necessitated as the first agreement was never acted upon and the disputes have arisen between parties as a result of which the shares were not transferred as per time-frame stipulated in the original agreement entered on 16/6/2007. He has drawn our attention to copy of the share transfer Form whereby shares held by the assessee were transferred in favour of Shri G.Somashekara Reddy. The shares transfer Form was dated 2/4/2013 a .....

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..... evant to assessment year under consideration. But it is nobody s case that possession of share certificates was handed over to the transferee. The Hon ble Madras High Court in the case of CIT vs. Ramaswamy (151 ITR 122), after reviewing precedents on the subject, held that transfer of shares is complete only when share certificates along with duly signed share transfer Forms were handed over to the transferee. This principle was again reiterated by the Hon ble Kerala High Court in the case of Rajagiri Rubber Produce Co. vs. CIT (1993) 203 ITR 663 wherein it was held as follows: We heard counsel. We perused the appellate order passed by the Appellate Tribunal. The relevant dates are not in dispute. It is conceded that the company passed a resolution and the share certificates were delivered and consideration was also received during the accounting period relevant to the assessment year 1978-79. As between the transferor and the transferee, the transaction was complete. The share certificates were handed over to the broker on June 28, 1977. In such circumstances, as held by the Supreme Court in Howrah Trading Co. Ltd.'s case [1959] 36 ITR 215 and Shelat's case [197 .....

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