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Shri Shailendra Babu and Smt. Poornima Shailendra Babu Versus Asst. Commissioner of Income-tax Circle 7 (2) Bangalore Deputy Commissioner of Income-tax Circle 3 (1) Bangalore

TM - Chargeability of capital gains arising on sale of shares - assessment year selection - Held that:- The AO as well as the CIT(A) were driven by the fact that there was a change in the management and control of the company pursuant to share transfer of agreement between assessee and Shri G.Somashekara Reddy & others and also full consideration was received during the financial year relevant to assessment year under consideration. In our considered opinion, these are not conclusive to determin .....

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ssion 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 .....

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s, 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 assessment year the assessee has received a sum of ₹ 13.50 crores as advance for sale of shares. Therefore, presumption has to be drawn that the assessee has advanced loans to others out of his own fund and therefore, the question of any addition does not arise. Hence, we direct the AO to delete the addition made on a .....

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8-09. 2 The assessees raised the following common grounds of appeal: 1) The learned CIT (Appeals) erred in upholding the validity of reopening when the conditions precedence were absent. 2) Without prejudice, the learned CIT (Appeals) erred in upholding the computation of capital gains and levy of capital gains tax in respect of alleged transfer of shares in the relevant year when there was no transfer of shares in the books of the company in the name of the transferee or handing over of possess .....

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ny or the company itself and in this connection the learned CIT (Appeals) ought to have followed the judgment of the jurisdictional High Court in the case of Bhuruka Engineering Industries Ltd (now known as Bhoruka Realty & Services Ltd) vs. DCIT in ITA No.120/2011 dt. 09.04.2013 and held that there was no transfer of asset contemplated in the relevant year to justify the computation of capital gains in the relevant year. 5) The learned CIT (Appeals) ought to have appreciated that the Appell .....

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ns 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 .....

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urged at the time of hearing, the Appellant prays that the appeal may be allowed. 3. Briefly facts of the case are as under: For the sake of convenience and clarity, facts in ITA No.291/Bang/2016 are stated herein. The assessee is an individual deriving income from house property. Return of income for the assessment year 2008- 09 was filed declaring income of ₹ 55,10,870/-. Against said return of income, assessment was completed u/s 143(3) of the Income-tax Act, 1961 [hereinafter referred .....

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ceedings, the AO noticed that an amount of ₹ 13.5 crores was received as advance towards sale of shares in STPPL from one Mr.G.Somashekara Reddy. On enquiry by the AO, it is found that the said company i.e. STPPL had passed a Board Resolution on 1/6/2007 at Bangalore to transfer management of the company to the new entrepreneurs i.e. Shri G.Somashekara Reddy and Smt. G.Vijaya. The AO further concluded that consideration of ₹ 35 crores was received during the period from 8/6/2007 to 1 .....

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tire consideration was received and the management and control of the company was taken over by the buyers of shares. 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 Memor .....

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e 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 and even Registrar of Companies stamped on the share Transfer Form on 4/3/2013. Therefore, according to the learned counsel for the assessee, though substantial amount of consideration was receiv .....

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rder. He also placed reliance on the decision of the Chandigarh bench in the case of Mr.Shamsher Singh Dullo vs. ITO in ITA No.1219/CHD/2012 dated 31/7/2013 for the proposition that when the consideration was received and possession was handed over, the transfer is complete. 6. We heard rival submissions and perused the material on record. The only issue in this appeal is about the year of chargeability of capital gains arising on sale of shares held by the assessee in the company called STPPL. .....

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n, these are not conclusive to determine whether transfer of shares has taken place or not. The underlying purpose of share transfer agreement was only to transfer shares in the company STPPL. It is not the case of the AO that relevant share transfer Forms duly signed by the assessee were handed over to the buyer during the previous year relevant to assessment year under consideration. Needless to say shares are movable assets and therefore transfer thereof is guided by the Sale of Goods Act. Th .....

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mplete 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 d .....

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