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Commissioner of Income Tax Versus M/s. Sriram Investments Ltd.

2016 (12) TMI 673 - MADRAS HIGH COURT

Dis-allowance of Long Term Capital Loss on account of sale of shares to a sister concern - Held that:- We are of the view that the Assessee had provided an acceptable justification for both transactions of sale of shares including the aspect of valuation of the shares. The Assessing Authority, while accepting the genuineness of the transactions, merely raises a vague suspicion relating to the valuation adopted by the assessee. This, by itself, is insufficient to reject the claim of capital loss. .....

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the same has been concurrently accepted by both the lower appellate authorities. No perversity has been either alleged or made out at any stage in appeal. We agree with the conclusions of the ITAT and are of the view that no substantial questions of law arise for consideration. - Decided in favour of the assessee. - Civil Miscellaneous Appeal No. 1421 of 2010 - Dated:- 15-11-2016 - Nooty Ramamohana Rao And Dr. Anita Sumanth, JJ. For the Appellant : Mr. J.Narayanasamy For the Respondent : Mr. R. .....

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pellate Tribunal was right in holding that the assessee was entitled to account for only the additional finance charges on a cash basis, while it was otherwise following the mercantile the system of accounting and also accounting for the very same transaction on a mercantile basis under the Company Law? 2. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the assessee could be permitted to follow the mercantile system of accoun .....

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43 D of the Income Tax Act and Rules made thereunder, specifying the classes of assessees and categories of bad and doubtful debts in respect of which such exclusion could be made? 4. Whether on the fact and in the circumstances of the case, the Income Tax Appellate Tribunal was right in deleting the dis-allowance of Long Term Capital Loss of ₹ 3,98,07,218/- on account of sale of shares to a sister concern without applying the ratio of the Supreme Court's decision in the case of Aishi .....

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and Mr.R.Sivaraman, learned counsel appearing for the respondent/assessee. 4. Learned counsel appearing for both sides agree that question Nos.1, 2 and 3 are covered by a decision of this Court, in T.C.A.No.1422 of 2010, of even date, in favour of the assessee and Question No.5, in favour of the Revenue and against the assessee. Adverting to question No.4, the brief facts are as follows:- The assessee / respondent is a Non Banking Financial Company engaged in the business of hire purchase, fina .....

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re of ₹ 1/- per share and the sale resulted in a capital loss of an amount of ₹ 3.98 crores (Rs.2.88 + 1.10 crores). 5. During the course of assessment, the Assessing Authority raised a query on the allowance of capital loss on the sale of shares, specifically on the valuation adopted. The justification provided by the assessee in respect thereof reads thus:- The company is a manufacturer of Automobile components. We had acquired 10 lakhs shares in this company at a cost of ₹ 1 .....

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siness and had to exit from manufacturing activities. There was no scope for the sale of these shares in market. In these circumstances, we had to sell these shares @ ₹ 1 per share and exit from the company. Shripet Cybertech Systems Limited has been manufacturing pet bottles and had made very insignificant profits till 31.03.03 and had not declared any dividend since its inception. In the year ended 31.03.04, it had incurred a huge loss of ₹ 1,14,59,899/-. Due to loans, there has be .....

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ions in the stock exchanges since April 2002. Hence there was no market for the shares. In these circumstances, we had to sell the shares @ Re.1 per share and exit from that company. 6. The assessee thus explained that the two companies were either incurring loss or making insignificant profits and neither had declared dividend since inception. Thus, though the equity shares of one of the companies were listed in the Madras and Ahmedabad Stock Exchanges, there had been no transactions in the sai .....

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ure. 7. An appeal was filed before the Commissioner of Income Tax (Appeals) (in short the CIT (A) ) that was allowed by order dated 24.12.2008, holding that the valuation adopted by the assessee appeared to be acceptable in the light of the justification offered by the assessee and also specifically noting that though the assessing officer rejected the valuation adopted by the assessee, he had not offered or arrived at any other alternative. The order of the CIT (A) was assailed before the Incom .....

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of the view that the Assessee had provided an acceptable justification for both transactions of sale of shares including the aspect of valuation of the shares. The Assessing Authority, while accepting the genuineness of the transactions, merely raises a vague suspicion relating to the valuation adopted by the assessee. This, by itself, is insufficient to reject the claim of capital loss. While the Assessing Officer is certainly entitled to question the valuation, he ought to have produced some .....

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