TMI Blog2017 (2) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... e commencement of the winding up, shall unless the court otherwise orders, be void. Section 536(2) of the Companies Act declares the transfer of shares during the liquidation proceedings as void. The transfer of shares includes transfer of rights in shares which is declared void under section 536(2) of the Companies Act and therefore, it is not a transfer at all and therefore, the question of capital gains/losses on the said transaction does not arise. Therefore, the transfer of 27410 shares of M/s Rustom Mills Industries Ltd by the assessee company by way of deed of assignment is held as void and not falling under section 2(47) of the Income-tax Act with no consequences as to the claim of long-term capital loss is not allowed to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant assessment year 1994-95, the assessee had pledged 27410 equity shares with the IDBI bank, which had gone in liquidation when it was pledged. The assessee had shown a long-term capital gain of ₹ 19,61,617 on sale of such shares of RMIL to its sister concern. On such sale of shares, the assessee had claimed long-term capital loss of ₹ 19,61,617. 2.1 The Assessing Officer noted that the shares of Rustom Mills and Industries Ltd. which the assessee sold were pledged with the IDBI bank and treated the transfer of the impugned 27410 shares as not valid in the eye of law. The Assessing Officer disallowed the loss arising on the sale of the shares of RMIL (being 27410 in number) amounting to ₹ 19,61,617. The assessee ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial institution along with the duly signed transfer forms, in so far as the assessee's relation with the bank is concerned, there would be a serious question of validity of such transaction. The High Court, however, in the present proceedings, is not concerned with such internal possible dispute between the assessee and the said financial institution. It may also be that if the purchaser-company desired to have such shares transferred in its name, such attempt would run into serious roadblock. Primarily, without the original share certificates in possession of the purchaser company, which were in possession of the IDBI bank, the company would not in view of section 108 of the Companies Act, be able to register such transfer. Further it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction itself is bad in law, the case which has been relied upon by the assessee in case of Biraj Investments (P.) Ltd. v. Asst. CIT (supra) is not applicable to the present case. 5. We have carefully considered the submissions made by learned advocates for both the sides. It is borne out from the record that the assessee had not taken permission of the relevant statutory authority regarding sale of said shares. The assessee's reply to the Assessing Officer remained silent on the issue of statutory permission. Section 536(2) of the Companies Act, 1956 is very clear regarding the avoidance of transfers after commencement of winding up. In the case of a winding up by or subject to the supervision of the court, any disposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... encumbered to the extent of the liability guaranteed by the assessee- company to IDBI what could be assigned, even assuming such a transfer to be valid, is the residuary rights in the said shares, which (shares) can only be considered as composite of the entire bundle of rights associated forthwith. As such, what the assessee stands transferred is such residuary rights in the impugned shares, the cost of which is not ascertainable with reference to the provision of the Income-tax Act 1961. It is held by the hon'ble Supreme Court in the case of Sunil Siddharathbhai v. CIT [1985] 156 ITR 509 (SC) that if the machinery provision(s) of law does not provide for or envisage the working in a given circumstance/situation the said transaction ou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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