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TMI Blog2016 (11) TMI 1469X X X X Extracts X X X X X X X X Extracts X X X X ..... No.CIT(A)-VI/Cir.7/287/10-11 arising out of order u/s 143(3) of the Act also framed on 27/10/2012 by Addl.CIT, Range-7, Ahmedabad. As the issues raised in these appeals and the Cross Objections by the assessees are common in nature they are being disposed of by this common order for the sake of convenience. 2. First we will take up ITA No.1879/Ahd/2011 for Asst. Year 2008-09. Grounds raised by the Revenue are as below :- 1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 3,85,28,505/- made by the AO on account of long term capital loss on sale of Shares of M. H. Mills & Inds. Ltd. without appreciating the fact that a wrong claim made by the assessee in a return, which had not been subjected to scrutiny would not enable the assessee to perpetuate the wrong claim in subsequent years. 2. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,15,043/-made by the AO on account of disallowance u/s 14A of the Act. 3. On the facts and in the circumstances of the case, the Ld. CIT (A) ought to have upheld the order of the Assessing Officer. 4. It is, therefore, prayed that the order of the Ld. CIT (A) may be set aside and that o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vehemently argued supporting the order of Assessing Officer and also relied on the decision of Hon. Bombay High Court in the case of Killick Nixon Ltd. vs. DCIT (2012) 20 taxmann.com 703 (Bom) and further submitted that assessee has intentionally entered into a sham transaction by selling equity shares in off market with the intention to evade long term capital gain tax on sale of land by setting off of long term capital loss. 7. On the other hand, ld. AR apart from relying on the submissions made before ld. CIT(A) further briefed that all the transactions entered into by assessee i.e. sale of land, sale of equity shares through recognized stock exchange by paying security transaction tax, gifts of equity shares from relatives and sale of gifted shares through off market have been entered on the fair market value and Revenue/Assessing Officer has not raised any objection about the genuineness. Ld. AR further contended that Hon. Supreme Court in the case of Mc. Dwell & CO. vs. CIT (1985) 154 ITR 148 (SC) has held that tax planning may be legitimate provided it is within the frame work of law. Colorable device cannot be a part of tax planning and it is wrong to encourage or entertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls & Indus. Ltd. as against long term capital gain from sale of land. We find that during the year under appeal assessee earned long erm capital gain of Rs. 12,19,16,490/- realized on sale of agricultural land at Hansol. Against this long term capital gain from sale of land assessee claimed set off of loss of Rs. 3,85,28,505/- arose from off market sale of shares of M.H.Mills & Indus. Ltd. and M. H. Packaging Ind. Ltd. Further equity shares the sale of which gave rise to a long term capital loss were received as gift in the beginning of the year. However, genuineness of the gifts has not been questioned by the Revenue. Further during the year assessee also earned long term capital gain at Rs. 10,42,332/- from sale of shares being listed securities on recognized stock exchange after paying security transaction tax and the same was claimed as exempt u/s 10(38) of the Act. 9. Analyzing the facts we find that ld. Assessing Officer's main observation was that assessee has intentionally first received gifts from relatives of equity shares and then sold them off market incurring loss and claiming it as set off against long term capital gain on sale of land in order to minimize long term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,85,28,505/-. There was no difference in the off market and on market sale price of these shares. This fact has also been confirmed by the A.O. in the assessment order. The A.O.'s objection in respect of the transaction of sale of shares of M.H. Mills & Industries Ltd. "off market" is that the shares of the said company were listed on the stock exchange and had it been sold on market, then in that case the long term capital loss would have been exempt and therefore, in that case the appellant could not claim set off of such exempt long term capital loss. Thus, as per the A.O., this is a clear planning on the part of the appellant to sell the shares of listed company off market because the appellant was very well aware of the market price of company and it was deliberately done to claim the benefit of loss which would have not been permitted in case of on market transaction. As per the A.O., the need for sale of shares off market as against on market option available to the appellant are as under: 1. The benefit of the loss can be claimed if the shares are sold off market. 2. The need for sale of the shares of a listed company off market is a proper planning to reduce the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inference is required to be drawn against the appellant in respect of the off market transactions done by him merely because such off market transactions have resulted in loss and not gain. When under the Income tax Act, there are different modes of taxation of long term capital gain available to the appellant, then he can choose any of the modes of taxation so as to plan his affairs which is not prohibited by law, but it is strictly as per the provisions contained in the Income tax Act. It is further contended that the shares are required to be sold through recognized Stock Exchange and STT is required to be paid only when the appellant desires to claim such resultant transaction of capital gain as exempt. However, this may not the case for all the assessees and there are many assessees, who would choose or would opt for the transaction, which take place outside Stock Exchange not paying STT and therefore, bear the consequences of Income Tax provisions. In appellant's case, the fact regarding purchase/acquisition of the shares is not in dispute. Similarly, the cost of shares as envisaged u/s. 49 of the Act, sale of shares at the correct market price to purely outsider/third ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd, 47 ITD 638 (ITAT Calcutta) I have gone through the above judgments and found that eyen after the decision of McDowell's case, the Hon'ble Supreme Court and other High Courts have consistently held that the assessee can still arrange his affairs legitimately to reduce the impact of tax, if it is done within the four corners of Law. In the present case of the appellant he has done the same absolutely genuine within the four corners of law and the set off of long term capital loss on sale of shares against the long term capital gain on sale of land is the consequence of the different provisions of the Act and no other device or dubious transaction to reduce the tax liability as observed by the A.O in the assessment order. 10. Further on going through the judgment of Hon. Bombay High Court heavily relied by ld. DR in the case of Killick Nixon Ltd. vs. DCIT (supra) we find that the facts dealt in this case are different to the extent that the long term capital loss claimed as set off were investigated by ld. Assessing Officer and were found to be circuitous transaction by way of purchase at exorbitant price and subsequently sold at negligible/throw away price and, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lready noted, such special angle may have repercussion insofar as the legal relation between the assessee and the IDBI is concerned and insofar as the purchaser's right to have shares transferred in its name is concerned. This, however, by itself would not establish that the sale of shares was only a paper transaction and a device contrived by the assessee to claim loss which it did not suffer and thereby seek set off against the capital gain received by it during the year under consideration. 18. In the case of Commissioner of Income Tax v. Sakarlal Balabhai, 69 ITR 186, a Division Bench of this Court observed that avoidance of tax cannot include every case of reduction of tax liability of an assessee. The assessee may enter into a transaction which has the effect of diminishing his income and consequently reducing his tax liability. In such a case, there would be no avoidance of tax, For example, a case where the assessee makes a gift of shares to his son. By reason of gift income from the shares would not accrue to the assessee but would accrue to the son and to that extent the income of the assessee would be diminished and his tax liability reduced. This cannot be regarde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... selling of its shareholding. 8. In the present case therefore, what essentially boils down to is whether the shares were sold at a correct price or at the price which was artificially arrived at to inflate the loss. In this respect, we have already noticed that the CIT [A] as well as the Tribunal both had gone to the factual findings pertaining to the methodology adopted by the valuer in valuing the shares. We have also noticed that the Assessing Officer: except for doubting such valuation, on the basis of circumstances, did not have anything concrete at hand to hold that the price of Rs. 6.25 per share was not the correct price. In the circumstances, we do not find that the Tribunal had committed any error. 9. Before closing, we may notice that in case of Porrits & Spencer (Asia) Ltd. vs. CIT (2010) 231 190 Taxman 174. the Punjab & Haryana High Court had somewhat similar situation to tackle with. Referring to and relying on the decision of the Apex Court in case of Union of India vs. Azadi Bachao Andolon (2003) 263 ITR 706 (SC) and the decision of this Court in case of Banyan & Berry vs. CIT [(1996)222 ITR 831/84 Tnxman 515 (Guj)] it was observed .that once the transaction is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Security Exchange Board of India. In the given facts and circumstances of the case we observe that judgment of Hon. Supreme Court in the case of Mc. Dwell & Co. (supra) squarely applies to the assessee wherein Hon. Supreme Court has observed as under :- "Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges.". and, therefore, all the transactions entered into by the assessee are within the frame work of law and cannot be termed as a colourable device to evade tax rather it is assessee's right of tax planning which he has used to reduce his tax liability by entering into all the transactions permissible by law. We, therefore, find no reason to interfere with the order of ld. CIT(A). We uphold the same. Accordingly this ground of Revenue is dismissed. 14. The second ground raised by the Revenue is against deletion of disallowance of Rs. 1,15,043/- u/s 14A of the Act r.w.r 8D of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sources u/s 57 of the Act then Revenue would have a case for calculating the disallowance. However, no such facts are existing in the case of assessee as assessee has not claimed any expenditure against salary income, or income from other sources as verifiable from the computation of income placed at page 10 to 14 of the paper book. We are, therefore, of the view that no disallowance is called for u/s 14A of the Act and no interference is called for in the order of ld. CIT(A). We uphold the same. Accordingly, this ground of Revenue is also dismissed. 16. Ground nos. 3 & 4 are of general nature, which need no adjudication. 17. C.O. of the assessee has not been pressed. Therefore, the CO is dismissed as not pressed. 18. Now we take ITA No.2015/Ahd/2011 in the case of Smt. Kusumlataben N. Parikh wherein Revenue has raised a single issue against the action of ld. CIT(A) allowing set off of long term capital loss at Rs. 3,48,93,607/- from sale of shares off market. 19. At the outset ld. AR appraised that the facts of the case in this appeal are similar to the facts of the case in ITA No.1879/Ahd/2011 in the case of Deepak N. Parikh. Further we also observe that ld. CIT(A) has del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question why a particular option has been chosen and not the other one. .In the present case of the appellant, he's having two legal options available for selling the shares. "On market" and "off market" and he had choose the "off market" option while evaluating the tax implication of it. The AO cannot question the appellant on the decision taken by him which is legal, valid and within four corners of law. In my considered view, there seems no colorable device in the transactions of sale of shares of M H Mills and Industries Ltd off market by the appellant which has eventually resulted in the loss. AO has not brought on record any cogent material evidence in support of the allegation that the transaction of sale of shares of M H Mills and industries Ltd off market is a colorable device to avoid the fax. In view of the detailed discussion held above, the disallowance made by the AO for set off of long-term capital loss on sale of shares of M H Mills and industries Ltd is not justified and therefore is deleted." Since facts of the appellant's case is identical to that of her son in whose case aforesaid appeal order is passed. Since appellant was co-owner of the land which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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