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TMI Blog2015 (10) TMI 2734X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals are admitted for adjudication. 3. First we take up ITA No.1600/Mds/2015 for adjudication. None appeared on behalf of the assessee. Therefore, we proceed to decide the case on merits after hearing the ld. Departmental Representative. 4. The grievance of the Revenue in this appeal is regarding treating the sale of shares as long term capital gains instead of short term capital gains. 5. The facts of the case are that the assessee filed her return of income had offered Long Term Capital Gains of Rs. 2,27,52,531/- earned by her from the sale of shares of M/s. Ganesar Ginning Company (Pvt) Ltd. The assessee, her husband Shri T.S.R.Khannaiyan and their daughter Smt K. Priya, are the directors of the above company. They entered into a Memorandum of Understanding dated 28-11-2006 with M/s. DLF Retail Developers Ltd., as per which the entire share capital of the company M/s. Ganesar Ginning Company Pvt. Ltd was transferred to M/s. DLF Retail Developers Ltd. On this transaction, the assessee has offered her share of Long Term Capital Gains in the return of income filed. M/s. Ganesar Ginning Mills Pvt. Ltd., was having only the land of 2 acres and 23 cents and a building on it, in C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to believe that Income chargeable has escaped assessment Hence notice u/s.148 was issued to the assessee. While computing assessment, the Assessing Officer treated capital gain on transfer of shares as short term capital gains. Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). 6. The Commissioner of Income Tax (Appeals) placed reliance on the judgment of Karnataka High Court in the case of Bhoruka Engineering Industries Ltd vs. DCIT 36 taxmann.com 82 decided the issue in favour of the assessee. Against this, the Revenue is in appeal before us. 7. The ld. Departmental Representative submitted that the Commissioner of Income Tax (Appeals) erred in relying on the decision of the Karnataka High Court in the case of Bhoruka Engineering Industries Ltd. (cited supra). The balance sheet of the acquired company showed only a loss of Rs. 3,19,905/- the assessee's purpose of purchase of shares of the loss making company was to acquire the land which was later sold to m/s. DLF Retail Developers Ltd. for a high price of Rs. 14,58,40,140/- which shows this is definitely a colourable device. Hence the assessing officer's action of assessing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom sale of shares. Before sale of shares, BSFL systematically reduced all its assets except land. The Revenue contended that transaction of sale of shares was a colourable device and virtually immovable property had been transferred. The High Court held that "where arrangement of assessee to avoid payment of tax did not contravene any statutory provision and was achieved within four corner of law, it cannot be found fault with'. The High Court also held that" whether merely because if registered sale deed had been excecuted by BSFL selling land in favour of DLF-CDL, capital gain tax should be paid on sale consideration, was of no reason to held that when a shareholder of BSFL transferred their shares for a consideration after complying with legal requirement, he was not entitled to benefit of tax exemption'. The High Court held that it was a valid legal transaction in law and merely because they were able to avoid payment of tax, it cannot be said to be a colourable device or sham transaction or a unreal transaction. In the case of the appellant the transaction is real, all legal formalities have been complied with and what is transferred is the shares and not immovable pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -. As per the Profit and Loss account filed by the Company for the said period, there was a net loss of Rs. 3,19,905/-. Further, no income was reflected in this account, which showed that no business was conducted for 31.3.2005 and 31.3.2006. In such a situation, no prudent business man would acquire 1500 shares of a company, which was incurring continuous losses, with a face value of Rs. 1,50,000/- for Rs. 5,31,97,500/-. Hence it was apparent that when the assessoe and her parents acquired the shares of The Ganesar Ginning Company Private Limited, their only objective / interest was in the prime land owned by the company and not in the business of the company. Hence the amount of Rs. 5,31 ,97,500/- that they paid was for the land and not for the business of the company. Further the MOU entered into between the directors of the Ganesar Ginning Company Private Limited ( ie assessee and her parents) and M/s. DLF Retail Developers Limited talked mainly about the transfer of the said land ( 2.23 acres at Ganapathy East Village, Coimbatore) i.e. about its mode of acquisition by the company, ceiling limits under the ULCR Act, approval obtained by the directors on 5.7.2006 from Coimbatore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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