TMI Blog2022 (7) TMI 1255X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the Ld. CIT(A) and dismiss the ground of appeal raised by the revenue. Long Term Capital Loss (LTCL) from the off-market share transactions - whether the LTCL claim of the assessee on sale of seven scrips in the off-market transactions can be allowed to be set off and carried forwarded as per the provisions of the Act? - allegation of the AO was that the De-mat accounts of certain buyers of these seven scrips were handled by the share broking company of which the assessee was one of the Director - HELD THAT:- DR could not point out how this allegation of AO has any material bearing in this case. Moreover, it was brought to our notice that the AO in the assessment year for A.Y.2014-15 has accepted the same transaction in the scrutiny assessment u/s 143(2) (except in-respect of three scrips, where the reasons given by AO was that same were executed at a price more than the prevailing market price on the relevant date). We note that the AO has accepted the other transaction carried out by the assessee in the off-market transaction where the price was as per the prevalent market prices. Thus we note that the AO had no objection to off-market transactions per-se for A.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same as business income was reversed. Aggrieved by the aforesaid action of the Ld. CIT(A), the revenue is in appeal before us by preferring the aforesaid ground of appeal. 3. We have heard both the parties and perused the records. We note that the assessee is an individual who has earned substantial LTCG of Rs.17.02 crores which included capital gain on some shares held for as long as two to three years. Even though, the AO accepted the claim of LTCG from sale of shares, he didn t accept the claim of assessee about the STCG from sale of shares and treated it as business income. It was brought to our notice that the assessee is a high net worth individual having net worth of Rs.135.20 crores and invest in shares to the tune of Rs.107.78 crores as on 31.03.2013 (A.Y.2013-14). Even though, the AO accepted the LTCG claim of Rs.17.02 crores from sale of shares which means AO accepted the AO as an investor on this capital gain but he did not accept the STCG claim of the assessee of Rs.12,18,961/- on the ground that there is high volume, frequency and continuity of transactions. However, the AO has not taken into consideration, the high value of investment made by assessee i.e. ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investor and hence he did not treat the claim of STCG on sale of shares as business income. We also note that the assessee had been maintaining her books of accounts by showing the shares as investment which are reflected in the balance-sheet accordingly. We also note that the shares are always valued at cost and assessee never took any benefit of valuation loss for invested shares, even if the market value had fallen below the cost. We note that this accounting practice has been consistently followed by the assessee for several years and is a deciding factor in such matters as held by the Hon ble Jurisdiction High Court in the case of CIT VS. Gopal Purohit (2011) 336 ITR 287 Mumbai. Considering the aforesaid facts as well as taking into consideration the CBDT Circular No.04/2007 dated 15.06.2007, we find that the assessee s intention of buying and selling of shares was that of an investor and therefore, the action of the AO to treat the consideration from sale of shares to the tune of Rs.12,18,961/- as business income has been rightly not agreed upon by the Ld. CIT(A). Taking into consideration the aforesaid facts, we find that there was no new facts before the AO to upset the ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.059232.85 914.575 132.45 16142248.75 9916984.10 Total 914.575 23.31 127,209,995,.66 17.65 92,996,374.60 5. Even though, it is undisputed that the seven scrips were sold in the off-market transactions at the prevailing market price as on date of sale without suffering STT, the AO has disallowed the loss claimed by the LTCL claimed by the assessee. According to the AO, the assessee had sold these shares to some of the parties whose demat statements were managed by the share-broking company in which the assessee is one of the director; and moreover, the AO noted that even though these seven scrips were purchased by the assessee held for more than 12 months after purchasing it on which STT were paid, she had claimed loss, by selling the same off-market without STT, which action of assessee the he/AO refused to accept. According to AO since assessee had purchased these shares by remitting STT held them for more than 12 months therefore the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account with M/s. Finquert Securities Pvt. Ltd. The said broking company acted as a Depository Participant (DP) and as such it maintained their De-mat account. It has to be borne in mind that the transfer in and out of these De-mat account are permitted only when the client signs the instruction slip and not otherwise. It is like a bank maintaining a saving /current account of a client. In this context, the Ld. DR could not point out how this allegation of AO has any material bearing in this case. Moreover, it was brought to our notice that the AO in the assessment year for A.Y.2014-15 has accepted the same transaction in the scrutiny assessment u/s 143(2) of the Act (except in-respect of three scrips, where the reasons given by AO was that same were executed at a price more than the prevailing market price on the relevant date). We note that the AO has accepted the other transaction carried out by the assessee in the off-market transaction where the price was as per the prevalent market prices. Thus we note that the AO had no objection to off-market transactions per-se for A.Y.2014-15, when the same was transacted off-market. Coming back to the relevant AY 2013-14, it was brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction of sale of such equity share held as long-term capital asset. It is undisputed that STT is payable in respect of transactions carried through a Stock Exchange, which are called on-market transactions. If there is some off-market transaction, namely, which is undertaken without involvement of a Stock Exchange and is directly between the buyer and seller, then no STT is payable thereon. This implies that if the transaction is off-market, then, no STT would be payable and, ex ITA No.1880/Del/2014 consequenti, the provisions of section 10(38) would not be magnetized. Once this section is not applicable, there can neither be any exemption of income nor there can be any question of denial of benefit of set off and carry forward of loss. In other words, loss arising from transfer of shares etc., held as long term capital assets, on which no STT is paid because of off-market sale transaction, does not fall within purview of section 10(38) and consequently becomes eligible for set off and carry forward as per the other relevant provisions. This is a lacuna in the provision which has been lawfully exploited by the assessee by transferring shares held as long-term capital assets th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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