TMI Blog2023 (4) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... ] As long as the Revenue could not doubt the sale price of the shares, it would not be open for the Revenue to contend that the assessee had shown loss which it did not really suffer. We cannot be oblivious to the fact that the Revenue has not disputed the sale price of the shares and the identity of the purchasers is also not in doubt. Therefore, when all the parties to the transaction are genuine and the intention of the assessee in subscribing to the preferential shares of the company is also supported by the benefits derived by the company, the mere fact that the shares were sold at loss does not result in treating the entire transaction as colourable - Appeal by the Revenue is dismissed. - ITA no.3003/Mum./2016 - - - Dated:- 3-4-2023 - Shri Om Prakash Kant, Accountant Member And Shri Sandeep Singh Karhail, Judicial Member For the Assessee : Shri Hiro Rai For the Revenue : Shri Sandeep Raj ORDER PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the Revenue challenging the impugned order dated 17/02/2016, passed under section 250 of the Income Tax Act, 1961 ( the Act ) by the learned Commissioner of Income Tax (Appeals) 33, Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er husband for a long. All the shares (i.e. initial shareholding of 49,999 and preferential shares 23,45,000) were sold by the assessee at Rs.0.21 per share, incurring a short-term loss of Rs.23,44,27,385 on the preferential shares and long-term loss of Rs.6,72,341 of the shares bought in the earlier years. During the assessment proceedings, on being called to explain the subscription of shares of M/s I Dream Production Pvt. Ltd. at a huge premium despite the fact that the company s net worth was negative, the assessee submitted that since she held almost 99.99% of shares, it was her obligation to infuse funds so as to revive the net worth of the company and so that the company has adequate liquidity to meet its liabilities of creditors including Bank. Accordingly, the assessee withdrew Rs.26.50 crores from the Capital Gains Deposit Scheme and infused capital of Rs.23.45 crores by way of subscribing additional capital so that liabilities of the company can be discharged and the same can be sold out. However, the Assessing Officer ( AO ) did not agree with the submissions of the assessee and vide order dated 04/03/2013 passed under section 143(3) of the Act held that the company whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be appreciated that no person would be out of pocket by Rs. 23.5 crore just to save tax of Rs. 5.2 crore. 17. In this case, it is observed that the appellant was holding 99.99% shares of M/s I.Dream Production Pvt. Ltd., which is a private limited company. The said company had incurred huge losses and as on 31-3-2009, had huge liabilities, including Rs. 16.24 crores payable to the banks. It is apparent from the balance sheet that the net worth of the company had turned substantially negative. Under this circumstances, I donot agree with the AO that there is no responsibility of the appellant towards the company in general and the lending banks in particular. The appellant cannot be treated as a mere shareholder in the light of the fact that she was holding 99.99% share of the company. The company's liability may be limited but the appellant being promotor holding all most all shares of the company cannot shed her responsibilities particularly when such huge burden of bank loans exist. In this regard, it can be seen from the balance sheet of the company that entire bank loans of Rs. 16.24 crore was serviced( repaid) due to infusion of capital and the total current liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case viz., CIT v Oberoi Hotels P Ltd. 334 ITR 293 (Cal), Asst. CIT v Biraj Investment P Ltd. 210 Taxman 418 (Guj), Bhoruka Engineering Industries Ltd. v DCIT 356 ITR 25 (Kar). DCIT v Mahendra M Mehta 89 TTJ 1 (Mum-Trib), ADIT v Maersk Line UK Ltd. 149 TTJ 537 (Kol-Trib). CIT vs Walfort Share Stock Brokers P Ltd. 326 ITR 1 (SC), Union of India v Azadi Bachao Andolan 263 ITR 706 (SC), CIT vs Special Prints Ltd. 356 ITR 404, DIT (International Taxation) vs Maersk Line UK Ltd. 270 CTR 545 (Cal.). 21. Considering totality of the facts and circumstances of the case, I donot find any justification in the action of the AO in disallowing short term capital loss of Rs. 23.44 crore on the sale of shares of I.Dream Production Pvt. Ltd. The AO is directed to allow the same. Hence, grounds of appeal no. 1 to 6 are allowed. Being aggrieved, the Revenue is in appeal before us. 6. From the record it is evident that M/s I Dream Production Pvt. Ltd. is a private limited company and all the shares therein are held by the assessee, except one which was held by her mother-in-law. From the financials of the aforesaid company, it is evident that the current liabilities including bank overdr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company. At the same time, we cannot be oblivious to the fact that the Revenue has not disputed the sale price of the shares and the identity of the purchasers is also not in doubt. Therefore, when all the parties to the transaction are genuine and the intention of the assessee in subscribing to the preferential shares of the company is also supported by the benefits derived by the company, the mere fact that the shares were sold at loss does not result in treating the entire transaction as colourable. In this regard, the following findings of the Hon ble Gujarat High Court in ACIT vs Biraj Investment Pvt. Ltd., (2012) 210 Taxman 418 (Guj.), become relevant:- 17. We are not inclined to accept the Revenue s contention that this was a colourable device and that the entire arrangement was a paper arrangement. Firstly, there is no provision in the Act which would prevent the assessee from selling loss making shares. Simply because such shares were sold during the previous year when the assessee had also sold some shares at profit by itself would not mean that this is a case of colourable device or that there is a case of tax avoidance. Further, there is no restriction that such s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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