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TMI Blog2024 (8) TMI 1044X X X X Extracts X X X X X X X X Extracts X X X X ..... choose any of the option and taxing authority cannot question the reason for selection of the option, completely ignoring the fact that in the impugned sales, assessee has never parted his control and interest in assets sold and it always was with assessee even after such transfer. 3. The learned CIT(A) erred in holding that loss incurred by the Assessee through 'off market' sale of shares to partnership firm, controlled and managed by assessee, is legal and valid on the ground that the assessing officer has not made any inquiries to establish that the transaction was in genuine, completely ignoring that the assessee has himself admitted that such transactions were done in 'off market' mode' as a matter of legitimate and permissible tax planning, which was considered by the AO only as colourable devise, to reject and deny the carry forward and set off such loss. 4. The learned CIT (A) erred in holding that loss incurred by the assessee through 'off market' sale of shares to partnership firm, controlled and managed by assessee, is eligible for set off and carry forward and legal, on the ground that the AO failed to prove that assessee has been benefited during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the LTCG on unlisted securities amounting to Rs. 6,96,06,436/- and balance amount carried forward to the A.Y. 2018-19. The AO observed that those shares on the equity market that were yielding gain were sold by the Assessee after paying the STT, whereas those shares which were not yielding gain were sold by the Assessee through an off-market transaction to his Sister Concern viz. M/s. Ever fresh Enterprises LLP. The Assessee owns 60% of the shares in this LLP and the rest of the shares (40%) are owned by his son. The scrips in question which were sold through an off-market transaction for a loss were 'Ansal Properties and Infrastructure Ltd.' and 'Welspun Enterprises Ltd.'. Both the scrips were listed on bourses. The Assessee submitted before the AO that the scrips were sold at the prevailing market price and that it was not relevant to consider whether the transaction was on market or off market as there was no provision of law being contravened and thus he claimed that the transactions were correct and therefore the LTCL should be allowed to be carried forward after set off against current year's gain on unlisted securities. 4. However, the AO observed that the Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... violated the Spirit of the Act and is a colorable device through which the Assessee on the one hand seeks to take advantage of the Statutory Provisions i.e., Section 10(38) of the Act, by claiming exemption of Long-Term Capital Gains but on the other hand creates Long Term Capital Loss artificially by transfer the shares to his sister concern in order to offset current and future gains against losses as mentioned (supra). 7. The Hon'ble Supreme Court in the case of McDowell & Co. Ltd. v. CTO, (1985) 3 SCC 230 has categorically held: - "45. 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." This view of the Hon'ble Supreme court was reiterated by it in the case of Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613 wherein the Hon'ble Supreme Court held that:- "68. The majority judgment in McDowell [(1985) 3 SCC 230: 1985 SCC (Tax) 391] held that: (SCC p. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if we analyse the whole transaction it can be concluded that effectively money is lying with the assessee i.e. consideration paid by the partnership firm to the assessee, securities /shares are still with the assessee i.e. hold by the partnership firm of the assessee, on the other hand without any effective loss of control of the securities and artificial transfer of consideration, he made himself entitled to create a long term capital loss which is available for set off against the current years capital gain and also available for future long term capital gains. 9. In these circumstances, the case laws relied upon by the assessee and Ld. CIT (A) is of no help as the facts of those judicial pronouncements vis-a-vis the facts of the assessee's case cannot be equated. Further, in such type of matter, inference can be drawn from Section - 95, [CHAPTER X-A GENERAL ANTI-AVOIDANCE RULE], although applicable w.e.f. A.Y. 2018-19 onwards. It is further held that the arrangement under scrutiny appears to lack commercial substance. It was noticed that the transaction under consideration created extraordinary rights and obligations that do not align with principles of fairness, suggesting it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e inter se relationship between parties to an agreement. Particularly in the case of execution of a duly registered document, law attaches importance to the recital in the said document. But where recital in such a document is tainted, the position would be different. For example the form of a benami transaction is deceptive. It employs various subterfuges in legal language. What is true of a tax avoidance scheme is also true of a benami transaction. In such cases apparent is not real. Therefore, 'form' of the transaction has to be pierced through to ascertain the true meaning of a document and recital made therein. 13. In State of AP v. Kone Elevators India Ltd. [2005] 181 ELT 156 (SC), it was held that the substance of a contract is determinative but not form. The essence of a contract is to be ascertained taking into account the intention of parties. In Sundaram Finance Ltd. v. State of Kerala AIR 1966 1178 (SC), the emphasis was placed on substance of a transaction taking into account surrounding circumstances. It was held that the Court is entitled to go behind a transaction ignoring its form. In a benami transaction, a wholesome appreciation of evidences - documentar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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