TMI Blog2005 (10) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... ustom Mills Industries Ltd. ("RMIL" for short), a sister concern, by the learned CIT(A) vide the impugned order, as: "1. The ld. CIT(A) has erred in law and on facts in deleting the disallowance of long term capital loss of Rs. 19,61,617 incurred to the assessee on sale of 27,410 equity shares of RMIL to its sister concern." 3.1 The facts of the case are that the assessee earned a short-term and long-term capital gain of Rs. 23,87,553 during the relevant previous year, being financial year 1994-95, as also incurred a long-term capital loss of Rs. 25,03,417, including the impugned loss of Rs. 19,61,617. The Assessing Officer, during the course of assessment proceedings, observed in respect of this loss, as under: (a) RMIL, a group co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illegal document, with no basis in law, further holding w.r.t. a judgment of the Hon'ble Supreme Court Ahmed G.H. Ariff v. CWT [1970] 76 ITR 471, that the transfer of shares would include the transfer of any rights in shares, being the right in the surplus arising out of liquidation proceedings, as also contended by the assessee, so that the same having been declared as void under section 536(2) of the Companies Act, 1956, there was no question of any capital gain or loss arising out of the transaction(s) of said transfer. Aggrieved, the assessee preferred an appeal before the learned CIT(A). 3.3 Before the learned CIT(A), the assessee contended that the shares under question being fully paid-up, it cannot be called upon to contribute to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompo Cas. 622, that the pledge of shares would not abrogate the right of the assessee to transfer the pledged shares; it holding a clear title thereto. Following the said decision of the ITAT, the learned CIT(A) upheld the assessee's claim, directing the allowance of the long-term capital loss aforesaid. 4. Before us, while the learned D.R. placed complete reliance on the order of the Assessing Officer, the learned A.R. reiterated the contentions before the lower authorities, contending the matter to be fully covered by the decision of the ITAT in the case of Biraj Investments (P.) Ltd. 5. We have heard the rival submissions and perused the material on record, as also the case law cited. 5.1 At the outset, we find that the Hon'ble Guj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above definition which specifically includes a holder of fully paid-up shares in the company being wound-up, the assessee's contention that in view of section 426(1)(d) of the Act, which restricts the liability of a member of a company being wound-up to the amount, if any, unpaid on the shares in respect of which it is a member, would not, thereby obviate, or cause to nullify or render nugatory, the effect of section 536(2) of the Companies Act, which shall have effect, as also confirmed by the OL, with all its incidental effects and consequences. The assessee has pressed an argument that it has, instead of receiving from the OL, received from the Assignee the value of the property in the said shares. However, this claim is not tenable, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be considered as outside the ambit of the charging provision of the said Act. Here it may also be pertinent to state that in the case before the Hon'ble Madras High Court in A.M.P. Arunachalam's case, where the rights of the Pledgee of shares in a company stand discussed, the transferee, along with the request (to the Pledgee) for transfer of shares in its name, also sought to discharge the entire liability to the Pledgee in respect of which the said shares stood pledged, so that it had no surviving right in those shares, i.e., the transfer (being sought) would operate to transfer the entire property in the said shares, while in the present case, what is sought to be transferred, admittedly, per the Deed of Assignment, is only the limit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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