Abhar Holdings Private Limited Vs DCIT (Gujarat High Court)
Gujarat High Court held that Explanation to section 73(1) of the Income Tax Act cannot be applied to loss on sale of shares which were acquired on conversion of partly convertible debentures. Hence, loss on sale of such shares is not speculation loss and hence set off allowed.
Facts- By this Appeal under Article 260A of the Income Tax Act, 1961, the appellant has challenged the order dated 2nd March, 2007 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench ‘A’, Ahmedabad for Assessment Year 1996-97. It is mainly contested that ITAT has erred in holding that loss on account of sale of shares amounting to Rs.37,47,304/- is speculation loss and so the same cannot be set off against the other income.
Conclusion- Held that in the facts of the case, on conversion of the partly convertible debentures, the shares were allotted to the petitioner by the Company from its own capital by ‘creation’ of the shares and not from ‘transfer’ of the shares from any other person. Therefore, the Explanation to Section 73(1) of the Act cannot be applied to the facts of the case. Thus, we are of the opinion that the Tribunal was not justified in holding that the loss on account of sale of shares amounting to Rs.37,47,304/-is speculation loss and the same cannot be set off against the other income. We therefore, answer the question in negative, i.e. in favour of the assessee and against the Revenue.
