Smt. Anvida Bandi Vs DCIT (Telangana High Court)
Conclusion: Department had not been able to show any arrangement to have been made by assessee in the course of selling its shares of M/s. HCL Technologies Pvt. Ltd. amounted to Impermissible Avoidance Arrangement (for short, ‘IAA’) and it was a pure trading done by assessee with no knowledge. In the absence of any strong material made available by the Department meeting the requirements and ingredients that were reflected under Section 96(1) of the Act, the writ petition was accordingly allowed.
Held: Assessee was involved in making investment in shares and securities for many years. Assessee was holding shares of value equivalent to Rs.31,88,81,428/- and also had mutual funds worth Rs.47.59 crores. From the investment, assessee had sold shares of one Company held by her as an investment prior to the sale and earned long-term capital gains of Rs.44,14,05,007/-. With so much of funds available with assessee, assessee thought of other investment for deployment of the said funds. Going by the market trend, assessee decided to purchase shares of M/s.HCL Technologies Pvt. Ltd. with an intention of earning short-term gains and thereafter to make long-term gains from subsequent disposal of investments. Further, assessee also invested in units of mutual funds worth Rs.32.92 crores during the same assessment year. Later on, assessee sold shares of M/s.HCL Technologies Pvt. Ltd. worth Rs.17.35 crores in the same year and thereby assessee was left with net investment of Rs.17.66 crores. The cumulative effect of purchase of shares of M/s.HCL Technologies Pvt. Ltd. in the open market and sale of shares thereafter resulted in loss of Rs.17.65 crores to assessee for the same Financial Year 2019-20. However, the authorities found that the transaction of purchase and sale of shares undertaken by assessee amounted to Impermissible Avoidance Arrangement (for short, ‘IAA’), and therefore the provisions of Chapter X-A, General Anti-Avoidance Rule (for short, ‘GAAR’) would become applicable to the said transactions. Accordingly, the matter, was made to respondent No.3, i.e., the approving panel for GAAR which finally passed the impugned order holding that the transactions undertaken by assessee so far as purchase and sale of shares of M/s.HCL Technologies Pvt. Ltd., particularly taking into consideration the period of time during which the sale and purchase was made amounts to “impermissible avoidance arrangement”. Notices were issued to assessee and assessee submitted objections thereto so far as applicability of GAAR provisions to the transactions under consideration. However, Respondent held that sale and purchase transactions resulted in short-term capital gain which was set off with long-term capital gain which was nothing but “impermissible avoidance arrangement” under the GAAR provisions. It was held that it was necessary to take note of the report prepared by the expert committee under the Income Tax Act with regard to general anti-avoidance rules were concerned. The said report itself had categorically held that sale and purchase through stock market transactions would not come under the GAAR provisions. It was held that timing of a transaction or a taxpayer would not be questioned under the GAAR provisions on sale and purchase of shares made by the assessee. Department had not been able to show any arrangement to have been made by assessee in the course of selling its shares of M/s.HCL Technologies Pvt. Ltd., and it was a pure trading done by assessee with no knowledge of purchase and sale carried out by assessee. In the absence of any strong material made available by the Department meeting the requirements and ingredients that were reflected under Section 96(1) of the Act, the writ petition deserved to be and was accordingly allowed.
