Case Law Details
ACIT Vs Safari Mercantile Pvt. Ltd. (ITAT Mumbai)
Conclusion: Where there was no transfer of shares but only a pledge of shares for purposes of obtaining a loan and revenue not disputed the fact of return of loan and also receipt of pledged shares creditor, no capital gain could be charged. Only income was actually received or accrued upon sale of shares had to be taxed and not any contingent deferred income, notional or hypothetical income taxed as capital gain income in the hands of assessee.
Held: Assessee was an investment company belonging to the GTL. In this case, the regular assessment was completed by the AO u/s 143(3) determining the total income at Rs.240,84,19,450/- as against the gross total income of Rs.74,18,37,910/- shown by assessee. The business of assessee during the year under consideration was investment in stocks and shares. Assessee had 31,34,000 of GTL shares as on 31.03.2000 as opening balance. During the year the assessee had sold its 5,94,100 shares on which capital gains was offered to tax. Further, during the year, the Classic Credit Ltd. (CCL) had requested the assessee to advance 5,00,000 shares as a loan. CCL had stated that it would return on 04.11.2000. However, the same was not returned to the assessee. It was seen that LIPL had 2,62,500/- of GTL shares as on 31.03.2000 as opening balance. Also GCCPL had 3,08,780 of GTL shares as on 31.03.2000 as opening balance. On 01.12.2000, LIPL sold their 75,000 shares of GTL and GCCPL sold their 75,000 shares of GTL @ Rs.1000/- per share (75,000 shares each company) through NH Securities Ltd. resulting in sale consideration of Rs.15 crores (Rs.7.5 crores each company). On the same date i.e. 01.12.2000 the assessee wrote a letter to CCL and requested to adjust delivery of 1,50,000 shares against the loan shares 5,00,000. On 15.03.2001, LIPL and on 20.03.2001 GCCPL delivered 1,50,000 shares of GTL to assessee. It was found that assessee received its part loan i.e. 1,50,000 shares through adjustment against sale of shares. However, balance outstanding loan of 3,50,000 shares was not returned by CCL despite several request of the assessee. During the original assessment proceedings, AO treated whole transaction of 5,00,000 shares of GTL as Long Term Capital Gains (LTCG). In respect of 1,50,000 shares, AO held that it was sold by assessee and computed capital gains at Rs.12,07,50,000/- and shares of 3,50,000 never received by assessee and thus treated the same as sale consideration and computed capital gains at Rs.35,23,75,000/-. Aggrieved by the order of AO, assessee filed an appeal before CIT(A). CIT(A) deleted the addition in respect of 3,50,000 shares ; in respect of 1,50,000 shares, CIT(A) confirmed the addition made by the AO treating the same as a sale consideration. Against the order of CIT(A), assessee filed an appeal before the Tribunal on the issue of 1,50,000 shares whereas the Revenue filed an appeal on deletion of 3,50,000 shares. It was held that the assessee had advanced 5,00,000 shares of GTL by way of loan. 1,50,000 shares were with assessee and hence could not be assessed as capital gains ; remaining 3,50,000 shares which were lent to CCL were never received back, nor any consideration was received. Where there was no transfer of shares but only a pledge of shares for purposes of obtaining a loan and revenue not disputed the fact of return of loan and also receipt of pledged shares creditor, no capital gain could be charged. Only income was actually received or accrued upon sale of shares had to be taxed and not any contingent deferred income, notional or hypothetical income taxed as capital gain income in the hands of the Assessee. Followed Reliance Communication Infrastructure Ltd. (2012)254 CTR 251(Bom.)(HC) and Hemal Raju Shete (2016) 239 Taxman 176 (Bom)(HC)
FULL TEXT OF THE ITAT JUDGEMENT
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