Case Law Details
Abhinav Agarwal Vs DCIT (ITAT Delhi)
Snapshot of Basic modus of providing bogus LTCG
1. Merger of Unlisted companies with Listed Entity:
This is the most preferred option for the persons willing to operate for the purpose of doing Long Term capital Gains. In case of the mergers with listed companies, the merger petition has to be filed with concerned stock exchange under clause 24F of the Listing Agreement, which gives its permission to go ahead with the merger scheme in consultation with SEBI. Here the main catch is valuation of shares of the companies. Since the Act provides for the valuation of shares at book value and the same has been approved by the Supreme Court in various decisions which has been discussed below after this para. Since, the Stock Exchange and SEBI keep close watch on price movement of shares, these people adopted the route of merger of private limited companies having huge premium thereby increasing their book value whereas the book value of the shares of listed companies were still Rs. 10/ despite the fact that they were trading at considerably higher price.
It can be understood by following example:
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