ACIT Vs Shapoorji Pallonji Solar Holdings Pvt. Ltd. (ITAT Mumbai)
Long-Term Capital Loss on Group Share Sale Allowed: ITAT Mumbai Upholds ₹183 Cr LTCL in Shapoorji Pallonji Solar Case
The Mumbai Bench of the ITAT dismissed the Revenue’s appeal for AY 2021-22 and upheld the order of the CIT(A) allowing the assessee’s claim of long-term capital loss (LTCL) of ₹183.00 crore arising from sale of shares in group companies by Shapoorji Pallonji Solar Holdings Pvt. Ltd.
The Tribunal noted that the Assessing Officer had disallowed the LTCL primarily on the ground that the assessee failed to furnish adequate documentary evidence regarding purchase and sale of shares, valuation of shares sold at prices below face value, and genuineness of the transaction. However, during appellate proceedings, the assessee furnished extensive documentary evidence, including demat statements for purchase and sale, bank statements, share purchase and sale agreements, and an independent valuation report. These materials were examined by the AO through two detailed remand reports.
Crucially, the ITAT observed that after verification, the AO did not make any adverse finding on the valuation of shares and merely reiterated general objections without countering the valuation with any independent analysis. The Tribunal emphasized that the shares were sold to a completely unrelated foreign entity (Terra Asia Holdings Pte. Ltd., part of the KKR Group) after negotiations and due diligence, negating any allegation of a colourable device. The ITAT further found that the sale price was higher than the NAV computed under Rule 11UA, and the Revenue failed to demonstrate what, according to it, should have been the fair market value on the date of sale.
