Case Law Details
Madhu Sarda Vs ITO (ITAT Mumbai)
The learned AR of the assessee submits that during the year under consideration assessee sold 900 shares of National Tiles & Industries Private Ltd (NTPL) at the rate of Rs. 100/-per share on their fair market value. These shares were held by the assessee for last 15 years. The assessee purchased the share in the year 1991 from NEC Investment Company. During the relevant financial year the assessee also sold a property situated in Santacruz Mumbai. After claiming indexation benefit the assessee offered long term capital gain of Rs. 25 Lacs (approx) on sale of such property. It was submitted that assessee also sold 900 shares of National Tiles & Industries Private Ltd to her son. Her son had returned from abroad after completing his education and was interested in starting his own business. The aforesaid 900 share was sold at the fair market value. The shares were transferred by executing share transfer Form and after paying the requisite Stamp duty, the company NTPL also passed a Board Resolution for transfer of those shares. The consideration of share was effected to through banking channel. The learned AR of the assessee drawn our attention about the fair market value arrived by assessee, as furnished before Commissioner (Appeals), (page No. 74 of PB). It was submitted that transactions is genuine, merely because the assessee has claimed setoff of capital loss against the capital gain earned during the same period, which cannot be said to be a colourable device or method adopted by assessee to avoid the tax. Transactions of sale of share were genuine and transacted at a proper valuation. The lower authority has not disputed the genuinity of transaction. All the transactions carried by assessee are valid in law, and cannot be treated as non-est merely on the basis of some economic detriment or it may be prejudicial to the interest of revenue. The learned AR of the assessee further submits, mainly because the period co-existed or permitted the assessee to set off her capital loss against the capital gain earned itself would not give rise to the presumption that the transaction was in the nature of colourable device.
Held by ITAT
In Union of India v. Play world Electronics (P.) Ltd. [1990] 184 ITR 308 the Supreme Court has held that tax planning may be legitimate provided it is within the frame work of the law. In the present case it can hardly be suggested that the assessee cannot take advantage of the provisions of the Income-tax Act to claim set off of the capital loss against the capital gain. The department would have to go to the extent of proving the sale of shares as a sham transaction if it were to so suggest. But that is not the case here and as stated earlier no evidence has been let in to show that the sale of the shares was not genuine or was a collusive transaction. Thus the transaction is genuine and is also within the frame work of law but it results in a tax advantage to the assessee. In such circumstances the tax advantage cannot be stated to the result of a dubious device.
Considering the factual matrix of the case and legal discussions cited above we are convinced that the shares were sold by assessee at the fair market value. In our view the transactions being genuine, merely because the assessee has claimed set-off of capital loss against the capital gain earned during the same period, cannot be said to be a colourable device or method adopted by assessee to avoid the tax. The shares were transferred by executing share transfer Form and after paying the requisite Stamp duty. The company NTPL also passed a Board Resolution for transfer of those shares (Page-35of PB). The consideration of share was effected to through banking channel (Page 14 of PB). The fair market value arrived by assessee, as furnished before Commissioner (Appeals), (page No. 74 of PB). The balance sheet of NTPL for assessment years 2004-05 to 2006-07 is at (page 76-81of PB). In our view the transactions of sale of share were genuine and transacted at a proper valuation. The lower authority has not disputed the genuinity of transaction. The transactions carried by assessee are valid in law, cannot be treated as non-est merely on the basis of some economic detriment or it may be prejudicial to the interest of revenue. Further, if the period co-existed or permitted the assessee to set off her capital loss against the capital gain earned, would itself not give rise to the presumption that the transaction was in the nature of colourable device. We notice that the assessee has taken indexed case of acquisition of share at Rs. 30,40,400/-. We notice that the Assessing Officer has not examined the same and accordingly direct him to verify the computation given by the assessee and allow set off of correct amount of Long Term Capital Loss against Long Term Capital Gain. In the result, the grounds of appeal raised by the assessee are treated as allowed.
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