Case Law Details
Pr. CIT Vs M/s. Aegis Limited (Bombay High Court)
Conclusion: Transaction of purchase and sale of redeemable preference shares could not be regarded as being equivalent to interest free loans advanced by assessee to the AE & charge notional interest thereon as the apparent transaction could not be disregarded and substituted without any material or exceptional circumstances pointing out that assessee had tried to conceal the real transaction. Thus, TPO could not question the commercial expediency of assessee entered into such transaction.
Held:
Assessee had subscribed to redeemable preferential shares of its Associated Enterprises (“AE”) and redeemed some of its shares at par. TPO held that the preference shares were equivalent to interest free loans advanced by assessee and accordingly charged interest on notional basis. Tribunal deleted the addition observing transaction of secured loans on the ground that TPO could not disregard the apparent transaction and substitute the same without any material of exceptional circumstances pointing out that assessee had tried to conceal the real transaction or that the transaction in question was sham. Tribunal observed that TPO could not question the commercial expediency of assessee entered into such transaction. It was held nothing was brought on record by Revenue to suggest that the transaction of purchase and sale of shares was sham. In absence of any material on record, TPO could not have treated such transaction as a loan and charged interest thereon on notional basis.
FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT
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