Taxpublishers.in - InterestingDecision/Flash_133.htm - Tax Publishers Your Tax Solution Hub

Share via Whatsapp 211 Views


Tax Publishers ACIT v. Safari Mercantile (P) Ltd. [ITA No. 4566/Mum/2013, dt. 7-10-2020] : 2020 TaxPub(DT) 4176 (Mum-Trib) Shares loaned but not returned -- Sustainability as transfer under capital gains *Facts:* Assessee an investment company had loaned 500,000 shares of its group company GTL to one CCL which was to be returned back by CCL. Subsequently two other group companies LIPL and GCCPL had sold 75000 shares a piece of GTL resulting in a consideration of Rs. 15 crores (7.5 crores each). Assessee requested that CCL adjust the 150,000 sold against the returnable loaned shares of 500,000 and the balance shares of 350,000 alone be returned which was not done by CCL. It was the case of the revenue that the 350,000 unreturned shares out of the loaned shares were transfer of shares and notional capital gain was taxed in the hands of the assessee. On higher appeal in the second round of appeal the Commissioner (Appeals) agreed with the contention of the assessee that the said 350,000 was not a sale and the shares which were loaned ought to have been returned and were never returned thus no capital gains arose out of a transaction which did not constitute a transfer in the first place. Aggrieved revenue went in higher appeal -- Held against the revenue that the 350,000 shares which were loaned on returnable basis since were not returned could not be construed as a transfer subject to capital gains as no consideration arose to the assessee. Also to note that the 150,000 which was offset against the 500,000 loaned the plea of assessee was upheld that the consideration for this was already received by the respective companies LIPL and GCCPL and thus cannot be taxed again as capital gain in the hands of the assessee. *Applied:* CIT v. Mrs. Hemal Raju Shete (2016) 239 Taxman 176 (Bom-HC) : 2016 TaxPub(DT) 2102 (Bom-HC) CIT v. Reliance Communication Infrastructure Ltd. (2012) 254 CTR 251 (Bom-HC) : 2013 TaxPub(DT) 0128 (Bom-HC) *Editorial Note:* If the shares were pledged and then they were not returned then the loan amount obtained from their pledge would have to be read as consideration for transfer subject to capital gains. As against in this case the shares were simply loaned on returnable basis.

Tax Publishers

ACIT v. Safari Mercantile (P) Ltd. [ITA No. 4566/Mum/2013, dt. 7-10-2020] : 2020 TaxPub(DT) 4176 (Mum-Trib)

Shares loaned but not returned -- Sustainability as transfer under capital gains

Facts:

Assessee an investment company had loaned 500,000 shares of its group company GTL to one CCL which was to be returned back by CCL. Subsequently two other group companies LIPL and GCCPL had sold 75000 shares a piece of GTL resulting in a consideration of Rs. 15 crores (7.5 crores each). Assessee requested that CCL adjust the 150,000 sold against the returnable loaned shares of 500,000 and the balance shares of 350,000 alone be returned which was not done by CCL. It was the case of the revenue that the 350,000 unreturned shares out of the loaned shares were transfer of shares and notional capital gain was taxed in the hands of the assessee. On higher appeal in the second round of appeal the Commissioner (Appeals) agreed with the contention of the assessee that the said 350,000 was not a sale and the shares which were loaned ought to have been returned and were never returned thus no capital gains arose out of a transaction which did not constitute a transfer in the first place. Aggrieved revenue went in higher appeal --

Held against the revenue that the 350,000 shares which were loaned on returnable basis since were not returned could not be construed as a transfer subject to capital gains as no consideration arose to the assessee.

Also to note that the 150,000 which was offset against the 500,000 loaned the plea of assessee was upheld that the consideration for this was already received by the respective companies LIPL and GCCPL and thus cannot be taxed again as capital gain in the hands of the assessee.

Applied:

CIT v. Mrs. Hemal Raju Shete (2016) 239 Taxman 176 (Bom-HC) : 2016 TaxPub(DT) 2102 (Bom-HC)

CIT v. Reliance Communication Infrastructure Ltd. (2012) 254 CTR 251 (Bom-HC) : 2013 TaxPub(DT) 0128 (Bom-HC)

Editorial Note: If the shares were pledged and then they were not returned then the loan amount obtained from their pledge would have to be read as consideration for transfer subject to capital gains. As against in this case the shares were simply loaned on returnable basis.