Taxpublishers.in - InterestingDecision/IDDTF_124.htm - Tax Publishers Your Tax Solution Hub

Share via Whatsapp 89 Views


The Tax Publishers Short term capital loss arising out of subscribed shares at a premium and reselling the same at a negligible value - Tax evasion or otherwise *Facts :* Assessee owned 99.99% shares of a closely held company called I Dream Production Pvt. Ltd. The other shareholder was her mother-in-law. The said Company I Dream was heavily indebted for Rs. 20 crores, to tide which assessee with drew part amount of her personal holdings in capital gains scheme and infused the same by way of a preferential allotment per share of Rs. 100 each with Rs. 10 par value and Rs. 90 as share premium for Rs.26.5 crores so as to pay its debts and safeguard her reputation/goodwill. Subsequently she sold all her holdings in I Dream at Rs. 0.21/share and sustained both long term and short term loss. The short term loss was read to be a colourable transaction by AO and on appeal CIT(A) allowed the same on merits. Aggrieved revenue went in higher appeal to ITAT - Held in favour of the assessee that the transaction being genuine with no contravention of any provisions of the law, order of the CIT(A) required no changes. The short term and long term capital gains stood allowed. *Ed. Note :* Often in cross border transactions we talk of round tripping of a company receiving passive income from India and rerouting it back as ECB/FDI or similar investments. This is a case of domestic round tripping with factual case found genuine on merits. *Case:* Asstt. CIT v. Kalpana Shripal Morakhia 2023 TaxPub(DT) 2212 (Mum-Trib)

The Tax Publishers

Short term capital loss arising out of subscribed shares at a premium and reselling the same at a negligible value - Tax evasion or otherwise

Facts :

Assessee owned 99.99% shares of a closely held company called I Dream Production Pvt. Ltd. The other shareholder was her mother-in-law. The said Company I Dream was heavily indebted for Rs. 20 crores, to tide which assessee with drew part amount of her personal holdings in capital gains scheme and infused the same by way of a preferential allotment per share of Rs. 100 each with Rs. 10 par value and Rs. 90 as share premium for Rs.26.5 crores so as to pay its debts and safeguard her reputation/goodwill. Subsequently she sold all her holdings in I Dream at Rs. 0.21/share and sustained both long term and short term loss. The short term loss was read to be a colourable transaction by AO and on appeal CIT(A) allowed the same on merits. Aggrieved revenue went in higher appeal to ITAT -

Held in favour of the assessee that the transaction being genuine with no contravention of any provisions of the law, order of the CIT(A) required no changes. The short term and long term capital gains stood allowed.

Ed. Note : Often in cross border transactions we talk of round tripping of a company receiving passive income from India and rerouting it back as ECB/FDI or similar investments. This is a case of domestic round tripping with factual case found genuine on merits.

Case: Asstt. CIT v. Kalpana Shripal Morakhia 2023 TaxPub(DT) 2212 (Mum-Trib)