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Tax Publishers 1) Adjustment whether possible under MAT provisions in a subsequent year in a case where limitation was lost for revenue for having missed to carry out the MAT adjustment in an earlier year 2) Disallowance of long term capital loss citing tax evasion with transfer to related party without controverting evidences *Facts:* 1) Assessee was a private limited investment company. They had gifted in FY 2011-12 (assessment year 2012-13) 750,000 shares of one Super Religare Laboratories Ltd. (SRLL) to the employees of SRDL (a subsidiary of SRLL). These gifted shares were held as non-current investment in the books of the assessee company. Part of the gifted shares (615000 shares) were redacted and taken back in assessment year 2015-16 by crediting the amount to Reserves and surplus for Rs. 21.23 crores from certain people to whom it was originally gifted due to non-compliance of certain employment/service conditions. Assessee was liable to tax under MAT provisions under section 115JB for the year under appeal. The AO and CIT(A) added the amount credited to Reserves and suplus in the computation of MAT. Assessee's plea was that during assessment year 2012-13 the year when the shares were gifted in that year, the gifted amount of the shares which was a capital expenditure was debited to in the Profit and loss account. The same was disallowed and added back under normal computation sections (in that year MAT was not applicable) in the tax computation statement. However, while doing MAT computation the same was not added back in the year of gifting erroneously by the revenue. This error was hit by limitation for the revenue besides the fact that AO cannot tinker with audited accounts for MAT as held in Apollo Tyres Ltd. reported in (2002) 255 ITR 273 (SC) : 2002 TaxPub(DT) 1371 (SC). 2) On another issue, assessee claimed Long term capital loss of Rs. 61.55 crores by selling shares of Religare Enterprises Ltd. in an off-market deal to its group company RHC Holding Pvt. Ltd. on 13th March 2015 and on 30th March 2015 (fag end of the year). (28,73,306 + 12,09,000) shares were sold at Rs. 335 per share = Rs. 136.76 crores Indexed cost of acquisition = Rs. 198.31 crores Long term loss thus was Rs. 61.55 crores Revenue disallowed part of the long term capital loss for the second transaction dated 30th March 2015 citing that the on going market price of Religare Enterprises Ltd. was Rs. 337 on 30th March 2015 and since the off-market deal was with a related party thus a planned transaction to claim capital loss. Market price was Rs. 372.60 on 15.03.2015 is to be noted so the larger quantum of the loss on sale was not disallowed as it was possibly not closer to 31st March 2015 in the opinion of the revenue. On higher appeal to the ITAT - Held in favour of the assessee - 1. The revenue has lost its limitation and thus they cannot find a respite under MAT provisions now to add the redacted amounts credited to reserves and surplus under MAT provisions. 2. The long term capital loss claimed was allowable as revenue either should have disallowed the entire loss by bringing forward evidences. When the sale price was within the last 12 month average market prices, the same cannot be disallowed simply because of an off-market deal with a related party. *Case:* Shivi Holdings (P) Ltd. v. ACIT 2024 TaxPub(DT) 1218 (Del-Trib)

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1) Adjustment whether possible under MAT provisions in a subsequent year in a case where limitation was lost for revenue for having missed to carry out the MAT adjustment in an earlier year

2) Disallowance of long term capital loss citing tax evasion with transfer to related party without controverting evidences

Facts:

1) Assessee was a private limited investment company. They had gifted in FY 2011-12 (assessment year 2012-13) 750,000 shares of one Super Religare Laboratories Ltd. (SRLL) to the employees of SRDL (a subsidiary of SRLL). These gifted shares were held as non-current investment in the books of the assessee company. Part of the gifted shares (615000 shares) were redacted and taken back in assessment year 2015-16 by crediting the amount to Reserves and surplus for Rs. 21.23 crores from certain people to whom it was originally gifted due to non-compliance of certain employment/service conditions. Assessee was liable to tax under MAT provisions under section 115JB for the year under appeal. The AO and CIT(A) added the amount credited to Reserves and suplus in the computation of MAT. Assessee's plea was that during assessment year 2012-13 the year when the shares were gifted in that year, the gifted amount of the shares which was a capital expenditure was debited to in the Profit and loss account. The same was disallowed and added back under normal computation sections (in that year MAT was not applicable) in the tax computation statement. However, while doing MAT computation the same was not added back in the year of gifting erroneously by the revenue. This error was hit by limitation for the revenue besides the fact that AO cannot tinker with audited accounts for MAT as held in Apollo Tyres Ltd. reported in (2002) 255 ITR 273 (SC) : 2002 TaxPub(DT) 1371 (SC).

2) On another issue, assessee claimed Long term capital loss of Rs. 61.55 crores by selling shares of Religare Enterprises Ltd. in an off-market deal to its group company RHC Holding Pvt. Ltd. on 13th March 2015 and on 30th March 2015 (fag end of the year).

(28,73,306 + 12,09,000) shares were sold at Rs. 335 per share = Rs. 136.76 crores

Indexed cost of acquisition = Rs. 198.31 crores

Long term loss thus was Rs. 61.55 crores

Revenue disallowed part of the long term capital loss for the second transaction dated 30th March 2015 citing that the on going market price of Religare Enterprises Ltd. was Rs. 337 on 30th March 2015 and since the off-market deal was with a related party thus a planned transaction to claim capital loss.

Market price was Rs. 372.60 on 15.03.2015 is to be noted so the larger quantum of the loss on sale was not disallowed as it was possibly not closer to 31st March 2015 in the opinion of the revenue.

On higher appeal to the ITAT -

Held in favour of the assessee -

1. The revenue has lost its limitation and thus they cannot find a respite under MAT provisions now to add the redacted amounts credited to reserves and surplus under MAT provisions.

2. The long term capital loss claimed was allowable as revenue either should have disallowed the entire loss by bringing forward evidences. When the sale price was within the last 12 month average market prices, the same cannot be disallowed simply because of an off-market deal with a related party.

Case: Shivi Holdings (P) Ltd. v. ACIT 2024 TaxPub(DT) 1218 (Del-Trib)