CIT v. Special Prints Ltd. - Taxpublishers.in

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The Tax PublishersTax Appeal No. 332 of 2013 arising out of order of Tribunal, dated 26-10-2010 2013 TaxPub(DT) 1663 (Guj-HC) : (2013) 053 (I) ITCL 0113 : (2013) 356 ITR 0404 : (2013) 262 CTR 0119 : (2013) 215 TAXMAN 0628 : (2013) 093 DTR 0351 Income Tax Act, 1961 --Tax planning vis-a-vis Tax avoidance--Both capital gain and capital loss co-existed during same period--Assessee had sold its plant and machinery to a group company and had earned short-term capital gain. During the same period, Assessee Company had also entered into another transaction with another group company to whom assessee sold 1% Cumulative Convertible Preference Shares incurred long-term capital loss. Assessee had set-off this loss against capital gain earned on account of sale of plant and machinery. assessing officer, however, rejected the valuation report and found that assessee had entered into a colourable device for tax avoidance. Commissioner (Appeals) held that the transactions would fall within the legitimate tax planning and would not amount to colourable device for tax avoidance. He found that assessee had relied on the report of the valuer, who had adopted correct parameters. Tribunal held that the valuation report was on the basis of consideration of relevant factors and did not suffer from any infirmity. *Held:* Commissioner (Appeals) and Tribunal having come to the conclusion that valuation report did not suffer from any legal infirmities, no interference was called for. Since both the transactions were genuine and also traded at proper valuation, merely because the period co-existed or permitted assessee to set off its capital loss against some capital gain, by itself would not give rise to the presumption that the transaction was in the nature of colourable device. In the Gujarat High Court Akil Kureshi & Sonia Gokani, J.J. CIT v. Special Prints Ltd. Tax Appeal No. 332 of 2013 arising out of order of Tribunal, dated 26-10-2010 15 April, 2013 Appellant by : Sudhir M. Mehta Respondent by : J. P. Shah and Manish J. Shah ORDER *Akil Kureshi, J.* Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal, Ahmedabad ('Tribunal' for short) dated 26-10-2010, raising following questions for our consideration : (A) 'Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs. 6,43,81,967 by not taking into consideration the tax exploitative scheme adopted by the assessee to defraud the revenue ?' (B) 'Whether on the facts and in the circumstances of the case and in law, the Honble ITAT was justified in not appreciating the fact that there was no commercial purpose of the transaction of Cumulative Convertible Preference Shares other than avoidance by setting off the short term capital gain into long term capital loss?' SUBSCRIBE FOR FULL CONTENT

The Tax PublishersTax Appeal No. 332 of 2013 arising out of order of Tribunal, dated 26-10-2010
2013 TaxPub(DT) 1663 (Guj-HC) : (2013) 053 (I) ITCL 0113 : (2013) 356 ITR 0404 : (2013) 262 CTR 0119 : (2013) 215 TAXMAN 0628 : (2013) 093 DTR 0351

Income Tax Act, 1961

--Tax planning vis-a-vis Tax avoidance--Both capital gain and capital loss co-existed during same period--Assessee had sold its plant and machinery to a group company and had earned short-term capital gain. During the same period, Assessee Company had also entered into another transaction with another group company to whom assessee sold 1% Cumulative Convertible Preference Shares incurred long-term capital loss. Assessee had set-off this loss against capital gain earned on account of sale of plant and machinery. assessing officer, however, rejected the valuation report and found that assessee had entered into a colourable device for tax avoidance. Commissioner (Appeals) held that the transactions would fall within the legitimate tax planning and would not amount to colourable device for tax avoidance. He found that assessee had relied on the report of the valuer, who had adopted correct parameters. Tribunal held that the valuation report was on the basis of consideration of relevant factors and did not suffer from any infirmity. Held: Commissioner (Appeals) and Tribunal having come to the conclusion that valuation report did not suffer from any legal infirmities, no interference was called for. Since both the transactions were genuine and also traded at proper valuation, merely because the period co-existed or permitted assessee to set off its capital loss against some capital gain, by itself would not give rise to the presumption that the transaction was in the nature of colourable device.

In the Gujarat High Court

Akil Kureshi & Sonia Gokani, J.J.

CIT v. Special Prints Ltd.

Tax Appeal No. 332 of 2013 arising out of order of Tribunal, dated 26-10-2010

15 April, 2013

Appellant by : Sudhir M. Mehta

Respondent by : J. P. Shah and Manish J. Shah

ORDER

Akil Kureshi, J.

Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal, Ahmedabad ('Tribunal' for short) dated 26-10-2010, raising following questions for our consideration :

(A) 'Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in deleting the addition of Rs. 6,43,81,967 by not taking into consideration the tax exploitative scheme adopted by the assessee to defraud the revenue ?'

(B) 'Whether on the facts and in the circumstances of the case and in law, the Honble ITAT was justified in not appreciating the fact that there was no commercial purpose of the transaction of Cumulative Convertible Preference Shares other than avoidance by setting off the short term capital gain into long term capital loss?'