Mumbai ITAT upholds Taxpayer’s right to legitimate tax planning
ACIT Circle 4(1)(1), Mumbai vs. Ranu Vohra (ITA No.412/Mum/2024)
Facts:
1. While verifying the return of income, the AO noticed that in the year under consideration, assessee had sold shares of Avendus Capital Pvt. Ltd. on 02.02.2016 and derived long term capital gain of Rs.16,81,07,825/-.
2. As against the capital gain so derived, the assessee has set off short term capital loss of Rs.9,14,39,681/-, comprising mainly of short term capital loss of Rs.9,11,83,666/- from sale of shares of M/s. Mindtree Ltd.
3. On further verification, he found that the shares of Mindtree Ltd. were purchased by the assessee between 17.02.2016 to 04.03.2016. Whereas, they were sold during the period of 09.03.2016 to 31.03.2016.
4. The AO found that M/s Mindtree Ltd. had announced issuance of bonus shares on 18.01.2016 at the ratio of 1:1. He observed that as a result of issue of bonus shares, the price of share reduced almost to half its original price.
5. Taking advantage of such reduction in price of shares, the assessee sold the shares purchased earlier resulting in short term capital loss of Rs.9,11,83,666/-.
6. According to the AO, by adopting colorable device of selling the shares of M/s Mindtree Ltd. assessee arranged its affairs in a manner so as to derive maximum benefit by selling the shares at a loss, so as to set off the long term capital gains earned.
ITAT Mumbai held as below:
1. The AO, neither has disputed these facts nor has any dispute with regard to the genuineness of the acquisition and sale of shares.
2. When the transactions relating to purchase and sale of shares are beyond doubt and are not in the nature of sham transaction even there is no such allegation by the AO, the short term capital loss derived by the assessee from sale of shares cannot be prevented from being set off against the long term gain by alleging adoption of colorable device.
3. There is no requirement under the law that the assessee has to pay more tax.
4. If the assessee arranges her affairs within the legal framework and through legitimate means to reduce its tax liability, the AO cannot prevent her from doing so.
5. So the appeal by the revenue is dismissed.
The copy of the order is as under:
