Uday S. Jagtap 931-17-ITXA-91=.doc IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 931 OF 2017 Pr. Commissioner of Income Tax-12 .. Appellant v/s. Kingpin Investment & Finance P. Ltd. .. Respondent Mr. Sham Walve for appellant None for respondent CORAM : M.S. SANKLECHA & NITIN JAMDAR, J.J. DATED : 14 th OCTOBER, 2019 P.C. 1. This appeal under Section 260A of Income Tax Act, 1961 (Act) challenges order dated 20th July, 2016 passed by Income Tax Appellate Tribunal (Tribunal). This appeal relates to Assessment Year 2002-03. 2. Revenue urges only following question of law for our consideration :- Whether in facts and circumstances of case and in law, Tribunal was justified in holding that Long Term Capital Loss arising from transfer of preference shares was not sham transaction ? 1 of 4 ::: Uploaded on - 19/10/2019 ::: Downloaded on - 23/10/2019 10:47:07 ::: Uday S. Jagtap 931-17-ITXA-91=.doc 3. In its return of income for subject assessment year, respondent had claimed long term capital loss of Rs. 3.61 crores on sale of preference shares. These shares had been allotted by Welspun Mercantile Pvt. Ltd. (245360 shares) and Welspun Trading Pvt. Ltd. (134240 shares) to respondent for appropriate consideration. During assessment proceedings, respondent also filed share certificates along with allotment letter issued by both companies. Out of above preference shares, respondent had sold in previous year relevant to subject assessment year 215000 shares of Mercantile Welspun Pvt. Ltd. to Global Home-tex Ltd. and 30630 shares of M/s. Welspun Trading Pvt. Ltd. to M/s. Sheetal Financial Services Pvt. Ltd. Assessing Officer noted that transferee of shares had suppressed consideration to avoid payment of stamp duty. Besides, funds for purchase of preference shares had been received from group company namely M/s. Wellson India Ltd. and M/s. Glofame Cotton Yarn Ltd. Thus, Assessing Officer came to conclusion that as these companies belong to same group, entire transaction is sham transaction. Further, it held that as no dividend had been received from two companies 2 of 4 ::: Uploaded on - 19/10/2019 ::: Downloaded on - 23/10/2019 10:47:07 ::: Uday S. Jagtap 931-17-ITXA-91=.doc M/s. Welspun Mercantile Ltd. and Welspun Trading Pvt. Ltd. transaction was not genuine. Therefore, loss ought to be ignored as it is sham transaction. 4. In appeal, Commissioner of Income Tax (Appeal) [CIT(A)] dismissed respondent s appeal. 5. On further appeal, Tribunal on facts found that purchase of preference shares was shown in balace-sheet as on 31 st March, 2001 filed along with return of income for Assessment Year 2001-02. above purchase was accepted in scrutiny assessment for Assessment Year 2001-02. impugned order further records finding of fact that purchase of preference shares was genuine in as much as allotment letter, share certificate, consideration paid etc. was duly supported by documentary evidence and return filed with Registrar of companies. It also held that non-deduction of dividend by company in which shares are held is not factor to hold that transaction is not genuine. In terms of Section 205 of Companies Act, dividend shall be paid only out of profits. Mere suspicion that transaction is sham transaction would not by itself justify disregarding documents 3 of 4 ::: Uploaded on - 19/10/2019 ::: Downloaded on - 23/10/2019 10:47:07 ::: Uday S. Jagtap 931-17-ITXA-91=.doc already on record, which establish genuineness of transaction. Moreover, on facts Tribunal found that loss which has arisen on sale of shares was due to indexed cost of acquisition and has been claimed as set off against any profits. Thus, there could be no motive for sham and / or bogus transaction as held by Assessing Officer. On aforesaid facts, impugned order held that transaction is genuine. 6. We note that impugned order of Tribunal on finding of fact has come to conclusion that transaction for claiming short term loss was genuine. Nothing has been shown to us which would indicate above finding of fact by Tribunal is perverse. Therefore, question as proposed being one of finding of fact, does not give rise to any substantial question of law. Thus, not entertained. 7. Accordingly, appeal is dismissed. (NITIN JAMDAR, J.) (M.S. SANKLECHA, J.) 4 of 4 ::: Uploaded on - 19/10/2019 ::: Downloaded on - 23/10/2019 10:47:07 ::: Pr. Commissioner of Income-tax-12 v. Kingpin Investment & Finance P. Ltd