MR MAHESHKUMAR RAMDAS KANKAREJ,MUMBAI vs. ITO, INT TAX,NASHIK, NASHIK

The only grievance of the assessee is against the disallowance of long term capital loss at Rs.15,23,785/-.

We have heard the rival submissions and perused the record placed before us. We have carefully gone through the detailed paper book filed by the assessee and the case laws referred therein and the submissions made by the ld. Counsel for the assessee during the course of hearing. We observe that the assessee is a Non-resident Indian and filed the return of income for A.Y.2 020-21 on 19.12.2020 declaring income at Rs.10,280/- wherein the assessee has shown income from other sources and has also claimed short term and long term capital loss from the sale of Equity shares. Case selected for scrutiny followed by validly issuing notices u/s.143(2) and 142(1) of the Act.

So far as the issues raised in the grounds of appeal, we find it that relates to the transaction of sale of 50,838 Equity Shares of Lactose (India) Ltd. The assessee purchased these Equity shares in the year 2016 at Rs.38,03,710/- on the recognised stock exchange and were transferred to the Demat Account. After holding them approximately for four years, the asssesee has sold the Equity Shares in the year 2020 for a consideration of Rs.15,23,785/- and incurred long term capital loss of Rs.22,79,925/-. Ld. Assessing Officer based on the information received from DIT (Investigation) has passed the assessment order observing that the alleged long term capital loss has arisen from manipulated trading and that Lactose (India) Ltd is a Penny Stock company. Ld. Assessing Officer thus has disallowed the long term capital loss of Rs.22,79,925/- and has also made the addition u/s.68 for the sale consideration of Rs.15,23,785/-. The assessee challenged the action of the Assessing Officer before the ld.CIT(A) but failed to succeed. Now the assessee is in appeal before this Tribunal assailing the impugned order.

We have gone through the detailed paper book and noticed that the assessee has made the purchase on the recognised stock exchange of the Equity Shares of Lactose (India) Ltd. in the year 2016 supported by contract note and they are transferred in the Demat Account held with ICICI Securities Ltd. After making the payment for the purchase of Equity Shares through banking channel and holding them in the Demat Account for almost four years, the assessee has sold them in the year 2020, i.e. during covid-19 pandemic period at a loss of Rs.22,79,925/-. The sale transaction has also taken place on the recognised stock exchange. Section 10(38) of the Act refers to the income arising from sale of capital asset and the conditions referred in the said section which a person need to be fulfilled for claiming the exemption which reads as under :

Now on examining the facts of the instant case in light of the provisions of section 10(38), we note that the assessee has purchased Equity Shares of Lactose (India) Ltd. from the recognised stock exchange and the payment has been made through banking channel and the shares have been transferred to the Demat Account. So far as the sale is concerned, the assessee after holding these Equity Shares in demat account for more than one year, has sold them on the recognised stock exchange after duly making payment of Securities Transaction Tax and that the sale consideration has been received directly in the bank account of the assessee. It is an admitted fact that on the online purchase and sales on the SEBI monitored recognised stock exchange, the assessee is not having any information about the other person who has sold or purchased Equity Shares and the information is only available with the Securities and Exchange Board of India (SEBI) controlling the recognised stock exchange. The assessee has fulfilled all the conditions which are required to make a valid transaction of long term capital gain/long term capital loss. We also take note of the fact that Lactose (India) Ltd. is presently listed on the Bombay Stock Exchange (BSE) and the current share price is around Rs.108. 20. On going through the rate chart for past ten years, we observe that the purchase price of approx.. Rs.74/- paid by the assessee is in accordance with the market rates which were there during the year 2016. Thereafter, the share price reached to the level of Rs.180/- in September 2017 but assessee did not sold the shares then during covid-19 pandemic prices scaled down to Rs.19/- also. Thereafter, the assessee has sold the Equity Shares at approx.. Rs.30/- per share but then the Equity Share price of the very same company has reached to a level of Rs.247.40 on 10.12.2024. All these facts clearly indicate that Lactose (India) Ltd. is being regularly traded and the share price witness high and lows on the basis of market conditions. The company is also active and turnover for F.Y. 2025-26 is Rs.163 crore with a net profit after tax at Rs.6.00 crore. We thus are satisfied with the contention of ld. Counsel for the assessee and find that the assessee who is a Non-resident is regularly making investments in Equity Shares and genuine transaction of purchase and sale of Equity Shares of Lactose (India) Ltd. has been carried out by the assessee and therefore the ld.CIT(A) grossly erred in confirming the action of the Assessing Officer. We accordingly hold that the assessee’s claim of long term capital loss at Rs.22,79,925/- deserves to be allowed. Similarly, since sales have been made on the recognised stock exchange, ld. Assessing Officer also erred in invoking section 68 of the Act for making the addition for sale consideration at Rs.15,23,785/- and same stands deleted. Finding of ld.CIT(A) is set aside and the effective grounds of appeal raised by the assessee on merits are allowed.

In the result, the appeal of the assessee is allowed.

The Pr. CIT concerned. विभ गीय प्रतितनधि, आयकर अपीलीय अधिकरण, “SMC” बेंच, 4. पुणे / DR, ITAT, “SMC” Bench, Pune. ग र्ड फ़ इल / Guard File. 5. आिेश नुस र / BY ORDER,