Loading judgment…
Facts
The assessee, an NBFC, claimed a loss of Rs. 1,49,75,269/- on the transfer of shares in a group company (GRPL) to HSIIDC as a business loss. The transfer was made under compelling circumstances to save a project threatened with cancellation. However, the lower authorities treated it as a capital loss due to lack of evidence for commercial expediency.
Held
The tribunal set aside the orders of the lower authorities and remanded the issue back to the Assessing Officer. The AO is directed to re-examine the commercial exigencies of the share transfer at a loss, in accordance with the provisions of the Act, after providing the assessee a reasonable opportunity of being heard.
Key Issues
Whether the loss incurred by the NBFC assessee on the transfer of shares was a business loss or a capital loss, and if the transfer was necessitated by commercial exigencies.
Sections Cited
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
O R D E R
PER MANISH AGARWAL, AM:
This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals) [CIT(A) in short] -16, New Delhi, dated 28.03.2019 passed in Appeal No. 10161/18-19 for AY 2014-15.
None appeared for the assessee. Since it is very old appeal, therefore, after considering the prayer of the revenue to decide the appeal early, we proceed to decide the same on the basis of the
Before us, the ld. Sr. DR vehemently supported the order of the lower authorities and argued that even after admission of the additional evidences filed before the ld. CIT(A), the assessee has failed to justify the claim of loss on the transfer of shares as business loss. Ld. Sr. DR further submitted that the ld. CIT(A) has duly considered the fact that assessee is a NBFC and after appreciating the submission of the assessee has rightly held the business loss as capital loss which order deserves to be confirmed. He prayed accordingly.
After considering the arguments of the ld. Sr. DR and further after perusing the orders of both the lower authorities, we find that neither before the AO nor before the ld. CIT(A), the assessee could be able to substantiate the claim that the shares sold at a lower price were under commercial expediency. The assessee is a NBFC and claim of the assessee was that the investment was made in the group company M/s Gurgaon Recreation Park Ltd. (GRPL) as strategic investment in terms of the Assisted Sector agreement. The assessee in order to save the project undertaken by the company GRPL, had transferred its equity to Haryana State Industrial & Infrastructure Development Corporation Limited (HSIIDC) who threatened to cancel the allotment if it was not allotted 15% of the paid up capital of GRPL in the shape of sweat equity shares and thus incurred loss of Rs. Unitech Holdings Ltd. vs. DCIT 1,49,75,269/-. Since the assessee is regularly engaged in making strategic investment in group companies, the loss incurred due to transfer of shares under compelling circumstances to save the company and was a business loss. However, no evidences to establish that the shares were transfer under commercial exigencies were filed before the AO or before the CIT(A) therefore, both the authorities were of the view that the this was a capital loss.
In view of the above discussions, we are of the view that the matter needs to be considered afresh from the aspect of commercial exigency. Therefore, we set aside the orders of the lower authorities and remand back this issue to the file of the AO to examine the commercial exigencies of the assessee in transfer of shares to HSIIDC at loss and decide the same in accordance with the provisions of the Act. Needless to say, assessee be provided reasonable and sufficient opportunity of being heard.
In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in open court on 17.04.2025.