SHRI RAMASWAMY SHIVARAMAN,,CHENNAI vs. ACIT, CC - 1 (1),, CHENNAI

आदेश / O R D E R

PER G. MANJUNATHA, ACCOUNTANT MEMBER:

This appeal filed by the assessee is directed against the order of the

Commissioner of Income Tax (Appeals)-1, Chennai, dated 28.02.2020

and pertains to AY 2016-17.

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3A. Thereby the Learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of Short Term Capital Loss of Rs.3,81,74,128/-.

3B. Thereby the Learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of deduction claimed u/s 54F amounting to Rs.2,41,17,741/-.

5, For that the Learned Commissioner of Income Tax (Appeals) failed to appreciate that the appellant's mother did not have sufficient funds to complete the construction of the impugned property and hence had sold the same to the appellant at market value. Hence the appellant had rightly claimed the deduction u/s 54F of Rs.2,41,17,741/-.

For these grounds and such other grounds that may be adduced before or during the hearing of the appeal, it is prayed that the Hon'ble Tribunal may be pleased to delete the addition of Long Term Capital Gains made and/or pass such other orders as this Hon'ble Tribunal may deem fit.

shareholder/director of M/s. Accendere Knowledge Management Services

Pvt. Ltd., filed his return of income for the AY 2016-17 on 30.12.2016

declaring a total income of Rs.4,99,860/-. The case was taken up for

scrutiny. During the course of assessment proceedings, the AO noticed

that the assessee had entered into a shares purchase agreement with

M/s.CL Educate Ltd., on 07.09.2015 to sell 51% stake held by him in M/s.

Accendere Knowledge Management Services Pvt. Ltd., for a consideration

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of Rs.13.64 Crs. The consideration for sale of shares was discharged by

M/s.CL Educate Ltd., by paying Rs.1.25 crores in cash and the balance in

the form of allotment of 99915 equity shares at Rs.590/- per share. The

assessee has computed long term capital from sale of equity shares at

Rs.6,72,63,014/-. It was further noted that the assessee is one of the co-

owner of immovable property held in the name of his mother. After the

demise of his father, the property was jointly owned by his mother along

with his brother. Subsequently, the assessee and his brothers had

relinquished their right in the property in favour of their mother vide

Release Deed No.3855/2016 dated 27.06.2016. The said property has

been subsequently purchased by the assessee from his mother vide Sale

Deed No.4426/2016 dated 19.07.2016 for a consideration of

Rs.2,21,26,500/- and said consideration was paid partly in cash

amounting to Rs.54,80,778/- and the balance amount of

Rs.1,66,45,722/- by way of transfer of equity shares held by the assessee

in M/s.CL Educate Ltd. The said sale of shares resulted in short term

capital loss of Rs.3,81,74,128/-. The assessee has computed long capital

gain from sale of shares of Accendere Knowledge Management Services

Pvt. Ltd., at Rs. 6,72,63,014/-. The assessee had also computed short

term capital loss of Rs. 3,81,74,128/- from sale of M/s CL Educate Ltd.

Finally, after claiming exemption u/s.54EC & u/s.54F of Income Tax Act,

1961, declared net short term capital loss to be carry forward to

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subsequent year at Rs.28,855/-. The relevant computation of capital gain

is as under:

Long Term Capital Gains Rs.6,72,63,014/- Less: Deduction u/s.54F Rs.2,41,17,741/- Less:Deduction u/s.54EC Rs.50,00,000/- Long Term Capital Gain after investment u/s.54F and 54EC Rs.3,81,45,273/- Less: Short Term Capital Loss Rs.3,81,74,128/- Short Term Capital Loss c/f Rs.28,855/-

was not convinced with the explanation furnished by the assessee and

according to him, subsequent Release Deed executed by the assessee and

his brother in favour of his mother and purchase of very same property by

the assessee by paying cash consideration and transfer of equity shares

of M/s.CL Educate Ltd., is a colourable device arranged by the assessee

through multiple layers of transaction between related parties and thus,

opined that short term capital loss declared by the assessee on transfer of

M/s.CL Educate Ltd., shares to his mother, is a sham transaction and

hence, cannot be allowed to be set off against long term capital gains

derived from transfer of equity shares of M/s. Accendere Knowledge

Management Services Pvt. Ltd. The AO discussed the issue in the light of

transaction between the assessee and his mother and share price of

M/s.CL Educate Ltd., when it was allotted to the assessee on 07.09.2015

and subsequent transfer of shares to his mother at a much lesser rate of

Rs.179.15 per share, and opined that transaction of purchase of property

by transfer of equity shares is nothing but an arranged transaction

between two related parties and hence, cannot be considered as a

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genuine transaction, which was took place between two independent

parties. The AO had also disputed property purchased by the assessee

from his mother in the light of guidelines value of the property and held

that, although the guideline value of the property is much lesser as on the

date of transfer, but the assessee has paid a consideration of

Rs.1,03,50,000/- which is more than guideline value. The AO had

disputed amount paid for building and according to him, amount paid by

the assessee for 3458 sq.ft. building is much higher than the actual cost

of construction. Therefore, he has denied subsequent purchase of

property from his mother and also sale of equity shares and

consequently, denied the benefit of exemption claimed u/s.54F of Income

Tax Act, 1961 and also set off short term capital loss derived from the

sale of equity shares to his mother. The relevant findings of the

Assessing Officer are as under:

2.1 The submissions made by the assessee have been carefully perused, the facts and circumstances of the transaction are also examined and the following observations are made with respect to the transactions.

2.2 The assessee Sh. RamaswamySivaraman has sold his shares in the company M/s Accendure Knowledge Management Services India Pvt Ltd. It is seen that, as per the agreement, M/s CL Educate Ltd, agreed to purchase the shares for a 51% stake in the company for a total consideration of Rs. 13.64 crores, partly to be paid in cash and the rest to be paid as shares of M/s CL Educate Ltd.

2.3 The consideration was paid as cash to the tune of Rs.1.25 crores and the remaining was paid to the assessee in the form of shares of M/s CL Educate Ltd - a total of Rs.92915 shares that has been valued at Rs.590/- per share (Face Value of Rs.10/-). Since the same was a transfer under the Income Tax Act, the assessee had to declare long term capital gains on the said transaction. The long term capital gain from the said transaction was worked out to be arriving at the tune of Rs.6,72,63,013.92/- as per the assessee's calculations.

2.4 Further, the assessee has claimed a deduction under the sections 54EC as well as 54F of the Income Tax Act, 1961 out of the aforementioned capital gains. The details of the transactions along with relevant documents were called for and examined. The deduction claim under section 54EC by investment in the bonds of NHAI appears to be in order. However, on examining all the documents related to the claim of deduction under section

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54F, it is noticed that the arrangements were made in such a way that the transfer as well as the values of the transaction has been designed purposefully between the related parties to specifically claim a deduction and avoid the payment of long term capital gains.

2.5 For the claim of deduction under section 54F of the Income Tax Act, 1961, the assessee has made a purchase, pf a residential property from his own mother. It is also noticed that the prior to the purchase of the property, the assessee himself had relinquished his rights on the property acquired as a legal heir in favour of his mother without receiving any compensation, and brought back the same along with the rest of the property, a mere 3 weeks after the relinquishment: Similarly, the consideration for the acquisition of the property was also shown as being made partially through cash (to the tune of Rs.54,80,778/-) and the remaining amount was shown to have been paid in the form of the shares of CL Educate Ltd, received as part of the sale consideration itself. However, the valuation of the shares at this time was not taken at the value of Rs.590/- per share but at Rs.179.15/- per share and considered to have a total value to the tune of Rs.1,66,45,722/-. Thus, the acquisition of the property has been made through this arrangement from his mother for claiming the deduction under section 54F.

2.6 Similarly, as mentioned above, since the part of the consideration has been shown as paid in shares, the assessee has considered it as a short term capital transfer. Since the value of the share at this point of time was taken as Rs. 179.15/- as opposed to Rs. 590/- at the time of allotment, a short term capital loss of Rs. 3,81,7,127.75/- was claimed by the assessee which was again used to set off the remaining long term capital gains. Thus, in effect, the assessee successfully negates the entire gains received by the original sale of shares by the elaborate arrangement made with his mother. Similarly, with the abnormal value of acquisition and consideration, as opposed to the market value of the property purchased, the mother also ended up having no tax liability from the said transaction, as the arbitrary values being assigned by the assessee and his mother has resulted again in a long term capital loss in her own hands. The assessee has conveyed the property to his mother estimating the market value of property at Rs.2,23,50,000/- wherein the land of 2258 sq.ft is valued at Rs.1,03,50,000/- and the building of 3458 sq.ft is valued at Rs.1,20,00,000/-. But on verification of the guideline value of the said land at www.tnreginet.net the same is valued at Rs.3500/- per sq.ft which translates to a sum of Rs.79,03,000/- in respect of the land, against Rs.1,03,50,000/- considered by the assessee. The guideline value as obtained from the website is incorporated for ready reference:

2.7 Further, the construction cost of 3458 sq.ft of super structure has been adopted as Rs.1,20,00,000/- by the assessee which translates to the cost of construction of Rs.3470/- per sq.ft which is again a highly improbable valuation and also not supported by any supporting documentary evidences. Therefore, it can be seen that the mother also, avoids payment of taxes and has benefited from the arrangement made. Each of the transactions may be analysed carefully to examine the arrangements for tax avoidance envisaged by the assessee. Dealings involving funds transfer to near and dear ones need to be looked into with care and caution and necessary inferences drawn if there are abnormalities attaching to such transactions as per the law laid down by the Hon'ble Supreme Court in the cases of Workmen, Associated Rubber Industry Ltd. Vs Associated Rubber Industry Ltd. (SC) 157ITR 77, Union of India &Ors. Vs Playworld Electronics P. Ltd. &Anr. (SC) 184 ITR 308.

2.8 The property that has been acquired by the assessee for the claim of 54F deduction has been originally purchased by the father and mother of the assessee during the year 2014. Subsequently, upon passing of the father of the assessee, the legal rights vested with the mother (5/8th share) and 3 sons (1/8th share each). In the present case, the sale of shares by the assessee happened in the financial year 2015-16 on 7th September 2015. Further to this, before the filing of returns for the relevant assessment year, since there was a huge capital gain windfall for the assessee, the arrangement as discussed above has been designed within a short time period to entirely negate the gains made during the year and to avoid payment of taxes on the same. The three sons, including the assessee, has relinquished their legal rights of 1/8th share of the property each to their mother vide a release deed no. 3855 of 2016 dated 27.06.2016. Soon enough, the property was transferred to the name of the assessee, Shri RamaswamyShivaraman vide Sale Deed No.

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4426/2016 dated 19.07.2016, i.e. a mere three weeks after he had relinquished his share also in the name of the mother. It has to be seen that the assessee and the mother was staying in the same property and continues to do so.

2.9 The consideration for the transfer also, as seen from the records, as mentioned earlier was majorly paid in kind, by the shares of M/s CL Educate Ltd that was received by the assessee earlier. It is to be noted that annual report wherein the valuation of shares allotted to the assessee as available to the assessee wherein the share is valued at Rs.590/- per share. However, for subsequent transfer of the share, the assessee has conveniently taken the book value of shares as on 31.03.2015 without providing any reasonable logic, at Rs.179.15 whereas a few months before the assessee himself had accepted the shares at a value of Rs.590 per share. By taking the value of the shares at Rs.179.15, the assessee has not only claimed the 54F deduction by making it a part of the purchase consideration, but also a huge short term loss as well by considering the same as a short term capital asset transfer. It can be seen that the entire arrangement has been made with the sole intention of fitting all the values of the transactions as per the arrangements so as to avoid payment of any taxes.

2.10 The transfer of the property by the mother to the assessee in the aforesaid circumstances can only be considered as a sham transaction with only an intention of availing the benefit of deduction under section 54F of the Income Tax Act, 1961. The surrounding circumstances and the relationship between that parties, along with the convenient valuation of all the transactions involved, clearly points to a well schemed arrangement to avoid the payment of the taxes. It is also to be noticed that the mother continues to stay in the same property before and after the transfer and so does the assessee. There is only a change in ownership as per title deed but there is no change in the substance or the circumstances even after the transfer of the property. As already mentioned above, the valuations are conveniently made as per the requirement of the assessee and there is no tax liability arising for either the assessee or his mother. Substance of transaction should prevail over its form which is the trite law as per the decision of the Apex Court in the case of Karanpura Development Co. Ltd. Vs CIT (SC) 44 ITR 362. In lieu of the discussions, the claim of deduction under section 54F is only out of a sham transaction for the purpose of avoidance of long term capital gains tax and is to be disallowed.

2.11 Thus, it follows that the transfer of shares as part of the 'sale consideration' is also a sham transaction wherein there is no intention of the parties to actually transfer any rights on the asset. As already discussed, the assessee has derived a huge short term capital loss as well out of the said transaction. Further, the valuation of the shares at Rs.179.15 (as on 31.03.2015) while getting allotted for Rs.590/- per share on 07.09.2015 has not been explained satisfactorily, other than the fact that the values conveniently fit the mould of nullifying any tax liability. Therefore, the short term capital loss of the assessee is only out of arbitrary assignment of value of the shares and is liable to be disallowed. However, without prejudice, since the transfer of shares as part of the sale consideration is in itself a sham transaction, as discussed in the foregoing paragraphs, the short term capital loss claimed is also to be disallowed.

2.12 The Hon'ble ITAT Delhi has held that "Tax liability in the case of suspicious transactions to be assessed on the basis of the material available on record, surrounding circumstances, human conduct, preponderance of probability and nature of incriminating information / evidence" in the case of Hersh V. Chadha L/H of Late W.N. Chadha Vs DDIT(lnt.Tax) (ITAT, Del) 135 TTJ 513. Similarly, with respect to a transaction, the Hon'ble Bombay HC has held that " What has to be considered is not to ask whether the provision should be construed literally or liberally, nor whether the transaction is not unreal and not prohibited by the statute but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it - Courts can remove the veil to find out the real nature of the transaction" in the case of Nayantara G. Agrawal Vs CIT (Bom) 207 ITR 639.

2.13 Thus, as per all the discussions: made supra, along with the support of various judgements over the years, it can be seen that the claim of 54F Deduction as well as the claim of Short Term Capital Loss-arise out of sham transactions and are therefore liable to

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be disallowed. Thus, the amount Claimed as deduction under section 54F, to the tune of Rs.2,41,17,740.93/- as well as the short term capital loss of Rs.3,81,74,127.75/- is hereby disallowed and added back to the total income of the assessee. 5. Being aggrieved by the assessment order, the assessee preferred

an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee has

reiterated his arguments made before the Ld.AO and submitted that when

the AO has accepted capital gains declared for transfer of equity shares,

has erred in denied subsequent sale of shares and consequent set off of

capital loss and also exemption claimed u/s.54F of the Income Tax Act,

1961 towards purchase of residential house property from his mother.

The Ld.CIT(A) after considering the relevant submissions of the assessee

and also taken note of various facts brought out by the AO, opined that if

we see sequent of events between the assessee and his mother, it

appears that the assessee arranged a method to reduce his taxable

income arises out of transfer of equity shares and thus, opined that there

is no error in the reasons given by the AO to disallow set off claimed

towards short term capital loss arises on account of transfer of equity

shares to his mother and further denial of exemption claimed u/s.54F of

the Income Tax Act, 1961, in respect of the purchase of property from his

mother. Accordingly, rejected the arguments of the assessee and

sustained additions made by the AO. Being aggrieved by the order of the

Ld.CIT(A), the assessee is in appeal before us.

confirming the assessment made by the AO towards computation of long

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term capital gains derived from the sale of equity shares after excluding

set off of short term capital loss derived from subsequent sale of shares.

The AO for the assessee, further, submitted that there is no doubt, the

assessee has entered into a transaction with his mother for purchase of

property and further consideration for purchase of property was paid

partly in cash and partly by transfer of equity shares of M/s.CL Educate

Ltd. Just because, transaction was between mother and son, it cannot be

said that the transaction is a sham transaction which is arranged for

reducing tax liability. He, further, submitted that no doubt when the

assessee transferred M/s.CL Educate Ltd., shares to his mother, the price

was much lesser when compare to shares purchased by the assessee,

when he had sold 51% stake in a company, but fact remains that when

the assessee has sold his shares held in M/s.Accendere Knowledge

Management Services Pvt. Ltd., to M/s.CL Educate Ltd., the shares were

allotted on the basis of enterprise value which is, further, backed by the

fact of M/s.CL Educate Ltd., was in the process of listing its shares in

stock market. However, the same did not materialize and hence, the

assessee could not liquidated said rate. However, fact remains that

subsequently, M/s.CL Educate Ltd., came up with an IPO and the shares

were listed in BSE and when the assessee has sold the shares to his

mother at Rs.179.15 per share, the share price was trading at Rs.120.10

per share. Therefore, it is highly incorrect on the part of the AO to allege

that the assessee has sold shares at a lesser price to book short term

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capital loss. He further submitted that in so far as purchase of property

from his mother and claiming benefit of exemption u/s.54F is concerned,

there is no dispute with regard to the fact that the property was jointly

owned by the assessee, his mother and his brothers. It was also not in

dispute that the assessee and his brothers were relinquished their right in

property in favour their mother. It was also not in dispute that

subsequently the assessee has purchased the property by paying cash

consideration and transferring equity shares held by him in M/s.CL

Educate Ltd.,. All these transactions were done in accordance with the

law. There is no restriction under any law for entering into a transaction

with related party. As long as the transactions are genuine which are

backed by evidences, same cannot be doubted only for the reasons said

transactions were between the related parties. Therefore, he submitted

that the AO is completely erred in denying set off of short term capital

loss against long term capital gains and further exemption claimed

u/s.54F of the Income Tax Act, 1961 towards purchase of residential

house property.

submitted that the facts brought out by the AO clearly shows that

subsequent Release Deed executed by the assessee in favour of his

mother and purchase of very same property by paying consideration

partly in cash and partly by transfer equity shares is nothing but a sham

transaction arranged by the assessee with related parties to reduce his

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taxable income arise out of transfer of equity shares and thus, there is no

error in the reasons given by the AO to deny set off of short term capital

loss and exemption towards purchase of another residential house

property. The Ld.CIT(A) after considering the relevant facts has rightly

upheld the additions made by the AO and his order should be upheld.

record and gone through orders of the authorities below. The fact with

regard to sale of equity shares held by the assessee in M/s.Accendere

Knowledge Management Services Pvt. Ltd., to M/s.CL Educate Ltd., for a

consideration of Rs.13.64 Crs. is not disputed by the AO. In fact, the first

transaction of sale of shares and consequent computation of long term

capital gains is undisputed. The only dispute is with regard to subsequent

transfer of M/s.CL Educate Ltd., shares to his mother and consequent set

off of short term capital loss against long term capital gains. As regards,

selling of shares of M/s.CL Educate Ltd., to his mother, there is no dispute

with regard to the fact that said transaction is for purchase of a

residential house owned by his mother. Facts borne out from records

shows that the assessee had purchased a residential house owned by his

mother vide Sale Deed dated 19.07.2016 for a consideration of

Rs.2,21,26,500/- and said consideration was discharged partly in cash of

Rs.54,80,778/- and partly by transfer of equity shares of M/s.CL Educate

Ltd., at Rs.179.15 per share. The AO has not disputed fact that the

assessee has transferred shares to his mother’s account through DEMAT

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Account and physical shares certificate are handed over to his mother.

The AO disputed transaction only on the sole ground that when the

assessee has purchased M/s.CL Educate Ltd., shares at Rs.590/- per

share, no reason was given to sell very same share after a period of 10

months for a lesser price of Rs.179/- per share. Therefore, he opined

that it is sham transaction arranged by the assessee in collusion with his

mother to reduce his tax liability.

the AO in light of various evidences filed by the assessee and we

ourselves do not subscribe to the reasons given by the AO for the simple

reason that, subsequent sale of shares to his mother is a normal

transaction between two individuals although, both are relatives. Further,

said transaction was happened in pursuant to a registered Sale Deed of

immovable property conveyed by the assessee’s mother in favour of the

assessee. All these transactions were happened in accordance with law.

As regards, price for which shares were sold to his mother, the assessee

was justified selling price by adducing various evidences as per which

M/s.CL Educate Ltd., shares were subsequently listed in BSE on the date

of transfer at Rs.122.10 per share. Further, M/s.3A Financial Services

Ltd., offered to buy shares of M/s.CL Educate Ltd., from the assessee for

Rs.4/- per share on 15.01.2016. Subsequently, when M/s.CL Educate

Ltd., was in the process of IPO, the very same firm made a revised offer

of Rs.100/- per share. If you compare offer for share price received by

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the assessee from a third party, we find that the share price received by

the assessee from his mother is more than prevailing market rate of the

shares in the open market. Further, book value of M/s.CL Educate Ltd.,

share as on the date of transfer to assessee mother was at Rs.179.15 per

share. No doubt, the assessee has purchased very same M/s.CL Educate

Ltd., shares at Rs.590/- per share on 07.09.2015, but fact remains that

there is a gap of 10 months between date of purchase of shares by the

assessee and subsequent sale of shares to his mother. It is a well-known

fact in the share market, share price may go up and come down for

various reasons and it cannot and never be constant at any time.

Therefore, merely for the reasons that the assessee has purchased very

same shares at Rs.590/- per share, the AO cannot dispute selling price of

shares at Rs.179.15 per share when other evidences filed by the assessee

clearly shows that the transactions were genuine which was happened

through proper channel. Further, the AO cannot dispute the transactions

merely for the reason that said transaction was happened between the

related parties. It is a well settled position of law that for the purpose of

Income Tax, mother and son are two different persons. If there is any

transactions between mother and son and said transaction is happened in

the normal course, then the AO cannot dispute such transaction merely

said transaction resulting in payment of less tax to the Department by

any person. Moreover, the assessee has given various reasons to justify

selling price of M/s.CL Educate Ltd., which is backed by factual evidences.

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Hence, in our considered opinion, the AO is completely erred in disputing

subsequent sale of shares to his mother and consequent denial of set off

of short term capital loss arises out of such transactions. Hence, we

direct the AO to allow set off of short term capital loss arises out of

transfer of shares to his mother against long term capital gain derived

from sale of shares held by the assessee.

Tax Act, 1961 in respect of purchase of residential house from his mother.

The AO has not disputed fact that the assessee has purchased a

residential house vide Sale Deed dated 19.07.2016 for a consideration of

Rs.2,21,26,500/-. The AO had also not disputed the fact that said

property was legally owned by his mother. The sole reason for the AO to

denial of exemption claimed u/s.54F of the Income Tax Act, 1961, was

that, the assessee has arranged sham transaction by relinquishment of

his right in the property in favour of his mother and subsequent purchase

of very same property from mother to claim benefit of exemption u/s.54F

of the Income Tax Act, 1961. In other words, facts with regard to

purchase of property were not in dispute, but only dispute is manner in

which such transfer took place. Admittedly, the property was initially

owned by the assessee’s father. The assessee’s father was subsequently

demised in November, 2015 and after his demise, all properties were

inherited by the assessee, his mother and his brothers. As per the facts

available on record, the assessee owned 1/8th share in the said property.

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The assessee’s share was relinquished along with his brother’s share in

favour of their mother vide Release Deed dated 27.06.2016 and said

Release Deed was registered in the Office of the Sub-Registrar. Further,

the assessee had purchased very same property from his mother for a

consideration of Rs.2,21,26,500/-. The AO had never disputed above

facts. However, only dispute is with regard to manner of transfer of

property and timing of transfer of said property. According to the AO, the

relinquishment of assessee’s right in the property and subsequent

purchase of very same property, is sham transaction. Further, to arrive at

such conclusion, the AO, except bringing relationship between the

assessee and his mother, has not brought on record any evidences to

justify his case. Admittedly, the assessee, his mother and brothers are

different persons for the purpose of Income Tax. Each one has separate

assessable entity. Further, there is no restriction whatsoever under any

law for buying or selling a property between mother and son. If at all, two

individuals decided to enter into a transaction of purchase/sale property,

it is their own wisdom and decision. The Transaction may result in some

consequential tax effect, but the AO cannot dispute said transaction

merely because it resulted in payment of less taxes by anyone of the

person, unless the AO brought on records evidences to prove that the

parties have arranged transaction to evade payment of taxes.

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assessee and his mother and his brothers. They decided to relinquish

their right in favour of his mother and said transaction was a bona fide

decision. His mother decided to sell her property and property purchased

by the assessee was once-gain a bonafide transaction. Therefore, merely

because transaction was between mother and son, the AO cannot dispute

genuine transaction of purchase of property. If at all, he has any doubt

about the conduct of the assessee in relinquishment of his 1/8th share in

favour of his mother and subsequent purchase of said share by the

assessee, then it can be held to be an arrangement between the parties

for reducing the tax liability. In our considered view, except this in respect

of remaining 7/8th share held by his mother and brothers, definitely right

of the property was with different persons and the assessee has acquired

said right by paying consideration and thus, same cannot be treated as

sham transaction.

guideline value of the land and opined that the assessee has paid more

consideration to his mother. We have carefully considered reasons given

by the AO and we find that there is a slight difference of Rs.20 lakhs

between consideration paid by the assessee for purchase of land and

guideline value of the said land. It is quite common in real estate market

that the rate will fluctuate depending upon various factors and obviously,

ITA No.571/Chny/2020 :: 17 ::

the guideline value of the property may not be correct value of the

property. Therefore, for said reason, consideration paid by the assessee

through a registered Sale Deed cannot be disputed by the AO. As

regards, consideration paid for building, the assessee has paid a sum of

Rs.2,00,00,000/- for a total 3458 sq.ft., building. The AO has disputed

value and argued that it is higher side. However, could not bring on

record any comparable cases of similar in nature. Therefore, without any

evidence he cannot dispute consideration paid for purchase of property

through a registered Sale Deed. Therefore, in our considered view

reasons given by the AO to deny the benefit of exemption claimed

u/s.54F of the Income Tax Act, 1961 for purchase of property cannot be

appreciated.

including the decision of the Hon’ble Apex Court in the case of Omar Salay

Mohamed Sait v. CIT reported in [1959] 37 ITR 151 (SC)., that no

addition can be made on the basis of suspicion, conjecture and surmises.

The Hon’ble Apex Court in the case of Omar Salay Mohamed Sait v. CIT

reported in [1959] 37 ITR 151 (SC) held that the conclusion arrived at

was due to suspicion which could not take place of proof but based on

many surmises and conjectures, reliance cannot be placed. In this case,

the AO has doubted genuine transaction of purchase of property by the

assessee from his mother which was supported by registered deed only

ITA No.571/Chny/2020 :: 18 ::

on the basis of suspicion and surmises, because said transaction was

between the mother and the son. Therefore, we are of the considered

view that the AO is erred in completely denying the benefit of exemption

claimed u/s.54F of the Income Tax Act, 1961. However, as we noted in

earlier part of this order, the assessee was originally owned 1/8th share in

impugned property and the same has been relinquished in favour of his

mother without any consideration. The assessee has subsequently

purchased very same 1/8th share in the impugned property by paying a

consideration. Therefore, if at all, it can be said that there is an

arrangement between the assessee and his mother for reducing tax

liability, then it can be said in respect of 1/8th share held by him in the

impugned property. Therefore, we are of the considered opinion that the

AO is erred in denying complete exemption towards purchase of property

u/s.54F of Income Tax Act, 1961. Hence, we direct the AO to allow

exemption u/s.54F of the Act, towards 7/8th share in the impugned

property.

circumstances of this case, we are of the considered opinion that the AO

is erred in denial of set off of short term capital loss derived from sale of

M/s.CL Educate Ltd., shares to assessee’s mother against long term

capital gains derived from sale of share of M/s.Accendere Knowledge

Management Services Pvt. Ltd. Hence, we direct the AO to allow set off

ITA No.571/Chny/2020 :: 19 :: of short term capital loss against long term capital gains. We, further, directed the AO to allow exemption claimed u/s.54F of Income Tax Act, 1961 towards 7/8th of impugned property.

Order pronounced on the 17th day of December, 2021, in Chennai.

Sd/- Sd/- (वी. दुगा� राव) (जी.मंजूनाथा) (G. MANJUNATHA) (V. DURGA RAO) लेखासद�य/ACCOUNTANT MEMBER �याियकसद�य/JUDICIAL MEMBER

चे�ई/Chennai, �दनांक/Dated: December 17, 2021. TLN आदेशक��ितिलिपअ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 4. आयकरआयु�/CIT 2. ��यथ�/Respondent 5. िवभागीय�ितिनिध/DR 3. आयकरआयु� (अपील)/CIT(A) 6. गाड�फाईल/GF