The drastic transformation in the governmental policies and approach testimonial to the measures taken by the Income Tax Authorities to eliminate the possible ways to legitimize the unaccounted money and tax payers trying to carve out the same, the Nagpur Bench of Bombay High Court pronounced a decision:
In the case of Shantidevi Bimalchand Jain vs. ITO [ITA No. 18/2017; by order dated 10th April 2017, upholding the denial of long term capital gains exemption for unexplained transaction in shares.
The above verdict came after plaintiff moved to High court to avail Long term capital gain exemption on sale of Equity shares of two private companies,the Taxpayer had purchased shares at the rate Rs 5.50 per share and Rs.4 per share of Syncom Marketing Pvt. Ltd and Skyzoom Distributors Pvt.Ltd respectively.The payments were made by the assessee in cash for acquisition of shares of both the companies. The address of both the companies was interestingly, the same. The authorized signatory of both the companies was also the same person.These companies merged into a listed company, after a short while.
In the next year, the Taxpayer transferred the listed company’s shares through broker, Ashish Stock Broking Private Limited for an exorbitant sum,the proceeds from the aforesaid sale transaction were directly credited by the broker in the savings bank account of the asses see. The motive of the investment made by the asses see was not to derive income but to earn profit. Both the brokers, i.e. the broker through whom the asses see purchased the shares and the broker through whom the shares were sold, were located at Kolkata and the asses see did not have any linking as to what was going on in the whole transaction except paying the amount in cash for the purchase of shares of the two penny stock companies.
Thus, the assesses claimed the resultant income as long-term capital gains eligible for capital gains exemption under section 10(38) of the Indian Tax Laws.
The Tax Authority and the lower appellate authorities denied the exemption and taxed the gains as business income.
The High Court after considering several facts from inception held, the characterization of purchase and sale transactions as “adventure in the nature of trade” and their consequent taxation as business income thereby dismissing the Taxpayer’s appeal.
The lack of bonafide explanation or evidence to prove the genuineness of share sale led to taxation as unexplained cash credit or unexplained investment which, under the laws, as of date attracts a very high rate of tax liability.
The Judgment is a major setback to all the tax evaders who in the name of, tax avoidance and planning dodged unscathed from the hawk-eyed vigil of Income tax authorities, unlawfully earning the huge sum of money.
TRC Consulting in the scenario of, layering loopholes and cuffing the accused, is awaking and awaring the taxpayers through provision of advisory and consultancy services. TRC Consulting has been catalyzing in contributing revenue to government, without excessive draining of money from client, intending their top-level satisfaction.
Mr. Amrit Ranjan,