DCIT, CIR-7(1), Kolkata V. M/s CD Equipfinance Pvt. Ltd., Kolkata

ITA 2146/KOL/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5369 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 16-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Earning of tax free income; Cost of acquisition; Revised return; Capital Gains
• Section: 143(3); 115JB; 208; 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCH “C”, KOLKATA BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.2146/Kol/2019 Assessment Year: 2014-15 Deputy Commissioner of Income-tax Circle-7(1) Kolkata. Vs. C. D. Equifinance Pvt. Ltd. 37, Shakespeare Sarani Kolkata-700 017. (PAN: AACCP7333A) (Appellant) (Respondent) Present for- Appellant : Smt. Ranu Biswas, Addl. CIT, DR Respondent : Shri Akkal Dudhwewala, FCA Date of Hearing : 28.04.2022 Date of Pronouncement : 20.07.2022 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal by the revenue is arising out of the order of ld. CIT(A)- 23, Kolkata vide Appeal No. CIT(A)-23/Kol/23/10439/17-18 dated 01.07.2019 against the order of DCIT, Circle-7(1), Kolkata passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the ‘Act’) dated 29.12.2016, for AY 2014-15. 2. Ground nos. (a) and (b) raised by the revenue relate to allowance of loss of Rs.7,724/- by the Ld. CIT(A) on account of share of loss of the assessee in the partnership firm while computing book profit u/s. 115JB of the Act. Ground no. (c) raised by the revenue relates to allowance of long term capital loss of Rs.3,79,12,054/- for carry forward and set off as held by the Ld. CIT(A). 3. Before us, Shri Akkal Dudhwewala, FCA represented the assessee and Smt. Ranu Biswas, Addl. CIT, DR represented the department. ITA No.2146/KOL/2019 C. D. Equifinance Pvt. Ltd. AY 2014-15 2 4. Brief facts of the case are that assessee is engaged in the business of trading and investment in shares and securities, running financial consultancy services. Return of income was filed on 26.09.2014 reporting a total income of (-) Rs.69,89,990/-. In the assessment completed by the Ld. AO, he had disallowed the share of loss of Rs. 7,724/- from the partnership firm in assessing the book profit u/s 115JB of the Act. Ld. AO did not accept the explanation of the assessee and held that the share of loss from the partnership firm is liable to be added back to net profit for MAT computation u/s 115JB of the Act. 4.1 On the other issue of disallowance of long term capital loss of Rs.3,79,12,054/-, ld. AO disallowed it and also did not allow it to carry forward for subsequent years. Ld. AO observed that u/s 10(38) of the Act, any income arising from transfer of long term capital asset being equity shares where such transaction is chargeable to Securities Transaction Tax (STT), is an exempt income. Since this type of income is an exempt income therefore naturally, the loss arising from similar transaction where STT is levied is also ignored. The said loss is a ‘dead loss’ and cannot be carried forward for next assessment year for set off, since STT paid LTCG is an exempt income. For completing the assessment, ld. AO on this issue held that the manner in which the sale transactions were conducted was a colorable device adopted by the assessee to generate artificial long term capital loss by executing the sale transactions off-market whereon STT was not paid which resulted it not coming in the purview of section 10(38) of the Act and thus making it available for set off and carry forward to subsequent years, to be set off against long term capital gains. 4.2 Aggrieved, the assessee went in appeal before the Ld. CIT(A) who granted relief to the assessee on the above two issues. Aggrieved, the revenue is in appeal before the Tribunal. ITA No.2146/KOL/2019 C. D. Equifinance Pvt. Ltd. AY 2014-15 3 5. The first issue relates to share of loss from the partnership firm of Rs.7,724/-. Ld. Counsel for the assessee objected to its addition made by the ld. AO. He submitted that in the year under consideration, the assessee was a partner of M/s. C. D. Investment having share in profit/loss @ 17.5%. In the impugned year, the said partnership firm incurred a loss and share of the assessee in the said loss amounting to Rs.7,724/- was debited to the P&L Account of the assessee prepared in accordance with provisions of the Companies Act, 1956. Ld. Counsel submitted that in the present case, total income was not assessed at the book profit in terms of section 115JB but it was assessed under the computational provision of the Act. Ld. Counsel submitted that this issue of whether the share of loss allocated by the partnership firm and debited in the P&L A/c of the corporate partner (the assessee), is liable to be added in arriving at book profit u/s. 115JB of the Act was considered by the jurisdictional Co-ordinate bench of ITAT Kolkata in the assessee’s own case for AY 2012-13 in ITA No. 577/Kol/2016, order dated 09.02.2018. Ld. Counsel strongly relied on the order of this Co- ordinate bench in assessee’s own case and submitted that the present case is squarely covered by the said order, there being no change in the facts and circumstances and the applicable law. 6. On the second issue of claim of carry forward of long term capital loss, ld. Counsel for the assessee submitted that in the return of income assessee had disclosed loss of Rs.3,79,12,054/- which it had incurred on sale of shares of eleven (11) companies listed on Bombay Stock Exchange. He submitted that assessee had acquired these shares in the prior years at a cost of Rs.26,56,82,551/- for which the aggregate indexed cost was Rs.36,38,85,241/-. These shares were sold by the assessee in the year under consideration in off-market transaction, realizing gross sale consideration of Rs.32,59,73,187/-. Ld. Counsel stated that full particulars in respect of purchase and sale of these ITA No.2146/KOL/2019 C. D. Equifinance Pvt. Ltd. AY 2014-15 4 shares were furnished before the ld. AO along with DMAT statement to establish that all the shares were transferred from its DMAT account to the DMAT account of the buyers. He also submitted that the sale consideration was received through proper banking channel for which bank statements were furnished. It was also brought on record in the assessment proceedings that the sale consideration realized on sale of shares of these eleven companies was within the price range which prevailed on Bombay Stock Exchange on the relevant dates of sale. Ld. Counsel thus submitted that despite all the materials placed on record, which established the genuineness of the transaction, ld. AO refused to assess the loss as long term capital loss for carry forward and set off in future years. According to the ld. Counsel, since the assessee sold the shares in off-market transaction which was not chargeable to STT, ld. AO drew an adverse view that the said transaction is a colorable device adopted by the assessee to make such a loss assessable under the Act for the purpose of its carry forward and setting it off against long term capital gains in subsequent years. 6.1 Ld. Counsel submitted that there are certain undisputed and uncontroverted facts which are listed below: (i) that the shares which were sold were held for more than one year and were long term capital asset of the assessee; (ii) that the shares so held, all of them were of listed companies, listed on Bombay Stock Exchange; (iii) that shares were sold at the prevailing market price range which prevailed on the date of sale on the Bombay Stock Exchange; (iv) that the transaction of the shares sold were from the DMAT account; and ITA No.2146/KOL/2019 C. D. Equifinance Pvt. Ltd. AY 2014-15 5 (v) that the realization of sale consideration by the assessee was through proper banking channel. 6.2 Ld. Counsel submitted that the approach of ld. AO was based entirely on surmises and conjectures without establishing that the impugned genuine off-market transaction of sale of equity shares of listed companies is a sham and bogus transaction. He further submitted that this transaction was entered into in the ordinary course of investment activity of the assessee and that assessee had not claimed set off of the said loss against income of the relevant year. He also pointed out that before ld. CIT(A) it was clarified that assessee had not availed the benefit of set off against any capital gain up to AY 2019-20. Thus, according to him, no tax benefit has actually been availed by the assessee against the impugned long term capital loss. 6.3 Ld. Counsel submitted that one of the reasons for selling off- market was to minimize the costs and expenses associated with the sale which includes STT, brokerage, service tax, stamp duty, etc. These costs and expenses, according to him totals up to Rs.11,99,073/- which were avoided by executing the transaction of sale off-market. It was further stated that on the sale of these shares off-market, the assessee per se did not incur any monetary loss but earned profit. According to him, the loss was incurred as a consequence of deduction claimed for indexed cost of acquisition in terms of section 48 of the Act. He thus explained that on monetary terms, there is a real and actual profit of Rs.6,02,90,636/- [Rs.32,59,73,187 – Rs.26,56,82,551] which is reported in the audited Profit & Loss account and taken into consideration for computing book profit u/s 115JB of the Act. However, in terms of section 48, by taking indexed cost of acquisition, there is a long term capital loss of Rs.3,79,12,054/- [Rs.32,59,73,187 – Rs.36,38,85,241] which has been claimed for carry forward and set off ITA No.2146/KOL/2019 C. D. Equifinance Pvt. Ltd. AY 2014-15 6 in subsequent years. Ld. Counsel referred to detailed working of computation of long term capital loss in the form of a chart placed in the paper book page at 28 which is reproduced as under: ITA No.2146/KOL/2019 C. D. Equifinance Pvt. Ltd. AY 2014-15 7 6.4 By referring to the above chart, Ld. Counsel submitted that irrespective of whether the assessee sold the shares in off-market transaction or on the exchange, the price which the appellant would have realized would have been the same as was received by the assessee actually, since all the shares were sold by the assessee within the price range which prevailed in the Bombay Stock Exchange on the relevant dates of sale. He further submitted that the sale was off-market without paying STT and the sale price of the shares sold was in the price range which prevailed on the Bombay Stock Exchange on the relevant dates of sale. According to the Ld. Counsel, the only point raised by the Ld. AO was that there was a clear planning on the part of the assessee to sell the shares of listed companies in order to claim the benefit of long term capital loss by its carry forward and set off in future years which otherwise would not have been permitted to be carried forward within the meaning of section 10(38) of the Act. According to him, Ld. AO held that the assessee used a colorable device to avoid tax which is totally misplaced in terms of both facts and law. On the above issues, the Ld. Addl. CIT, DR relied on the order of the AO. 6.5 It was further submitted that sale of shares in off-market transaction was neither prohibited by law nor it was debarred under the Act. Based on the undisputed and uncontroverted factual matrix, for the said contention, ld. Counsel for the assessee strongly relied on the decision of the Co-ordinate bench of ITAT, Delhi in the case of Mridu Hari Dalmia Parivar Trust v. AO (ITA No. 1880/Del/2014) dated 01.04.2016 which squarely covers the case of the assessee on similar facts pattern. 7. We have heard the rival contentions, perused the submissions made and material placed on record. We have also gone through the judicial precedents of the Co-ordinate bench of ITAT, Kolkata in ITA No.2146/KOL/2019 C. D. Equifinance Pvt. Ltd. AY 2014-15 8 assessee’s own case and also in the case of Co-ordinate bench of ITAT, Delhi (supra) covering the two issues in the case before us. 7.1 On the first issue relating to share of loss from the partnership firm liable to be added back to the net profit for computation of book profit u/s. 115JB of the Act, we note that in the given facts and circumstances of the present case, the issue is squarely covered by the decision of jurisdictional Co-ordinate bench of ITAT, Kolkata in assessee’s own case for AY 2012-13 in ITA No. 577/Kol/2016, dated 09.02.2018. From the perusal of this order, we note that in assessment year 2012-13 also, as in the present year, assessee was partner of M/s. C. D. Investments having the same 97.5% shares in its profit/loss. In AY 2012-13, the said partnership firm incurred substantial loss in which the share of assessee was Rs.18,91,12,786/- and was debited by the assessee in its P&L Account. This debit of share of loss in the P&L Account of the assessee was added back by the Ld. AO in arriving at the book profit u/s. 115JB of the Act. On this issue, the Co-ordinate bench in the assessee’s own case (supra) held that in assessing the book profit u/s. 115JB of the Act, such share of loss from the partnership firm was not liable to be added to the net profit disclosed in the audited P&L Account prepared in accordance with the provisions of Companies Act, 1956. The contention of the assessee was accepted by the Co-ordinate bench by holding that the provisions of section 115JB of the Act should be construed strictly and that in interpreting the said provisions, nothing more than what is specifically stated by the legislature can be read into the Act or inferred. According to the Co-ordinate bench, merely because share of profit from partnership firm is exempt u/s. 10(2A) of the Act and is excluded from the computation of book profit if credited in the P&L Account as per clause (a) of explanation u/s. 115JB of the Act then, for this reason alone, it cannot be held that share of loss from the partnership firm when debited to the P&L Account is to be ITA No.2146/KOL/2019 C. D. Equifinance Pvt. Ltd. AY 2014-15 9 added for calculating the book profit. It was held by the Tribunal that since none of the clauses of the explanation to sec. 115JB permitted the AO to make adjustment to the net profit on account of share of loss from partnership firm debited to the P&L Account, the AO was not justified in making the addition which was not specifically provide for by the legislature by way of any specific clause in the said explanation to section 115JB of the Act. We note that the Co-ordinate bench thus held that the addition made by the AO in respect of share of loss allocated by the partnership firm, was legally unsustainable. 7.2 The observation and findings given by the Co-ordinate bench in assessee’s own case (supra) are reproduced hereunder for ease of reference: “2. Ground No. 1 to 8 raised by the assessee in this appeal involve a common issue relating to the addition of Rs. 18,91,12,786/- made by the A.O. and confirmed by the Ld. CIT(A) on account of the assessee’s share of loss in the partnership firm while computing the book profit under section 115JB of the Income Tax Act, 1961. 3. The assessee in the present case is a non-banking finance company which is engaged in the business of trading of investment in shares and securities as well as rendering financial consultancy services. The return of income for the year under consideration was originally filed by it on 27.09.2012 declaring a total income of Rs. 11,77,96,429/-. Thereafter a revised return was filed by the assessee on 28.03.2015 declaring its total income under the normal provisions of the Act at Rs. 12,27,63,780/- and book profit under section 115JB of the Act at Rs. 20,48,42,669/-. The assessee company during the year under consideration was a partner in the partnership firm of M/s. C.D. Investments having share of profit of 97.50%. The said partnership had incurred a loss of Rs. 19,39,61,832/- for the year ended on 31.03.2012 and its share in the said loss amounting to Rs. 18,91,12,786/- was debited by the assessee company to its profit & loss for the year under consideration. While computing the book profit u/s 115JB of the Act, the amount of such loss however was not added back by the assessee company by relying on the decision of Mumbai Bench of the ITAT in the case of DCIT vs Metro Exporters Ltd. 10 SOT 647 wherein it was held that the case of the assessee was not being the case of share of profit from partnership firm in the hands of the assessee credited to the profit and loss account, no addition for the purpose of computation of total income of the assessee u/s 115JA could be made with regard to the share of loss from the partnership firm. This stand of the assessee was not found acceptable by the A.O. By relying on the decision of Hon’ble Kolkata High Court in the case of Eastern Aviation & Industries Ltd. vs CIT 208 ITR 1023, he held that the general rule is that the ‘income includes loss’ and by applying the said rule, he held that the share of its loss in the partnership firm amounting to Rs. 18,91,12,786/- was liable to be added back while computing the book profit of the assessee company under section 115JB of the Act as per clause (ii) of Explanation (1) to section 115JB(2). He accordingly added the said amount while computing the book profit ITA No.2146/KOL/2019 C. D. Equifinance Pvt. Ltd. AY 2014-15 10 of the assessee company in the assessment completed under section 143(3) vide an order dated 30.03.2015. 4. Against the order passed by the A.O. under section 143(3), an appeal was preferred by the assessee before the Ld. CIT(A) and a detailed submission was made on behalf of the assessee before the Ld. CIT(A) in support of its case that the addition made by the A.O. on account of its share of loss in the partnership firm while computing the book profit under section 115JB was not sustainable. The Ld. CIT(A) however did not find merit in the said submission and proceeded to confirm the addition made by the A.O. on this issue for the following reasons given in paragraph no 6 of his impugned order: “I have carefully examined the A/R’s submissions and also the observations and findings recorded by the A.O. in the assessment order. I have also perused the judicial decisions cited both by the assessee as well as the Assessing Officer. The A.O. added back the share of loss from partnership firm by invoking clause (ii) of Explanation (1) to Section 115JB of the Act. In AO’s view, since the share of profit from the partnership firm is excluded under clause (ii) of Explanation (1) to Section 115JB of the Act, then by same analogy the loss from partnership firm deserves to be added back to the Net Profit as disclosed in the Profit & Loss Profit & Loss Account so as to arrive at the 'book profit'. In my considered opinion the term 'income' as used in clause (ii) includes negative income or 'loss' as well. The assessee has however claimed that the provisions of Section 115JB are deeming in nature and therefore should be strictly construed. The A/R of the assessee submitted that the clause (ii) refers to "income" which is "credited" in P& L A/c which has to be "reduced" from the Net Profit. According to the assessee the clause (ii) cannot be interpreted so as to add to the net profit "loss" which is debited in Profit & Loss Account while computing book profit u/s 115JB of the Act. Strong reliance in this regard was placed by the assessee on the decision of ITAT, Mumbai in the case of Dy. CIT vs Metro Exporters Ltd (10 SOT 647). I however do not find merit in the assessee's claim. The Supreme Court in the case of CIT Vs J.H. Gotla (156 ITR 323) has specifically held that the term "income" used in the Income-tax Act, 1961 includes "loss". Even the Calcutta High Court in the case of Eastern Aviation & Industries Limited (208 ITR 103) held that the loss is 'negative income'. Accordingly the contention of the assessee that the term 'income' as employed in clause (ii) of Explanation to Section 115JB cannot be said to include 'loss' is untenable. I therefore hold that the AO had rightly added back the share of loss of Rs.189,112,786/- from the partnership firm under clause (ii) of Explanation (1) to Section 115JB of the Act. Ground Nos. 1 to 3 are therefore dismissed. 5. We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. As rightly contended by the learned counsel for the assessee, the decision of Hon’ble Supreme Court in the case of J.H. Gotla (supra) and that of Hon’ble Kolkata High Court in the case of Eastern Aviation & Industries Ltd. (supra) propounding that the term ‘income’ includes ‘loss’ was rendered in different context and not in the context of application of clause (ii) of Explanation (1) to Section 115JB of the Act, which is the bone of contention in the present case. Even the learned DR has not raised any contention to dispute this position. On the other hand, the decision of Mumbai Bench of this Tribunal in the case of Metro Exporters Ltd. (supra) cited on behalf of the assessee before the authorities below as well as before us was rendered on a similar issue wherein it was held that the case of the assessee not being the case of share of profit from a partnership firm in the hands of the assessee credited to the profit and loss account, no addition for the purpose of computation of total income of the assessee under section 115JA could be made with regard to the share of loss from the partnership firm. The ITA No.2146/KOL/2019 C. D. Equifinance Pvt. Ltd. AY 2014-15 11 relevant observations recorded by the Tribunal while coming to this conclusion in paragraph no 4 of its order are reproduced hereunder: “We have considered the rival submissions and have perused the orders of the Assessing Officer and the CIT(A). We find that the assessee has debited its share of loss from a registered firm to its profit and loss account and Assessing Officer has made the addition of the same to the net profit while computing the total income of the assessee as per provisions of section 115JA of the Act on the plea that share of profit of the assessee from a partnership firm is exempt from tax as per Chapter III under section 10(2)(a) of the Act. We find that the provisions of Chapter XII-B of the Act is a special provision relating to assessment of certain companies whereby the income of certain companies chargeable to tax for the relevant previous year shall be deemed to be an amount equal to 30 per cent of such book profit. These, being special provisions applicable to certain companies have to be strictly applied and income of the assessee has to be computed in accordance with "Book Profit" of the assessee and the working of the "book profit" has to be made as per the provisions of Chapter XII-B of the Act. The proposition that the word "income" includes "loss" is not applicable while computing the "book profit" in accordance with the provision of Chapter XII-B of the Act. We find that the provision of sub-clause (f) to Explanation to section 115JA of the Act relates to the amounts of "Expenditure" relatable to any income to which any of the provisions of Chapter III applies and therefore the “loss share” from a registered firm cannot be said to be synonymous to the word expenditure mentioned in the relevant sub-clause (f) to Explanation to section 115JA of the Act. In sub-clause (ii) Explanation to section 115JA provides for any amount of income to which any of the provisions of Chapter III applies, if such amount is credited to the profit and loss account of the assessee. In this case, the share of the assessee from a registered firm is a “loss” figure and therefore is debited to the profit and loss account of the assessee and cannot be credited to the profit and loss account of the assessee. In these facts of the case, we find that the CIT(A) has rightly observed that if any share of profit from the firm had been credited to profit and loss account the same would have to be reduced from the net profit for the purpose of computation of income under section 115JA by virtue of sub-clause (ii) to Explanation to section 115JA of the Act. This being not a case of share of profit from a firm in the hands of the assessee credited to the profit and loss account, we hold that no addition for the purpose of computation of total income of the assessee under section 115JA of the Act can be made with regard to share of loss from a registered firm of the assessee and accordingly we uphold the order of the CIT(A) that even on merits the addition made is not in accordance with law and the ground of appeal No. 2 of the revenue is dismissed.” 6. Although the decision of Metro Exporters Ltd. (supra) was rendered by the Tribunal in the context of the provisions of section 115JA, we find ourselves in agreement with the contention of the learned counsel for the assessee that the ratio of the same can be applied to decide the issue in the context of section 115JB, the provisions of which are analogous to the provisions of section 115JA. The Ld. CIT(DR), has also not raised any contention in this regard and simply relied on the order of the Assessing Officer. We, therefore, respectfully follow the decision of Mumbai Bench of this Tribunal in the case of Metro Exporters Ltd. (supra) and delete the addition made by the A.O. and confirmed by the Ld. CIT(A) on account of share of assessee’s loss in the partnership firm while computing the book profit under section 115JB of the Act. Ground No. 1 to 8 of the assessee’s appeal are accordingly allowed.” ITA No.2146/KOL/2019 C. D. Equifinance Pvt. Ltd. AY 2014-15 12 7.3 We note that Ld. CIT(A) following the decision of the coordinate bench of ITAT, Kolkata in assessee’s own case (supra) deleted the addition of Rs.7,724/- in the present case on account of share of loss from the partnership firm while computing the book profit u/s. 115JB of the Act. Since there is no change in the facts and law in the present case before us, we respectfully following the decision of the Co-ordinate bench of ITAT, Kolkata in assessee’s own case (supra) find no reason to interfere with the finding given by the Ld. CIT(A) in deleting the addition made by the Ld. AO. Thus, no interference is called for in the relief granted by the ld. CIT(A). These grounds of appeal are thus dismissed. 8. On the second issue relating to claim of carry forward of long term capital loss on off market sale of shares of eleven listed companies, the case of the revenue is that assessee has sold shares of listed companies in off-market transactions which are otherwise liable to STT and hence, the transactions are governed by the provisions of section 10(38) of the Act. Revenue contends that assessee by effecting off market sale of the said shares has perpetuated a mischief and the transaction is a colorable device. On the contrary, the case of the assessee is that it has sold the shares of listed companies on the price range on Bombay Stock Exchange prevailing on the relevant dates which were sold off market on which no STT was paid and, therefore, it is not governed by section 10(38) of the Act. Accordingly, the loss so arisen is eligible for carry forward and set off in future years. 9. Before adverting on this issue, let us peruse the relevant provisions of section 10(38) of the Act which is reproduced as under: "10(38) Any income arising from the transfer of a long term capital asset, being an equity share in a company or a unit of an equity oriented fund where - ITA No.2146/KOL/2019 C. D. Equifinance Pvt. Ltd. AY 2014-15 13 (a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and (b) such transaction is chargeable to securities transaction tax under that Chapter : Provided that the income by way of long term capital gain of a company shall be taken into account in computing the book profit and income tax payable under section 115JB." 9.1 From the perusal of the above section, we note that if a transaction of sale on or after specified date (01.10.2004) of equity shares s chargeable to STT then the provisions of sec. 10(38) of the Act are attracted which results into exempting the long term capital gain from taxability. 10. Admittedly, we note that the transaction of sale of shares listed on stock exchange can be carried out through two different modes i.e. by way of sale through stock exchange or by way of sale through off market transaction. Both the modes of sale are recognized modes of sale transaction and any person is at liberty to attempt any of the modes. In a case, where the quoted shares of a company are sold through stock exchange, STT becomes payable and once the STT is paid, provisions of section 10(38) of the Act gets attracted. In the present case before us, sale by other mode i.e. as off-market transaction was adopted by the assessee where no STT was charged/paid and accordingly the provisions of section 10(38) of the Act would not be attracted. We note that ld. AO has disallowed the long term capital loss amounting to Rs.3,79,12,054/- by treating the transaction of sale of shares by the assessee as a tax avoidance device. The only concern raised by the ld. AO on the sale of shares pertains to the mode of their selling i.e. off- market which was not subjected to STT resulting it to be out of the purview of section 10(38) of the Act for the purpose of carry forward and set off in subsequent years. ITA No.2146/KOL/2019 C. D. Equifinance Pvt. Ltd. AY 2014-15 14 10.1 Thus, the question before us for consideration is to decide whether or not the transaction of sale of shares by the assessee through off market trade is genuine. We note that the Ld. DR has not pointed out any provision which debars off market trading of listed shares. 10.2 Ld. Counsel of the assessee invited our attention towards certain decision in which off-market sale transactions have been recognized as valid transactions. One of such decision referred by the Ld. Counsel is in the case of Asara Sales & Investments Pvt. Ltd. by the Co-ordinate bench of ITAT, Pune in ITA No. 1345/Pune/2014 dated 08.03.2017, in which a reference has been made to the website of NSDL which recognizes the market trade and off-market trade, and the same is reproduced as under: "12.2 Market Trades 12.2.1 The participant shall effect a debit or credit to the accounts of its Clients only on receipt of proper authorization from the Clients in the forms laid out in Annexures Land M. Alliteratively, a Client may give standing instructions to its Participant to credit its account. 12.2.2 The aforementioned forms submitted by the Clients and Clearing Members shall be checked by the Participant to ensure the completeness of the form and validity of the signature of the Client and the Clearing Member before the requests on these forms are executed. 12.3 Off - Market Trades 12.3.1 Transfer of securities in respect of off market trades shall be effected on receipt of a duly filled in securities transfer instruction form from the Clients for delivery as well as a securities transfer instruction form from the Clients for receipt. The specimen of these forms have been laid out in Annexure Land M respectively as specified in Rule 12.2.1 above. Alternatively, a Client may give standing instructions to its Participant to credit its account. 12.3.2 The Participant should check for the completeness of the form and validity of the signature of the Client before effecting such transfers. " ITA No.2146/KOL/2019 C. D. Equifinance Pvt. Ltd. AY 2014-15 15 16. So, the module is provided on the NSDL platform under which any person while disposing of its security is given the option of trading the same in on market transaction and off market transaction. So the existence and acceptance of off market trades cannot be doubted. The assessee while selling the shares of listed company GGDL opted to transact on off market trade, since the said shares were of Kirloskar group concern and the group did not want the shares to be picked up by any stranger, if traded on the Stock Exchange. Such business decision taken by the assessee cannot be doubted and called as colourable device to set off profits arising on sale of unquoted shares.” 10.3 From the above, it can be discerned that off-market transaction of transfer of shares is not per se illegal or void. To hold so, we gainfully draw further force from the observation and finding given by the Hon’ble High Court of Gujarat in the case of CIT v. Prudent Finance Pvt. Ltd in Tax Appeal No. 1003 of 2013 and Others, order dated 03.02.2014 (copy placed in the paper book at pages 148 – 155) which reads as under – “Additionally, we also note that necessary entries were made in the account books of both sides, i.e. purchaser and seller and delivery receipts were also passed demonstrating contemporaneous sale and purchase of the shares. It is not even the case of the Revenue such off market transactions were not permissible. When we find that off market transactions were permitted in law, that there was no evidence to suggest that artificially they were sold at rates lower than the prevailing market rates and we further find that the Assessing Officer could not bring on record any material to show that the transactions were shown to be deliberately back-dated, the findings of the CIT(Appeals) as well as that of the Tribunal, in our opinion, call for no interference.” 11. Genuineness or otherwise of any transaction can be tested on the touch-stone of several other factors which are not exhaustive. What essentially boils down to is whether the shares were sold at a correct price or at the price which was artificially arrived at to inflate the loss. In this respect, we note that facts on record do not suggest that sale prices of shares were artificially arrived at. It is an accepted fact that shares were sold in the price range which prevailed on the Bombay Stock Exchange on the date of sale of the shares under consideration. Nothing has been brought on record to establish that the impugned transaction of off-market sale is a sham and bogus transaction. We note ITA No.2146/KOL/2019 C. D. Equifinance Pvt. Ltd. AY 2014-15 16 that ld. CIT(A) has given a finding that no material is available on record to show that either the prices were manipulated or the transactions did not take place at all. Ld. CIT(A) also gave his finding that no claim of set off was made either in the year on in the subsequent year so as to justify AO’s claim that loss was artificially generated to gain unfair tax advantage. We thus hold that no interference is called for on these factual findings by the ld. CIT(A). 12. From the perusal of the decision of Co-ordinate bench of Delhi ITAT in the case of Mridu Hari Dalmia Pariwar Trust (supra) on which the ld. Counsel placed his strong reliance, we note that ld. CIT(A) also relied upon it for giving his findings in favor of the assessee. However, in the said decision, we observe that a casus omissus in section 10(38) has been noted which the assessee has exploited to its advantage in the form of tax planning in respect of the issue being addressed hereunder. In our considered understanding, such a defect can be remedied only by the legislation and not by judicial interpretation since fiscal statute has to be interpreted on the basis of the language used therein and not de hors the same. Be that as it may, we find that in the present facts and circumstances before us, said decision covers the case of the assessee in its favor. Relevant extracts of the said decision from para 12 are reproduced hereunder for ease of reference: “12. Coming back to our context, we find that section 10(38) is an exemption provision. This exemption provision states that any income arising from transfer of equity shares etc., held as long-term capital asset on which STT is paid, will be exempt from taxation. As income includes losses also, this provision applies to both positive and negative income. In other words, if the conditions stipulated under this provision are fulfilled, namely, there is a transfer equity shares etc., held as long term capital asset on which STT is paid, then the resultant gain will not be chargeable to tax and the resultant loss, if any, will equally not qualify for set off and carry forward. In order to fall within the purview of section 10(38), it is sine qua non that STT must have been paid on the transaction of sale of such equity share held as long- term capital asset. It is undisputed that STT is payable in respect of transactions carried through a Stock Exchange, which are called on-market transactions. If there is some off-market transaction, namely, which is ITA No.2146/KOL/2019 C. D. Equifinance Pvt. Ltd. AY 2014-15 17 undertaken without involvement of a Stock Exchange and is directly between the buyer and seller, then no STT is payable thereon. This implies that if the transaction is off-market, then, no STT would be payable and, ex consequenti, the provisions of section 10(38) would not be magnetized. Once this section is not applicable, there can neither be any exemption of income nor there can be any question of denial of benefit of set off and carry forward of loss. In other words, loss arising from transfer of shares etc., held as long term capital assets, on which no STT is paid because of off-market sale transaction, does not fall within purview of section 10(38) and consequently becomes eligible for set off and carry forward as per the other relevant provisions. This is a lacuna in the provision which has been lawfully exploited by the assessee by transferring shares held as long-term capital assets through off market transactions resulting into genuine loss and thus escaping the rigor of the exemption provision contained in section 10(38), which would have otherwise disentitled it to claim set off and carry forward of such a loss. The AO has held these off-market sale transactions as a colorable device and tax avoidance scheme adopted by the assessee to evade payment of legitimate tax due to the exchequer. In our considered opinion, this is a glaring example of tax planning rather than the tax avoidance as has been held by the AO. In view of the fact that the assessee entered into valid transactions of transfer of shares of Bajaj Hindustan Ltd., Tata Consultancy Ltd. and Reliance Communications Ltd. to Shri M.H. Dalmia and Smt. Abha Dalmia, we hold that the loss suffered on such transactions is a genuine loss which cannot be disallowed as it does not fall within the ambit of section 10(38) because of non-payment of STT. Overturning the impugned order on this issue, we direct the allowing of carry forward of loss amounting to Rs.1.86 crore.” 13. We also find force in the submissions made by the ld. Counsel which are stated in the above paragraphs. Considering the facts on record, submissions made and judicial precedents relied upon, we hold that no interference is called for in the observations and findings given by the ld. CIT(A) on the issue relating to carry forward and set off of long term capital loss in subsequent years as claimed by the assessee. Accordingly, in terms of our above observations and findings, the ground of appeal is dismissed. 14. Accordingly, the appeal of the Revenue is dismissed. Order pronounced in the open court on 20 th July, 2022. Sd/- Sd/- (SANJAY GARG) (GIRISH AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Kolkata, Dated: 20.07.2022. ITA No.2146/KOL/2019 C. D. Equifinance Pvt. Ltd. AY 2014-15 18 JD, Sr. P.S. Copy to: 1. The Appellant: 2. The Respondent: 3. The CIT, , Kolkata 4. The CIT (A) – 23, Kolkata 5. DCIT, Circle-7(1), Kolkata. 6. The DR, ITAT, Kolkata. //True Copy// By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata 1.