The Income Tax Appeals Tribunal (ITAT), Mumbai Bench, ruled that the stock demand money is a “capital asset” for the purposes of the Income Tax Act .
As part of the corporate restructuring undertaken by the evaluated group, it was decided that the shares of certain entities of the group held by the evaluated would be transferred to other entities of the group, with the evaluated company concentrating on the activities real estate.
The appraised, M / s Morarjee Realties Ltd. transferred its investments held in the form of shares, preferred shares and share application rights, i.e. share demand money held in M / s MBL, to an entity MGM Shareholders Benefit Trust. The appraised also transferred equity shares in certain entities as well as equity demand funds held in M / s Morarjee Legler Limited to M / s MBL.
In doing so, the appraised person suffered long-term capital losses as well as short-term capital losses, the compensation for which was denied by Ld. AO. However, on a new call, Ld. first appeal authority authorizes the same thing against which the income was appealed.
In its order, the Tribunal partially allowed the appeal by observing that, although the losses resulting from the transfer of equity shares and preferred shares are eligible for valuation, the money of the demand for shares does not could not be considered a capital asset within the meaning of Article 2 (14) of the Law.
The question raised was whether the money from the demand for shares could be considered a fixed asset or not.
The Coram composed of Ravish Sood and Manoj Kumar Aggarwal considered that the money of the request for shares as transferred / assigned by the appraised would constitute a “capital asset” within the meaning of article 2 (14) of the law. It does not fall under any of the exclusions. Therefore, the resulting losses would be eligible for valuation.
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