B. Mr. Dhaval, aged 45 years, is making investment in Equity shares at recognised stock exchange through registered broker. During previous year…

CA Final · Direct Tax Laws and International Taxation · PYQS · November 2024
B. Mr. Dhaval, aged 45 years, is making investment in Equity shares at recognised stock exchange through registered broker. During previous year 2023-24, he made a short term capital gain in Equity shares of 10,00,000 till 20.03.2024. He was holding 1000 Equity shares of SPR Limited (purchased on 01.01.2024 at 500 per share). The market price of it was 200 per share on 31.03.2024. Mr. Dhaval sold all the shares of SPR Limited on 31.03.2024 and purchased the same quantity of these shares back on 01.04.2024. He did it so that his short-term capital gain may reduce by - 3,00,000 for P.Y. 2023-24. Is it a tax planning or tax evasion?

Suggested Answer and Working Notes:

B. Investment strategy adopted by the assessee to reduce its tax effect for a particular year is not a method of tax evasion. Selling of shares of an Indian company at loss and setting off such loss against the short-term capital gain arising on sale of other listed shares is as per the provisions of law. It does not make any difference if the shares sold are purchased again in the next year. It would be considered as tax planning.

Topics: Double Taxation Relief, Capital Gains, Non-Resident Taxation

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