SC: Admits SLP against HC-ruling holding Jindal Group's transaction as colourable device

SC admits assessee’s (Abhinandan Investment Ltd., a Jindal group company) SLP against Delhi HC ruling for AY 1992-93 wherein HC had held that the transaction of renunciation of rights for subscribing to partly convertible debentures (‘PCDs’) of JISCO (another Jindal Group company) was a colourable device to contrive artificial loss; Assessee had renounced rights in PCDs in favour of another group company (‘JSL’) at a significantly lower price than the market value resulting in a significant loss, such loss set-off claim was denied by the HC by regarding it as only a notional loss; Taking note of peculiar facts whereby assessee sold JSL shares during relevant year resulting in substantial capital gains, and at the same time undertaking a transaction of renunciation of rights resulting in huge losses, HC had opined that “In order to avoid paying the tax, the investment companies including the Assessee entered into transactions for renunciation of rights with related companies of the same group. These incestuous transactions were for no other business purpose but to contrive a loss in the hands of..assessee who had incurred a tax liability on account of the gains made”; Relying on SC ruling in Azadi Bachao Andolan and Vodafone International Holding BV, HC had held that “in order to examine whether a transaction is a device or a subterfuge the answer to the question whether the transaction has any reasonable business purpose would be a vital consideration”; HC has thus ruled that the transactions were implemented by the assessee for no commercial purpose but to create a tax loss while ensuring that the rights remained within the Jindal Group