Summary: The High Court ruled in favor of Smt. Anvida Bandi, overturning a previous decision that labeled her stock transactions as tax avoidance.
Smt. Anvida Bandi, who lives in Hyderabad, filed a legal request to challenge an order by the Income Tax Department. The order, dated January 23, 2023, accused her of using a "not allowed tax-saving plan" with her stock transactions for the financial year 2019-20.
Anvida is familiar with investing in stocks and financial products. By March 31, 2020, she had shares worth about Rs. 31.88 crores and mutual funds worth Rs. 47.59 crores. During the year, she sold shares and made long-term profits of Rs. 44.14 crores. She then invested in HCL Technologies shares, which resulted in a short-term loss of Rs. 17.65 crores.
The Income Tax Department claimed that Anvida's transactions were cleverly planned to cancel out her profits and avoid paying taxes. They applied the General Anti-Avoidance Rule (GAAR) to these transactions, saying they were not genuine and lacked real business purpose.
"The transactions were considered a not allowed tax-saving plan," said the Department.
Anvida's lawyer argued that the transactions were real and done through the stock market without any special tricks. They pointed out that similar transactions do not fall under GAAR rules, as backed by expert reports.
The court, led by Justice P. Sam Koshy and Justice Suddala Chalapathi Rao, found no proof of tax avoidance. They noted the lack of solid evidence from the Department to support their claims.
"The Department failed to show any plan by Anvida," the court stated.
The court overturned the previous order, agreeing with Anvida's claim that her transactions were real and followed the rules. This decision highlights the need for strong evidence when applying tax avoidance rules.
