A transaction in respect of transfer of shares pledged with a bank to a group company can be regarded as “Transfer” for income-tax purposes so far as requirements of S. 2(47) are complied with:

A transaction in respect of sale of shares pledged with a bank to a group company cannot be said to be a colorable device merely on the grounds that such a transaction resulted into loss to the assessee and that the requirements of Section 108 of The Companies Act, 1956 regarding registration of transfer of shares have not been complied with since the shares were in possession of a bank owing to which such shares could not have been said to be transferred. So far as the requirements of Section 2(47) of the Income-tax Act, 1961 are complied with, the transaction is to be regarded as “Transfer” for the income-tax purposes. There is no restriction that such a transaction cannot be effected with a group company. Also, it is not open for the revenue to doubt the loss suffered by the assessee unless it doubts the sale prices of the shares.

[BIRAJ INVESTMENT PVT. LTD. - TAX APPEAL No.260 of 2000 - GHC]