2011 (10) TMI 703 - AT - Income Tax

Benefit u/s 28(iv) or any capital gains on re-transfer of the shares - Held that - When there was no transfer and the premium estimated by the Assessing Officer at the time original transfer is based on the some future development and events then, there is no question of either any benefit u/s 28(iv) or any capital gains on retransfer of the shares. Accordingly, the appeals filed by the revenue are dismissed.-

Summary

Issues Involved:
1. Deletion of addition under Section 28(1)(iv) of the IT Act for AY 2003-04.
2. Appointment date of Shri Ashish P Deora as a director.
3. Deletion of addition on account of long-term capital gain for AY 2005-06.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 28(1)(iv) of the IT Act for AY 2003-04:
The revenue contested the deletion of Rs. 17,39,43,000 added by the Assessing Officer (AO) to the assessee's total income under Section 28(1)(iv) of the IT Act. The AO argued that the difference between the price at which shares were allotted to M/s Reliance Infocomm Ltd (RIC) and the price at which they were allotted to the assessee should be taxed as a benefit arising from his business. The assessee countered that no benefit or perquisite accrued or was received, as the shares were held on an interim basis and had to be returned to the transferor, Ganesh Infrastructure Capital Fund (GICF), due to non-fulfillment of project conditions. The CIT(A) deleted the addition, noting that the shares were eventually returned to Ganesh Trust. The Tribunal upheld this decision, emphasizing that since the shares were returned and no benefit accrued or was received, Section 28(iv) could not be invoked.

2. Appointment Date of Shri Ashish P Deora as a Director:
The revenue also challenged the CIT(A)'s finding that Shri Ashish P Deora was appointed as a director on 3.5.2005, contrary to the AO's observation that he was a director in June 2002. The Tribunal upheld the CIT(A)'s finding, confirming that the appointment date was indeed 3.5.2005.

3. Deletion of Addition on Account of Long-term Capital Gain for AY 2005-06:
For AY 2005-06, the revenue contested the deletion of Rs. 40,45,80,000 added by the AO as long-term capital gain on the transfer of shares to M/s Reliance Infocom Ltd. The AO had determined the value of shares based on their rate of increase from 16.9.2002 to 16.3.2006, arguing that the shares were not listed on the BSE or NSE on the sale date. The Tribunal noted that the shares were returned to Ganesh Infrastructure Fund due to non-fulfillment of project conditions, and thus, no capital gain resulted from the return of shares. The Tribunal upheld the CIT(A)'s decision, emphasizing that no transfer was completed, and the premium estimated by the AO was based on future developments and events, which could not be considered for capital gains.

Conclusion:
The Tribunal dismissed the appeals filed by the revenue for both AY 2003-04 and AY 2005-06, upholding the CIT(A)'s orders. The Tribunal confirmed that no benefit accrued or was received by the assessee under Section 28(iv), and no capital gains resulted from the return of shares due to non-fulfillment of project conditions.