2016 (3) TMI 758 - HC - Income Tax

Addition on Long Term Capital Gain on account of sale of share - ITAT deleted the addition - Held that - We find that both Commissioner of Income Tax (Appeals) as well as the Tribunal have rendered a finding of fact that the consideration of ₹ 750/- and ₹ 936/- per share received on the sale of the shares by the respondent-assessee was in fact the full consideration which have been disclosed to the revenue. It is not the case of the revenue that the amount disclosed by the respondent assessee was less than what has been received by them or what had accrued on sale of its shares. The revenue has not in any manner shown that the consideration disclosed by the respondent-assessee to the revenue is not the correct consideration received by them and that the same should be replaced. Moreover, wherever the Parliament thought it fit that the consideration on a transfer of a capital asset has to be ascertained on the basis of market value of the asset transferred specific provision has been made in the Act. To illustrate Section 50C of the Act provides for stamp value duty in case of transfer of land or buildings. Similarly, Section 45(2) and 45(4) of the Act in cases of conversion of the investment into stock in trade or transfer of shares on dissolution of a firm to its partners respectively has to be at market value. In this case computation of capital gain is governed by Section 48 of the Act and it only refers to full value of consideration received. The reliance upon the decision of the Apex Court by the Tribunal was therefore appropriate. In the above view, as there are concurrent finding of fact rendered by the Commissioner of Income Tax (Appeals) and by the Tribunal that the consideration disclosed on sale of shares by the respondent-assessee was infact the only consideration received/accrued to it, no occasion to substitute the same can arise. No substantial question of law. - Decided against revenue

Summary

Issues:
1. Whether the Tribunal was justified in deleting the addition made by the AO on account of the sale of shares, resulting in Long Term Capital Gain?

Analysis:
The appeal filed by the Revenue under Section 260A of the Income Tax Act, 1961 challenged the order of the Income Tax Appellate Tribunal (Tribunal) dated 24th May, 2013, concerning the Assessment Year 2008-09. The core issue raised was whether the Tribunal was correct in deleting the addition made by the Assessing Officer (AO) regarding the sale of shares by the respondent-assessee, resulting in Long Term Capital Gain. The respondent-assessee, a firm belonging to a specific group, sold its 19% shareholdings in a company to another entity and reported a capital loss. The AO disputed this claim and substituted the consideration received by the respondent-assessee with a higher value, resulting in a significant difference in the calculation of long term capital gains.

Upon appeal to the Commissioner of Income Tax (Appeals), it was held that the full value of consideration received by the respondent-assessee should be accepted as declared, and there was no provision in the Act to substitute the actual consideration with a market value. The Commissioner cited Section 48 of the Act, emphasizing that capital gains are computed based on the actual consideration received, cost of acquisition, and transfer expenses. The Tribunal, affirming the Commissioner's decision, highlighted that the transaction was not aimed at tax avoidance and relied on judicial precedents to support the acceptance of the declared consideration for computing capital gains.

The Revenue further appealed to the High Court, arguing that the Tribunal's reliance on past judgments was not applicable under the current Act. However, the High Court noted that both the Commissioner and the Tribunal had found that the consideration disclosed by the respondent-assessee was accurate and complete. The Court emphasized that specific provisions in the Act mandate market value considerations in certain cases, but in this instance, Section 48 governed the computation of capital gains based on the full value of consideration received. As there was no evidence to suggest otherwise, the Court upheld the concurrent findings of fact by the Commissioner and the Tribunal, dismissing the appeal by the Revenue.

In conclusion, the High Court dismissed the appeal, stating that the question raised did not present a substantial question of law, as the consideration disclosed by the respondent-assessee was deemed accurate and no grounds existed to substitute it. The Court highlighted the importance of specific provisions in the Act for determining market value in certain scenarios, which did not apply in this case.