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2016 (8) TMI 900 - AT - Income TaxLTCG - full value of consideration received on transfer of shares and its computation of LTCG - Held that - A reading of clauses 2.1 & 2.2 of the Agreement dated 29.1.2010 between the parties, clearly shows that the liability of M/S.Khaitan & Co.Consulting Ltd., was not part of the consideration of sale of shares. It was an already existing liability in the books of the Assessee which was discharged by the Purchasers. The Purchasers took over that liability and M/S.Khaitan & Co.Consulting Ltd., acknowledged the Purchasers as their Creditor in so far as the sum of ₹ 4,97,25,928/- is concerned. On the facts of the present case, we are of the view that the sum of ₹ 4,97,25,928 cannot be attributed to consideration for sale of shares and the Assessee was justified in its claim that the said sum did not form part of the full value of consideration received on transfer of shares and its computation of LTCG was correct. We do not find any grounds to interfere with the decision of the CIT(A). - Decided against revenue Justification of holding the brokerage as expenditure of the company for sale of shares - Held that - As we have already seen the sale of the property was sought to be achieved by sale of shares of M/S.Khaitan & Co.Consulting Ltd., which was held by the Assessee to the extent of 99.97%. The bill issued by the broker contained a description that it was sale of the property. In our view this description in the bill issued by the broker to whom commission was paid is insignificant. The fact remains and it is not disputed that Mr.Manish B.Thakkar, acted as an intermediary in the transaction and was paid brokerage. Capital gain declared by the Assessee arises out of the same transaction. In such circumstances, the claim of the Assessee for deduction could not have been refused by the AO. The CIT(A) in our view has rightly allowed the deduction claimed by the Assessee. We do not find any grounds to interfere with the order of the CIT(A).- Decided against revenue
Issues Involved:
1. Determination of the full value of consideration for the sale of shares. 2. Deduction of brokerage as an expenditure related to the sale of shares. Issue-wise Detailed Analysis: 1. Determination of the Full Value of Consideration for the Sale of Shares: The Revenue contested the CIT(A)'s decision that the total consideration for the sale of shares was ?10,40,705, arguing that the agreement for the sale of shares of KCCL was for ?15,37,35,633, which included a sale consideration of ?4,97,25,928. The Revenue also claimed that the CIT(A) erroneously applied the decision of the Hon'ble Supreme Court in CIT vs. Hooghly Mills Co. Ltd. (287 ITR 333), ignoring the fact that the cases were different. The Assessee argued that the real sale consideration for the shares was ?10,40,09,705, as ?4,97,25,928 out of the total consideration was a loan repayment by M/S.Khaitan & Co. Consulting Ltd. (KCCL) to the Assessee, which was discharged by the Purchasers and did not constitute part of the sale consideration of the shares. The Assessee supported its claim by showing that the loan was recorded as realized in its books and the Purchasers recognized KCCL as their creditor for the same amount. The AO rejected the Assessee's claim, stating that the agreement clearly defined the sale consideration as ?15,37,35,633 and that the repayment of the loan was part of the sale consideration. The AO added back ?4,97,25,928 to the sale consideration for computing the capital gains. On appeal, the CIT(A) agreed with the Assessee, stating that the agreement mentioned a lump sum amount of ?15,37,35,633, which included the loan repayment. The CIT(A) emphasized that the loan repayment did not constitute part of the sale consideration for the shares and relied on the Supreme Court's decision in Hooghly Mills Co. Ltd. and the ITAT Mumbai decision in Voltas Ltd. vs. ACIT. The Tribunal upheld the CIT(A)'s decision, stating that the liability of KCCL was not part of the consideration for the sale of shares but an existing liability discharged by the Purchasers. The Tribunal concluded that the sum of ?4,97,25,928 could not be attributed to the sale consideration for the shares and dismissed the Revenue's appeal. 2. Deduction of Brokerage as an Expenditure Related to the Sale of Shares: The Assessee claimed a deduction of ?12,13,300 as brokerage paid to Mr. Manish B. Thakkar while computing LTCG on the sale of shares of KCCL. The AO disallowed the deduction, stating that the brokerage was for the sale of premises, not shares, as per the brokerage bill. The Assessee argued that the brokerage bill mistakenly mentioned the sale of premises but was actually for the sale of shares. The CIT(A) accepted the Assessee's claim, noting that the broker confirmed the receipt of brokerage for the transaction and that the AO did not dispute the payment or the services rendered by the broker. The Tribunal upheld the CIT(A)'s decision, stating that the sale of the property was achieved through the sale of shares, and the brokerage was related to the same transaction. The Tribunal dismissed the Revenue's objection and allowed the deduction of brokerage as an expenditure related to the sale of shares. Conclusion: The Tribunal dismissed the Revenue's appeal on both issues, upholding the CIT(A)'s decisions that the full value of consideration for the sale of shares was ?10,40,09,705 and that the brokerage paid was a deductible expenditure related to the sale of shares.
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