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2019 (12) TMI 1179 - AT - Income TaxAddition u/s. 28(iv) - share transactions - whether the amount of premium paid by the Telenor Group for acquiring the shares of 8 UW companies can be held to be in the form of any benefit or perquisite arising from the business of assessee u/s 28(iv) ? - HELD THAT - Here, the assessee company had purchased 3.54 crore shares at ₹ 10/- per share from M/s. Unitech Ltd. of 8 telecom companies for an aggregate consideration of ₹ 34.50 crores under share purchase agreement dated 25.10.2008 and any subsequent allotment by such 8 telecom companies independently to Telenor at ₹ 179 per share cannot be the basis to hold that there is any benefit or perquisite arising from business carried on by the assessee company. In a worst case scenario if there is any benefit the same benefit would be of M/s. Unitech Ltd. which held the shares of 8 telecom companies from whom the three companies have purchased the shares. It would be also relevant to mention that Ld. CIT (A) in one of the assessee company which is also impugned before us, i.e., M/s Acorus Unitech Wireless Pvt. Ltd.,that the benefit if at all in these transactions actually accrued to Unitech Ltd. and to favour Sri Ramesh Chandra and Sri Sanjay Chandra the actual beneficiaries and not to the assessee company. This itself goes to support the contention of the Ld. Counsel that no benefit or perquisite arose in the hands of the assessee companies. The judgments relied upon by the ld. DR which has also been referred in the impugned order in no manner will apply on the facts of the present case because most of them pertained to waiver of a loan or unclaimed credit balance returned back to the P L account taken during the course of business. Thus, these judgments do not help the case of the Revenue at all. Accordingly, the additions made by the Assessing Officer and sustained by the Ld. CIT (A) u/s. 28(iv) are directed to be deleted.
Issues Involved:
1. Applicability of Section 28(iv) of the Income Tax Act. 2. Determination of benefit or perquisite arising from business transactions. 3. Validity of additions made by the Assessing Officer under Section 28(iv). 4. Comparison of share transactions between the assessee companies and Telenor Group. 5. Relevance of subsequent events (e.g., cancellation of telecom licenses) on taxability. 6. Applicability of judicial precedents and case laws. Issue-wise Detailed Analysis: 1. Applicability of Section 28(iv) of the Income Tax Act: The core issue was whether the benefit derived by the assessee companies from acquiring shares at face value (?10 per share) while Telenor acquired similar shares at a premium (?179.73 per share) could be taxed under Section 28(iv). The Tribunal concluded that Section 28(iv) applies to benefits arising from business or profession and must be in a form other than money. Since the assessee companies paid money for the shares, Section 28(iv) was not applicable. 2. Determination of Benefit or Perquisite: The Tribunal examined whether the assessee companies received any benefit or perquisite from the business transactions. It was argued that the shares were acquired as an investment and not in the course of business. The Tribunal agreed, noting that the shares were held as investments and not stock-in-trade, thus no business benefit or perquisite arose from these transactions. 3. Validity of Additions Made by the Assessing Officer: The Assessing Officer had added ?548,55,00,000/- under Section 28(iv), assuming a benefit based on the premium paid by Telenor. The Tribunal found this addition invalid, as the shares were acquired by the assessee companies at face value as an investment, and the transactions did not result in any business income. 4. Comparison of Share Transactions: The Tribunal compared the transactions of the assessee companies and Telenor Group, highlighting key differences: - Shares acquired by the assessee companies were pledged and had restrictive conditions. - Telenor acquired management control and economic interest, whereas the assessee companies did not. - The purpose of acquisition differed significantly, with the assessee companies complying with preconditions for Telenor's investment. These differences established that the transactions were not comparable, and the premium paid by Telenor could not be used to assess a benefit to the assessee companies. 5. Relevance of Subsequent Events: The Tribunal considered the impact of the subsequent cancellation of telecom licenses by the Supreme Court, which rendered the value of the shares to nil. This supported the argument that no real income or benefit had accrued to the assessee companies from the transactions. 6. Applicability of Judicial Precedents: The Tribunal relied on several judicial precedents, including the Supreme Court's decision in CIT vs. Mahindra & Mahindra Ltd., which held that Section 28(iv) does not apply to cash transactions. The Tribunal also referenced the Delhi High Court's decision in Unitech Holdings Ltd. vs. DCIT, which supported the view that acquiring shares at cost price does not result in taxable income under Section 28(iv). Conclusion: The Tribunal concluded that the additions made by the Assessing Officer under Section 28(iv) were not justified. The transactions did not result in any business benefit or perquisite to the assessee companies. The appeals of the assessee companies were allowed, and the Revenue's appeal was dismissed. The Tribunal's decision was pronounced on 8th November 2019.
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