9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (9) TMI 1441 - AT - Income TaxRectification u/s 254 - determination of fair market value of shares - whether the workings given by the Department for determination of fair market value of shares could be construed as workings given in terms of Rule 11UA of the Income Tax Rules, 1962? - main contention of the revenue is that these workings were not in accordance with Rule 11UA of the Rules and the Bench had also not directed the Department to furnish the workings in terms of Rule 11UA of the Rules - main contention of the assessee is that the actual consideration received by it should be adopted on sale of shares as against Rs. 131.86 per share determined as fair market value. HELD THAT - In the course of original MA proceedings, the assessee had placed on record before this Tribunal, the workings of fair market value of shares as per Rule 11UA of the Rules, wherein, FMV was arrived at Rs. 70.59 by the assessee. Even in the prayer of the assessee in his miscellaneous application which is reproduced supra, we find that the assessee is only seeking to include the fact that the workings were sought to be asked by the Tribunal in accordance with Rule 11UA of the Rules for determination of fair market value while computing capital gains on sale of SBPL shares to understand the intention of this Tribunal as to whether the workings of fair market value of share were called for as per Rule 11UA of the Rules or not. Tribunal always intended adoption of Rule 11UA of the Rules for determination of FMV of shares and directed the Department to furnish the workings accordingly. But the workings given by the Department to the Tribunal were not in accordance with Rule 11UA of the Rules as it had not considered the figures pertaining to certain intermediary companies. Whereas, in assessee s wife case i.e. Mrs. Neelu Analjit Singh, who had also sold certain shares along with assessee herein of SBPL, the Tribunal 2019 (12) TMI 1198 - ITAT DELHI had observed that the valuation of Rs. 131.86 per share adopted by the AO suffered from certain fallacy and the same was not according to Rule 11UA of the Rules. Accordingly, the Tribunal in the case of Mrs. Neelu Analjit Singh directed the AO to verify all the figures from the audited balance sheet of the intermediary companies and compute the fair market value of shares accordingly. AO had passed the giving effect order u/s 254/ 143(3) of the Act dated 12.02.2020 in the case of Mrs. Neelu Analjit Singh, wherein, for the very same shares, the AO by adopting Rule 11UA of the Rules had determined fair market value of SBPL share at Rs. 70.59 per share. Assessee in its miscellaneous application is only trying to substitute the value of FMV which was arrived at Rs. 131.86 per share by the Tribunal, which contain certain basic fallacies ad admitted by the Tribunal in the case of Mrs. Neelu Analjit Singh vide order dated 19.12.2019 if Rule 11UA of the Rules is adopted. Hence, it purely becomes arithmetical exercise. Accordingly, we have no hesitation to conclude that miscellaneous application of the assessee is only to rectify the arithmetical mistake that had crept in the original Tribunal order dated. Hence, this miscellaneous application proceedings is effectively meant only to modify the order passed by this Tribunal on 01.12.2017 and not to recall the same. On careful reading of the original appellate order dated 01.12.2017 of the Tribunal, we find that the Tribunal had ultimately sought to determine the fair market value of shares by using NAV method, which is admittedly one of the prescribed methods in Rule 11UA of the Rules. This aspect also goes to prove the intention of the Tribunal beyond reasonable doubt (de hors the observation made in first MA order dated 19.03.2018) that it was always intending to adopting only Rule 11UA of the Rules for determination of fair market value. In fact even in the workings given by the Department at Rs. 131.86 per share, provisions and Income Tax provisions had been added back which itself indicates that even the AO had sought to determine the FMV using Rule 11UA of the Rules only. In our considered opinion, the workings given by the Department before the Tribunal determining the FMV at Rs. 131.86 per share contained certain fallacies as it was not in accordance with Rule 11UA of the Rules, which alone is sought to be modified and rectified in the present miscellaneous application proceedings. Hence, the fallacies contained in the workings of the Department do constitute mistake apparent from record warranting rectification u/s 254(2) of the Act. Against the original Tribunal order passed on 01.12.2017 in the case of the assessee, the assessee had preferred an appeal before the Hon ble High Court and the same is admitted. Against the order passed by this Tribunal in the case of Neelu Analjit Singh dated 19.12.2019, the revenue as well as assessee had preferred respective appeals before Hon ble High Court and the same are already admitted. It was always the case of all the parties before us i.e. Mr. Analjit Singh, Mrs. Neelu Analjit Singh and the Income Tax Department, that Rule 11UA of the Rules cannot be applied for the purpose of section 48 of the Act while computing the capital gains. But Tribunal directed the Department to adopt FMV as per Rule 11UA of the Rules after dismissing the preliminary plea of the assessee that actual consideration received should be considered for computing the capital gains. This preliminary plea is already subject matter of challenge before the Hon ble High Court. As far as the Tribunal is concerned, since it had adopted two different values as fair market value, the same is sought to be rectified by this present MA proceedings. We direct the AO to adopt FMV of Rs. 70.59 per share and recomputed the capital gains accordingly in the case of assessee herein. The order dated 01.12.2017 stands modified accordingly. Miscellaneous Application of the assessee is allowed.
Issues Involved:
1. Recall of the Tribunal's order. 2. Errors in the valuation of shares. 3. Application of Rule 11UA. 4. Tribunal's direction on valuation methodology. 5. Tribunal's reliance on Department's working. 6. Tribunal's rejection of Kotak Mahindra's valuation. 7. Tribunal's decision in the case of Mrs. Neelu Analjit Singh. 8. Tribunal's power to rectify mistakes under Section 254(2). Detailed Analysis: 1. Recall of the Tribunal's Order: The assessee sought to recall the Tribunal's order dated 01.12.2017 in ITA No. 4737/Del/2017, claiming errors apparent from the record regarding the valuation of shares sold and the resultant long-term capital gains. The Tribunal had partly allowed the appeal filed by the assessee against the CIT(A)'s order dated 07.07.2017 for the assessment year 2014-15. 2. Errors in the Valuation of Shares: The assessee argued that the Tribunal's order contained errors in the valuation of shares of Scorpio Beverages Pvt. Ltd. (SBPL), which led to an incorrect computation of long-term capital gains. Specifically, the assessee contended that the Tribunal had adopted a fair market value (FMV) of Rs. 131.86 per share, which was flawed due to incorrect figures and the exclusion of certain liabilities. 3. Application of Rule 11UA: The assessee highlighted that the Tribunal had directed the Department to compute the FMV of the shares in accordance with Rule 11UA of the Income Tax Rules, 1962. However, the Department's computation was alleged to have errors, including incorrect figures and the exclusion of liabilities such as preference share capital and arrears of dividends. 4. Tribunal's Direction on Valuation Methodology: The Tribunal had rejected the valuation report by Kotak Mahindra, which used a hybrid method (DCF for VIL shares and NAV for intermediary companies), stating that it did not align with Rule 11UA. The Tribunal emphasized that Rule 11UA was specific for valuing unquoted shares and directed the Department to follow this rule. 5. Tribunal's Reliance on Department's Working: The Tribunal had relied on the Department's working, which valued SBPL shares at Rs. 131.86 per share. However, the assessee argued that this working was flawed and did not comply with Rule 11UA. The Tribunal acknowledged that the Department's working had been accepted without any rebuttal from the assessee at that time. 6. Tribunal's Rejection of Kotak Mahindra's Valuation: The Tribunal had rejected Kotak Mahindra's valuation of SBPL shares at Rs. 5.40 per share, stating that it was not in accordance with Rule 11UA. The Tribunal directed the Department to provide a correct valuation using Rule 11UA, which resulted in the FMV of Rs. 131.86 per share. 7. Tribunal's Decision in the Case of Mrs. Neelu Analjit Singh: In the case of Mrs. Neelu Analjit Singh, who had also sold SBPL shares, the Tribunal had directed the AO to verify figures from audited balance sheets and compute the FMV according to Rule 11UA. The AO determined the FMV at Rs. 70.59 per share in the giving effect order dated 12.02.2020. The assessee sought a similar rectification in his case. 8. Tribunal's Power to Rectify Mistakes under Section 254(2): The Tribunal acknowledged that the errors in the Department's working constituted mistakes apparent from the record, warranting rectification under Section 254(2) of the Income Tax Act. The Tribunal directed the AO to adopt the FMV of Rs. 70.59 per share and recompute the capital gains accordingly, modifying the original order dated 01.12.2017. Conclusion: The Tribunal allowed the assessee's miscellaneous application, directing the AO to adopt the FMV of Rs. 70.59 per share for SBPL shares and recompute the capital gains. The order dated 01.12.2017 was modified accordingly.
|
