2023 (2) TMI 208 - AT - Income Tax

Short term capital gain - sum received by it as partner on retirement from partnership firm - As contended alleged capital gain arose as sum received by the assessee as partner on retirement from partnership firm and, therefore, the same is exempt u/s 10(2a) - HELD THAT - This Tribunal, in 2019 (6) TMI 845 - ITAT DELHI held that the assessee is not liable to any capital gain tax on account of sum received by it as partner on retirement from partnership firm, there remains nothing form computation of capital gain tax and, accordingly, the Assessing Officer is directed to delete the impugned addition. - Decided against revenue.

Summary

Issues Involved:

1. Incorrect computation of total sales consideration.
2. Exclusion of certain figures for computing capital gains.
3. Deletion of addition made as undisclosed income admitted by the assessee.
4. Overall tax liability on short term capital gains and undisclosed income.

Issue-wise Detailed Analysis:

1. Incorrect Computation of Total Sales Consideration:
The Revenue contended that the CIT(A) erred in taking the total sales consideration as Rs. 106 Crores instead of Rs. 178.42 Crores. The Assessing Officer (AO) had initially computed the short-term capital gain (STCG) by considering the full value of consideration on the alleged transfer of shares in Trishul Industries, which was Rs. 178.42 Crores. However, the CIT(A) found that the actual sum infused by M/s Vatika Ltd. was only Rs. 112 Crores. Therefore, the CIT(A) directed the exclusion of Rs. 72.42 Crores from the computation of capital gains, leading to a revised sales consideration of Rs. 106.01 Crores.

2. Exclusion of Certain Figures for Computing Capital Gains:
The CIT(A) directed the AO to exclude Rs. 72.42 Crores for computing the capital gain, noting that this amount was received by other associate companies and not by the assessee directly. The CIT(A) concluded that sums paid by Vatika Ltd. to any other entity of the MDLR group cannot be taxed as capital gain in the hands of the assessee on the transfer of shares in Trishul Industries. The revised computation considered the infusion of Rs. 112 Crores, with the appellant's share being Rs. 53.20 Crores.

3. Deletion of Addition Made as Undisclosed Income Admitted by the Assessee:
The AO had added Rs. 30.41 Crores as undisclosed income admitted by the assessee. The CIT(A) deleted this addition after verifying that the sum had been declared in the return of income for the relevant assessment year, and taxes were paid on the declared income. The Tribunal upheld this decision, directing the AO to verify and allow due credits accordingly.

4. Overall Tax Liability on Short Term Capital Gains and Undisclosed Income:
The Tribunal noted that the CIT(A) had reduced the STCG from Rs. 79.71 Crores to Rs. 43.49 Crores, based on the revised sales consideration and investments. However, the Tribunal ultimately held that the assessee is not liable to any capital gain tax on the sum received as a partner on retirement from the partnership firm, following the precedent set by the co-ordinate bench in ITA No. 8214 & 8215/DEL/2018. Consequently, the Tribunal directed the deletion of the entire addition of Rs. 43.49 Crores sustained by the CIT(A).

Final Outcome:
The Tribunal dismissed the appeals of the Revenue, upholding the CIT(A)'s decision to exclude certain figures from the computation of capital gains and delete the addition of undisclosed income. The final taxable income was significantly reduced, and the assessee was not held liable for capital gain tax on the sum received upon retirement from the partnership firm. The order was pronounced in the open court on 03.02.2023.