9911796707
TMI Blog1990 (3) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... ct was made on 28th Dec., 1981 of the proposal to sell the shares of Rs. 100 each to the existing Indian shareholders and the Indian public at Rs. 335 per share. This was followed by correspondence seeking approval under the Foreign Exchange Regulation Act. In that correspondence it was specified that for organisational reasons, prior to the sale of the shares to the Indian shareholders and the public, the shares were to be transferred to another company called M/s Carborundum Company Inc. and consent was sought for that proposal. This was because the independent identity of the assessee company had disappeared by merger and the process of transfer required an independent entity to deal with the Indian public and shareholders. The Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Carbourndum Co. Inc. amounting to Rs. 13,914 and legal expenses in India amounting to Rs. 40,000 and 1/3rd of the legal expenses in USA amounting to Rs. 1,24,758 totalling Rs. 3,04,166 could be allowed as an expenditure incurred in connection with the transfer of shares. The assessee's appeal on this point failed. In the further appeal before us it was contended on behalf of the assessee that the transfer was actually made to the Indian shareholders and Indian public and that was the transfer in respect of which capital gains arose because the intermediate transfer to the Carborundum Co. Inc. was only a formality for the purpose of creating a legal entity which could effect the transfers as much as the original company had disappeared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther companies and no assessment could be made in the name of this assessee at all. Thus if the argument of the Revenue is to be accepted than the legal conclusion would be that the assessment itself would fail and the capital gains cannot be brought to tax in the hands of the assessee in the manner in which the assessment is made. Therefore, for all practical purposes we have to accept that the entire transaction was integrated transaction the intermediate transfer to Carborundum Co. Inc. having been made for organisational reasons with the approval of the Government which is further strengthened by the fact that the subsequent sales were at par. This itself shows that the transfer to Carborundum Co. Inc. was only a paper transaction and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed no separate cost could be taken for the bonus shares. He, therefore, took the market value of the original shares computed at Rs. 44,20,538 as the value in respect of the bonus shares. The ITO was of the view that having taken the cost of the original shares as on market value and entire shares have been divested no separate cost could be taken for the bonus shares. He, therefore, took the market value of the original shares computed at Rs. 44,20,538 as the value of the total share holding including bonus shares disallowing the claim of the assessee for a further deduction of Rs. 26,86,763 as the value of the shares. This was confirmed on appeal following the decision of the Madras High Court in the case of CIT vs. T.V.S. Sons Ltd. (19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return filed on 7th Feb., 1983 was not a valid return and the assessment was being made on the return filed on 30th March, 1984 even though it was called a revised return by the assessee. He also initiated proceedings for the imposition of penalty for the delay in filing the returns and after hearing the assessee who claimed that the delay due to the difficulty in getting full particulars imposed the assessment by disallowing the deduction of the tax paid for the purpose of computing interest under s. 139(8) by his order dt. 3rd June, 1986. The assessee's appeal against this rectification was allowed while its appeal against the penalty was dismissed. This had led to an appeal by the assessee in respect of the imposition of penalty under s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see had filed a provisional return which had been accepted for the purpose of processing it and allowing the remittance. The amount had been paid within the financial year relevant to asst. yr. 1983-84. This shows the bona fide of the assessee for the compliance. The contention of the Revenue that the return was invalid is highly technical plea which ought not to be taken especially when it had been acted upon. Secondly the correspondence between the assessee's advocate and the assessee which is part of the record shows that considerable time was required to gather all the particulars relating to the expenditure which could be claimed as an admissible deduction in computing the capital gains. The assessee had delivered that the return subse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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