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TMI Blog2006 (2) TMI 499X X X X Extracts X X X X X X X X Extracts X X X X ..... d evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. 2.( a ) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the disallowance made by the Assessing Officer for loss of Rs. 5,40,00,000 on sale of 60,00,000 shares of Mafatlal Burlington Industries Limited treating the impugned transaction as sham. ( b ) The learned CIT(A) failed to appreciate that the loss incurred by the appellant on sale of shares of Mafatlal Burlington Industries Ltd. was genuine and is supported by sufficient materials and evidences on record. ( c ) In reaching to the conclusion and confirming such addition, the learned CIT(A) omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors. 3.( a ) On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the view of the Assessing Officer that the amount worth Rs. 1,99,50,554 received from British Asia Pacific Holding (P.) Ltd. on transfer of shares of Gujarat Gas Company Limited was assessable under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f M/s. Sumish Associates. The consideration for transfer was credited by M/s. Sumish Associates to the assessee s current account as a partner. The shares were shown in the balance sheet of M/s. Sumish Associates as on 31st March, 2000 under the head Investments . Copy of the same is placed on record. The said amount was also shown by the assessee in its balance sheet as due from partnership firm in which the assessee-company is a partner. A copy of the balance sheet of the assessee as on 31st March, 2000 was also placed before the Assessing Officer. The shares transferred were reduced by the assessee from his investment accounts. The investment schedule and the balance sheet was also placed before the Assessing Officer. 5. During the course of assessment proceedings, the Assessing Officer required the assessee to furnish details of capital loss on sale of aforesaid 22 lakh shares of NOCIL and also to furnish information whether the above shares were purchased/sold through a recognized stock broker, if yes, then to produce particulars of above brokers along with its bill, contract note, confirmation of account and payment proof. The assessee vide letter dated 5th September ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee submitted the above required details vide letter dated 23rd January, 2003 that 22 lakh shares of NOCIL were transferred to M/s. Sumish Associates where the assessee is a partner, but the shares remained to be held in the name of the assessee, who is a partner in the firm, as the shares cannot be legally transferred in the name of the partnership firm. However, the beneficial ownership of shares was M/s. Sumish Associates and these facts were also recognized by the NOCIL in their letter dated 11th October, 2001 addressed to various stock exchanges. Copy of the letter was filed before the Assessing Officer. With regard to sale consideration of NOCIL shares, it was submitted that it was transferred at a total consideration of Rs. 2,64,00,000 at the rate of Rs. 12 per share, at the prevailing market price. Copy of the statement showing market price as on 6th March, 2000 was filed before the Assessing Officer. It was also explained that since shares were continued to be held in the name of the assessee, who was a partner in the firm, no transfer deed was required to be executed. The sale consideration of Rs. 2,64,00,000 was duly credited to the partners current account in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to acquire these shares in the pledged conditions. Therefore, transfer of all these shares is a valid transfer. It was further argued that the pledge agreement does not restrain the assessee from selling the pledged shares, subject to the existing clause. Even in the case of pledged immovable properties, the law does not prohibit sale of immovable property. The charge created over the property moves to the buyer along with the property. Similar has been the case here. Both the purchaser and seller agreed to the transactions of sale of shares in pledged conditions and since such transaction is permitted under law, it cannot be doubted by the department. A reliance was also placed on the order of the Tribunal in the case of Mafatlal Holdings Ltd. [IT Appeal No. 2935 (Mum.) of 2002] in which the Tribunal has categorically held that there is no bar in transferring the shares in pledged conditions. With regard to the necessary intimation to the respective companies it was contended that M/s. ICICI and M/s. Bajaj Auto Limited were duly informed by the assessee. The CIT(A) re-examined the issue, but was not convinced with it and he confirmed the disallowance. 9. Now, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties is also a valid contract. In the present case, where necessary accounting entries have been duly given effect to in the books of the assessee as well as of the transferee for transfer of shares and the fact that transferee is a beneficial owner has been reported to the company and also to stock exchange. It was further contended that the shares were transferred to M/s. Sumish Associates at the market price and in support of this claim, a statement showing market price of NOCIL shares in Bombay Stock Exchange for the period from 6th March, 2000 to 21st March, 2000 was filed before the Assessing Officer vide letter dated 23rd December, 2002. Copy of the same is also placed on record. It was further contended that as per the provisions of section 45(3), the profit and gain arising from transfer of a capital asset from a partner of a firm to the firm shall be chargeable to tax as his income of the previous year in which such transfer took place. In such a case, cost recorded in the books of the firm for such capital asset shall be deemed to be the full value of consideration. With regard to the registration of a firm it was contended that the registration with the Registrar of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court has commented on this judgment of McDowell Co. Ltd. s case ( supra ) by holding that decision in McDowell Co. Ltd. s case ( supra ) cannot be read as laying down that every attempt at tax planning is illegitimate and must be ignored or that every transaction or arrangement which is perfectly permissible under law, which has effect of reducing the tax burden of the assessee s, must be looked upon with disfavour. Their Lordships of the Apex Court has also observed that they are unable to agree with the submission that an act which is otherwise valid in law can be treated as non-est merely on the basis of some underlying motive supposedly resulting in some economic detriment or prejudice to the national interest, as perceived by the respondents. The learned counsel for the assessee further contended that McDowell Co. Ltd. s case ( supra ) did not lay down any principle of its own to deal with tax avoidance device. No doubt, the Hon ble Supreme Court did use strong language against tax avoidance, but the same were in context of artificial tax devices adopted to defeat a taxing statute. Their Lordships of the Apex Court who delivered the judgment in McDowell Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of lower authorities and material available on record we find that the assessee held 22 lakh shares of National Organic Chemical Industries Ltd. (NOCIL) which were transferred to M/s. Sumish Associates a firm in which the assessee is a partner. Undisputedly, the transfer of shares were duly recorded in the books of account of the assessee as well as of M/s. Sumish Associates. The consideration for transfer was credited by M/s. Sumish Associates to the assessee s current account as a partner and the shares were also shown in the balance sheet of M/s. Sumish Asso- ciates as on 31st March, 2000 under the head "Investments". The balance sheet of M/s. Sumish Associates as on 31st March, 2000 along with its investment schedule is placed on record. In the assessee s balance sheet, the consideration was shown to be due from partnership firm i.e., M/s. Sumish Associates. It is also undisputed fact that at the time when the shares were transferred in favour of M/s. Sumish Associates, it was pledged with ICICI Limited and Bajaj Auto Limited through pledge agreement. Despite the transfer of these shares by the assessee in favour of M/s. Sumish Associates, these shares remained in the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of the seller as well as of the buyer. With regard to the transfer of name with the NOCIL companies, it is observed that shares cannot be transferred in the name of the partnership firm. It is to be registered in the name of one of the partners. Since the shares were sold by one of the partners to the partnership firm, it remained in the name of same partners i.e., the seller though company was duly informed regarding this fact. Partnership firm i.e., M/s. Sumish Associates were recognized as a beneficial owner of these shares in the record of NOCIL. With regard to the transfer of money from M/s. Sumish Associates to the assessee, it is noticed that money was not transferred, but, necessary entries were passed in the books of account of the assessee as well as of the partnership firm and in the partnership firm, the consideration amount was shown in the name of partner under the head "Partners Current Account". Likewise, in the books of the assessee, this amount was shown to be recovered from the partnership firm. According to provisions of section 20 of the Sales of Goods Act, if the goods are identified and parties intend to pass the property to the buyer, the paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal partners of M/s. Arvi Associates were Sushripada Investment P. Ltd. and Suvin Trexechem P. Ltd., both are group companies of Mafatlal Group. Subsequently, vide deed of partnership dated 1-7-1997, two new partners which are also group companies of Mafatlal Group were admitted i.e., Mafatlal Holding Ltd. and Mafatlal Finance Co. Ltd. The Assessing Officer noticed that deed of partnership dated 1-7-1997 was not registered with the Registrar of Firms. Therefore, this is an unregistered firm. The Assessing Officer also found that the original partnership deed dated 12-10-1995 between Sushripada Investment P. Ltd. and Suvin Taxchem P. Ltd. was not registered with the Registrar of firms. The Assessing Officer also noticed that as on 31-3-1996, the capital of the partners of the firm was of Rs. 5,000 each and the total assets of the firm was Rs. 10,154. According to him the firm did not carry out any business activity during the year and there was a loss transferred to the partners current account amounting to Rs. 746 only. Further as on 31-3-1997, the total assets had remained at Rs. 10,154 and during the year, the assessee company had carried out no activity and as per the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer further observed from the balance sheet of the assessee firm that the investment made by the assessee company in the partnership firm was only Rs. 5,000. The Assessing Officer has thus, stated that the contention of the assessee company that the sale consideration of NOCIL shares to Arvi Associates was not received on the ground that the same were introduced as capital was not found correct. The Assessing Officer further noticed that in the balance sheet as on 31-3-1998 of the assessee company under schedule 6, under the heading loans and advances the assessee-company has shown this amount as an advance receivable, from M/s. Arvi Associates. Thus, according to the Assessing Officer, this amount cannot be stated as the capital contribution of the assessee- company and the same was an afterthought of the assessee company. The Assessing Officer, therefore, concluded that there was no introduction of the capital by the assessee-company in Arvi Associates in the shape of transfer of subject shares of NOCIL. 23. Regarding the sale of shares, the Assessing Officer had observed that the transfer deed of shares was not produced by the assessee. The shares had not been sold through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidend income of Rs. 71,19,180 and also profit on sale of investment at Rs. 17,06,579 both for separate consideration. The dividend income being exempt from income-tax, was ultimately not taken into consideration in the computation of total income. On the other hand, the net loss under the head capital gains was arrived as follows : (Rs.) ( i )Long-term/short-term capital gains on sale of GGCL shares 14,70,11,801 ( ii )Adjusted long-term/short-term capital loss on transfer of NOCIL shares 21,33,53,989 Net long-term/short-term capital loss to be carried forward 6,63,42,188 The department has disallowed the loss of Rs. 21,33,53,989 claimed by the assessee-company on the basis that the assessee was not owning the shares which it has transferred to the firm M/s. Arvi Associates. Thus, according to the department the transfer of shares was not valid and the assessee-company is not entitled to benefit of section 45(3) of the Act. On the other hand, the assessee-company submitted that the transfer of NOCIL shares to the firm Arvi Associates was as per the provisions of law, therefore, the assessee-company is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration amount was paid by M/s. Arvi Associates to the assessee-company nor was the amount credited to the capital account of the assessee-company. It is a fact that no cash money was paid by M/s. Arvi Associates to the assessee-company in respect of purchase of shares under consideration by that concern to the assessee-company. It is also a fact as pointed by the learned counsel that the capital account of the assessee-company in the books of the firm was not affected on account of this purchase. However, at the same time, the entire amount of consideration was credited to the current account of the assessee-company in the books of the said firm. The learned counsel also rightly pointed out that there is no requirement under any law relating to sale of goods or even of immovable property that the purchase consideration has necessarily got to be paid in cash. The meaning of word paid has been defined in section 43(2) of the Act as follows : The word paid is defined to mean the amounts actually paid or incurred according to the method of accounting followed by the assessee, for the purpose of computing profits or gains under the head profits or gains of business or pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a partner to M/s. Arvi Associates, the firm. The assessee-company has relied on the provisions of section 45(3) of the Act according to which when a capital asset owned by the person is introduced as the said person s capital contribution into a firm wherein such person was a partner, such introduction of the capital shall be deemed to be a transfer of the said capital asset for the purpose of section 45(1). The value recorded in the books of account of the said firm shall be deemed to be the full value of consideration of the said capital asset for computing the chargeable capital gains. In the present case, in the books of the firm the value of the capital assets have been recorded at the amounts at which it is shown to have been sold, in accordance with the provisions of section 45(3) for the purpose of computation of capital gains/loss on the transaction. The aforesaid amount recorded in the books of account of the firm have to be considered to be the full value of the consideration of the shares transferred. 46. The genuineness of the sale transactions of the shares is also challenged by the department on the basis that the shares under consideration have not been transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration have been transferred in the name of M/s. Arvi Associates. The Delhi and Andhra Pradesh High Courts in the case of CIT v. Manjit Engg. Industries 154 ITR 509 and CIT v. A.V. Bhanoji Rao 142 ITR 706 have held that no particular mode or form is provided for bringing in a separate property of the partner into the stock of the firm and no deed whatsoever registered or otherwise is required to be executed by the partner for doing so. 47. The contention of the department that no broker was involved in the sale of shares, therefore, the transaction of sale is not genuine is also without any basis. The transaction of sale of shares was between two independent parties and had not been carried out in a recognized stock exchange as it was not necessary that dealing in shares should be through any recognized broker of Stock Exchange. The learned counsel rightly invited our attention to the provisions of section 108 of the Companies Act which provides that the shares of listed company shall be freely transferable hence it was not necessary that the transactions under consideration should have been carried through a recognized Stock Exchange or broker. The learned Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the departmental authorities to prove whether such share certificates had actually been transferred or not in the names of M/s. Arvi Associates. This exercise of the department would have been futile in view of the fact that it is already admitted that the shares were not transferred in the books of the company. In our view, this exercise by the department was not necessary in the face of other documentary evidences in support of the genuineness of the sale transaction. But if the authorities below were very keen to examine the share certificates, they could have summoned the concerned bankers and other financial institution with whom the shares have been pledged by resorting to the provisions of section 131 of the Act for producing such documents. The approach of the department in this connection appears to be quite casual. Under the circumstances, the department has not brought any evidence on record to prove that the transaction of sale of shares is not genuine. 49. The learned CIT(A) referred to the provisions of Companies Act and has contended that the transactions were not genuine in shares because the transfer deeds were not executed in respect of the shares sold by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with M/s. Arvi Associates whereby the assessee-company transferred the shares to M/s. Arvi Associates though the immediate delivery of the shares was not given because the shares were pledged with banks and financial institution. In view of the decision of the Delhi High Court ( supra ), it does not make the transaction non-genuine. Thus, the provisions of section 4 of Sale of Goods Act, 1930, are moreover in favour of the assessee. The learned Departmental Representative also made reference to section 5 of Sale of Goods Act, 1930 and contended that the sale becomes final only when there is a transfer of property. Section 5(2) of the aforesaid Sale of Goods Act reads as under : Subject to the provisions of any law for the time being in force a contract of sale may be made in writing or by word of mouth, or partly in writing and partly by word of mouth or may be implied from the conduct of the parties. Thus, in view of the above provisions of Sale of Goods Act, even an oral contract would also suffice for the purpose of sale of shares. In the present case, the transactions have been confirmed by the transferee and necessary accounting entries had duly been given effect to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be an appropriation of goods by buyer in respect of particular contract. AIR 1948 Mad. 122 (127, 128) (DM). 51. During the previous year under consideration, the assessee-company purchased 228 lakh equity shares of NOCIL at the total cost of 98,06,39,400, 98,00,000 shares were purchased from Mishapur Investments and 1,30,00,000 shares were purchased from Sushmita Holdings Ltd. The assessee company did not make any payments to them. These shares were purchased on July 24, 1997 through Bombay Stock Exchange, which is a recognized Stock Exchange. Thus, the ownership of 228 lakh shares of NOCIL by the assessee-company cannot be doubted. Therefore, the shares of NOCIL owned by the assessee were in a deliverable State. Therefore, in the present case, there was an unconditional contract for sale of specific shares, which were in deliverable State, therefore, the shares as per the provisions of section 20 of Sale of Goods Act, 1930, were passed on to M/s. Arvi Associates as soon as there was contract between the assessee company and M/s. Arvi Associates. The shares remained no longer of the ownership of Mafatlal Holdings Ltd. Dividend on the shares after the sale transaction has been pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered as genuine is also without any substance. These transactions of sale of shares were between private parties and therefore, the rules of Stock Exchange were not applicable to them. There is nothing in law, which prevents conducting of transactions on Sunday between private parties. The learned Departmental Representative did not bring on record any material or evidence to support the contention of the department that even private parties cannot enter into such transactions on Sunday. 53. Now the only point remains for consideration that whether the shares if sold in the open market would have fetched more price by way of premium. The department has not produced any evidence to support their case. The department has also not contradicted the contention of the learned counsel that the shares were transferred by the assessee-company at the prevailing market rate on the relevant date. The opinion expressed by the departmental authorities cannot be considered unless they are based on some evidence. The assessee-company has furnished documentary evidence in support of the genuineness of the sale transactions. It was also brought to our notice that the department has accepted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of shares. This court case, therefore, is not relevant to the facts of the present case. Moreover, the transfer in the present case is under the provisions of section 45(3) of the Act, hence the above court case is different on facts and the same therefore, does not have any application to the present case. The case of Kartikeya v. Sarabhai ( supra ) is also not relevant because of amendment to section 45(3) of the Act with effect from 1-4-1988. This case pertains to the year 1981. Sub-section (3) of section 45 was brought on the statute by the Finance Act, 1987 with effect from 1-4-1988. The Hon ble Supreme Court in the above case held that when a partner contributes his capital asset to the firm, the capital gain tax will not be leviable since the value of the consideration is not ascertainable. The new sub-section (3) of section 45 has statutorily superceded to the effect of the said judgment. Therefore, the ratio of the above judgment and similar other judgments would apply only up to assessment year 1987-88. Under the circumstances, the above judgment is not relevant to the facts of the present case as the assessment year under consideration is 1998-99. The Calcutta High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT [2002] 257 ITR 235 (MP) in which Their Lordships have held that the Tribunal should not come to the conclusion a contrary one reached by another Bench of the same Tribunal. The Tribunal cannot overrule its own judgment rendered in another case. Only the matter can be referred to a Larger Bench. While passing judgment in the case of Agrawal Warehousing Leasing Ltd. ( supra ). Their Lordships have relied upon the judgment of the Apex Court in the case of Pradip Chandra Parija v. Pramod Chandra Patnaik [2002] 254 ITR 99 in which Their Lordships of the Apex Court have categorically held that judicial discipline and proprietary demands that a Bench of two Judges should follow a decision of a Bench of three Judges. But, if a Bench of two Judges concludes that earlier judgment of three Judges is so very incorrect that in no other circumstances, can it be followed, the proper course for it to adopt, is to refer the matter to a Bench of three Judges setting out the reasons why it could not agree with the earlier judgment. If, then the Bench of three Judges also comes to a conclusion that the earlier judgment of the Bench of 3 Judges is incorrect, reference to Bench of five lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Apex Court. In the case of Azadi Bachao Andolan ( supra ) Their Lordships of the Apex Court have held that, an act which is otherwise valid in law, cannot be treated as non-est merely on the basis of some underlying motive supposedly resulting in some economic detriment or prejudicial to the national interest. If the Court finds that notwithstanding of series of legal steps taken by assessee, the intended legal results has not been achieved, the Court might be justified in overlooking the intermediate step, but it would not be permissible for the Court to treat the intervening legal steps as non-est based upon some hypothetical assessments of the real motive of the assessee. Court must deal with what is tangible in an objective manner and cannot afford to change the will-o-the-wisp. There is no change in the fiscal jurisprudence in India. The judgment of the Apex Court in the case of McDowell Co. Ltd. ( supra ) was also examined by the Madras High Court and Their Lordship have commented upon it and concluded that decision in McDowell Co. Ltd. s case ( supra ) cannot be read as laying down that every attempt at tax planning is illegitimate and must be ignored ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited. 22. The facts borne out from the record are that during the previous year relevant to the impugned assessment year, the assessee sold 6,41,150 shares of Gujarat Gas Company Limited for a total consideration of Rs. 22,42,48,584. The sale was made pursuant to the agreement dated 5th March, 1999. This agreement dated 5th March, 1999 was entered pursuant to the rights available to the assessee as per the agreement dated 2nd July, 1997 which was entered into by the assessee along with other group companies of M/s. Mafatlal Industries Ltd. with British Gas Asia Pacific Holdings (P.) Ltd. for sale of shares of Gujarat Gas Company Limited. As per clause 9.2 of the agreement dated 2nd July, 1997, the assessee had right to require the purchaser i.e. , British Gas Asia Pacific Holdings (P.) Ltd. to acquire the remaining shares of Gujarat Gas Company Limited from the assessee. Pursuant to such right given in the agreement dated 2nd July, 1997, the assessee along with other companies entered into share purchase agreement dated 5th March, 1999 with the British Gas Asia Pacific Holdings (P.) Ltd. for selling remaining shares i.e. , 6,41,150 shares of the assessee. Clause 2 of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al gain. The contentions of the assessee were not accepted by the learned Assessing Officer and he accordingly treated the interest accrued thereon as income from other sources after holding that as per the agreement, the sale consideration was fixed at Rs. 270 per share and the amounts paid over and above to Rs. 270 is on account of interest thereon as stipulated in the agreements dated 2nd July, 1997. 24. The assessee preferred an appeal before the CIT(A). Besides reiterating its contentions, the assessee has contended that the assessee is an investment company and one of the main business of the assessee is to make investments in other companies, as such, the interest received even on sale consideration of shares, can only be treated as business income and not income from other sources. The financing activity is also one of the major activity of the assessee-company. It was further contended that the Assessing Officer has wrongly co-related clause 10.1 of the agreement dated 2nd July, 1997 and the sale consideration for the sale of 6,41,150 shares whereas the clause 10.1 is applicable in the case of purchaser defaults in payment of any sum due as per the agreement dated 2nd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only be effected when the goods are identified and delivered. As per provision of section 20 of Sales of Goods Act, no doubt the delivery and payment can be differed, but, there should be a clear cut intentions of sale of movable goods. It cannot be a subject to certain conditions to be fulfilled in future. In the instant case, through agreement dated 2-7-1997 the primary conditions for sale of shares were stipulated, but, the sale of shares were neither effected nor other conditions requiring a very valid transfer of shares were fulfilled. From reading the various clauses of this agreement, only one inference would be drawn that its primary document relating to sale of shares which gives right to the parties to enforce the transactions of sales at a price stipulated in this agreement. It was also made very clear through this agreement, if sale of shares is delayed, the sale consideration would be determined by invoking the provisions of clause 10.8 of this agreement. Since the sales of shares were delayed and were effected through an agreement dated 5th March, 1999, the consideration stipulated in this agreement is the real sale consideration of sale of share and the interest det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available on record, it is not clear how much portion of this agreement was fulfilled by the respective parties. For the sake of reference, we extract clause Nos. 4 and 5 of this agreement as under : "4. Consideration : 4.1 The consideration for the purchase of the Sale Shares shall be the cash sum of Rs. 270 for each Sale Share making an aggregate consideration of Rs. 1,08,60,95,250 which shall be divisible among the Vendors as set out in Part 1 of Schedule 1 and paid to the Vendors in due proportion on Completion. 4.2 4.2.1 Subject to the execution and delivery to the Purchaser of the Custodian Agreement together with the share certificates and executed share transfers in blank for the 25,65,000 sale shares to be deposited thereunder, the Purchaser agrees to advance the sum of Rs. 35,00,00,000 by way of an advance payment against the consideration payable for the Sale Shares under this clause 4 (the Deposit ). On satisfaction of the condition precedent referred to in the previous sentence, the Purchaser will instruct the remittance of the Deposit into a designated account in the name of the Purchaser with Barclays Bank Pic. Bombay (the Designated Account ). Following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price payable per State share under clause 4.1 shall be increased to Rs. 301 per Sale share. 4.3.2 The Vendors agree to procure that prior to Completion the Company will not enter into a legally binding contract for an additional supply of gas to the Company without the prior written consent of the Purchaser, which consent will not be withheld in the event that the Purchaser s prior consent is sought of an unconditional and legally binding contract between Gujarat State Petroleum Corporation Limited. Niko Resources Limited and the Company for an additional supply of gas to the Company of at least 0.3 million standard cubic metres per day with delivery commencing not later than 1st December, 1999 at the price and on terms which are no less favourable to the Company than the contract between Gujarat State Petroleum Corporation Limited, Niko Resources Limited and the Company dated 6th June, 1997. 4.3 Wherever in this Agreement provision is made for the payment by one party to another, such payment shall be effected by banker s draft drawn payable in Bombay and drawn on any scheduled bank reasonably acceptable to the payee and the payer and having an office in Bombay. Payment of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the sale of specific goods in a deliverable state. For reference, we reproduce section 20 of the Sales of Goods Act as under: "Section 20 - Where there is unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made and it is immaterial whether time of payment of price and the time of delivery of the goods or both is postponed for effecting the sale, the goods must be identified and be made in a deliverable state." To attract section 20, two conditions must be fulfilled: 1.that the contract of sale must be for specific goods in a deliverable state. 2.the contract must be unconditional one. If the parties to the contract are required to fulfil certain conditions, the contract may not be called to be unconditional and property would not immediately pass on execution of an Agreement. 29. From a careful reading of this agreement dated 2nd July, 1997 in the light of the provisions of section 20 of Sales of Goods Act and other provisions of Act, we find that it was a formal agreement between the parties with regard to sale of shares, but it was to be enforced on fulfilment of certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an appeal before the CIT(A) with the submissions that the Assessing Officer did not ask the assessee to produce any evidence in this regard. It was further submitted that it has not received any interest from any debtors and advances given as per terms and conditions mutually agreed between the assessee and debtors and the persons to whom the appellant has given advances. The CIT(A) re-examined the issue, but, was not convinced with the explanation of the assessee and he confirmed the disallowance after having observed that nothing had been placed on record to prove that the shares in question were purchased out of own funds and not from the borrowed funds. He, further observed that it is also not known as to on which date the money was actually borrowed and share was purchased. 32. Now the assessee preferred an appeal before the Tribunal with the submissions that the lower authorities have not properly examined the facts of the case. Whatever investments were made in the shares, it was out of own funds. During the course of hearing, it was asked from the assessee to furnish the evidence that investment was not made out of the borrowed funds or from his personal funds and in re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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