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TMI Blog2009 (1) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... he ACIT ] had correctly computed the capital loss at Rs. 6,44,64,034 in respect of 9,00,000 shares acquired by the appellant in foreign currency before 1-4-1981 as against Rs. 79,20,22,296 per the Return of Income. ( b )The CIT(A) erred in holding that the ACIT was right in not allowing the appellant to exercise the option to replace the cost of acquisition with the Fair Market Value (FMV) as on 1-4-1981 while computing the cost of acquisition of 8,09,000 shares. The CIT(A) erred in holding that the ACIT was right in stating that the option to adopt FMV as on 1-4-1981 in respect of cost of a capital asset is available only to resident assessee. ( c )The CIT(A) erred in holding that the ACIT was right in not computing the capital gains (loss) on 91,000 shares as per the first proviso to section 48 of the Act. 2.The CIT(A) ought to have held that the appellant was entitled to and right in, availing of the option set out in section 55(2)( b )( i ) and that it s method of computing the capital loss was correct, and therefore it had incurred a loss of Rs. 79,20,22,296 on the transfer of 9,00,000 shares of Clariant Limited acquired by it prior to 1-4-1981. 3.The CIT(A) ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have heard both the parties and perused relevant orders as well as paper book filed before us. We have also gone through the relevant paragraphs of the Alcan Inc. s case ( supra ). The provisions relating to sections 48, 49 and 55 of the Income-tax Act, which deal with the issue of cost of acquisition of shares in the hands of the non-resident assessee. These issues have been analysed in depth from Paras 14 to 17 of the said order. The same are relevant and, therefore, for the sake of completeness, the same are reproduced as under: "14. Section 55(2) deals with the cost of acquisition for the purpose of sections 48 and 49. Clause ( b ) and sub-clause ( i ) thereof deals with the capital asset, which became the property of the assessee before 1-4-1981. In such cases, the law provides that the cost of acquisition of the asset can be taken as the FMV of the asset as on 1-4-1981 or at the actual cost incurred by the assessee, at the option of the assessee. This option is really given to an assessee to come out of an unfair situation. That is, in respect of assets of Alcan Inc. acquired in the old past, if reasonable value is not assigned to it as cost of acquisition, the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nowhere make the said section 55 subservient to section 48. In fact, section 55 defines the value of the variables necessary for computing the capital gains as provided in section 48. 17. In the facts and circumstances of the case, we find that the assessee is entitled to for the benefit of the option available under section 55(2)( b )( i ) of the Act. Therefore, the assessing authority is directed to compute the capital gains attributable to the shares acquired by the assessee-company before 1-4-1981, after giving the benefit of FMV as on 1-4-1981." 6. In the light of the above finding of the Tribunal, we find no reason to differ with the said order of the Tribunal. It is also noticed that this identical issue was decided by the co-ordinate Bench in the case of May Baker Ltd. in [IT Appeal No. 519 (Mum.) of 2005, dated 31-8-2007] deciding in favour of the assessee, i.e., assessee is entitled to adopt FMV of the shares as on 1-4-1981 by virtue of the above stated position in law, we find that assessee must succeed in appeal. Grounds 1 to 3 of the appeal are allowed. 7. The sub-issue which arose out of the grounds mentioned above, relates to the Assessing Officer s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overseas in foreign currency. With these observations, we direct the Assessing Officer to compute the capital gains in respect of the total holdings of 9 lakhs adopting the cost of acquisition as per the discussions above. Accordingly, ground 1( c ) is decided in favour of the assessee. 10. Ground 4 relates to levy of interest of Rs. 40,47,353 under section 234B of the Income-tax Act. Factually, the Assessing Officer did not give any discussion while charging the interest under section 234B. However, the first appellate authority discussed this issue in paras 7 and 8 of the impugned order where he mentioned that both the seller and buyer are the non-residents and the equity shares are the capital assets transferred. Assessee received the full amount of sale consideration without any TDS from the buyer. In the background of these facts, the assessee submitted before him that no interest is leviable under section 234B in case of a non- resident company in view of the provisions of section 195 of the Act and also in view of the provisions of section 201(1)( d ). As per the assessee, he is not the person in default and default is attributable to the buyer of the capital asset. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sultantly, the view taken by the first appellate authority is hereby affirmed and this ground of assessee is dismissed." This order of the Tribunal was subsequently set aside by the Hon ble High Court of Bombay as mentioned in Para 6 of the said judgment requiring our fresh adjudication on the issue in this appeal. 12. During the proceedings before us, the learned Counsel for the assessee argued that the entire payments to the non-resident assessee, i.e., royalty and the capital gains, are subjected to the TDS provisions and therefore, the provisions of section 234B have no application in view of the Special Bench decision in the case of Motorola Inc. v. Dy. CIT [2005] 95 ITD 269 (Delhi) for the proposition that all payments made to the assessee, being subjected to the TDS provisions, though not actually deducted, by the deductor, the assessee cannot held to have committed default in paying advance tax and consequently there can be no liability to pay interest under section 234B . Further, the counsel also argued that when the payments are tax deductible, the assessee should not be deemed to be the person in default and, therefore, the provisions of section 243B has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-resident assessee. From the above, it is relevant to first decide if the said amounts of sale consideration are tax deductible within the meaning of the provisions of section 209(1)( d ) of the Act. Further, the Special Bench decision in the case of Motorola Inc. ( supra ) has any application. In this regard, we need to examine the provisions of section 195 and section 209 of the Act. The provisions of section 195(1) read as under : "195. (1) Any person responsible for paying to a non-resident, not being a company or to a foreign company, any interest or any other sum chargeable under the provisions of this Act. . . ." 15. From the above, it is evident that the provisions of section 195 have no application in case of the payees, being the non-resident companies. However, it has application to persons of foreign companies and other non-resident persons excluding the said non-resident companies. The foreign company is defined as not a domestic company as per the provisions of clause ( 23A ) of section 2. Further, these provisions apply to any person responsible for paying and such persons may be resident or non-resident assessee or foreign companies. Under these circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first instalment itself. This action of the assessee makes the assessee in default and is against the provisions of section 209 of the Act. The orders of the revenue authorities do not refer to any submissions of the assessee, having received the sale consideration fully in May 1997 itself, as to why the assessee selected to the requisite advance tax in instalments as described above and also why the assessee chose to not to consider including the whole of the relevant capital gains in the estimate against the vary provisions of section 209 of the Act. In the backdrop of the above facts, we have examined whether these provisions of section 209 should be interpreted differently in the case of non-resident company assessee in the light of Apex Court judgment in the case of Anjum M.H. Ghaswala ( supra ) and Special Bench decision in the case of Motorola Inc. ( supra ) and find no reason to do so. While Apex Court established the fact that levy of interest under section 234 is mandatory, once the default is committed, the decision in the case of Motorola Inc. ( supra ) established the proposition that interest under section 234B is not leviable, when the all payments to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21.53 per share as against Rs. 10.76 adopted by the Assessing Officer. Before us, the DR for revenue mentioned that relevant discussion in this regard is given in para 5.1 of the assessment order and argued that the Assessing Officer has rightly arrived at the figure of Rs. 10.76 per share as against the rate of Rs. 21.53 as per the assessee. In this regard, DR argued that profit for the year 1996, which is abnormally higher, contributed to the said increase in the average figures. Thus, the DR requested for referring the issue to the files of the Assessing Officer for correct working in this regard. On the other hands, Ld. Counsel for the assessee relied on the impugned order and argued that the order of the CIT(A) does not call for any interference in this regard. 22. We have considered arguments of both the parties and perused the orders of the revenue authorities on the issue. The FMV as on 1-4-1981 of the share under consideration is the issue. Assessing Officer has arrived at the figure of Rs. 10.76 per share as against the rate of Rs. 21.53 as per the assessee. We find the profits of the assessee for the year 1996 is abnormally high, which contributed to the abnormal fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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