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TMI Blog2011 (2) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... undue monetary benefit to the aforesaid ladies, who were related persons. His findings are that,- (i) The book value of the share was about 21 times the sale price; (ii) The transactions are a colourable devise to pass undue benefit to the buyers directly or indirectly related to the company; (iii) The transactions do not represent a distress sale as the amount received is insignificant compared to the financial health of the company; and (iv) Earning per share (EPS) after deduction of income-tax is Rs. 43.21. 2.1. Therefore, he computed the capital gains by adopting the fair market value of the shares. 3. The matter was agitated in appeal before the CIT(Appeals)-VII, New Delhi, who disposed of the appeal on 18.9.2009 in appeal no 64/2008-09. It was contended before him that for the purpose of computation of capital gain, the material amount is sale consideration and not the fair market value of the share. There is no evidence on record that any thing over and above the stated sale consideration had been received by the assessee. Therefore, the AO could not have altered the computation of income adverse to the assessee. The ld. CIT(Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., 2,50,000 shares multiplied by Rs. 254.51 in place of Rs. 30,00,000, i.e. 2,50,000 shares multiplied by Rs. 12. In the instant case, all that the AO has done is to rely upon the hypothetical sale price which does not show or prove that there is some underhand dealing& consideration has passed more than what is disclosed by the assessee. The sale consideration disclosed by the assessee, supported by documentary evidence, cannot be disbelieved merely on the basis of a hypothetical sale price adopted by the Assessing Officer. In view of the aforesaid discussion, I am of the considered view that the AO has failed to adduce evidence on record in support of understatement of the sale consideration by the assessee. Therefore, AO is directed to adopt the sale consideration of the impugned shares at the figure as disclosed by the assessee for the purpose of computation of capital gain. As a result, ground no. 2 is allowed." 4. Before us, the ld. DR referred to page no. 22 of the assessment order, where the book value of the share has been computed at Rs. 31.80 as under:- As per Balance-sheet of NSIL as on 31st March, 2003 Share capital Issued Subscribed & Paid up 50,00,000 R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so that a proper amount is brought to tax as capital gain. 5. We have considered the facts of the case and submissions made before us. There is no dispute that the shares were transferred by the assessee-company to the three ladies whose names have been mentioned by us already in this order. In other words, there is no dispute that the transactions fall within the meaning of the word "transfer" defined in section 2(47). There is also no dispute that the transfer is in relation to a capital asset, being the shares of NSIL. Therefore, the transaction is covered for the purpose of taxation under the head "capital gains" under section 45(1). Section 48 prescribes the mode of computation of the capital gains as under:- "48. The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely:- (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto;" 5.1. The provision regarding computation of cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, received must be based on such material from which an irresistible conclusion follows. Referring to the decision in the case of K.P. Verghese [1981] 131 ITR 597 (SC), it was mentioned that the onus was on the revenue to prove that there was under-statement in the document, not that the goods were sold at undervalue. Understatement of a value is a mis-statement of value. Selling goods at an undervalue to defeat the revenue is different from under-stating the value in the document of sale. Relying on this decision, it was held that the provision contained in proviso to section 12B(2) of the 1922 Act, can be invoked only where the consideration for the transfer of the capital asset has been understated by the assessee. The only argument made by the ld. DR in this matter is that the sale by the assessee was not a distress sale. That according to us, does not distinguish the facts of the case because what the court approved was that there is a different between understatement and mis-statement of the value. On the basis of this decision and the decision in the case of K.P. Verghese, it can be said that the relevant figure is that of "full value of consideration received or accruing", ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been brought on record to show that the transactions constituted inappropriate and excessive tax planning devise. The transactions were conducted with independent parties. Some of the cases relied upon by the ld. counsel pertain to the period in which the provisions contained in section 52 were in force, which have been omitted with effect from 1.4.1988. Therefore, if the case of the revenue does not stand the test of scrutiny under more stringent provisions, it cannot stand the test of scrutiny after omission of the provisions contained in section 52. Apart from that, the decision in the case of Smt. Nilofer I. Singh (supra) is in relation to assessment year 1998-99, when the provision contained in section 52 was not in operation and, therefore, is fully applicable to the facts of the case. 5.6. It may be mentioned here that the transactions have taken place at values far lesser than arm's length price. But in absence of any evidence of receipt etc. of more than stated consideration, the computation of capital gains made by the assessee cannot be altered. 5.7. In a nutshell, it is held that the ld. CIT(Appeals) was right in directing the AO to compute the income on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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