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TMI Blog2011 (9) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... s were sold at a price more than the book value or not. - Matter remanded back for verification for finding out the book value. - I.T.A No. 1437/Kol/2010 - - - Dated:- 8-9-2011 - [Before Hon ble Shri B. R. Mittal, JM Hon ble Shri S.V. Mehrotra, AM] For the Appellant : Shri S.K. Roy For the Respondent : Shri S.K. Tulsiyan ORDER Per S. V. Mehrotra, A. M. The Department has preferred this appeal for assessment year 2007-08 against order of Ld. CIT(A)-VIII, Kolkata dated 11.05.2010. 2. The grounds of appeal raised by the Department read as under :- (1) On the facts and circumstances of the case in law, whether the Ld. CIT(A) was right in holding that the sale value of unquoted share of Rs.2,41,57,700/- instead of value considered at Rs.4,00,00,000/- by A.O. (2) On the facts and circumstances of the case and in law, whether the Ld. CIT(A) was right in holding that Long Term Capital Loss of Rs.1,30,96,496/- for sale of unquoted share which was group concerned company instead of capital gain of Rs.27,45,865/- as determined by the Assessing Officer. 3. Brief facts of the case are that the assessee, NBFC Company, had invested in unquoted shares which were a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult in loss. Further, in some cases shares were sold below 50% of the purchase price. Every person invests with the aim to earn at least 10-12% rate of return. In the instant case, assessee has sold unquoted shares whose index cost of acquisition is Rs.9,54,03,000/- at Rs.2,41,57,700/- i.e. at a loss of Rs.7,12,45,300/- that too its group company. Further, it was also found that index cost of acquisition was not correctly calculated. Exact amount of index of acquisition is as under :- Company Year of Investment Qty. Value of Investment Index cost of acquisition. Berlin Securities 1995-96 6000 6,60,000/- 12,19,004/- Berlin Securities 2000-01 15000 16,50,000/- 21,09,236/- Beri Mercurio 1995-96 34000 37,40,000/- 69,70,686/- Beri Mercurio 1996-97 40000 44,00,000/- 74,87,213/- Beri Finvest 1997-98 47000 51,70,000/- 81,06,435/- Beri Finvest 2000-01 15000 16,50,000/- 21,09,236/- Major Metals Ltd. 1998-99 126000 63,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of K.P. Varghese vs. ITO [1981] 131 ITR 597 (SC), sale consideration as disclosed by the assessee could not be altered. Assessing Officer was bound to accept the sale consideration declared by the assessee without bothering about adequacy or inadequacy of the same. 6. We have considered the submissions of both the parties and have perused the records of the case. There is no dispute that shares had been sold by assessee-company to closely held company and in the process assessee had claimed long term capital loss of Rs.1,17,27,000/-. The main dispute is regarding fixation of price of shares sold. The Assessing Officer did not accept the mode of fixation of sale price by assessee and, therefore, estimated the sale consideration. The fixation of price i.e. saleable price of unquoted shares depends upon the net assets of the company. The price of unquoted shares is always amenable to manipulation by the closed persons to avoid taxability of the gain on the transfer by fixing price in a manner that it suits the most. The value of shares as per NAV method is most appropriate method of valuation in such circumstances. The revenue authorities under such circumstances a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) The principle what is apparent is real is not sacrosanct and may be overlooked if surrounding circumstances so suggest. (v) It is true that every person entitled to so arrange his affairs as to. Avoid taxation but the arrangement must be real or bonafide and not a sham or makebelieve or colourable device. Tax planning, may be legitimate provided it is within the frame-work of the law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax or to obtain any advantage or benefit for tax purpose by dubious method. (vi) A colourable transaction is one which is seemingly valid, but a feigned or counterfeit transaction entered into for some ulterior purposes. The transaction is to be decided as such by reference material or evidence or circumstances of each and every case. (vii) The principle on the matter of tax evasion and tax avoidance as laid down by the Supreme Court in landmark judgment in the case of McDowell Co. Ltd. v. CTO [1985] 154 ITR 148/22 Taxman 11 (SC) can have its application only where colourable or artificia1 devices are adopted and not to the transactions whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transactions were bonafide or not, we have to examine whether the shares were sold at a price more than the book value or not. In this regard, we find that Assessing Officer though has taken note of assessee s submissions which are that the shares were sold above book value but has not given actual book value in this regard. He has also, as rightly pointed out by Ld. CIT(A), not given any basis for adopting sale consideration at Rs.4.00 crore. CIT(A) has observed that Assessing Officer has not disputed the assessee s contention in this regard. Under such circumstances, in our opinion, Tribunal has not only power but bound to bring complete facts on record. Accordingly, it is necessary that the actual book value of shares transferred has to be brought on record. We, therefore, restore this matter back to the file of the Assessing Officer for limited purpose of finding out the book value of shares and if he finds that the book value of shares transferred is less than the actual sale price, then no addition is called for. 7. In the result, appeal of the Department is allowed for statistical purposes in terms of above observations. Order pronounced in the Court on 08. 09. 2011. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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