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TMI Blog2012 (10) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... n Dialog Private Limited ('Orion Dialog' for short) to Essar Investments Ltd. for consideration of Rs. 5,750/- per share. Thus, the total sale consideration amounts to Rs. 86.25 lakh. However, the sale consideration taken into account for computing LTCG has been shown at Rs. 60.00 lakh only @ Rs. 4,000/- per share. In this connection, it has been noticed that the agreement for sale of shares has been entered into on 15.02.2006. The delivery of shares has also been given on this date. The agreement has been signed by one of the directors of Orion Dailog, Ms. Ishita Swarup, on behalf of all the shareholders. These facts show that the agreement has been made in this year and delivery has also been given in this year. Therefore, the assessee has been requested to state as to why the sale consideration should not be taken at Rs. 86.25 lakh. It has been submitted that as per agreement, only a sum of Rs. 60.00 lakh has been receivable in this year. The balance amount is receivable in three succeeding years subject to fulfilment of certain targets by Orion Dailog. Therefore, only a sum of Rs. 60.00 lakh accrues as consideration in this year and this is also the amount received in this year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any outsourced process for Hutch, Essar Spacetel Pvt. Ltd., BPL Mobile Communications Ltd. or BPL, Mobile Cellular Limited, if it is given an opportunity to do so, and it maintains the current operating cost structure, which would include direct costs borne by the company in relation to payroll payments, costs for running the facilities of the company, operating overheads, subject to inflationary adjustments and any unforeseen events; and it achieves projected revenue target of Rs. 20.00 crore for the financial year ended on 31.03.2007 or as modified by mutual discussion, and (iii) Rs. 1,16,66,666/- (third trenche) on a date not later than 30 days from 31.03.2008 subject to the conditions that the company operationalises any additional capacity added to service new or existing service contracts and it achieves projected revenue target of Rs. 20.00 crore for the financial year ended on 31.03.2008 or as modified by mutual discussion. 4.2 She further refers to the findings of the AO and the ld. CIT (Appeals), particularly in respect of the provisions contained in sections 45 and 48. It is argued that the case is covered u/s 45(1) under which profits or gains arising from tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which transfer takes place. There is no doubt that the transfer of shares has taken place in this year. The agreement has been signed in this year and the shares have been delivered in this year. On prima facie reading of this provision, which is in the nature of charging section, it will be clear that the capital gains are chargeable in the year of transfer as they are deemed to be the income of the previous year in which the transfer takes place. Section 48 regarding "mode of computation" is the machinery provision and the computation under it starts with ascertainment of the full value of consideration received or accruing as a result of the transfer. This provision does not speak of the year of accrual or receipt. This provision has to be read in conjunction with section 45 with clear understanding that it cannot over-ride section 45 implicitly. The reason for lack of the year in latter provision is that all sums accruing or received in connection with transfer are liable to be taxed in the year in which transfer takes place. With these preliminary remarks, we may examine the cases relied upon by the ld. counsel. 6.2 In the case of CIT v. Ashokbhai Chimanbhai [1965] 56 ITR 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention towards the head notes in the case of Anurag Jain (supra). The Authority ruled that - (i) the contingent payments were in substance and reality payments for ensuring performance under the employment agreement to achieve the desired object in exceeding threshold earnings before interest, tax and depreciation allowance, and had no real nexus with the consideration for sale of shares; (ii) the entire capital gain had to be assessed in assessment year 2004-05 as the sum of US$ 2.30 million was received on 01.07.2003; and (ii) the contingent payment had nexus with performance of the assessee for achieving defined target and had connection with not carrying on any activity in relation to any business. The consequence of failure was termination of the agreement coupled with not making further contingent payments as well as refunds of such payments if already received. These contingent payments did not fall u/s 25(va). 6.5 This decision was a matter of writ petition before Hon'ble Madras High Court. The questions before the Hon'ble Court were as under:- "(i) Whether the gains arising from the transfer of 15,000 equity shares in M/s Vision Health Source India (P) Ltd. covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment and share purchase agreement cannot be said to be totally different as one document is inter-linked with the other. This becomes clear from question no. 3. Therefore, the AAR was competent to take into consideration the share purchase agreement and other exhibits connected thereto. Since the associated employment agreement is exhibit B, which forms part of the agreement, therefore, it cannot be said that the Authority has acted beyond its power while deciding the reference. 6.7 We may now consider the facts of the case in the light of these decisions. In the case of Ashokbhai Chimanbahi (supra), the Hon'ble Court has distinguished between the word "received" and the words "accruing" and "arising". But it is also mentioned that under the Income-tax Act, income is taxable when it accrues, arises or is received, or when it is by fiction deemed to accrue, arise or is deemed to be received. Section 45 contains a fiction that profits and gains arising from transfer of a capital asset shall be deemed to be the income of a previous year in which the transfer takes place. Therefore, the words "received" or "accruing" in section 48 shall have to be read in conjunction with the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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