9911796707
TMI Blog2012 (12) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... R PER N.K. BILLAIYA (AM): This appeal by the Revenue is directed against the order of Ld. CIT(A)- 32 dt. 22.10.2009 for assessment year 2006-07. 2. The effective grounds of appeal raised by the Revenue are as under: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 6,19,26,831/- made in respect of Long Term Capital Gains. 2. (i) The Ld. CIT(A) has erred in treating this transaction as parallel to Sec. 45(5) of the I.T. Act as the facts of the case are different and Sec. 45(5) is applicable only in respect of cases where there is compulsory acquisition of capital assets under any law. (ii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not treating the entire transaction as capital gains in this asst. years thereby ignoring the settled legal position that capital gains is attracted even in case of part performance of the contract/agreement. 3. The only additional ground raised by the Revenue reads as under: The Ld. CIT(A) has erred in to allow relief to the assessee relying upon certain additional evidence which was not submitted before the AO. This c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shete family. According to the AO, the total consideration agreed upon is Rs. 20 crores and the assessee s share in the shares transferred was at 34.5%, the assessee s share of the net consideration was taken at Rs. 6.90 crores. Based on this sale consideration, the AO worked out the Long Term Capital Gain at Rs. 6.19 crores and added to the returned income and completed the assessment. 5. The assessee questioned this mode of computation before the Ld. CIT(A). The main contention before the Ld. CIT(A) was that the AO has wrongly interpreted clause 3.2 of the agreement for sale and purchase of shares of UIPL. The assessee submitted that the deferred consideration as per clause 3.2 of this agreement is to be determined in the subsequent years as per the formula contained in the clause 3.4. The assessee further submitted that the formula for computing the deferred consideration is based on the multiple of average profit for the two preceding years less debt plus cash minus the consideration already paid. It was argued by the assessee that the accrual of the sale consideration is to take place in the subsequent years on various dates as per the agreement i.e. 30.6.2007, 30.6.2009 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be also computed on the same lines. Finally, the Ld. CIT(A) held that in view of the facts and circumstances of the case, the additions made in respect of Long Term Capital gains are to be deleted. 6. Aggrieved by the order of Ld. CIT(A), Revenue is in appeal before us. The Ld. Departmental Representative submitted that there is no dispute so far as transfer of shares and the effective date of transfer of shares are concerned. The only dispute relates to the total sale consideration which has been rightly taken at Rs. 20 crores by the AO as per Clause 3.2 of the Agreement for Sale and Purchase of shares of UIPL. 7. The Ld. Counsel for the assessee rebutted the submission of the Ld. DR and submitted that the consideration referred by Ld. DR is the maximum consideration which the Shete family was ought to have received and is not the total sale consideration as alleged by the Revenue. The Counsel further argued that as per the agreement, only initial consideration has been provided whereas the deferred consideration is to be calculated as per the formula given in the said agreement. The Counsel further relied upon the provisions of Sec. 45(5) of the Act and stated that the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which could be liable to capital gain tax would be only Rs. 20 lacs whereas the right to receive the total consideration has already accrued to A . In the light of the provisions of Sec. 45(1) being a deeming provision, the entire consideration on the transfer of property is to be taken for consideration during the year in which the transfer is effective, irrespective of the fact that the payment of the consideration may have been deferred by the parties, because any contrary view will frustrate the legislative intent. Therefore, in our considered view, the entire sale consideration accrued to the assessee would be taxed in A.Y. 2006-07. The Ld. Counsel for the assessee further referred and relied upon the provisions of Sec. 45(5) of the Act. From the perusal of Sec. 45(5), which is operative from assessment 1988-89, it appears that two conditions are to be satisfied for the application of that Sec. 45(5) i.e. i) Capital gains must arise from the transfer of a capital asset by way of compulsory acquisition under any law , and ii) The compensation for such transfer is enhanced or further enhanced by any Court, Tribunal or other authority. Unless both these conditions con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Southern Roadways Ltd., and that in consequence they decided to accept paid up shares in the transferee company, that would be a capital loss which arose outside the accounting year, and, therefore, cannot be taken notice of for the relevant accounting year 12. In the light of the above discussion, we do not find any logic or reason in Counsel s submission that this case is covered by provisions of Sec. 45(5) of the Act as it refers to transfer of a capital asset by way of compulsory acquisition under any law. We also reject the submission that only the consideration which is received in the year can be taken for consideration for computing the capital gains tax , it is clear from the provisions of Sec. 45(1) , being a deeming provision any gain which has arisen during the year has to be taken for consideration irrespective of the fact that the transferor may receive the sale consideration in subsequent years. Further, the observation of the Ld. CIT(A) that in family members cases, for the capital gains arising out of the transfer of shares, the return of income have been accepted by the department under scrutiny assessment , cannot be accepted under the principles of co ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
