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TMI Blog2013 (2) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 50C in the instant case, what transferred by the assessee are the shares in the company and not the land or building or both. Assessee does not have full ownership on the flats which are owned by the company. The transfer of shares was never a part of the assessment of the Stamp duty Authorities of the State Government. The company was deriving income, taxable under the head 'income from property' for more than a decade. The expression "assessable" is inserted in section 50C(1) of the Act is not relevant for the impugned assessment years. In such circumstances, the AO's decision to invoke the provisions of section 50C to the tax planning adopted by the assessee is not proper and it does not have the sanction of the provisions of IT Act. The provisions of section 50C are deemed provisions which are required to be strictly interpreted, it is not covered by the expressions of the present case. Therefore, order of the CIT(A) is required to be reversed with a direction to the AO to allow the claim of the assessee - in favour of assessee. Addition on additional consideration of money paid by the transferees to the company who utilized the same for repayment of loans of the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances of the case and in law the Ld CIT(A) erred in not considering the ground of the appellant to substitute indexed cost of the immovable property while computing capital gains on sale of immovable property. 4. Each of the above grounds of the appeal is without prejudice to one another." 2. There are two core issues raised in the grounds for our consideration and they are: if the provisions of section 50C of the Income Tax Act, 1961 apply to the fact of this case and secondly, if the 'sale consideration' includes the amounts infused into the company's accounts for discharging the liabilities of the company qua its directors. 3. Briefly stated the relevant facts of the case are that the assessee is a shareholder in M/s. Kamala Mansion Pvt. Ltd (KMPL). Along with other shareholders of this company, the assessee sold his shares to Mrs. Rekha Gunwant Ashok Shah and M/s. Suraj Limited for a consideration. The transferors are also to infuse a sum of Rs. 55,28,500/- into the company for the purpose of clearing the company's loans to its directors. M/s. KMPL owns two flats i.e. 1901B and 2001B in a building known as Om Vikas Apartments situated at Walkeshwar Road, Mumbai-26 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,13,238/- Taxable capital gain ............. Rs. 36,38,131/-" 5. Finally, AO concluded that by engineering the sale of the shares of all other shareholders of the company i.e. M/s. KMPL, the assessee effectively transferred the immovable property belonging to the assessee, therefore, it is an indirect way of transferring the immovable properties i.e. flats no 1901B and 2001B, for lesser consideration and, therefore, the provisions of section 50C of the Act have application to the facts of the case and consequently, AO applied the guidelines prices of the flats and worked out the capital gains. Further, AO treated this case as an eligible case for piercing of corporate veil. 6. During the first appellate proceedings i.e. CIT(A), assessee reiterated the submissions that this is a case of transfer of shares in a company and not the case of transfer of the flats as alleged by the AO. It was submitted that there is no occasion for registering the transfer of the shares before the State Registration Authorities envisaged in section 50C of the Act. Referring to the provisions of said section 50C of the Act, assessee submitted that the sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "full value consideration" received or accruing as a result of the transfer as fully explained by various decision which are as follows. 1. CIT v. George Henderson Co. Ltd [1967] 66 ITR 622 (SC) 2. CIT v. Gillanders Arbuthnot Co [1973] 87 ITR 407 (SC) 3. Rupee Finance Management (P.) Ltd. v. Asstt. CIT [2008] 22 SOT 174 (Mum.) ITAT -Affirmed by Bombay High Court ITA No.1208 dated 20.10.2008. Vishal P. Mehata v. Dy. CIT [ITA No. 3586/Mum/2009, dated 26.10.2010] 8. Further, as per Ld Counsel, the provisions of section 50C are not applicable as the agreement is for the sale of shares which are to be registered to the Stamp Duty Authorities and placed reliance on the following decisions. 1. Carlton Hotels (P.) Ltd. v. Asstt. CIT [2010] 35 SOT 26 (Luck) 2. Ran Mal Bhansali v. Asstt. CIT [2012] 3. Navneet Kumar Thakkar v. ITO [2008] 110 ITD 525 (Jodh) (SMC) 4. Smt. Vijay Laxmi Bhadhha v. ITO [2009] 20 DTR (JP) (Tri) 365. 9. The expression "assessable" is substituted in section 50C of the Act to enable the AO to adopt the same valuation even though agreement for sale of immovable property is not registered and no stamp duty is adjudicated. The Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed [or assessable] by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed [or assessable] shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer 12. Prima facie, the above section refers to the expressions i.e. "capital asset, being land or building or both", "assessed" (assessable does not apply to the AY in question), "capital asset, being land or building or both", "deemed to be the full value of the consideration" etc. The above sub-section provides for meaning of the "full value of the consideration" (FVC) and it is a deemed definition. Accordingly, when the assessee transfers a capital asset being land or building or both, for a consideration lesser than the value adopted, assessed by any authority of a State Government, the value so adopted or asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gains. But AO ignored the basic fact that the transaction of payment of Rs. 55,28,500/- took place between the transferee and the assessee-company and the assessee only received his dues from the company. The dues received by the assessee cannot be equated with the additional sale consideration. Ld DR relied on the orders of the Revenue. 14. We have heard the parties and perused the orders of the Revenue and the papers filed before us. The entries in the books of accounts vividly suggests that the transferees infused the money in the accounts of the company and the company repaid the liabilities of the Directors and it is not the case of the transferees paying additional consideration directly to the transferors of the shares i.e. capital assets. Therefore, considering the book entries placed before us, the allegations of the AO do not have sustainable strength. Therefore, Income tax Authorities have fallen into error zone in deeming the loan repayments as an additional sale consideration. We agree with the arguments of Ld Counsel. Accordingly, ground no.2 raised by the assessee is allowed. 15. Ground no.3 relates to indexation of the cost of the value of property while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... la Mansion P. Ltd., and also on the issue of taxation of additional consideration of Rs. 55,28,500/-. Of course, there are other issues relating to indexation and also deeming long term capital gains as short term capital gains. In principle, the issues raised in this appeal are identical to the ones adjudicated by us vide ITA NO.8831/M/2011. In said decision above, we have held that the provisions of section 50C will not apply to the sale of the shares transferred by the assessee on the ground that provisions of section 50C deals with transfer of land or building or both and therefore, the said provisions have no application to the facts of the instant case as the said provisions, being deemed provisions have to be interpreted strictly. We have also held that it is not a fit case for lifting of corporate veil. Considering the commonness of the facts, the above said decisions apply to the appeal under consideration too. Accordingly, grounds raised by the assessee in this appeal are partly allowed. 20. In the result, appeal of the assessee is partly allowed. I.T.A. NO.8836/M/2011 (AY: 2008-2009) 21. This appeal filed by the assessee named Shri Iqbal Abdul Kader Fazlani is ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the said provisions have no application to the facts of the instant case as the said provisions, being deemed provisions have to be interpreted strictly. We have also held that it is not a fit case for lifting of corporate veil. Considering the commonness of the facts, the above said decisions apply to the appeal under consideration too. Accordingly, grounds raised by the assessee in this appeal are partly allowed. 24. In the result, appeal of the assessee is partly allowed. I.T.A. NO.8851/M/2011 (AY: 2007-2008) 25. This appeal filed by the assessee named Shri Imran Yunus Fazlani is against the order of CIT(A)-38, dated 16.9.2011 for the assessment year 2007-2008. Grounds raised in this appeal revolve around the issue of applicability of provisions of section 50C of the Act to the full value consideration received by the assessee on transfer of shares of other company named M/s Kamala Mansions P. Ltd., and also on the issue of taxation of additional consideration of Rs. 55,28,500/-. Of course, there are other issues relating to indexation and also deeming long term capital gains as short term capital gains. In principle, the issues raised in this appeal are identica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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