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TMI Blog2014 (8) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not have been the basis of the valuation - valuation was undertaken, report made as was required to get requisite approval under the exchange control regulations - it cannot be assumed that underhand or undeclared sale consideration was paid – No substantial question of law arises for consideration – Decided against Revenue. - Income Tax Appeal 1616/2010, Income Tax Appeal 1619/2010 - - - Dated:- 24-7-2014 - Sanjiv Khanna And V. Kameswar Rao,JJ. For the Appellant : Mr. Sanjeev Sabharwal, Sr. Standing Counsel. For the Respondent : Mr. Mayank Nagi, Advocate. ORDER Sanjiv Khanna, J. (Oral) These two appeals by the Revenue pertain to one assessment year 2000-01 and the challenge is to acceptance of book loss of ₹ 10.12 crores/indexed loss of ₹ 13.62 crores on sale of shares @ ₹ 2.02 per share of Siel Tizit Ltd. on the ground that the sale was a colourable device. The said shares were sold by the respondent assessee to the joint venture partner Plansee Tizit Aktiengesellschaft, (Plansee, for short), an Austrian company. 2. Plansee and the assessee had entered into a joint venture agreement dated 20th June, 1994, followed by first am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en liable to pay has been built into the low costs it has incurred on the purchase of share from its JV partner. (3) The dates of agreement (31.3.99) and slate of valuation (sighed- on 22nd April, 99) and the RBI approval received vide letter. dated 29th April, 1999 prove that this was part of an arrangement. It was already agreed in the agreement which was placed as evidence (as discussed above) that Plansee would buy 127 lakh shares held by Siel for US $. 6,00,000/-. *The valuation is dated April, 1999. It more than proves that the valuation was an afterthought and only a ploy to get RBI's approval for remitting, the amount otherwise it was not possible for the two JV particulars to arrive at the value of $ US 6,00,000 before the valuation. (4) It is for reasons best known to the JAP partners that where the need for getting the valuation done was when the rate was already available. Rights renunciation and the sale of shares which have been done by Siel Ltd in favour of Plansee Tizit has taken place in such span of time where the rates could not have varied much. Rights renounced at ₹ 10 at cash at par was the ideal rate which would have formed the basis of sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue that the transaction relating to sale of shares in question was bogus transaction having no commercial or business reasons. It is not disputed that shares were transferred by the assessee to Plansee. In these circumstances, we do not think that the principle of colourable device as a part of tax evasion plan would be applicable. It is not the case of the revenue that sale transaction was a cover up, a device and the de facto or real transaction was different. The real issue and question is whether the sale price received by the respondent assessee was the true and correct price or there was some undeclared consideration paid, which was not brought in the books. 7. The Assessing Officer primarily relies upon the fact that Plansee had acquired shares in Seil Tezit Ltd. in the assessment years 1999-2000 and 2000-01 at the face value of ₹ 10/- each and not at the discounted price of ₹ 2.02 per share. This, we do not think, can be a ground or reason to disregard and hold that sale of shares @ ₹ 2.02 per share does not represent the true and correct price. Rights issue was for the purpose of generating and augmenting the capital in the loss making company. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the date of acquisition of such shares by Plansee either from company or Siel, which will enable Siel to have 50% share holding in the joint venture company. 3. Further, the above approval is also subject to the condition that issue/transfer/pricing of shares shall strictly be as per SEBI/RBI Guidelines. 10. Thereafter, Reserve Bank of India by their letter dated 29th April, 1999, accorded approval in the following words:- 2. We note that the Department of Industrial Policy and Promotion, Ministry of Industry, Government of India, Foreign Collaboration Section-II have vide their letter No.FC II 833(96)/837(96)-Amend dt. 20th April, 99 approved increase in the foreign equity participation in the paid up capital of Seil Tizit Ltd. New Delhi (STL) by Plansee Tizit Aktiengesellschaft, Austria (Plansee) from 58.3% to 95%. Having regard to the above, we advise that we have no objection under Section 29(1)(b) of Foreign Exchange Regulation Act, 1973 to Plansee acquiring 1,27,00,000 eq. Shrares of ₹ 10 each (35.28%) of STL from Siel Ltd. New Delhi (SL) for an aggregate consideration of US$ 600,000. 11. The aforesaid said letter also mentions that the conditions, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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