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TMI Blog2016 (11) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... A. M. - Challenging the order, dated 31/10/2013, of the CIT (A)-10, Mumbai the assessee has filed the present appeal. Assessee-company, incorporated in Mauritius, was registered with SEBI as a sub-account of Citi Group Global Markets Ltd. , London(CGGML). It filed its return on 24.10.2007, declaring total income of ₹ 3.48lakhs. The Assessing Officer (AO) completed the assessment on 21.02.2011, u/s. 143(3) r.w.s. 144C(3)of the Act, determining the income of the assessee at ₹ 1,64,14,014/-. Facts of the case: 2. On perusal of the record, the AO found that an offer was made by Oracle Global (Mauritius)Ltd. to the shareholders of the shares of I-flex solutions Ltd. @Rs. 1,475/-per-share along with an additional consideration of ₹ 11.35 for the delay in the open offer as per the SEBI Regulations, that it had received additional consideration of ₹ 1.60 crores or delay in making payment of sales consideration. He held that the additional consideration was not linked to original consideration and hence it was to be treated separately, that amount received by the assessee was penal in nature, that while making the payment of additional consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable in India as per the provisions of the Act. He further made one more alternative argument with regard to rate of tax to be levied. He contended that AO had erred in not taxing the additional consideration in accordance with the provisions of section 115AD of the Act, that he should have applied the rate of 20. 91% as against the rate of 41. 82%. The AR referred to page No. 29,87,118 and 119 of the paper book and stated that original and revised schedule proved that additional compensation @ ₹ 16 per share was for a period upto Jan. 2007, that there was delay in making the offer and not in making payment, that it was not interest. He relied upon the order of the Tribunal dt. 14.8.2013 in the case of Genesis Indian Investment Company Ltd. (ITA/2878/Mum/2006). He referred to the cases of Sainiram Doomgarmal(42 ITR392) ; Sahani Steel Works Press Works Ltd. (152 ITR 39); K. G. Subramaniam (195 ITR 199) and Hindustan Conducors P. Ltd. (247ITR 762). XXXXXX The Department Representative (DR) contended that additional consideration was received for delay in making the payment of sales consideration, that it could not be taken as part of total sale value, tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount of ₹ 2.20 crores received by the assessee as additional consideration is taxable or not ?While going through the page Nos. 117 and 119 of the Paper Book, we find that the offer letter contains two schedules original and revised, that the revised schedule contains the details of additional consideration to be paid by Oracle. In our opinion, it cannot be treated as penal interest or interest for late payment of consideration by Oracle. We find that initially the additional consideration was fixed at ₹ 11.35 per share, but, because of the delay in making the open offer and dispatch the letter of the offer, same was later enhanced to ₹ 16. 00 per share. Thus, there was increase in the offer price of the shares. It is a fact that the regulatory authority i. e. SEBI had approved the transaction, that the transaction could not be completed in due time because of certain reasons, that Oracle had revised the offer price. Considering all these factors, we are of the opinion that additional consideration received by the assessee is part and parcel of the total consideration. It cannot be segregated under the heads original sale consideration and penal interest r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequential open offer was announced for acquisition of 20% of the issue capital of Castrol India Ltd. On 10.7.2000 B. P. Plc approached the SEBI seeking exemption from the requirement of making a public offer for acquisition of upto 20% of the shares of Castrol India Ltd. The said exemption application was disposed of by the SEBI vide order dated 7.8.2000 by granting exemption subject to certain conditions which was not acceptable to the holding company. Accordingly, the request for exemption was withdrawn on 6.12.2000 and the holding company proceeded to take steps to make public offer to the shareholders of Castrol India Ltd. On 11.12.2000 Castrol UK made open offer for acquisition of 20% of the issued capital of Castrol India Ltd. with SEBI indicating the offer price of ₹ 311.91 per equity share based on the market price as on 7.7.2000. Thereafter on 16.2.2001 the SEBI inter alia directed the Castrol UK to revise the minimum offer price taking 14. 3. 2000 as the relevant date and the price as on that date is ₹ 350.02. The holding company challenged the order of SEBI by filing an appeal before the Securities Appellate Tribunal (SAT). The Securities Appellate Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not accept the contention of the assessee and upheld the action of the AO. Tribunal decided the matter in following manner: 6. We have considered the rival submissions as well as relevant material on record. The order of SEBI for payment of interest and particularly the rate of interest was challenged by the holding company before the SAT as well as Hon'ble High Court. It is clear that the payment of interest was directed by the SEBI under regulations 22 and therefore it was held that this is not a penalty but the payment of interest on account of failure to make the payment by the acquirer as per the time schedule prescribed under SEBI regulations. It is clear that this payment of interest @ 15% was not on account of any accretion in the value of the asset in question because the market price of the share is determine as per the rates prevailing on stock exchange. The consideration for acquiring the shares under open offer was determined at ₹ 350.02 which was the market price as on 14.3.2000 when the holding company made a public announcement of acquisition. However, the case in hand the interest received by the assessee is for the period prior to the tender ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee can be treated as receipts which flow to him de hors the business which is carried on by him. In our view, the interest payable to him certainly partakes of the same character as the receipts for the payment of which he was otherwise entitled under the contract and which payment has been delayed as a result of certain disputes between the parties. It cannot be separated from the other amounts granted to the assessee under the awards and treated as income from other sources . The second question is, therefore, answered in favour of the assessee and against the Revenue. 7. In the case in hand the interest is received in pursuance to the directions of the SEBI and due to delay in completion of the process of buy back of shares as prescribed under the SEBI regulations. The real acquisition of shares took place only in the month of November 2001 and prior to the said date it cannot be said that the interest was paid due to delay in the payment of consideration. Therefore, we held that the additional amount received by the assessee being 15% interest from 8.8.2000 to 22.11.2001 is part of sale consideration and accordingly will be treated as part of capital gain a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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