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TMI Blog2018 (6) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... we reverse the order of the FAA and decide effective ground in favour of the assessee. - I. T. A. /6107/Mum/2016 - - - Dated:- 1-6-2018 - Shri Rajendra, Accountant Member And Sandeep Gosain, Judicial Member For The Revenue : Shri Samuel Darse-CIT-DR For The Assessee : Shri Nitesh Joshi Order u/s . 254(1)of the Income- tax Act, 1961(Act) PER RAJENDRA, AM Challenging the order, dated 30/09/2016 CIT(A)- Mumbai-I the assessee has filed the present appeal. Assessee-Company, engaged in the business of manufacturing and selling of shaving products and systems, filed its original return of income on 30/11/2011 declaring total Loss at ₹ 19. 78 crores. The Assessing Officer (AO)completed assessment u/s. 143 (3) r. w. s. 92CA of the Act on 31/03/2016 determining income of the assessee at ₹ 32, 68, 71, 48, 000/-. 2 . The assessee has raised two effective grounds of appeal. First one is about validity of the proceedins, whereas in the second ground merits of the order of the First Appellate Authority (FAA)has been challenged. 2 . 1 . During the assessment proceedings, the AO found that, the assessee had entered into the two Business Transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eft no doubt that section 9 itself was a charging section. He referred to letter dated 29/5/12 issued by the CBDT (F. No. 500/111/2009-FTD-1(PT) and held that the disputed amount was taxable in India in the hands of the assessee. He further observed that capital asset, as mentioned in the provisions of section 9, would include shares as well as interests (stake) in a company or entity registered or incorporated outside India. If the stake derived its value, directly or indirectly, substantially from the assets located in India, that the AO had clearly mentioned that assessee had transferred its stake, that it had transferred interest in itself to Singapore entity and made indirect transfer to Actis, that the transaction was covered by Explanation 5 to section 9, that Group companies located outside India were having interest in assessee company directly or indirectly that they were merely investment holding companies and that they existed merely on paper, that the transfer of interest by the assessee in itself derived its value from the business /assets located in India, that the transfer of interest by the assessee was held as income deemed to accrue or arise in India, that the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed further shares to its parent company, that consideration received from issuance of shares was a capital receipt and hence not liable to tax. , that SMOH had merely issued fresh shares to Actis, that SMOH was the ultimate share holder of M/s. Super Max group of the companies, that it was investment holding company for the group companies encompassing number of operating companies outside India apart from the assessee, that the amount of ₹ 1002 crores from Actis was received by SMOH and not by the assessee, that in the affidavit dtd. 26/7/16 filed with the Hon'ble Bombay High Court in Writ Petition No. 1641 of 2016 the AO had mentioned that the Malhotra-Family-Directors were the real beneficiaries, that while complet -ing the assessment the AO had held that the assessee had transferred the stake in itself outside India to SSPL, that the addition was made by placing reliance on certain un 6107/ substantiated assumptions, incorrect facts and conjectures, that SMOH had merely issued fresh shares to Actis, that there was no transfer, that the assessee was not a party to the transaction entered into by Actis and SMOH. He further stated that even if there was a transfer of sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act was also amended by including therein an additional head of income, and that additional head was Capital Gains . Resultanly, Section 12B came in to exitence, which specifically dealt with capital gains. Section provided that the tax shall be payable by an assessee under the head capital gains in respect of any profits or gains arising from the sale, exchange or transfer of a capital asset effected after 31/03/ 1946, and that such profits and gains shall be deemed to be income of the previous year in which the sale, exchange or transfer took place. There were several provisos to section. Sub-section (2) of Section 12B provided that the amount of a capital gain shall be computed after making certain deductions from the full value of the consideration for which the sale, exchange or transfer of the capital asset is made;and one of the important deductions is the actual cost to the assessee of the capital asset. Looking to these provisions, it can be said that what the Legislature taxed was the capital value of certain assets, the capital value being computed in a particular manner. In other words, all assets were not taxed, but only those assets which were either sold, transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital gains were (i) there must be a transfer of a capital asset;(ii) profit or gains must have arisen from the transfer after making deductions as provided by section 48 of the Act. The Hon ble Gujarat High Court, in the matter of Mohanbhai Pamabhai(91 ITR 393)has observed that section 2(47)defines transfers in relation to a capital asset, that the transfer of a capital asset in order to attract capital gains tax must be one as a result of which consideration would be received by the assessee or would accrue to the assessee. Here, we would also like to reproduce the relevant part of the judgment of the Hon ble Madras High Court delivered in the case of Cadd Centre (383 ITR 258)and it reads as under: In order to bring a transaction under the ambit of capital gains, it is a must that the receipt or accrual must have originated in a transfer within the meaning of section 45(1) read with section 2(47) of the Act . The transfer presumes the existence of both the asset and the transferee, to whom, it is transferred . Considering the undisputed facts of the case, enumerated at paragraph 5. 1 of our order, we are of the opinion that the endeavor of the departmental o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 54EB, 54F, 54G and 54H, be chargeable to income-tax under the head Capital gains , and shall be deemed to be the income of the previous year in which the transfer took place . xxx xxx xxx Section 2(47) transfer , in relation to a capital asset, includes, - ( i) the sale, exchange or relinquishment of the asset ; or ( ii) the extinguishment of any rights therein ; or ( iii) the compulsory acquisition thereof under any law ; or ( iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-intrade of a business carried on by him, such conversion or treatment ; or ( iva) the maturity or redemption of a zero coupon bond ; or ( v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; or ( vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rately created to avoid taxes in India and to conceal the information about the ultimate beneficiaries. Having AE. s outside India in itself cannot be held against an assessee. Because of advancement of technology, the globe has become a villge. So, the nature of business has changed a lot. In our humble opinion, assessees are free to decide the manner in which they want to run their businesses. It is said that a citizen is perfectly entitled to exercise his ingenuity so to arrange his affairs as may make it possible for him legally and lawfully not to pay tax, and if his ingenuity succeeds, however reluctant the Court may be to acknowledge the cleverness of the assessee, the Court must give effect to the letter of the taxation law rather than strain that letter against the assessee. The Hon ble Supreme Court in Azadi Bachao Andolan (263 ITR 706) has observed as under: It is open for assessees to arrange their affairs in such a manner that it would not attract the tax liabilities, so far as it can be managed within the permissible limit of the law . Tax management is permissible, if the law authorises so . In the affidavit filed before the Hon ble Bombay High court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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