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TMI Blog2020 (2) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... admitting total income of Rs. 212,37,62,980/- and the assessment was completed u/s 143(3) on 31.08.2016. Subsequently, the case was reopened u/s 147 of the Act by issue of notice u/s 147. During the course of reassessment proceedings, the Assessing Officer (AO) found that the assessee had admitted the long term capital gains of Rs. 211,78,44,832/- on sale of 31,57,657 shares of M/s TMPPL. During the year, the assessee along with other individual share holders and a foreign company, entered into an agreement dated 04.11.2013 for sale of total share holding of M/s TMPPL to M/s BSA International. In the process of transfer of hares, the company M/s TMPPL had entered into an agreement through an Engagement Letter (EL) dated 05.07.2013 with M/s Barclays Bank PLC for evaluating the value of shares of TMPPL and for searching a probable buyer to have control over its investments or its affairs. The terms of the agreement entered into were, the company M/s TMPPL has to pay the success fee on completion of the transaction to M/s Barclays Bank as per the invoice raised by them. Accordingly, at the end of the transaction, M/s Barclays has raised an invoice dated 08.01.2014 for Rs. 28,81,31,63 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company when the invoice was raised by the M/s Barclays towards success ,fee and hence sec 2(24)(iv) is not applicable was not accepted by the AO for the reason that the appellant was Director on the date of the execution of the EL. It was held by the AO that it is not the date of payment but the date of execution of EL which creates a liability should be seen. As per sec. 2(24)(iv) of the Act, any benefit or perquisite obtained from a company by a Director/such person is an income. As discussed above there is no benefit enured to the appellant. Once there is no benefit, it is not necessary to discuss whether the appellant was Director or not at the time of payment or raising invoice. It is a fact that the payment was made after the appellant ceased to be a shareholder of the company. Hence the view point of the AO is also not correct. I have considered the submissions, the report of M/s. Deloitte and reassessment order on this issue. The appellant is entitled to receive share purchase consideration as per SPA. The SPA provides for working of consideration after adjustment to be done. The company obtained a report in a draft form from M/s Deloitte. The consultant company worked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In addition to this on mutual basis certain adjustment proposed, out of many suggested, by the consultant, have been accepted and arrived at the consideration and the same has been received through banking channels and offered the said consideration to tax. In view of this the consideration offered by the appellant appears to be as per SPA and mutual agreement. Considering the above discussion the quantum offered by the appellant is in tune with SPA Regarding the issue of disallowance made by the AO the same has been dealt supra. In view of this the addition made by the AO is hereby deleted and ground raised by the appellant is allowed." Against which the revenue filed appeal before this Tribunal. 5. We have heard both the parties and perused the material placed on record. Identical issue has come up before this Tribunal in the case of Sri Danda Bharhmanandam and Sri Battini Nageswara Rao in I.T.A.No.11&12/Viz/2019 dated 19.07.2019 and the Tribunal has considered the issue elaborately and decided the issue in favour of the assessee and dismissed the appeal of the revenue. For the sake of clarity and convenience, we extract para No.6 to 8.1 of the order of this Tribunal which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the individual shareholders were compelled to sell the shares to BSA International which cannot be held against the assessee to hold that the assessee got the benefit. Since the assessee was not the party to Barclays for EL, there is no legal obligation on the part of the assessee to make the payment and the same is not enforceable against the assessee. The agreement is between the Barclays Bank and M/s TMPPL, but not between the shareholders and the Barclays. Thus, there was no legal liability of shareholders to make the payment. The AO did not furnish any material to show that the assessee had engaged the Barclays and the company made the payment on behalf of the assessee to derive the benefit directly or indirectly. As per section 2(22)(iv) of the Act, any sum paid by any such company in respect of any obligation which is required to be paid for the Director or shareholder has to be treated as income in the hands of such Director. In the instant case, there is no evidence to show that the assessee had entered into agreement for transfer of shares or the assessee was obliged to make payment to Barclays. As per the EL, Barclays was engaged as a sole financial advisor in connecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee did not derive any benefit, thus the issue becomes infructuous. However, it is also a fact that the assessee ceased to be director /shareholder by the time the invoice was raised and the payment was made. The new directors taken the decision to make the payment. Hence it is incorrect to apply the provisions of section 2(24) (iv) in the case of the assessee. 8. The next contention raised by the Ld.AR during the appeal hearing is that the success fee paid by the company was already recovered from the net consideration paid to the shareholders, hence, there is no case for making separate addition. The Ld.AR invited out attention to page No. 5 of the CIT(A) order, wherein, the details were furnished with regard to evaluation of the shares of company and purchase consideration agreed to be paid by BSA International which was calculated by Deloitte Touche Tohmantsu India Private Ltd which reads as under : 8.1. From the above working, it shows that Barclays fee was already recovered by BSA International and the net consideration was paid to shareholders which establishes that the amount of succession fee paid to Barclays from the profits and reserves of the shareholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ete the addition. 8. Against which the department has filed appeal before this Tribunal raising the following ground. "The Ld.CIT(A)-1, Guntur ought to have confirmed the addition made by the Assessing Officer on the fact that when the transaction of investment in the said plots has not materialized, assessee should have invested the said capital gain proceeds in the capital gain deposit scheme." During the appeal hearing, the Ld.DR submitted that the assessee had paid the amount to VUDA on behalf of his son who had participated in the auction. As per section 54F of the Act, it is not permissible to allow the deduction, unless the assessee makes the investment in his own name. The Ld.DR argued that since, the assessee has made the investment in the name of his son, the assessee is not entitled for deduction u/s 54 of the Act. Further, the Ld.DR argued that during the interim period, the assessee ought to have invested the amount in the capital gains scheme instead of participating in the bid for acquiring the land. Therefore, argued that the AO rightly made the addition and requested to set aside the order of the Ld.CIT(A) and allow the appeal of the revenue. 9. On the other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction u/s 54F of the Act which was allowed in the original assessment. Subsequently, the assessment was reopened for examining the issue of taxing the benefit u/s 2(24)(iv)of the Act and the AO once again examined the issue with regard to deduction claimed by the assessee u/s 54F of the Act and made the addition since the assessee has not responded to the show cause notice. In the instant case, the assessee has claimed the deduction u/s 54F to the extent of Rs. 24,83,82,054/- out of which Rs. 10.66 crores was deposited in capital gains scheme and Rs. 14.34 crores was paid to VUDA for acquiring the site. In the original assessment, the AO allowed the entire deduction. As per the submission made by the assessee, the assessee paid the sum of Rs. 14.34 crores for purchase of plots from VUDA for construction of residential house on the plots. The assessee also relied on the CBDT Circular No.667 dated 18.10.1993, wherein, the CBDT clarified that the land is an integral part of the residential house, whether purchased or built. Since the assessee had participated in the VUDA auction for purchase of plot, the intention behind participating in auction is to procure the land and to construc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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