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TMI Blog2020 (12) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the learned assessing officer under section 50C of the Act and instead he directed the learned assessing officer to adopt the valuation of the properties made by the DVO vis-á-vis the value of the shares transferred for the purpose of computation of Long Term Capital Gains on the facts and circumstances of the case. 4. The learned CIT(A) failed to appreciate that the reference made by the learned assessing officer to DVO itself is not proper and ought not to have directed the learned assessing officer to adopt the value arrived at by the DVO for the purposes of sale of shares under the facts and circumstances of the case. 5. The CIT (A) failed to appreciate that the reference to the District Valuation Officer with regard to the valuation of the commercial complex is not justified in taw under the facts and circumstances of the case. 6. The lower authorities failed to appreciate that there is transfer of shares held by the Appellant during the impugned assessment year and not capital assets being land or buildings or both as held by the lower authorities on the facts and circumstances of the case. 7. The learned CIT (A) was not justified in alleging that the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th guidance value adopted by stamp valuation authorities. Assessee in response submitted that the said properties did not attract stamp duty as assessee only sold shares in the company M/s Esteem Arcade Pvt.Ltd. 3. Ld. AO, accordingly worked out capital gain arising from sale of 4 shops at Rs. 53,39,040/-as against Rs. 11,64,598/-adopted by assessee. The capital gain on sale of 4 shops was worked out pending receipt of DVO report. 4. Aggrieved by addition made by Ld.AO, assessee preferred appeal before Ld. CIT (A). 5. It was submitted that, as appeal was pending before Ld.CIT (A), DVO report was received. 6. Based on submissions of assessee, Ld.CIT (A) observed as under: "7.2 Section 50C of the Act provides that if the consideration received or accruing is less than the value adopted or assessed or assessable by the stamp valuation authority of the State Government for such transfer then the value so adopted or assessed or assessable shall be deemed to be the full value of consideration and the capital gains will be computed accordingly. The phraseology of section 50C of the Act clearly provides that it would apply only to "a capital asset, being land or building or both". ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Stamp duty Authorities of the State Government. The company was deriving income, taxable under the head income from property for more than a to 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 Assessing Officer's decision to invoke the provisions of section 500 to the tax planning adopted by the assessee was not proper and it did not have the sanction of the provisions of IT Act." 7. Further Ld.CIT(A), referring to DVO report, came to the conclusion that, real intention of assessee was to adopt a colourable device to avoid tax in guise of transfer of shares. Ld.CIT(A) relied upon decisions of Hon'ble Supreme Court in case of McDowell & Co Ltd vs CTO reported in 154 ITR 148 and Union of India vs Azadi the Bachao Andolan reported in (2003) 132 taxman 373. Ld.CIT (A), thus, based on DVO report upheld capital gains computed in accordance with value adopted by DVO. 8. Aggrieved by order of Ld.CIT(A), assessee is in appeal before us now. 9. At the outset, Ld.AR submitted that, provisions of section 50C is not applicable to present facts of the case, as, has been held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... until the expiry of lease period, and hence, there could not be any absolute transfer of properties. Assessee placed lease agreement entered into by Company with Indian Red Cross Society, dated 11/07/2001 at page 12 to 30 of paper book. Assessee also entered into agreement with the Company, wherein, she is a partner in respect of 4 units allotted to her under the scheme of company, based holding of specific No. of shares and also specific amount of deposit with the company. 13. Subsequently, assessee sold her shares to 4 different buyers. Copies of the agreements have been placed at page 109 -130 of paper book. The details of sale of shares and deposit are as under: Name of the Buyer Unit Allotted SaIe Value for Shares Receipt for Deposits Total Receipt Surplus M.Bhavana S-4 3,45,000 16,56,000 20,01,000 2,07,000 Bhatia Et Others G- 10 4,72,050 12,58,800 17,30,850 3,67,150 Bhatia Et Others G - 11 2,02,5C0 5,40,000 7,42,500 1,57,500 Ratanchand G - 4 5,56,650 14,84,400 20,41,050 4,32,950 Total 15,76,200 49,39,200 65,15,400 11,64,600 14. Ld. CIT (A) agreed with contention of assessee that provisions of section 50 C are not applicable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation we cannot read into the Section, which was not intended to, by the Parliament at the time of enacting this provision. The language employed in Section 10(38) of the Act is simple and unambiguous and it makes no distinction between the transfer of share of company with an immovable asset and movable asset, instead of executing a sale deed in respect of the immovable property by the company, which is owning the land. If the shareholder chooses to transfer the lands and part with the land to the purchaser of the shares, it would be a valid legal transaction in law and merely because they were able to avoid payment of tax, it cannot be said to be a colourable device or a sham transaction or an unreal transaction." 18. In the present facts, of the case we note that Company had no rights to sell superstructure. Company is permitted only to sublet or sublease or assign or nominate any portions thereof falling to its share to one or more parties in one or more than one deeds for the period of lease. We have also perused Scheme of allotment by the Esteem Arcade Pvt. Ltd., wherein, the members enrolled under this scheme would be allotted commercial space/unit on following terms and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t amount shall be paid in such instalments as may be specified by the Board. The Board shall have full discretion in the above matter and may specify different instalments for different members. e. The deposit shall be adjusted against the assets of the Company at the expiry of lease period of 85 years. The Company can modify the scheme of adjustment of deposits only if so resolved by the members in the general meting by 2/3rd majority to take advantage of fiscal laws of the country from time to time. f. In the event of any member ceasing to be a member of the company other than by way of death, insolvency, transfer or operation of law then and in that event the Company shall refund the proportionate deposit to the extent of the unexpired period of lease. 5. Each member shall be entitled to the possession and enjoyment of unit / Commercial space allotted to him pursuant to the above scheme together with full right to possess, enjoy, let-out and realize the rent there from. The Member shall alone be entitled to rent or other consideration received for Parting with possession or granting license to outsiders in respect of his / her / their units and the company shall not be ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lotment of the unit. 20. A unit/commercial space allotted shall absolutely belong to the Member for his/her enjoyment and such right is heritable, provided the legal heirs continue to hold the shares and deposit. 21. The shares and relevant deposit shall always go with a specific unit/commercial space and the transfer thereof shall be done simultaneously to the same person in whom the right of enjoyment of that unit is vested. No transfer of Deposit without the shares being transferred in favour of any person is possible under article No.7 of Articles of Association of the Company. 22. The Municipal taxes payable shall be paid by the Company after collection from shareholders based on the assessment done by the Corporation in respect of each of the units. The individual unit owners shall pay the additional taxes, if any determined by the concerned authorities in respect of their units. 23. Building shall revert back to the original land lord i.e. M./s. INDIAN RED )SS SOCIETY after lapse of 85 years in terms of lease deed dated P72002. (and as per laws prevalent at that time ) 24. Any lease deed executed by individual members of the Company or unit holder shall not be bind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that assessee adopted a colourable device to avoid tax. Facts in present case are different as compared to facts considered by Hon'ble Allahabad High Court. In our view, assesee cannot blow hot and cold at the same time. There is no documentary evidence brought on record by authorities below to establish such allegation.
22. We note that individual members cannot enjoy the units allotted in respect of shares and deposits held with the company beyond a period of 85 years starting from 11/07/2002. We also note that number of units held by a particular member is proportionate with 12 times the face value of shares as security deposit in order to get entitlement of enjoyment of the unit to be allotted. Further clause 11 of the scheme allows a member to sell or dispose of his/her shares along with deposits subject to payment of full amount due to the company towards shares/or deposit in accordance with the rules and regulations subject to Articles of Association of the company.
Accordingly grounds raised by assessee stands allowed.
In the result, appeal filed by assesee stands allowed.
Order pronounced in the open court on 28th Aug, 2020. X X X X Extracts X X X X X X X X Extracts X X X X
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