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TMI Blog2023 (1) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts and circumstances of the case, the ld. CIT(A) has erred in holding that no real income has accrued to the assessee despite the documentary evidence." 3. All the facts have been taken from the order of the ld. CIT(A). 4. A search & seizure operation u/s 132 of the Income Tax Act, 1961 was conducted at business premises of companies of Rockland Group as well as at the residential premises of Directors of the companies on 06.09.2011. 5. The A.O. noted that from the details available in the case of the M/s RHL, M/s RHL has issued 100,000 equity shares to the appellant in the form of sweat equity shares to the appellant. The equity shares bear a face value of Rs.10. These shares have been valued however at Rs. 200 per share by M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings asked the appellant to furnish reasons why the difference between the market value of the shares and the cost in hands of the appellant (Nil) should not be taxed as professional income of the appellant u/s 28(iv) of the Income Tax Act, 1961 in the A.Y. 2007-08. 7. In response, the appellant submitted that it is not income u/s 17(2)(vi) because of the following:- (i) For the relevant A.Y. 2007-08, sweat equity shares allotted to any person were not treated as perquisite. This has become taxable u/s 17(2)(vi) only w.e.f. A.Y. 2010-11. (ii) During the A.Y. 2006-07, appellant was not employee of M/s Rockland Hospitals. (iiii) Sweat equity shares became taxable under Fringe Benefit tax only from A.Y. 2008-09. The appellant also subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of business transaction one party should give to the other party an irretrievable benefit or advantage as an obligation or facility or a concession. He relied upon the decision of the Hon'ble ITAT Mumbai in the case of Helios Food Improvers (D) Ltd. v. DCIT (2007) 14 SOT 546 (Mumbai). It was submitted that in the appellant's case, the transaction was not of any irretrievable benefits; rather, the benefit was conditional because of the two conditions of minimum association of 10 years and a lock-in period of three years. It further submitted that due to the lock-in period of three years, ownership and enjoyment starts only after the lock-in period expires and therefore the market value of the shares in its hands has to be zero in the A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x, even though in bookkeeping, an entry is made about a 'hypothetical income', which does not materialize. Where income has, in fact, been received and is subsequently given up, in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account." 10. In Godhra Electricity Co. Ltd. v. Commissioner of Income Tax, [1997]225 ITR 746 (SC), the apex Court reiterated the view taken in Shoorji Vallabhdas and Morvi Industries. In that case, it was noted that the Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered in a realistic manner. 11. In the case of State Bank of Travancore vs. Commissioner of Income Tax, [1986] 158 ITR 102 (SC) wherein the majority view was that accrual of income must be real, taking into account the actuality of the situation; whether the accrual had taken place or not must, in appropriate cases, be judged on the principles of real income theory. The majority opinion went on to say: "What has really accrued to the assessee has to be found out and what has accrued must be considered from the point of view of real income taking the probability or improbability of realization in a realistic manner and dovetailing of these factors together'. Of course, once the accrual takes place, on the conduct of the parties subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um was nothing but an entry in the books of M/s RHL; there is nothing to indicate that M/s RHL would have actually compensated the appellant in money terms. Indeed, the book value was around only Rs.9.98 as against face value of Rs.10. (2) there is no indication of the actual services provided by the appellant and the quantification thereof. (3) the entry in the books of M/s RHL was actually reversed in a subsequent year. Taking a practical view, it is clear that no real benefit accrued or arose in the hands of the appellant, and hence there is no taxability u/s 28(iv). 14. The ld. CIT(A) held that even assuming that a benefit could have said to have accrued, then also it has been held in the case of Helios Food Improvers Pvt. Ltd. v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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