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TMI Blog2023 (6) TMI 814X X X X Extracts X X X X X X X X Extracts X X X X ..... I Ltd, therefore, the addition has to be made in the hands of the assessee. Provisions of section 56(2)(viia) are not attracted to the Assessee - Appeal filed by the Revenue is dismissed. - I.T.A. No. 760/DEL/2019 - - - Dated:- 16-6-2023 - Dr. B.R.R. Kumar, Accountant Member And Shri Yogesh Kumar Us, Judicial Member For the Assessee : Shri R. S. Singhvi, Advocate; And Shri Satyajit Goel, Advocate; For the Department : Shri P. Praveen Sidharth, [CIT] - D. R.; ORDER PER YOGESH KUMAR US, JM This appeal is filed by the Revenue against the order dated 30.11.2018 of the ld. Commissioner of Income Tax (Appeals)-I [(hereinafter referred to CIT (Appeals)] New Delhi, for assessment year 2015-16. 2. The Revenue has raised the following substantive ground of appeal :- Whether on facts and circumstances of the case, the learned CIT (Appeals) has erred in deleting the addition of Rs. 24,01,57,001/- under section 56(2)(viia) of the Income Tax Act, 1961 on account of difference in valuation of shares as per book value and the value adopted as per DCF Method. 3. Brief facts of the case are that, the assessee filed return declaring Nil income for the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Ld. DR submitted that the CIT(A) has committed error in deleting the addition. 7. The Ld. AR vehemently contended that the Section 56(2)(viia) of the Act is not applicable to the Assessee, since the Assessee has purchased shares of Ansal Township from IIRF India Realty II Ltd. and IFIN Reality Trust at a price higher than the alleged book value, in as much as, the allegation is that shares were purchased @Rs. 2777/- as against the book value/FMV of Rs. 815.59/-. Since Section 56(2)(viia) of the Act is applicable in a converse situation, therefore, the provisions of the Section cannot be invoked for the simple reason that the precondition to invoke Section 56(2)(viia) of the Act is that the consideration for transfer of share should be less than FMV by Rs. 50,000/- or more. Further by relying on the order of the CIT(A) and taking us through the order of the CIT(A) and the paper book, submitted that the order of the CIT(A) requires no interference at the hands of the Tribunal accordingly prayed for dismissal of the appeal filed by the Revenue. 8. We have heard the parties perused the material available on record and gave our thoughtful consideration. 9. The assessee Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d) or clause (vii) of section 47. Explanation. - For the purposes of this clause, fair market value of a property, being shares of a company not being a company in which the public are substantially interested, have the meaning assigned to it in the Explanation to clause (vii); 11. The Ld.CIT(A) while deleting the above addition held that provision of Section 56(2)(viia) are not applicable to the transaction of purchase of shares by the assessee particularly when the purchase price is higher than FMV shares. The CIT(A) has also approved the business expediency of the transaction as well. The relevant portion of the findings of the CIT(A) are as under: 6.4.1. I have carefully considered the assessment order and written submissions filed by the Ld. AR. The Ld. A.R. has submitted that the appellant company was incorporated on 6.11.2006 to carry on real estate business. It is a wholly owned subsidiary of Delhi Towers Ltd which is a wholly owned subsidiary of Ansal Properties Infrastructure Ltd. (Ansal API), a company in which public are substantially interested. As such, Ansal API is the holding company of the appellant. The Ld. A.R. has stated that during F.Y. 2014- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt made by the foreign investor and during F.Y. 2014-15 Ansal API through its subsidiary i.e. the appellant partially purchased the investment held by IIRF India Realty II Ltd and IFIN Realty Trust in Ansal Township. From IIRF India Realty II Ltd, 5576 equity shares 1,12,908 CCCPS of Ansal Township Pvt. Ltd. were purchased and from IFIN Realty Trust, 190 equity shares 3767 CCCPS were purchased. Entire purchase was made for total consideration of Rs. 34,00,18,657/-. Addition of Rs. 24,01,57,001/- was made by the Assessing Officer under section 56(2)(viia) of the Act, for the reason that book value of share / CCCPS was Rs. 815.59, whereas the same were purchased @ Rs. 2,777/- per share / CCCPS. It was held by the A.O. that since the difference (Rs. 1961.41) cannot be added in the hands of the seller i.e. IIRF India Realty II Ltd, therefore, the addition has to be made in the hands of the appellant. In making the addition, reference was made to certain Circulars / Notifications issued by RBI. It was also observed that valuation at discounted cash flow method was without any basis. 6.4.4. In addition to the above, the Ld. A.R. has submitted that due to certain unavoidable reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the prescribed limit of Rs. 50,000) by an individual or an HUF is chargeable to income-tax in the hands of recipient under the head income from other sources . However, receipts from relatives or on the occasion of marriage or under a will are outside the scope of this provision. The existing definition of property for the purposes of section 56(2)(vii) includes immovable property being land or building or both, shares and securities, jewellery, archaeological collection, drawings, paintings, sculpture or any work of art. A. These are anti-abuse provisions which are currently applicable only if an individual or an HUF is the recipient. Therefore, transfer of shares of a company to a firm or a company, instead of an individual or an HUF, without consideration or at a price lower than the fair market value does not attract the anti-abuse provision In order to prevent the practice of transferring unlisted shares at prices much below their fair market value, it is proposed to amend section 56 to also include within its ambit transactions undertaken in shares of a company (not being a company in which public are substantially interested) either for inadequate consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e higher than the fair market value of the shares and CCCPS. The Ld. A.R. has explained that the price at which shares and CCCPS have been purchased are less than what was agreed by the agreement dated 2.4.2008 and - 20.5.2010 and the commercial expediency of the business cannot be doubted in -e 32 3 transaction of purchase of shares and CCCPS by the appellant company. Considering the facts of the case, I am of the opinion that the provisions of section 56(2)(viia) are not attracted in the instant case. Accordingly, I hold that the AO is not justified in making the addition of Rs. 24,01,57,001/- in the case of the appellant company and the addition of Rs. 24,01,57,001/- is deleted. This ground of appeal is allowed. 12. On plain reading of the Memorandum explaining the insertion of section 56(2)(viia) and amendment of section 56(2)(vii) of the Act, it is evident that both the provisions are to counter evasion of tax - by way of transfer of property either without consideration or inadequate consideration. A combined reading of the provisions of section 56(2)(viia) of the Act and the Memorandum explaining the provisions shows that the provision of section 56(2)(viia) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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