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TMI Blog2007 (9) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... a joint venture agreement with Hewlett Packard, USA, and that in terms thereof, shares of the erstwhile HCL would effectively be transferred to HCL Ltd. and HCL HP Ltd. In fact, a scheme of arrangement to this end was prepared and sanctioned under sections 391 and 394 of the Companies Act, 1956, by this court. One of the terms of the scheme of arrangement, with which we are concerned, provided that the shareholders of the erstwhile HCL would receive, for 100 shares held by each shareholder, 68 shares of HCL HP Ltd., and 32 shares of HCL Ltd. The assessee also came to know that Hewlett Packard, USA, would buy the shares of HCL HP Ltd., at a predetermined price of Rs. 168.80 per share. 3. Based on this information, the assessee purchased 7, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the second issue regarding valuation of the closing stock of shares is concerned, the assessee worked out the average cost of the shares of HCL HP Ltd., at Rs. 55.82 per share. The Assessing Officer took the view that the market price for the shares of HCL HP Ltd. was Rs. 100 per share and on this basis he made an addition of Rs. 1,40,94,839 to the closing stock of shares held by the assessee. 9. The assessee challenged both the conclusions arrived at by the Assessing Officer but the Commissioner of Income-tax (Appeals) ("the CIT(A)") by his order dated October 31, 1995, rejected the challenge. The assessee then preferred an appeal before the Tribunal which passed an order on January 20, 1997. This order is of some importance because the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee had actually made purchases from the Delhi Stock Exchange. More-over, the transaction was confirmed by the brokers and payments were made to the brokers through account payee cheques. The transactions did not appear to be sham transactions and the Assessing Officer had not brought on record any evidence to show to the contrary or that any part of the consideration had come back to the assessee. It was noted that the assessee had some special knowledge about the joint venture and the scheme of arrangement and was, therefore, willing to pay a higher price to corner the shares. The Commissioner of Income-tax (Appeals) came to the conclusion that section 40A(2) of the Act was inapplicable inasmuch as the expenditure was neither excessive nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner of Income-tax (Appeals) correctly understood the earlier order passed by the Tribunal on January 20, 1997, and had fully implemented it. 16. On the merits of the case, the Tribunal held that on the first issue, the Commissioner of Income-tax (Appeals) had clearly held that no case had been made out for invoking the provisions of section 40A(2) of the Act or to hold that the transactions entered into by the assessee were sham transactions. The explanation given by the assessee for purchasing the shares of the erstwhile HCL at a high price was plausible and since the payments made to the brokers were through account payee cheques, there was enough material to negate all doubts about the transaction being a sham. Moreover, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind any reason to interfere in this regard because this is essentially a matter of under-standing the order of the Tribunal which does not lead to any substantial question of law. 20. On the merits also, we find that the explanation given by the assessee with regard to the first issue was a plausible explanation and could not be termed as perverse. The Commissioner of Income-tax (Appeals) as well as the Tribunal were quite justified in examining the explanation and coming to a conclusion thereon which is that the transactions of purchasing shares of the erstwhile HCL at a high price were not sham transactions. This is essentially a question of fact which ought not to be disturbed unless it is perverse which, in our opinion, is not so. Both ..... X X X X Extracts X X X X X X X X Extracts X X X X
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