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TMI Blog2024 (3) TMI 374X X X X Extracts X X X X X X X X Extracts X X X X ..... n 1 to section 115JB(2) of the Act. The law in this regard is very well settled by the decision in the case of Apollo Tyres Ltd [ 2002 (5) TMI 5 - SUPREME COURT] As stated earlier, the mistake committed by the assessee which stood subsequently endorsed by the revenue was in Asst Year 2012-13 wherein the cost of investment of gift of shares should have been added back in the computation of book profits u/s 115JB of the Act. Even if this item does not fall under any of the items mentioned in Explanation 1 to section 115JB(2) of the Act, still the same ought to have been added back for the purpose of computation of book profits u/s 115JB of the Act for the simple reason that the accounts per se were not in accordance with provisions of section 227(1A) of the Companies Act, 1956 as Capital Expenditure has been debited to Revenue Account . But since revenue had missed the bus in Asst Year 2012-13, the correct treatment given by the assessee in Asst Year 2015-16 which is in accordance with the provisions of the Companies Act and the said receipt not falling under any of the items reflected in Explanation 1 to section 115JB(2) of the Act, the said receipt cannot be taxed u/s 115JB of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2019 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) dated 30.12.2017 by the Assessing Officer, ACIT, Circle-23(1), New Delhi (hereinafter referred to as ld. AO ). 2. The assessee has raised the following grounds of appeal before us:- 1. That the Order passed by the CIT(A) is bad in law as the same has been passed without considering and discussing the detailed written submissions and case law submitted by the appellant company and, therefore, same deserves to be quashed. 2. That the CIT(A) erred in upholding adjustment of Rs.2, 12,31,641/- in Book Profit of the appellant company for the purpose of Section 115JB of the Act without considering the facts of the case and also the decision of the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. vs. CIT (2002) 255 ITR 273 (SC) and other judgements. 3. That the CIT(A) erred in upholding the disallowance made by the AO of Rs. 11,04,54,306/- in the amount of Long Term Capital Loss to be carried over without appreciating the facts of the case and the legal position that the appellant company had correctly determined the amount of Capital Loss adopting the rate at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e years from the date of execution of the gift deed, ie. July 7,201, whichever is higher. During the current year, 615000 equity shares gifted by the company have been surrendered by the recipients due to non fulfillment of the conditions mentioned in the Gift deed. Accordingly, these shares have been reinstated as Investment during the year. 4. Since this transaction was not routed through profit and loss account and directly credited to reserves and surplus, the assessee was show caused by the ld. AO as to why the same should not be considered for the purpose of computation of book profits u/s 115JB of the Act. The assessee in its reply admitted that when the shares were gifted to the aforesaid persons in Asst Year 2012-13, the cost of investment was charged off to profit and loss account , which was a capital expenditure, and the same was added back in the computation of income under normal provisions of the Act. However, erroneously, it was omitted to be added back in the computation of book profits u/s 115JB of the Act. It was submitted that merely because a particular receipt is directly credited to reserves and surplus instead of routing it through profit and loss account, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PCIT. Hence the revenue had missed the bus to make suitable adjustment in Asst Year 2012-13 while computing book profits u/s 115JB of the Act. We find that admittedly, the receipt of shares due to surrender of gift during the year under consideration is a capital receipt. There is absolutely no quarrel on this point. The orders of the lower authorities also does not even suggest that the same is a revenue receipt. The only grievance of the revenue is that since in Asst Year 2012-13, at the time of gifting of shares, the value thereon was not added back by the assessee in the computation of book profits u/s 115JB of the Act and hence when the said shares were partially surrendered during the year under consideration, the receipt thereof would have to suffer tax u/s 115JB of the Act in Asst Year 2015-16. Though this argument prima facie becomes acceptable on the grounds of equity, in our considered opinion, the same cannot be brought to tax in Asst Year 2015-16 u/s 115JB of the Act. It is not in dispute, the total income of the assessee is determined u/s 115JB of the Act for Asst Year 2015-16. It is not in dispute that the assessee had not sought any benefit with regard to the subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rprises Ltd. The details of loss on sale of such shares as submitted by the assessee (as per IT Act, 1961) vide his submissions dated 27.11.2017 are as under:- Sl No. Name of Scrip(Quoted) No. of shares and dare of acquisition Indexed Cost of acquisition Date of disposal Proceeds realized Loss on sale of investment 1. Religare Enterprises Ltd 14,06,250 on 13.12.2006 14,67,056 on 2402.2010 12,09,000 on 44.39,30,636/- 64,38.35.755/- 13.03.2015 13.03.2015 47.10,93,750/- 49,14,63,760/- 27163114 (35,23.71.995) 24.02.2010 69,54.04,557/- 30.03.2015 40.50.15,000/- (29.03,89,557) TOTAL 198,31,70.948 1,36.75.72.510/- (61,55,98.438 On perusal of the chart mentioned above, it has come to notice that there is a huge Long Term Capital loss against the investment made by the assesse. It is further seen that the shares were sold to the group company M/s RHC Holding Pvt. Ltd. The assessee company is a part of Religare group of companies. The shares have not been sold at the quoted price at the exchange. Therefore, prima-facie it appeared that the transaction is not a genuine transaction but a sham transaction entered to create artificial/contrived losses Thus, vide order sheet dated 13.12.2017. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this regard, we have referred to your goodself the decisions of the Hon'ble Supreme Court in the case of CIT vs. George Henderson And co. ltd. (1967) 66 ITR 622 (SC) and CITvs. Gillanders Arbuthonot and Co., Ltd (1973) 87 ITR 407 (SC) and also the decisions of the Hon'ble High Court in the case of CIT vs. Nilofer I. Singh-309 ITR 233 (Del) and Dev Kumar Jain vs. ITO ANR (2009) 309 ITR 240 (Del) 9. The contention of the assessee has been examined The shares that have been sold was listed and quoted at the stock exchange. The assessee's average cost price per share comes to Rs. 335.53 (as per the books of accounts). These shares have been transferred to the group companies M/s RCH Holdings Pvt. Ltd. at a price of Rs. 335 per share and thereby creating a cash loss/books loss of Rs. 2163622/-. The market price of the shares is as under- Date Open Price High Price Low Price 1 Last Price Close Price No. of shares sold Value as per market price(at lowest price as per Rule 11UA) 13.03.2013 383.00 399.50 372.60 372.65 377.35 2873306 1070593816 30.03.2015 337.90 344.95 337.00 343.00 342.20 1209000 407433000 Total 1478026816 Thus against the market price of Rs. 1478026816/-, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g this observation in their respective orders. If the sale transaction is to be considered as ingenuine or sham, then the revenue ought to have disallowed the entire long term capital loss claimed by the assessee in the sum of Rs 61,55,98,438/-, whereas , the revenue had resorted to disallow only Rs 11,04,54,306/- and had even allowed the remaining loss of Rs 50,51,44,132/- to be carried forward. 12. Now another issue that crops up is that when the prevailing market price is very much available to the assessee to effect the sale transaction through a registered stock broker in a recognized stock exchange, whether it is justified in ignoring the same and effect an off-market trade at a mutually agreed price as explained supra. In this regard, we find that the assessee had been consistently maintaining the same stand that normally the shares of Religare Enterprises Ltd that were traded in the last 11 months during the year under consideration were in the range of 55000 to 60000 shares only, whereas the impugned transaction is to the extent of 4082306 shares in two tranches. Hence obviously when this kind of huge quantity of shares that were subjected to transfer more particularly bet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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