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TMI Blog2024 (4) TMI 581X X X X Extracts X X X X X X X X Extracts X X X X ..... said agreement within 120 days from the date of the agreement where either of the parties have failed to fulfill the conditions precedent to the satisfaction of either of the parties. It is also evident that sub clause 1 specified in clause 5 for delivery of shares to the purchaser is also fixed by the parties to be after the satisfaction of all the condition precedent but in any event has to be after 03.07.2006 and not later within 120 days from the date of execution of the said agreement. These clauses have categorically specified the date of contract of sale as declared by the parties which has been mandated by the board in Circular No. 704 which has been heavily relied upon by the lower authorities. The above position has justified the fact that the date of the agreement by no stretch of imagination could be the date of sale of the shares by the assessee to the purchaser. As per the decision of Bharti Gupta Ramola [ 2012 (4) TMI 438 - DELHI HIGH COURT] the date of transfer is 30.06.2006 for computing the holding period of assets from both the date, i.e., of acquisition and sale are not to be excluded. We would also like to draw our support from the decisions relied upon by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal subscription of CCPS converted later on into equity shares. On 20.04.2006, assessee entered into an agreement to sale above shares to Infosys Technologies Ltd. for a consideration of rupee equivalent to USD 115,131,000/-. This consideration was subject to terms and conditions of that agreement which are mentioned as condition precedent to the agreement as per clause 4 of the agreement. If such conditions are not fulfilled there was a right to rescind the contract as per clause 4.3.7 of agreement. Clause 5 of agreement also specifies closing date of transaction. There was also an escrow agreement and consideration was to be released after share transferred to depository account and Infosys Ltd. On 30.06.2006, shares of Progeon Ltd. (now Infosys BPO Ltd.) was transferred to ICICI Bank Ltd. On 23.06.2006, there was an amendment to the share purchase agreement dated 20.04.2006 for certain reference. On 30.06.2006, assessee received payment of Rs. 308,65,86,584/- from Infosys Tech. Ltd. through Escrow account pursuant to transfer of shares on 30.06.2006 from demat account of assessee. The assessee had shown capital gain on sale of shares as long term capital gain as date of acquisit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares was only on 30.06.2006. The ld. AR further stated that the lower authorities have relied on the CBDT Circular No. 704 dated 28.04.1995 for determining the date of transfer which the ld. AR contends that will not be binding on the assessee. The ld. AR further stated that even otherwise the CBDT Circular states that the date of contract as declared by the parties will be treated as date of transfer and in this case it has to be considered as 30.06.2006 being the date when the transfer was effected. The ld. AR reiterated that the lower authorities have erroneously considered the date of agreement to be date of sale. The ld. AR also stated that as per the agreements the assessee has dematerialized the shares on 20.06.2006 and the sale had takes place on 30.06.2006, thereby qualifying the same as LTCG. The ld. AR further to this submitted that as per the terms of the agreement, the sale was conditional only on the happening of the certain events specified in clause (4) of the said agreement. The ld. AR relied on the decisions of the Hon ble Delhi High Court in the case of Bharti Gupta Ramola vs. CIT (in Income Tax Appeal No. 1234/2011 vide order dated 12.04.2012) and the Tribunals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subjected to fulfillment on certain condition which was fulfilled and shares were transferred on 30.06.2006. The assessee contended that 30.06.2006 is the date of transfer of shares which were held for more than 12 months making it a long term capital assets. Reliance is placed on the decision of the co-ordinate bench in the case of Mrs.Hami Aspi Balsara (supra) and Suresh K Jajoo (supra). We hereby reproduce the agreement with a condition precedent as per clause (4) and (5) wherein the recitals of the said clause in the agreement are cited hereunder for ease of ready reference: 4. CONDITIONS PRECEDENT 4.1 Conditions to be fulfilled by the Vendor 4.1.1 The obligations of the Purchasers hereunder shall be subject to the Vendor complying with or fulfilling the following conditions precedent ( Conditions Precedent ). 4.1.1.1 Corporate Proceedings: The performance and fulfillment in all material respects of all corporate and shareholder proceeding of the Vendor necessary to authorize and approve the sale of the Shares, such as, if applicable, Resolutions by the Board of Directors of the Vendor approving and authorizing sale of the Shares as contemplated herein to the Purchaser. Certif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Board of Directors of the Purchaser approving and authorizing purchase of the Shares as contemplated herein from the vendor and the purchase thereof by the Purchaser. Certified true copies of the abovementioned. resolutions r other similarly effective documents, in form reasonably acceptable to the Vendor, shall have been provided to the Vendor. 4.2.1.3 FCTRS: The Purchaser shall have provided to the Vendor the following documents: (a) Consent letter duly signed by the Purchaser indicating the details of transfer i.e. number of shares to be transferred, the name of the Company and the price at which shares have been transferred. b) Certificate from a Chartered Accountant indicating fair value of shares. c) Undertaking from the Purchaser to the effect that the pricing guidelines specified in the RBI AP. (DIR Series) Circular No, 16 dated October 4, 2004 have been adhered to. d) The shareholding pattern of the Company after the acquisition of shares by the Purchaser. 4.2.1.4 Warranties: No breach of the representations or warranties of the Purchaser hereto shall have occurred and the representations and warranties of the Purchaser shall continue to be true with reference to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Shares, the Vendor shall, pursuant to Section 3.1 (a) of the Escrow Agreement, notify Citi Bank N.A., Hong Kong to instruct the Vendor DP (as defined therein) to proceed to arrange for the completion of the dematerialization of the Share and the credit of the same to the depositary account of the Vendor. The Purchaser and the Vendor shall exercise their best endeavors to fulfill the Conditions Precedent mentioned in this clause 4.3. 4.3.7 In the event all the Conditions Precedent are not fulfilled o the satisfaction of the Purchaser and the Vendor within 120 days from the date of this Agreement or such additional period as agreed to by the Parties then either of the Purchaser and the Vendor shall have the right to rescind this Agreement. Any such rescission shall be without prejudice to any accrued rights of the Parties hereunder. 44 Fulfillment of Conditions Precedent Immediately upon the fulfillment of the Conditions Precedent in accordance with the above, the Parties shall agree upon the Closing Date in the manner specified in Section S CLOSING 5.1 The closing by delivery of Shares to the Purchaser (the Closing ) shall be as soon as practicable after the satisfaction of all C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -4-1995. 22. Instructions regarding determination of the date of transfer and holding period for purposes of capital gains qua transactions in securities 1. Under the provisions of clause (42A) of section 2 of the Income-tax Act, 1961, the shares held in a company or any other security listed in a recognised stock exchange in India or units of the Unit Trust of India or units of a mutual fund specified under section 10(23D) shall be regarded as short-term capital assets if they are held by an assessee for not more than 12 months immediately preceding the date of its transfer. Clarifications have been sought as to which date should be regarded as the date of transfer and also about the date from which the holding period of the securities should be reckoned. Clarifications have also been sought as to how the holding periods will be computed for the purposes of capital gains when the securities, purchased in several lots at different points of time and which are taken delivery of in one lot, are subsequently sold in parts and no correlation of the dates of purchase and sale is available. 2. When the securities are transacted through stock exchanges, it is the established procedure tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fulfilled by both the vendor and the purchaser as specified in clause (4) of the said agreement. It is also evident that clause 4.3.7 of the said agreement either the purchaser or the vendor can rescind the said agreement within 120 days from the date of the agreement where either of the parties have failed to fulfill the conditions precedent to the satisfaction of either of the parties. It is also evident that sub clause 1 specified in clause 5 for delivery of shares to the purchaser is also fixed by the parties to be after the satisfaction of all the condition precedent but in any event has to be after 03.07.2006 and not later within 120 days from the date of execution of the said agreement. These clauses have categorically specified the date of contract of sale as declared by the parties which has been mandated by the board in Circular No. 704 which has been heavily relied upon by the lower authorities. 16. The above position has justified the fact that the date of the agreement by no stretch of imagination could be the date of sale of the shares by the assessee to the purchaser. As per the decision of Bharti Gupta Ramola v. CIT [2012] 20 taxmann.com 762 the date of transfer is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Legislature to treat the transfer on the basis of extinguishment of any right in capital asset then there was no necessity of including sale and exchange in the definition of transfer under section 2(47). It is well-settled principle of interpretation that no word in a statute is superfluous and each word has to be assigned specific meaning in the context in which it is used. We further find lot of substance in the argument of ld. counsel in this regard with reference to inclusion of clause (v) in the definition of transfer under section 2(47) only with reference to immovable property and not with reference to movable property. In the present case when final delivery of shares took place on 1/15-4-2005 and, therefore, in view of the decision in the case of M. Ramaswamy (supra) and Rajgiri Rubber Produce Co. (supra), in our opinion, transfer of shares took place on 1/15-4-2005. This view is fully supported by the decision of the Hon ble Supreme Court in the case of V.R. Shelat (supra) wherein, it was held that procedure required by law was to be complied with and, accordingly, delivery of share certificate along with transfer deed had to be handed over to purchaser in order to comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lete when the conditions contemplated in the agreement are fulfilled. The definition of sale as per Sale of Goods Act assumes significance because the term sale has not been defined in the Income-tax Act. 11. The Assessing Officer has pointed out that assessee had received substantial part of sale consideration at time of share purchase agreement which was not refundable. In this regard, ld counsel has referred to section 65 of Indian Contract and Specific Relief Act, which reads as under: Section 65. Obligation of person who has received advantage under void agreement or contract that becomes void. When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it. This section makes it very clear that if, for any reason, the terms of contract cannot be fulfilled then assessee is bound to restore the benefits she had received including consideration to the purchaser. 12. Now coming to the decision of the Amritsar ITAT in the case of Maxtelcom Ventures (supra). We are of the opinion that the said decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recording the unconditional and irrevocable discharge of the guarantees and cancelled the original guarantees. This occurred on 1-4-2005. Therefore, the date of contract of sale as declared by the parties in the share purchase agreement was 1-4-2005. The directors resigned on the date as per the said Article. Therefore, the contract was completed on fulfilment of conditions contemplated in Article 6 which took place on 1-4-2005. Thus, from the very beginning, the parties had declared the date of contract of sale subject to fulfilment of conditions and, therefore, on the date of fulfilment of above conditions, the date of contract of sale crystallized. We are, therefore, of the opinion that this circular in no way prejudice the assessee s claim. It is pertinent to note that Dabur India Limited, the purchaser has also recognized the purchase of shares in financial year 2005-06 and not financial year 2004-05. The ld. CIT(A) has observed that the entire sale consideration was Rs. 10,65,06,753 but the fact is that it was not the entire sale consideration as the assessee had received Rs. 5 lakhs on completion of sale. In view of the above discussion, we are of the opinion that as the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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