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TMI Blog2024 (6) TMI 421X X X X Extracts X X X X X X X X Extracts X X X X ..... ement and for that reasons a very general conclusion of consequences of transfer of shares considered it to be sale of capital assets of company, while it is a simple case of transfer of shares and there can be no attribution of any Long Term Capital Gain on account of transfer of shares for the purpose of Section 112(1)(c)(ii) taxing the income at 20% plus surcharge and cess. Assessee had reasonably explained the reasons for deduction of 20% of the TDS by Sundaram Industries Pvt. Ltd. and, even otherwise on the basis of deduction of excess TDS there cannot be any estoppel to change the nature of income with consequential effects, as to, at what rate the income is taxable. Decided in favour of assessee. - Shri G.S. Pannu, Hon ble Vice President And Shri Anubhav Sharma, Judicial Member For the Assessee : Shri Ved Jain, Adv. Ms. Supriya Mehta, CA For the Revenue : Shri Vizay B. Vasanta, CIT-DR ORDER PER ANUBHAV SHARMA, JM: This appeal is preferred by the assessee against the order of the Ld. CIT(A), Delhi-42, New Delhi dated 13.02.2023 relating to assessment year 2018-19. 2. The facts in brief are that the Assessee is a Foreign Company and admittedly tax resident of United States o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al gain on sale of unlisted shares at the rate of 21.63% (including surcharge and cess) under section 112(1)(c) (i) of the Act, as against the tax computed by the assessee in the return of income at the rate of 10.815%. (including surcharge and cess) under the provisions of section 112(1)(c) (i) of the Act. 3. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of AO in computing the tax at the rate of 21.63% (including surcharge and cess) under section 112(1) (c) (i) of the Act despite the fact that the provisions of section 112(1)( ) of the Act are not applicable to the transfer of capital assets, being unlisted securities and hence not applicable to the facts of the assessee. (ii) That the ld CIT(A) has erred in rejecting the contention of the assessee that assessee has only transferred the unlisted shares and therefore, tax has been rightly computed and declared under the specific provisions of section 112(1)(c) (iii) of the Act by the assessee in the return of income. 4. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of AO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law in confirming the action of the AO initiating the penalty proceedings under section 270A of the Act. 10. That the appellant craves leave to add, amend or alter any of the grounds of appeal. 2.2 Assessee had also raised Additional Grounds vide application dated 5.10.2023 but the same were not pressed during the hearing. 3. We have heard the Ld. Representatives of both the sides and what comes up as an undisputed fact is that the investment in shares in Firestone TVS Pvt. Ltd. was made in the year 2008. The shares were held for more than 24 months. The shares have been transferred by way of Share Purchase Agreement, a copy of which is made available at Page No. 49-68 of the Paper Book. The assets and liabilities of Firestone TVS Pvt. Ltd. continue to remain in the name of Firestone TVS Pvt. Ltd., after the sale of shares by the assessee. The settled proposition of law is that the share holdings of a person does not determine the rights qua the assets of the company. The holding howsoever, big does not vest any rights in the shareholder with regard to the assets or even liabilities of the company which is a separate and distinct legal entity from its share holders and members. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, not an identifiable or distinct capital asset independent of the holding of shares. The control of a company resides in the voting power of its shareholders and shares represent an interest of a shareholder which is made up of various rights contained in the contract embedded in the Articles of Association. The right of a shareholder may assume the character of a controlling interest where the extent of the shareholding enables the shareholder to control the management. Shares, and the rights which emanate from them, flow together and cannot be dissected. .. As a general rule, in a case where a transaction involves transfer of shares lock, stock and barrel, such a transaction cannot be broken up into separate individual components, assets or rights such as right to vote, right to participate in company meetings, management rights, controlling rights, control premium, brand licences and so on as shares constitute a bundle of rights. (See CharanjitLal v. Union of India AIR 1951 SC 41, Venkatesh (minor) v CIT 243 ITR 367 (Mad) and Smt. Maharani Ushadevi v. CIT 131 ITR 445 (MP). Further, the High Court has failed to examine the nature of the following items, namely. non-compete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Firestone Industrial Products INC US i.e. Assessee the seller and Firestone TVC Pvt. Ltd. whose shares are subject of transfer. The agreement shows that SIPL and the assessee had executed a Memorandum of Understanding on 28.05.207 by which a Joint Venture Agreement was executed on 20.8.2007 and an investment was made in Firestone TVS Pvt. Ltd. wherein Sundaram Industries Pvt. Ltd. held 18,86,000 equity shares aggregating to 49% of the paid-up share capital of the company and Firestone held 19,63,000 equity shares aggregating to 51% of the paid-up share capital of the company. Subsequently, a Technical Collaboration Agreement dated 30.7.2008 as amended by the Agreement dated 15.9.2017 and a Trade Mark License Agreement dated 30.7.2008 was executed by virtue of which asssessee provided certain technology to Firestone TVS Pvt Ltd., and was licensed to use the trade mark of assessee company. As we go across this agreement, it is more in the nature of dilution of share holding of the assessee company in the joint venture by way of exit from the joint venture and the consequences of the same is that the Firestone TVS Pvt. Ltd. was to stop using Firestone Mark and to use the name of Fire ..... X X X X Extracts X X X X X X X X Extracts X X X X
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