9911796707
TMI Blog2024 (9) TMI 1441X X X X Extracts X X X X X X X X Extracts X X X X ..... find that the assessee is only seeking to include the fact that the workings were sought to be asked by the Tribunal in accordance with Rule 11UA of the Rules for determination of fair market value while computing capital gains on sale of SBPL shares to understand the intention of this Tribunal as to whether the workings of fair market value of share were called for as per Rule 11UA of the Rules or not. Tribunal always intended adoption of Rule 11UA of the Rules for determination of FMV of shares and directed the Department to furnish the workings accordingly. But the workings given by the Department to the Tribunal were not in accordance with Rule 11UA of the Rules as it had not considered the figures pertaining to certain intermediary companies. Whereas, in assessee s wife case i.e. Mrs. Neelu Analjit Singh, who had also sold certain shares along with assessee herein of SBPL, the Tribunal [ 2019 (12) TMI 1198 - ITAT DELHI ] had observed that the valuation of Rs. 131.86 per share adopted by the AO suffered from certain fallacy and the same was not according to Rule 11UA of the Rules. Accordingly, the Tribunal in the case of Mrs. Neelu Analjit Singh directed the AO to verify all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l order passed on 01.12.2017 in the case of the assessee, the assessee had preferred an appeal before the Hon ble High Court and the same is admitted. Against the order passed by this Tribunal in the case of Neelu Analjit Singh dated 19.12.2019, the revenue as well as assessee had preferred respective appeals before Hon ble High Court and the same are already admitted. It was always the case of all the parties before us i.e. Mr. Analjit Singh, Mrs. Neelu Analjit Singh and the Income Tax Department, that Rule 11UA of the Rules cannot be applied for the purpose of section 48 of the Act while computing the capital gains. But Tribunal directed the Department to adopt FMV as per Rule 11UA of the Rules after dismissing the preliminary plea of the assessee that actual consideration received should be considered for computing the capital gains. This preliminary plea is already subject matter of challenge before the Hon ble High Court. As far as the Tribunal is concerned, since it had adopted two different values as fair market value, the same is sought to be rectified by this present MA proceedings. We direct the AO to adopt FMV of Rs. 70.59 per share and recomputed the capital gains accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn as diary companies te. MV Healthcare Services Private Limited (hereinafter referred to as MVH ) and ND Callus Info Services Private Limited (hereinafter referred to as NDC ) and other down-stream entities held equity shares in Hutchison Essar Limited ( HEL ), a company engaged in the business of providing telecom services across different circles in India, which was subsequently renamed as Vodafone India Limited ( VIL ). In the assessment order passed under section 143(3) of the Act, the assessing officer enhanced the amount of capital gains returned by the appellant by substituting the aforesaid actual consideration received from sale of shares of Scorpio with alleged fair market value ('FMV') thereof amounting to Rs. 2233,42,85,070, taking indirect interest of Scorpio in VIL at 9.65% (the correct figure being 8.9055%, duly accepted by the ITAT in the impugned order) and applying the same to enterprise value of VIL determined at Rs. 56,448 crores by the independent valuer i.e. Kotak Mahindra Capital Company Limited (hereinafter referred to as Kotak ) as per Discounted Cash Flow Method ( DCF Method ), thereby arriving at price per share of Scorpio at Rs. 142.70 The afore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l under section 260A of the Act before the Hon'ble Court, the applicant is seeking rectification of the apparent mistakes in the appellate order in adopting fair market value of the shares of Scorpio at Rs. 131.86 per share, furnished by the Revenue as computed as per Rule 11UA of the Rules, since such computation suffers from apparent mistakes, elaborated hereinafter in this application. It is respectfully submitted that the prayer for rectification of apparent mistakes in the impugned order is without prejudice to the submission(s) that - (i) the valuation given by Kotak was not the basis for fixation of the sale consideration for sale of Scorpio between the contracting parties; and (ii) rule 11UA of the Rules cannot be invoked to substitute the current sale consideration accrued between the parties. The grounds for rectification are as under: A. Liabilities excluded by Revenue, not in accordance with Rule 11UA Attention is invited to the relevant portion of Rule 11UA of the Rules (also reproduced at pages 113-114/para 61 of the impugned order), which reads as under: [2](a) the fair market value of unquoted equity shares (A-L) (PV). (PE) where, A=-book value of the assets in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded as part of liabilities to be reduced from the book value of assets. From the above it follows that - (i) outstanding amount of preference share capital, and (ii) arrears of dividend in respect of cumulative preference shares, are liable to be reduced from the book value of assets for computing net asset value (NAV) as per the aforesaid Rule 11UA of the Rules. Having regard to the aforesaid, the conclusion arrived at in Para 62 of the appellate order (reproduced above) to the effect that the Kotak had wrongly reduced aforesaid liabilities while computing NAV of intermediate companies is contrary to the clear, express and unambiguous provisions of clauses (i) and (vi) of Rule 11UA of the Rules. B. Incorrect amount of assets and liabilities adopted by Revenue Further, the amount of assets and liabilities adopted in said computation allegedly as per the balarice sheet of intermediate companies (between Scorpio and HEL/VIL) as on 31.03.2013 are incorrect inasmuch as the same are not reconcilable with the actual reported figures in the aforesaid audited balance sheet(s). In view of the above, the calculation of FMV furnished by the Respondent Revenue and adopted by the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition made by the assessing officer and upheld by the CIT(A). As per the working furnished by the Revenue, liabilities on account of preference share capital as per contractual terms were not to be reduced as is evident from the following extract at page 22/Para 34 and 35 of the Written Synopsis filed by the Revenue, which is reproduced hereunder for ready reference: 34. Annexure 4 to this note provides a working of the liabilities. It was submitted by the appellant at the time of oral hearing that difference arises primarily on account of the amount set apart for payment of dividends to preference shareholders. It is submitted that such a claim is clearly inadmissible in view of sub-rule 2(ii) of the Rule 11UA of the IT Rules. Even otherwise, such liabilities cannot be taken into account in arriving at the value of shares of a company under NAV method. 35. The valuation done as per the rule works out to Rs. 136 per share and the AO has taken the value of Rs. 132 per share only (initially it was Rs. 142.70, which was arrived at after taking the appellant's stake in VIL at 3.9% instead of the correct stake at 3.65%. Thus, the valuation adopted by the AO is in conformity with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny based on the books of accounts of such company as on 31 December, 2013, except that in case of any outstanding preference shares, the same has been valued as on 28 February, 2014 as per its contractual terms. As per the aforesaid method,, Kotak had arrived at a fair market value of shares of Scorpio by taking the value/valuation of underlying companies including VIL. The fair market value of the main underlying operating company, i.c., VIL was computed by Kotak on the basis of DCF method at Rs. 56,448 crores which has been accepted by the assessing officer. Considering that the other intermediary companies between Scorpio and VIL were only investment companies, without having any business operations, and no business projections/forecast were available for such companies, the same were valued on the basis of net asset value (NAV) of each such company, which were added (in case of positive net assets) or reduced (in case of negative net assets), as the case may be, from the fair value of VIL arrived on the basis of DCF method as pointed above. It would further be pertinent to point out that the NAV of the intermediaries/step down subsidiary companies was computed on the basis of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .... In other words, the aforesaid valuation rule provided for computing fair value of the shares/investments held by the holding company, while computing the value of shares of such later company; II. Similarly, the amended Rule 11UA of the Income Tax Rule, 1962 also provides that the fair market value of the shares held by such company will also need to be considered, while computing the fair market value of the shares of such holding company; iii. Schedule 2 of the Framework Agreement dated 05.07.2007, which prescribed for the method to be followed for computing the fair market value /enterprise value of the shares of HEL/VIL for the purposes of Clause (a)(ii) of Schedule 1 to check whether the said value exceeds USD 25 billion also provided that NAV of intermediary companies will need to be added and / or reduced from the enterprise value of HEL, for arriving at the fair market value of the shares of Scorpio. In that view of the matter, the methodology adopted by Kotak in valuing the shares of Scorpio was correct and the assessing officer erred in disregarding the said method and arriving at the alleged FMV of Scorpio by directly applying its indirect economic interest to the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion of the liabilities towards preference capital, etc., reduced by Kotak while calculating the FMV of shares of Scorpio. Prayer For the aforesaid cumulative reasons, it is respectfully submitted that the direction given by the Hon'ble Tribunal vide para 64-65 of the appellate order to adopt Rs 131.86 per share as the fair market value of shares of Scorpio, which accrued to the applicant from sale of said shares is erroneous and suffers from mistakes apparent from record, requiring rectification The direction contained in para 64 reproduced hereunder; Accordingly, we hold that the value of shares for which the sale consideration said to have been accrued to the assessee has to be worked out at Rs. 131.86 per share. Thus, the AO is directed to compute the capital gain by taking the sale consideration by adopting the per share value of SBPL at Rs. 131.86. needs to be replaced by the following: Accordingly, we hold that the value of shares for which the sale consideration said to have been accrued to the assessee has to be worked out strictly as per Rule 11UA of the Rules taking into account correct figures as per Balance Sheet of the intermediate companies as at 31.03.2013. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this order was rendered by the Tribunal on 19.12.2019. 11. Based on the aforesaid order of the Tribunal, an appeal effect order was passed by the Deputy Commissioner of Income Tax on 12.02.2020 [See Annexure P-1 and P-2 appended to CM Appl.48034/2023]. 12. Given this position, learned counsel for the petitioner says that this writ petition can be disposed of with a direction to the Tribunal to re-examine the merits of the miscellaneous application, which was dismissed via the order dated 19.03.2018. 13. Mr Puneett Singh, who appears on behalf of the respondent/revenue, says that he can have no objection if this court were to direct the Tribunal to reexamine the merits of the miscellaneous application. 13.1 It is ordered accordingly. 14. The impugned order dated 19.03.2018 is set aside. The miscellaneous application is restored to its original number and position. 15. The Tribunal is directed to pass a fresh order, after hearing the counsel for the parties. 16. List the aforementioned miscellaneous application (M.A. 742/Del/2017) before the concerned Bench of the Tribunal on 20.10.2023 for directions. 17. The writ petition is disposed of, in the aforesaid terms. 18. The date already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Your Honours' notice the broad implications of such a proposition keeping in view the final findings of the Hon'ble ITAT [which make no reference directly or indirectly to Rule 11UA]. 5. The Respondent-Revenue seeks the indulgence of the Hon'ble ITAT and prays that the Hon'ble ITAT may exercise its inherent power vested upon it under law and correct certain the fundamental flaws [as would be elucidated infra), found present in the order of the Hon'ble ITAT, particularly in the light of what is being canvassed by the Assessee in their present M.A A. Maintainability of the present petition seeking to bring to notice of the Hon'ble ITAT, certain apparent mistakes in the Impugned Order. 6. Briefly stated, on 01.12.2017, the Hon'ble ITAT was pleased to pass the Impugned Order disposing off the appeal filed by the Assessee. 7. Consequently, the Assessee preferred an M.A. bearing number- M.A. No. 742/Del/2017 before the Hon'ble ITAT, seeking rectification of certain errors contained in the Impugned Order., which came to be dismissed vide order dated 19.03.2018, 8. Aggrieved by the same, the Assessee preferred a Writ Petition before the Hon'ble High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory provisions contained in Section 245(2) of the Act grant this power to the Hon'ble ITAT. 12. Since the proceedings for rectification are open before the Hon'ble ITAT as a consequence of the order of the Hon'ble High Court dated 18.09.2023, the Revenue is entitled and would be failing in its duty if it does not point out the apparent mistake, more so when such apparent mistake is of law. 13. It is submitted that the Revenue is not pointing out any new mistake or bringing to light any new mistake of law or fact. The mistake being pointed out relates directly to the issue which is raised by the Assessee and is pending consideration before the Hon'ble ITAT in these proceedings. 14. It is no longer res integra that the law needs to be interpreted in a way so as to render substantial justice and not to deny the same on mere technicalities. Profitable reference may be made to the decision of the Hon'ble Supreme Court in the case of Grindlays Bank Ltd. vs. Central Government Industrial Tribunal', 1980 SCC 420 wherein it was held that: - ..It is a well-known rule of statutory construction that a Tribunal or body should be considered to be endowed with such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M.A. without crossing this fundamental threshold. 16. It is submitted that the Hon'ble ITAT has inherent power to rectify any mistake of law or fact, even if not pointed out by either of the parties. Reliance in this regard is placed on CIT v. ITAT, [2007] 289 ITR 191 (Ker) wherein it was held that: 5. Section 254(2) does not provide that an application is a must from the side of the assessee or the Assessing Officer to exercise the power under it. It appears to be a power which inhers in all Courts and Tribunals to correct any apparent mistake in its order. Here, the said power has been expressly conferred by a statutory provision. So, if a mistake is noticed by the Tribunal, either suo motu or on application of either of the parties, it may rectify it under section 254(2). If a genuine mistake is pointed out in a defective application by one of the parties, still the Appellate Tribunal cannot shirk its responsibility in rectifying the apparent mistake in the records. The said section does not provide that there should be an application in the prescribed manner. Therefore, the prescription contained in rule 34A made apparently in exercise of the power conferred on the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned Order- 62. Section 11UA(2) also envisages that the fair market value of the unquoted shares can be determined as per discounted cash free flow method, i.e., DCF but here the valuer seems to have adopted NAV method and he has reduced even those liabilities which are not permissible under 11UA Accordingly, we hold that the valuation done by the Kotak Mahindra Capital and the value of SBPL's shares is not in accordance with Rules as given in Rule 11UA which is specific for valuing the unquoted shares. The reason for not following the value of Kotak for SBPL shares is that, the Valuer has adopted NAV for valuing the intermediary companies; and if NAV method is to be adopted, then he can reduce liabilities as envisaged under Rule 11UA and not any other liabilities suggested by the companies without being authenticated by the companies or independently examined by the Valuer. Only liability which can be excluded while examining the book value is the liability shown in the balance sheet. C. How the above observations constitute mistake apparent from record? 19. It is submitted that Rule 11UA has a very limited applicability. While sub-Rule (1) of Rule 11UA is applicable 'for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch, during the course of proceedings, nowhere came to conclude that Rule 11UA was applicable for valuing the impugned shares. g. When the Hon'ble Bench directed the officers of the Revenue present in the court to give a working of the value of the shares, it only directed them to give the value by taking correct amount of liabilities. The officials were not directed to apply Rule 11UA. The working given by Revenue was not based on Rule 11UA but only on the correct amount of liability of intermediaries as appearing in their financials. h. The difference in the value proposed by the A.O. and that upheld by the Hon'ble ITAT was on account of difference in the percentage of shareholding and not as a consequence of application of Rule 11UA. The final finding of the Hon'bie ITAT holds so. i. Certain observations relating to Rule 11UA as appearing in Para 61 to 63 of the order came as a surprise to both the Assessee as also the Revenue. j. In fact, even the Assessee in its appeal to the Hon'ble High Court of Delhi [filed prior and after the original dismissal of Miscellaneous Application] in ITA Nos. 284/2018 380/2018 in Analjit Singh v. PCIT-6, New Delhi has challenged t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f law fit for adjudication by the Hon'ble High Court, it is not open to urge that the applicability of Rule 11UA had attained finality in the order of the Hon'ble ITAT. 25. However, without prejudice, it is submitted that if the Assessee places reliance on references to Rule 11UA in Paras 61, 62 and 63 to canvass that the final findings are based on Rule 11UA, Revenue would urge that such observations do constitute apparent mistake of law (application of Rule 11UA to Section 48) and ought to be rectified by dropping such references to the Rule as they seek to create untenable proposition. 26. Revenue would like to urge that the final findings in the order of the ITAT determining the value of shares at Rs 131.86 per share was not based on Rule 11UA but on the proportionate value of shares of VIL as determined by the valuer and adopted by the AO. The Assessee is seeking rectification of the value determined by the Hon'ble ITAT by invoking certain provisions of Rule 11UA which is based on two assumptions: - k. That, the ITAT has determined the value under Rule 11UA; and l. That, the ITAT has committed the error of not applying applicable provisions of Rule 11UA. It is subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the early hearing application, the Applicant alluded to the fact before the Hon'ble High Court that insofar as his wife is concerned, the valuation offered by her with respect to the shares at Rs. 70.59 per share has been accepted by the Hon'ble Tribunal and the DCIT has also given effect to that order. The Applicant therefore requested the Hon'ble Court that this writ petition can be disposed off with a direction to the Hon'ble Tribunal to re-examine the merits of the Miscellaneous Application dismissed early. 4. The most significant aspect of the Applicant's averments before the Hon'ble High Court was that he did not disclose the fact that in the case of Neelu Analjit Singh, his wife, the Hon'ble ITAT preferred not to follow the decision of the Coordinate Bench in the case of the Assessee and applied Rule 11UA to grant relief. It is also not disclosed to the Hon'ble High Court that a substantial question of law had already been admitted on the illegality of the Hon'ble ITAT applying Rule 11UA. The question of law was admitted with the consent of the Parties in the following words:- With consent of parties, the following questions of law are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O. is directed to compute the capital gain by taking the sale consideration by adopting the per share value of SBPL at Rs. 131.86 Para 64- Accordingly we hold that the value of shares for which the sale consideration said to have been accrued has to be worked out strictly as per Rule 11UA of the Rules taking into account the correct figures as per Balance Sheet of intermediate companies as on 31.03.2013. Thus, the A.O. is directed to compute the capital gain by taking the sale consideration by adopting the per share value of SBPL as per Rule 11UA. Para 65- Lastly the value of SBPL shares as per FMV of VIL would be Rs. 131.86 per share as determined c above and accordingly, the A.O. be directed to compute the capital gain taking the sale value of SBPL at Rs. 131.86 per share. Para 65- Lastly the value of SBPL shares as per FMV of VIL would be calculated as per Rule 11UA as directed above and accordingly, the A.O. be directed to compute the capital gain taking the sale value of SBPL so arrived at. The underlined portion represents changes suggested by way of rectification under Section 254(2) of the Act. 8. From the above, it transpires that the Applicant seeks the insertion of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the Revenue that value of share has to be determined as contractually agreed between the parties under the Framework Agreements of 2006 and 2007. It may be noted that these Framework Agreements of 2006 and 2007 do not make any reference to Rule 11UA much less draw any inference therefrom. A finding in this regard has already been reached in Para 50 which reads as under: - 50, In view of the facts as narrated above, following points can be deduced: The 'Framework Agreement dated 01.03.2006' envisaged fair market value of issued share capital of HEL for determining the value of SBPL shares. Even if we agree with the contention of the Ld. Sr. Counsel, Mr. Ajay Vohra that the agreement of 05.07.2007 alone is to be reckoned, then we find that in 'Framework Agreement of 2007' also, not only the similar clause of call/put option has been enshrined but also the determination of transfer price is by and large based on fair market value of equity share of HEL. In the agreement of 2007, the SBPL value of US $ 266.25 million was based on fair market value of HEL. In terms of INR, the value of SBPL shares in the year 2007 aggregated to Rs. 1088 crores. (when the indirect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and circumstances of the case; and if at all it could have been brought to tax in the hands of the transferor under the deeming fiction of Section 50CA or Section 56(2) (x), then same are not applicable for the year under consideration as these provisions are applicable from the A.Y. 2017-18. Lastly, the value of the SBPL shares as per FMV of VIL would be Rs. 131.86 per share as determined above; and accordingly, AO is directed to compute the capital gain taking the sale value of SBPL at Rs. 131.86 per share 14. It needs to be pointed out at this stage that 50C, 50CA and 50D are the only provisions where AO is empowered to adopt Fair Market Value of shares which could at all give rise to application of Rule 11UA. Once these provisions were held to be not applicable there was no way the Hon'ble ITAT could have applied Rule 11UA. The entire hypothesis in MA falls to the ground. 15. Unlike in the case of Neelu Analjit Singh, the Wife, the Hon'ble Tribunal never gave any direction to compute the value in accordance with Rule 11UA, but categorically recorded a finding that the value of consideration be taken at Rs. 131.86 per share. The Hon'ble ITAT took upon itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reason that there the Hon'ble Tribunal for good or bad reasons, in that case came to record a clear finding that the value of consideration has to be worked out under Rule 11UA and gave directions to that effect to the DCIT. In the case at hand, the Hon'ble Tribunal accepted the proposition of the Revenue that in terms of the contractual obligation, consideration has to be the proportionate share of Applicant in the value of HEL/VIL based on the Framework Agreements of 2006 and 2007. 20. In fact, the Framework Agreement of 2007 also provided some guidance for arriving at the per share price of SBPL and the allowance of liabilities, particularly, liabilities with respect to preference shares. It was in this context [upon examination of the terms of this Agreement), that the A.O. was directed to take the 'correct' amount of liabilities. The expression correct amount of liabilities does not amount to prescription of allowance of liabilities under any of rules but it only refers to prescription of allowance of liabilities under contractual agreements. 21. It needs to be kept in mind that the Hon'ble ITAT was not called upon to determine the Fair Market Value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no role to be played by any rule of valuation, unless the terms of agreement itself had recorded that consideration should get determined under a certain rule which it did not. 27. The Rules governing the determination of Fair Market Value were thus wholly irrelevant to the issues raised in this appeal. The assumption drawn by the Applicant that merely because Rule 11UA was referred to with a view to dispel valuation done by a merchant banker should form the basis to hold the Hon'ble ITAT had determined the value of per share price of SBPL under Rule 11UA is fallacious. 28. It has been contended by both the Applicant as also the Revenue that Rule 11UA cannot traverse beyond Section 56 and be applied in the context of Section 48. In the statutory appeal filed by the Applicant before the Hon'ble High Court against the order of the Hon'ble Tribunal, the following question of law was raised by the Applicant himself. 3) Without prejudice, whether the Tribunal erred in law in relying in the provisions of Rule 11UA of the Rules when such Rule exclusively operates in the realm of Section 56 of the Act (Income from Other Sources) and which provision firstly does not apply to a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This has to flow from the findings in the order. It is again not open to draw the presumption by reference to a sentence or a paragraph there. The order has to be read as a whole. 34. While making a wholesome reading of the order, it is not possible to ignore the observations in following paras: - a. Para 45- Rule 11UA did not figure in the list of issued framed for adjudication. b. Para 47- Reference to Framework Agreement of 2006 where it was agreed that the liability of intermediary companies was not to be recognised for working out the transfer price. c. Paras 48, 49- Where Framework Agreement of 2007 is discussed in detail. d. Para 50- Certain conclusions drawn referred to hereinabove. e. Para 56- Where Hon'ble ITAT holds that full value of consideration is not the fair market value of shares. f. Para 59- Where the Hon'ble ITAT holds that what accrued to the Appellant under Section 48 is the value determinable on the basis of the fair market value of VIL. g. Para 61- The Hon'ble ITAT rejects the valuation of Kotak Mahindra and in doing so, refers to Rule 11UA as well. h. Para 62- Hon'ble ITAT further rejects the methodology of Kotak Mahindra and in that proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 11UA. 40. The Coordinate Bench has committed grave error of law in applying Rule 11UA in the context of Section 48 (particularly three exceptions carved out in 50C, 50CA and 50D were not applicable in this case). 41. It is submitted that the decision of the Coordinate Bench suffers from law and is not a binding precedent. Besides, there are decisions of other Coordinate Bench which clearly hold that Rule 11UA will not apply in the context of Section 48 of the Act. In the case of Swiss Reinsurance Co. Ltd. v. DCIT-(IT)-Range4 (2) (2). Mumbai, ITA 6531/Mum/2017 dated 20.07.2021 the Hon'ble ITAT, Mumbai Bench held in Para 21 as under: - 21. In the facts of the present case, undisputedly, after applying the computational provisions of sections 48 and 49 of the Act to the sale transaction of shares of TTK, long term capital loss arises. Therefore, the assessee is entitled to claim such long term capital loss. As regards the allegation of the assessing officer that assessee had not valued the shares under rule 11UA, we fully agree with the submissions of learned counsel for the assessee that rule 11UA is application for valuation of assets specified under section 56(2) (vii). 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ints on which there may conceivably be two opinions. 46. In light of the above, MA deserves to be dismissed. Dated: 23.07.2024 (G.C. Srivastava, Adv.) Place: New Delhi Special Counsel for Revenue 6. The assessee had filed his rebuttal to the aforesaid two written submissions of the revenue as under:- SUB: REBUTTAL OF THE SUBMISSIONS OF THE DEPARTMENT PUT FORTH DURING THE COURSE OF THE HEARING CONDUCTED ON 23.07.2024 1. The captioned Miscellaneous Application was heard and reserved for orders on 23.07.2024. That during the course of the hearing, written submissions were filed by the Ld. Special Counsel before the Hon'ble Bench to oppose the Miscellaneous Application. By way of the present submissions, the Assessee seeks leave to counter those submissions. The same may please be taken on record. 2. At the very outset, it would relevant to bring to the attention of the Hon'ble Bench that the Applicant has already filed a brief submission on 15.02.2024 explaining the facts and circumstances leading to the present Miscellaneous Application. Succinctly, it would suffice to state that the matter revolves around the errors contained in the sheet provided by the Department at the be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t all be applied? c. Whether inferences regarding final finding can be drawn from selective reference to certain sentences and paragraphs? d. Is the decision rendered in the case of Mrs. Singh in respect of the balance shares be a binding precedent? e. Whether the mistake inferred by a process of reasoning and where two views are possible, can be considered as a mistake apparent from record? 5. Each of the above issues would now be addressed in seriatim. 6. That the overwhelming theme of the Revenue's contentions is that the Tribunal while adjudicating the appeal on merits in the Assessee's case did not invoke Rule 11UA and a mis-statement has been made on behalf of the Assessee aimed at misleading the Hon'ble High Court and the Tribunal. However, the conduct of the Revenue as well as the documents on record reveal that it is the Revenue which has misled the Tribunal repeatedly, by making false averments/oral arguments during the course of the hearing as well as in their written submissions. Since the relevant portions of the orders of the Hon'ble Tribunal in the appeal were elaborately read by both sides, the same are not being averred to at this juncture. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shareholders, he submitted that such claim is clearly inadmissible in view of sub-rule 2(ii) of Rule 11UA of the IT Rules. Even otherwise, such liabilities cannot be taken into account in arriving at the value of shares of a company under NAV method. The valuation done as per the rule works out to Rs. 136 per share and the AO has taken the value at Rs. 132 per share only (initially it was 142.70, which was arrived at after taking the appellant's stake in VIL at 3.9% instead of the correct stake at 3.65%. Thus, the valuation adopted by the AO in is conformity with the Framework Agreements, value of HEL shares as determined by Kotak and rules of valuation provided for UNDER RULE 11UA. Please refer Para 63, pages 87 to 89 of Paper Book Volume 2. 9. To further evidence the fact that this calculation under Rule 11UA (of 136.76 rectified to 131.86) was also submitted by the Ld. Special Counsel, the Applicant is attaching herewith a submission dated 06.11.2017 of the Department filed post the conclusion of the main merits appeal. The Hon'ble Tribunal may kindly refer to Para 34 and 35 of the said submission (Please refer page no. 31 of the present submission). Additionally, the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strictly worked out in accordance with Rule 11UA(2); and 14. Hence, the Tribunal itself acknowledged that the directions given to the Department in Para 62/63 of the Tribunal order dated 01.12.2017 to calculate the correct value of the shares of SBPL was to be done in accordance with Rule 11UA(2) of the Rules. Further in the subsequent paras (Please refer to page no. 67 to 70 of the present submission), the Tribunal endorses its direction on the applicability of Rule 11UA of the Rules whilst observing as under:- 13. After holding in the aforesaid manner, the Tribunal had directed the Department to file the calculation in accordance with Rule 11UA so that the correct share value/ price of unquoted shares could be worked out. As per the working given, the value of SBPL was worked out at 136.76 and since the assessee's hold in SBPL on pass through basis was 3.6512%, therefore, the figure was corrected to 131.86 per share and the same value has been held to be accrued to the assessee for the purpose of computing the capital gain. 14. Thus, the Tribunal has category held that the share value of SBPL should be taken at 131.86 per share which as directed by the Tribunal to the Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal and directed this Hon'ble Tribunal to reconsider the merits of the application. 18. Therefore, in the absence of any order sheet or any covering letter by the Department, it is this order and the submissions made by the Ld. Special Counsel at the time of the original hearing, which clearly brings out the fact that the direction of the Hon'ble Tribunal was specific that the valuation must comply with the methodology as prescribed under Rule 11UA. Hence, now at this juncture to state, from a recollection of the events, that the Tribunal never gave such a direction, is only to mislead and delay the process of justice. 19. For the sake of completeness, admittedly, the Applicant Assessee has himself been challenging the applicability of Rule 11UA since the case of the Applicant from day one has been that the Revenue in NOT EMPOWERED to substitute the actual consideration with any fair market value/notional value, as has been done in the present case 20. However, rightly or wrongly, the methodology as envisaged under Rule 11UA of the Rules has been applied by the Tribunal in the case of the Applicant for determining the per share price at INR 131.86, which calculation suf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred by a process of reasoning and where two views are possible, can be considered as a mistake apparent from record. To this effect, the revenue's submission is twofold i.e. a) that the question regarding the applicability of Rule 11UA being admitted by the Hon'ble High Court renders its applicability a debatable issue, beyond the scope of Section 254(2) of the Act and b) the question whether the Tribunal indeed applied Rule 11UA is not borne out of the findings of the Tribunal. 24. In this regard, it is submitted that the falsity of the entire case of the Revenue has been established beyond any doubt and the Revenue has miserably failed to counter the main issue, which is the errors which had crept into the working submitted by the Revenue at the time of the hearing of the main appeal. It has also been amply demonstrated in the finding of the co-ordinate bench in its order dated 19.03.2018, that the Tribunal had indeed relied upon the methodology prescribed under Rule 11UA and accordingly directed the Revenue to submit the valuation sheet. 25. The picture that is being tried to be projected by the Revenue now that the applicability of Rule11UA is a debatable issue, is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained its life pursuant to the direction of the Hon ble Jurisdictional High Court while disposing of the writ petition of the assessee in WP(C) No. 3121/18 dated 18.09.2023. As it could be seen that this Tribunal in assessee s case, had determined the fair market value per share at Rs. 131.86 based on the workings provided by the department at the time of hearing of the main appeal. Undisputedly these workings were furnished by the Income Tax Department (in short Department ) as per the directions of the Bench. Now the dispute arose to the fact whether these workings given by the Department for determination of fair market value of shares could be construed as workings given in terms of Rule 11UA of the Income Tax Rules, 1962 (in short the Rules). The main contention of the revenue is that these workings were not in accordance with Rule 11UA of the Rules and the Bench had also not directed the Department to furnish the workings in terms of Rule 11UA of the Rules. The main contention of the assessee is that the actual consideration received by it should be adopted on sale of shares as against Rs. 131.86 per share determined as fair market value. In the course of original MA proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner, the Tribunal had directed the Department to file the calculation in accordance with Rule 11UA so that the correct share value/price of the unquoted shares could be worked out. As per the working given, the value of the SBPL was worked out at Rs. 136.76 per share and since the percentage of assessee's hold in SBPL on pass basis was 3.6512%, therefore, the figure was corrected to Rs. 131.86 per share and the same value has been held to be accrued to the assessee for the purpose of computing the capital gain. 14. Thus, the Tribunal has category held that the share value of SBPL should be taken at Rs. 131.86 per share which as directed by the Tribunal to the Department was to be worked out in 11UA. As highlighted accordance with Rute above, this working was confronted to the assessee also so as to verify the figures and the working, but at that time no defect or error was pointed out, albeit, assessee continued to harp upon that it's actual sale consideration should be accepted. In absence of any rebuttal by the assessee, the working given by the department was accepted as such, as prima facie there was no apparent error. Now in the impugned miscellaneous application, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le working the share value. Thus, at the stage of rectification application it would be very difficult to rake up a new point which was not raised at the time of hearing. Secondly, assessee itself has given three sets of working of valuation of shares ranging between Rs. 106. 25; Rs. 101.25; and Rs. 70.59 per share after deduction of preference share liability and which one is to be adopted or is correct. The working of Kotak Mahindra relied by the assessee has been specifically not accepted by the Tribunal as there various presumptions sans any availability of correct figures made available to them. The whole exercise of the working of liability given by the assessee will open a new line of as to debat h liability is to be included and which are to excluded and that will require lot of deliberation from both the sides and verification of figures, which at the this stage is beyond and scope of section 254(2) as it will amount to review not rectification of mistake simplicitor. We do not wish to enter into the semantics of which liabilities are to be reduced and veracity of the working given by the assessee as it needs fresh verification and examination. Thus, we do not find any mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are reproduced herein supra are devoid of merit and deserves to be dismissed. 9. From the above observations, it becomes crystal clear that Tribunal always intended adoption of Rule 11UA of the Rules for determination of FMV of shares and directed the Department to furnish the workings accordingly. But the workings given by the Department to the Tribunal were not in accordance with Rule 11UA of the Rules as it had not considered the figures pertaining to certain intermediary companies. Whereas, in assessee s wife case i.e. Mrs. Neelu Analjit Singh, who had also sold certain shares along with assessee herein of SBPL, the Tribunal in ITA No. 2172/Del/2018 for AY 2014-15 dated 19.03.2019 had observed in para 42 of its order that the valuation of Rs. 131.86 per share adopted by the AO suffered from certain fallacy and the same was not according to Rule 11UA of the Rules. Accordingly, the Tribunal in the case of Mrs. Neelu Analjit Singh had in para 42 directed the AO to verify all the figures from the audited balance sheet of the intermediary companies and compute the fair market value of shares accordingly. The ld AO had passed the giving effect order u/s 254/ 143(3) of the Act d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017 and not to recall the same. On careful reading of the original appellate order dated 01.12.2017 of the Tribunal, we find that the Tribunal had ultimately sought to determine the fair market value of shares by using NAV method, which is admittedly one of the prescribed methods in Rule 11UA of the Rules. This aspect also goes to prove the intention of the Tribunal beyond reasonable doubt (de hors the observation made in first MA order dated 19.03.2018) that it was always intending to adopting only Rule 11UA of the Rules for determination of fair market value. In fact even in the workings given by the Department at Rs. 131.86 per share, provisions and Income Tax provisions had been added back which itself indicates that even the AO had sought to determine the FMV using Rule 11UA of the Rules only. In our considered opinion, the workings given by the Department before the Tribunal determining the FMV at Rs. 131.86 per share contained certain fallacies as it was not in accordance with Rule 11UA of the Rules, which alone is sought to be modified and rectified in the present miscellaneous application proceedings. Hence, the fallacies contained in the workings of the Department do cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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