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2019 (8) TMI 805 - MADRAS HIGH COURTGenuineness of sale price of shares - the entire share holding of Empee Distilleries Ltd., had been transferred to McDowells and while 51% of the shares held by the assessee and his family were valued at ₹ 14.25 shares, the balance held by another company owned by the assessee, that is, Empee Sugars & Chemicals was sold at ₹ 127 - assessee apart from sales consideration received non compete fee of ₹ 10 Crores - whether payment of non compete fee is a device to avoid tax - HELD THAT:- We are at a loss to understand as to how the Tribunal came to the conclusion that the price for which the shares are agreed to be sold is a justified reasonable price. Apparently, there was no material which was placed before The Tribunal to arrive at such a finding. More importantly, as rightly pointed out by the AO, there was no compulsion on the assessee or Empee Breweries Ltd., to sell their shares at a low price after initiating the arrangements for handing over Empee Breweries Ltd., and the AO noted that nothing has changed since their sale for such low prices till the time the shares were sold for ₹ 127.35 paise. Therefore, the finding rendered by the Tribunal that the price for which the shares were agreed to be sold is a justified reasonable price is a finding not supported by any document and therefore, perverse. Validity of assessment u/s 153C - assessee contended that no incriminating material related to assessee found in search - HELD THAT:- The Tribunal had failed to note that the AO, at the first instance, while calling upon the assessee to show cause as to why non compete fee of ₹ 10 Crores should not be brought to tax, placed reliance on the seized material in file no. Ann/MP/D&D/S.35. There is a specific reference to the same in paragraph 4.2 of the assessment order. Therefore, we fail to understand as to how the Tribunal came to the conclusion that there was no material to frame the assessment u/s 153C. There has been no attempt made by the Tribunal to examine the seized material which was the basis of the assessment proceedings, papers and documents were recovered from the residence of the assessee and the companies controlled by by him. Therefore, to say the least, the finding of the Tribunal, in this regard, is wholly unsubstantiated and without any material and consequently, perverse. The price of the shares which was shown at a much higher price in the hands of Empee Sugars & Chemicals Ltd., was undoubtedly to benefit the company which had huge accumulated losses and consequently, the same could be set off against capital gains. The benefit which will accrue to the assessee is by lowering and splitting up of the consideration for shares and non compete fee thereby being a device employed to evade tax. In the preceding paragraphs, we have analysed the factual details as culled out by the assessee and found that the assessee has specifically recorded the materials which were seized during the search operations which were brushed aside by the Tribunal in a single line order. Therefore, the decision in Sinhgad Technical Education Society [2017 (8) TMI 1298 - SUPREME COURT] , can be of no assistance to the case of the assessee. Taxability of non compete fee - assessee claimed as a capital receipt - HELD THAT:- Reliance was placed on Guffic Chem (P) Ltd. [2011 (3) TMI 6 - SUPREME COURT] to state that non compete fee is a capital receipt. We cannot be compelled to go thus far because, we have concurred with the view taken by the AO that the payment of non compete fee was a colourable device adopted by the assessee to avoid tax. Therefore, the decision in Guffic Chem (P) Ltd. (supra) does not in any manner help the case of the assessee. - the Revenue has to succeed in these appeals
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