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2009 (8) TMI 840 - AT - Income TaxAssessment framed u/s 143(3) - Additions to income - transfer of shares - Taxability of IRC Fees. Assessment framed u/s 143(3) - Additions to income - transfer of shares - income as Short Term Capital Gain - erroneous and prejudicial to the interest of the revenue - HELD THAT:- In the present case, there is no dispute about the fact that the assessee has received sum and it is also not the case of the Department that over and above the sum, the assessee has received any amount, and hence, as the full value of the consideration as against the value of the shares, the capital gain worked out to be ‘Nil’ under section 48 of the Act. Therefore, it cannot be said that Short-term Capital Gain as held by the ld. CIT in the order passed u/s 263 has escaped assessment. Moreover, the case of the assessee is supported by the interpretation given by the Hon’ble Supreme Court to the expression "Full Value of Consideration" in the case of George Henderson & Co. Ltd.[1967 (4) TMI 18 - SUPREME COURT]. Section 2(47) defines the word "transfer" which is inclusive. The Legislature has kept the identity in respect of the ‘sale’, ‘exchange’, ‘relinquishment of asset’ or the ‘extinguishment of any right therein’. Section 2(47) only defines the word "transfer" but as per section 45, there must be some gain on the extinguishment of any right. Moreover, the term sale is different than expression "extinguishment" of any right. In our opinion, the said observation of the ld. CIT is erroneous itself and contrary to the scheme of the capital gain as envisaged the Act. On this issue, the ld. CIT(A) has observed that the assessee had admitted that since the shares were transferred from Demat Account of the Company to the Demat Account of Mr. Mukesh D. Ambani, the true nature of the transaction was apparently sale of the shares by the Company to Mr. Mukesh D. Ambani and the reference of assessee’s letter is given. We have perused the letter addressed to the ld. CIT, which is a reply to the notice issued under section 263 and the copy of the said letter is placed, the assessee, had made the summary of what is stated in the notice and nowhere it is admitted that there was a transfer of the shares. Hence, in our opinion, the said statement of the ld. CIT is totally contrary to the fact. There is no mistake of law in the assessment order passed under section 143(3) by the Assessing Officer and hence, said order is not erroneous nor it is prejudicial to the interest of the Revenue, within the meaning of section 263 of the Act. Taxability of IRC Fees - whether the entire IRC Fees received from RIL for grant of right to use nationwide network is to be treated as income for the assessee in the assessment year 2004-05 - HELD THAT:- In our opinion, there is no absolute right to the assessee to treat the entire License fees of the 20 years as an income accrued during the financial year 2003-04. Moreover, on the theory of that matching principles, if the entire IRC Fees which is undisputedly received for the period of 20 years for use of the communication network is to be treated as an income of the assessment year 2004-05, then it will be given the distorted picture of the profit - Assessee has recognized the income from IRC Fees as per Rule 40 of ‘AS 19’ and in our opinion, the method followed by the assessee-company for recognizing the income is in accordance with the Accounting Standards as formulated by ICAI - Hence, in our considered opinion, the view taken and conclusion drawn by the Ld. CIT on this issue is also not sustainable. We, therefore, hold that the assessment order passed by the AO u/s 143(3) is not erroneous and also it is prejudicial to the interest of the revenue within the meaning of section 263 of the Act. We, therefore, cancel the order of the CIT passed u/s 263. In the result, assessee’s appeal is allowed.
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