2008 (10) TMI 681 - HC - Income Tax

Summary

Issues involved:
The judgment deals with the questions of law regarding the correctness of the Tribunal's decision in allowing the appeal of the assessee u/s 69 on the purchase of shares at a price much lesser than the market price, and whether such purchase of shares as an investment, with a lock-in period, for a consideration below market value can be taxed as a benefit or perquisite u/s 28 (iv) disregarding the fact that the shares were pledged at market price to obtain a loan.

Question 1: Tribunal's Decision on Addition u/s 69
The High Court examined whether the Tribunal was correct in law in allowing the appeal of the assessee by holding that no addition is sustainable u/s 69 on the purchase of shares at a price much lesser than the market price. The Tribunal's judgment was reviewed, and it was noted that the Tribunal found that the purchase of shares as an investment, with a lock-in period, for a consideration below market value cannot be taxed as a benefit or perquisite under Section 28 (iv) of the Act. The Tribunal also concluded that the assessee did not secure any benefit or perquisite in consideration of a business transaction with the sellers of the shares. Based on these findings, the High Court determined that there was no substantial question of law involved in the appeal and dismissed the same.

Question 2: Taxability of Shares Purchased Below Market Value
The second issue addressed by the High Court was whether the Tribunal was justified in law in holding that the purchase of shares as an investment, with a lock-in period, for a consideration below market value, cannot be brought to tax as a benefit or perquisite u/s 28 (iv). Despite the fact that the assessee had pledged these shares at market price to secure a loan of Rs. 49.75 crores, the Tribunal's decision was based on the finding that no benefit or perquisite was obtained in relation to a business transaction with the sellers of the shares. The High Court concurred with the Tribunal's reasoning and concluded that there was no case for admission of the appeal, ultimately dismissing it.