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2019 (10) TMI 833 - AT - Income TaxTaxation of succession fee - value of any benefit or perquisite in the hands of Directors - AR argued that success fee was deducted at source from the funds of the shareholders, hence, no benefit whatsoever received by the share holders and no need to tax the same u/s 2(24)(iv) - HELD THAT:- there was no legal liability of shareholders to make the payment. The AO did not furnish any material to show that the assessee had engaged the Barclays and the company made the payment on behalf of the assessee to derive the benefit directly or indirectly. Directors or shareholders are permitted to appoint their own consultant who will not have any say in the success fee. In view of this clause also, the contention of AO that the success fee was the obligation of the assessee is incorrect. As mentioned in the share purchase agreement (SPA), cost of transfer of shares should be borne by the assessee. Accordingly, the expenses in relation to the negotiation, finalization and execution of SPA have to be borne by the shareholders including the assessee. The success fee was for engaging the services of Barclays as per EL dated 05.07.2013 and the share purchase agreement was entered on 04.11.2013, much ahead of SPA, hence, the success fee cannot be treated as the expenditure incurred in connection with the SPA. - it cannot be held that the assessee got any benefit from the success fee paid by the TMPPL as observed by the CIT(A). Accordingly, we uphold the order of the Ld.CIT(A) and dismiss the revenue’s ground on this issue. Success fee is to be paid only on the completion of the transaction - The AO rejected the contention of the assessee stating that the obligation of the assessee arose on the date of agreement dated 05/07/2013 when the assessee was a director of the company and holding substantial stake in the company, hence rejected the argument of the assessee. As per the discussion made in the preceding paragraphs we have held that the there was no benefit derived by the assessee and once it is held that the assessee did not derive any benefit the issue becomes infructuous. However, it is also a fact that the assessee ceased to be director /shareholder by the time the invoice was raised and the payment was made. The new directors taken the decision to make the payment. Hence it is incorrect to apply the provisions of section 2(24) (iv) in the case of the assessee. Payment of success fee is the obligation of the company since the agreement was entered into by the assessee company and the Barclays, hence we hold that no personal benefit derived by the assessee and we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld.
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