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Showing 41 to 60 of 1558 Records
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2017 (2) TMI 1523
Capital gain - Scope and legislative intent of Section 2(47)(ii), (v) and (vi) - JDA entered - essential ingredients for applicability of Section 53A of 1882 Act - Meaning to be assigned to the term “possession” - transfer of land by members of a Cooperative Society by signing an irremovable Power of Attorney in the name of the Developer and also by signing a Joint Development Agreement (JDA) would constitute ‘transfer’ within the meaning of section 2(47)(ii) - taxable capital gains arises from the transaction entered by the assessee - HELD THAT:- As decided in C.S. ATWAL case [2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT] parties had agreed for pro-rata transfer of land.No possession had been given by the transferor to the transferee of the entire land in part performance of JDA so as to fall within the domain of Section 53A of 1882 Act.
The possession delivered, if at all, was as a licencee for the development of the property and not in the capacity of a transferee. Further Section 53A of 1882 Act, by incorporation, stood embodied in section 2(47)(v) of the Act and all the essential ingredients of Section 53A of 1882 Act were required to be fulfilled. In the absence of registration of JDA dated 25.02.2007 having been executed after 24.09.2001, the agreement does not fall under Section 53A of 1882 Act and consequently Section 2(47)(v) of the Act does not apply.
The issue of exigibility to capital gains tax having been decided in favour of the assessee, the question of exemption under Section 54F of the Act would not survive any longer and has been rendered academic.The Tribunal and the authorities below were not right in holding the assessee-appellant to be liable to capital gains tax in respect of remaining land for which no consideration had been received and which stood cancelled and incapable of performance at present due to various orders passed by the Supreme Court and the High Court in PILs.
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2017 (2) TMI 1522
Revision u/s 263 - Distinction between “lack of enquiry and inadequate enquiry” - Unexplained deposits in the bank accounts - HELD THAT:- We find that assessee had submitted copy of bank accounts and had also requested Assessing Officer to verify from the banks statements that the money deposited in banks were paid to agents and if the work was not done, the same was returned.
In view of the above facts and circumstance, we find that AO during assessment proceedings had duly verified the entries in the banks statement and therefore had arrived at the conclusion that the deposits represented business transactions and had taken a plausible view and therefore the provisions of section 263 were not applicable.
Provisions of section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer. It is only when an order is erroneous that the section will be attracted. Before invoking provisions of section 263 of the Act one has to keep in mind the distinction between “lack of enquiry and inadequate enquiry”. If there was any enquiry, even thought inadequate it would not in itself empower CIT to invoke provisions of section 263 of the Act merely because he had different opinion in the matter. It is only in cases of lack of enquiry that such a course of action would be available to CIT.
Cross objections filed by revenue u/s 253(4) - We find that the AO or assessee on receipt of notice that an appeal against the order of Deputy Commissioner (Appeal) or Commissioner (Appeal) has been preferred by either party and then the other party can file the cross objections. In the present case, the order passed by the CIT u/s 263 has not been passed by Deputy Commissioner (Appeal) or the Commissioner (Appeal) and rather it has been passed by Principal Commissioner and therefore the provisions relating to cross objections as contained in section 253(4) are not applicable and hence, the cross objections filed by revenue are not maintainable.
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2017 (2) TMI 1521
Dishonor of Cheque - prayer is that the sentences awarded to him in 14 different cases for the offence punishable under section 138 of the Negotiable Instruments Act, details of which are being provided in later part of this order, may be ordered to run concurrently - whether the High Court exercising powers under Section 482 Cr.P.C., invoke Section 427 Cr.P.C. and order that sentences awarded in two different cases shall run concurrently? - HELD THAT:- In all the 14 complaints filed against the petitioner, he has been convicted for the offence punishable under section 138 of the N.I. Act and different sentences have been awarded. The maximum sentence awarded to the petitioner is 2 years' simple imprisonment along with fine.
As per sub-section (1) of section 427 CrPC when a person already undergoing a sentence of imprisonment is sentenced on a subsequent conviction to imprisonment, such imprisonment shall commence at the expiration of the imprisonment to which he has been previously sentenced, unless the Court directs that the subsequent sentence shall run concurrently with such previous sentence - the intention of legislature is that even the life convicts have been held entitled to benefit of subsequent sentence, being run concurrently, be it life term or of any lesser term then the different yardstick cannot be applied for those persons, who have been awarded sentence of lesser duration than life unless there are compelling reasons to do so.
There are no compelling reason to order that all the sentences awarded to the petitioner in all 14 cases would run consecutively.
It would not be inconsistent with the administration of criminal justice if the petitioner is allowed the benefit of discretion contained in section 427 of the Code to meet the ends of justice - it is ordered that the substantive sentences awarded to the petitioner in the above referred 14 cases would run concurrently, however, the petitioner will have to serve default sentences as the provisions of section 427 of the CrPC do not permit a direction for concurrent running of substantive sentences with the sentences awarded in default of payment of fine/compensation.
Appeal allowed.
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2017 (2) TMI 1520
Refusal to grant an ad-interim relief in respect of share components of the property owned by the deceased - third party rights would be created in respect of the flat or not - HELD THAT:- The learned Single Judge took into consideration the various facts and circumstances, which had taken place after the demise of Dr. Desai and came to a conclusion that at this stage the question of granting an ad-interim relief in respect of shares does not arise, and kept the matter for final disposal, and a preliminary issue regarding jurisdiction has been decided in favour of the Appellants herein.
Issue regarding the shares - HELD THAT:- It is directed that value of the shares as on the date of demise of Dr. Desai should be protected and the plaintiffs/Appellants would be entitled to get shares valued, not less than their value as on the date of death. In the event, the Appellants succeed, they would be entitled to get the said valuation and/or other reliefs, which are claimed by the them in the suit and in the motion. Hearing of the motion is expedited.
Appeal disposed off.
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2017 (2) TMI 1519
Detention of goods - the contention of the petitioner is that the transaction was genuine and, thus, the subject goods ought not to have been detained - HELD THAT:- Having regard to the facts and circumstances of the case, coupled with the fact, that the petitioner offers to pay one time tax, the subjects goods are directed to be released. Consequently, upon payment of one time tax, by the petitioner, equivalent to the sum of Rs.2,98,013/-, the respondent will, forthwith, release the subject goods to the petitioner.
Petition disposed off.
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2017 (2) TMI 1518
Error in evaluation of answer book - without evaluating the position with regard to availability of vacancy right of other candidate, it is stated that the direction issued by the learned writ Court cannot be implemented in the manner - HELD THAT:- Admittedly, the results of the examinations were declared on 29.8.2013 and thereafter according to petitioner's own showing appointment orders were started to be issued in 2014 itself. The petitioner received the answer-book under the Right to Information Act in December 2013 and at that point of time even before the appointment orders were made the petitioner was of the know in the matter of illegalities committed in evaluating her answer-book. That being so, the question as to what relief could be granted to the petitioner in the light of the delay caused, if any, between December 2013 to May 2015 and the consequential action of the Department in making appointment has not been adverted to by the learned Writ Court while issuing the direction contained in para 12 of the writ petition.
In fact once there was an objection specifically raised in this regard in writing before the learned writ Court, we are of the considered view that this issue should have been addressed by the learned writ Court, even though this issue could be gone into by us, but, in this writ appeal the materials for deciding this issue are not available inasmuch as the effect of preparation of the revised merit list, availability of vacancy, right which had accrued to candidate who has been appointed and adverse effect on their appointment if any are all to be looked into and as the material for deciding these issues are not available in this writ appeal, it thought appropriate to remand the matter back to consider this limited question of granting relief to the petitioner based on the objection for delay raised by the respondent.
The order passed by the learned writ Court in the matter of error in evaluating the answer-book is upheld, but, the matter is remanded back to the learned writ Court to reconsider the question of grating an appropriate relief to the petitioner in the light of the objection raised by the Public Service Commission and the State Government in the matter of delay, if any, caused on the part of the petitioner in seeking the relief - appeal allowed in part.
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2017 (2) TMI 1517
Addition on account of arrears of gratuity and the arrears of leave encashment received from the State Government after retirement - assessee was an employee of the Chaudhary Charan Singh Haryana Agricultural University, Hisar and retired and after retirement, the assessee received arrears of gratuity and claimed the same as exempt u/s 10(10) - Assessee also received a sum on account of arrears of leave encashment which was claimed as exempt u/s 10(10AA)(i) - HELD THAT:- As decided in DHARAM JEET DAHIYA VERSUS INCOME TAX OFFICER, WARD-1, HISAR [2017 (6) TMI 165 - ITAT DELHI] AR submitted that there is not much difference in the language of section 10(10)(i) and 10(10AA)(i) and the view taken in respect of arrears of gratuity u/s 10(10) should be followed for arrears of leave encashment u/s 10(10AA). DR supported this proposition.
As both the sides are consensus ad idem on the position that the view taken in the context of section 10(10) as applicable to leave gratuity be followed here in the context of section 10(10AA) in the context of leave encashment, we are desisting from independently examining the later provision. In view of the fact that held the assessee to be entitled to exemption u/s 10(10)(i) in respect of arrears of gratuity, following the same, extend the benefit of exemption u/s 10(10AA)(i) in respect of arrears of leave encashment. - Decided in favour of assessee.
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2017 (2) TMI 1516
Estimation of GP - estimation of income as per section 145(3) - HELD THAT:- CIT(A) has erred in observing that section 145(3) could not be applied in this case, because, AO could not examine records as these accounts were not produced before him. In our opinion section 145(3) contemplates that the AO can resort to estimate the income, if he is unable to deduce true result from the accounts or other details. Strictly, books were not produced before the AO, and it was not rejection of books as such, but impliedly it is estimation of income as per section 145(3) of the Act.
CIT(A) has not considered any of these aspects, viz. why there is a decline in GP, why assessee does not want to scrutinise its books of accounts from the AO. Therefore, considering all these aspects, we are of the view that the order of the CIT(A) is not sustainable. Total addition cannot be deleted. As observed in the foregoing paragraphs that income even after rejection of books can be estimated on some guess work. It is to be estimated keeping in view surrounding facts and circumstances. In the present case, the assessee herself has shown GP at 4.21% in the immediately preceding year.
AO ought to have adopted GP nearby this figure and not at 20%. The assessee in her submission before the ld.CIT(A) has expressed the rate of at 4.25%. Thus, taking into consideration written submissions filed by the assessee before the ld.CIT(A) and other material, we deem it appropriate that ends of justice would be met, if the gross profit is being calculated at the rate of 5.5% (five point five percent) of the total turnover. With the above observation, order of the ld.CIT(A) is set aside and the AO is directed to recalculate the addition by applying GP at 5.5% (five point five percent) of the total turnover. The appeal of the Revenue is partly allowed for statistical purpose.
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2017 (2) TMI 1515
Penalty u/s 271C - treated the appellant as defaulter u/s.194A/201(1) - HELD THAT:- Issue decided in favour of assessee as interest is awarded by the court for loss suffered on account of deprivation of property or paid for breach of contract by means of damages or were not paid in respect of any debt incurred or money borrowed, shall not attract the provisions of Section 2(28A) read with Section 194A(1). See SAHIB CHITS (DELHI) (PVT.) LTD. [2009 (7) TMI 75 - DELHI HIGH COURT], CHIRANJI LAL MULTANI MAL RAI BAHADUR PVT. LIMITED [1988 (12) TMI 62 - PUNJAB AND HARYANA HIGH COURT]
Also in case of New India Assurance Co. Ltd [2016 (9) TMI 451 - GUJARAT HIGH COURT] insurance company was not justified in deducting tax at source while depositing the compensation in favour of the claimants. It therefore, cannot avoid liability of depositing such amount with the Claims Tribunal. The Claims Tribunal had committed no error in insisting on the insurance company in making good the shortfall - Decided in favour of assessee.
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2017 (2) TMI 1514
Income deemed to accrue or arise in India - Taxability of amount received - PE in India - HELD THAT:- Questions urged in this appeal are covered by the decision of this Court for the previous assessment years, titled as National Petroleum Construction Company Vs. Director of Income Tax (International Taxation)[2016 (2) TMI 47 - DELHI HIGH COURT]
Applicability of Section 234B relates to the Revenue’s contentions that interest was payable in respect of non-payment of advance tax - HELD THAT:- ITAT relied upon the judgment of this Court in Director of Income Tax (International Transactions) v. G.E. Packaged Power [2015 (1) TMI 1168 - DELHI HIGH COURT] where the Court held that the primary liability of deducting the tax for the period concerned is that of the payer. In the facts of the present case, the appellant was the payee and not the payer who could not, therefore, be passing the liability under the terms of the Act.In view of the fact that the ITAT followed the judgment of this Court, no substantial question of law arises
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2017 (2) TMI 1513
Rejection of books of accounts - gross profit estimation - no item wise information on stock of jewellery given - As per DR GP rate of 30% applied by the AO was correct since it was based on GP ratio shown by comparable cases - HELD THAT:- As gone through the order of Vivek Jain Prop. Vijay Jewellers [2016 (11) TMI 1714 - ITAT CHANDIGARH] wherein I.T.A.T. held that in view of the nature of business carried out by the assessee and the trading of items as per customer’s preference the FIFO method could not be applied as suggested by the Assessing Officer. The Hon'ble I.T.A.T., therefore, held that the rejection of books of account was incorrect and addition made on account of estimation of gross profit was, therefore, set aside.
In the present case, we find that the basis for rejection of books is similar to that in the case of Vivek Jain Prop. Vijay Jewellers (supra) being that item-wise information of stock of jewellery had not been furnished by the assessee.
Merely because item-wise details were not maintained, it could not be said that the books did not disclose true result of the assessee. The Ld. CIT (Appeals), we find, correctly held that no specific defect has been pointed out by the Assessing Officer by bringing on record any adverse material. Further, undisputedly, the books of account of the assessee were duly audited and there is no finding to the effect that the assessee had inflated the cost of raw material or cost of processing or that he had made sales outside the books or that the sale price were suppressed. The assumption of the Assessing Officer was clearly therefore sans documentary proof. The Ld. CIT (Appeals) has also given finding of fact that the gross profit rate shown by the assessee is progressive having increased from 12.48% in the preceding year to 14.30% in the year under consideration. In view of the same, we agree with the Ld. CIT (Appeals) that there is no reason at all to reject the books of account of the assessee and estimate the gross profit. - Decided against revenue.
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2017 (2) TMI 1512
Income derived from ‘income from business’ or ‘income from other sources’ - allowing only 2% of the expenditure on adhoc basis - HELD THAT:- It is a fact that the assessee had not carried out any Segment I business activity i.e. incubation of new entities during the year under appeal. It had only carried out Segment II business activities during the year under appeal. The various streams of income derived from Segment II business activities were stated elsewhere hereinabove in this order. This fact was lost sight by the lower authorities and the findings given by the appellate forums in earlier years were simply copy pasted while disposing off the appeal for the year under appeal.
We hold that the allowability of various expenses claimed by the assessee in its profit and loss account should have to be adjudicated based on the findings to be given with regard to the various streams of income in the form of shared services / infrastructure services etc by the lower authorities and the head of income thereon.
AO would have to go through all the relevant agreements entered into by the assessee and give a finding as to whether the same would fall within the objects of the assessee trust so as to fall within the ambit of business income of the assessee. In case if the same is to be construed as income from other sources, even then the allowability of the various expenses would have to be considered in the light of the provisions of section 57(iii) of the Act. We agree with the arguments of the ld AR that the findings given in the earlier years with regard to incubation of new entities does not apply to the facts during the year under appeal.
We hold that the lower authorities had not adjudicated the various streams of income in the correct perspective for the year under appeal. Accordingly, we deem it fit and appropriate, in the interest of justice and fair play, to set aside the entire assessment to the file of the ld AO for denovo adjudication, in accordance with law. Needless to mention that the assessee be given reasonable opportunity of being heard. Accordingly the grounds raised by the assessee are allowed for statistical purposes.
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2017 (2) TMI 1511
Exemption u/s 11 - Registration u/s 12AA - amendment to sec 12A(2) - Retrospectivity - scope of amendment made in section 12A vide Finance (No.2) Act, 2014 the Income Tax Act - HELD THAT:- As decided in ST. JUDE'S CONVENT SCHOOL AND OTHERS [2016 (9) TMI 1382 - ITAT AMRITSAR] The first proviso to section 12A(2) of the Act is applicable retrospectively. Likewise, for the same reasoning, it is also held, regarding the second batch of appeals, that even the second proviso to Section 12A(2) is retrospective in nature and the completed assessments in these cases ought not to have been reopened only for non-registration for the relevant assessment years. - Decided in favour of assessee.
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2017 (2) TMI 1510
Maintainability of prosecution - Food Adulteration - Parachute coconut oil manufactured by the Marico Industries Limited, Mumbai found to be adulterated - offences punishable under Sections 2(ia)(e) punishable under Section 7(i) and 16(1)(a) of Prevention of Food Adulteration Act - HELD THAT:- As the Marico Industries Limited, Mumbai has not been arraigned as an accused, therefore, the prosecution of the applicant in his official capacity is not permissible because he cannot be vicariously held liable for the offence committed by the Company unless and until, the Company which is a juristic entity is arraigned as an accused.
Petition allowed.
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2017 (2) TMI 1509
Establishment of NCLT Bench in the State of Kerala - Seeking direction to continue hearing of Company Cases having jurisdiction in State of Kerala by the Hon'ble High Court till NCLT Bench is established at Ernakulam for hearing of Company Cases - seeking direction to the 1st respondent to establish NCLT Bench at Ernakulam on a time bound basis in the interest of justice - HELD THAT:- While the Benches at New Delhi, Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai have been notified, those at the seats of other High Courts will be established in due course - Since such a decision is taken by the Government of India, proposing to establish NCLT Benches at the places wherein other High Courts are situated, in due course, he submits that necessary direction need to be issued to the Government of India. He further relies upon Annexure R1(a) dated 19.12.2016 produced along with the statement filed by the 1st respondent, Union of India and submits that in the next phase, after making the requisite infrastructure available and appointment of Members, it has been planned to constitute a Bench of NCLT at Kochi.
If Government of India has proposed and planned to constitute Bench of NCLT at Kochi, and the authorities have found the infrastructure at Kochi suitable, hopefully the same will be established at an early date so as to mitigate the problem faced by the litigants in company matters - it is for the authorities concerned to verify the infrastructure and to take a decision in the matter. Since the matter is being considered by Government of India, as is clear from the records produced along with the writ petition, hopefully the grievance of the Kerala High Court Advocates' Association will be met at an early date.
Petition disposed off.
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2017 (2) TMI 1508
Disallowance u/s 14A r.w.s. 8D - HELD THAT:- Disallowance made by the AO is more than the exempted income claimed by the assessee. On a similar issue the ITAT Delhi Bench ‘D’ in the aforesaid referred to case of M/s Global Capital Ltd., New Delhi [2015 (11) TMI 1667 - ITAT DELHI] by following the earlier decision in the case of Indus Valley Investment & Finance (P) Ltd.[2015 (4) TMI 1171 - ITAT DELHI].
As relying on GLOBAL CAPITAL LTD. VERSUS ACIT, CIRCLE-12 (1) , NEW DELHI. [2015 (11) TMI 1667 - ITAT DELHI] direct the AO to make the disallowance to the extent of the income claimed by the assessee as exempt - Appeal filed by the assessee is partly allowed.
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2017 (2) TMI 1507
Penalty u/s.271D - assessee received cash loans from his two partnership firms - violation u/s 269SS - proof of bonafied belief - whether transactions between a firm and partner do not attract the rigor of 269SS and 269T? - HELD THAT:- Revenue fails to dispute all the stated decisions holding that Section 269SS is not attracted in transactions between a partnership firm and its partner not partaking the character of a loan and deposit in general law as held in another co-ordinate bench decision in ITO vs. Bharat kumar Dayaram Patel[2010 (10) TMI 1228 - ITAT AHMEDABAD]. We accordingly draw support therefrom and uphold the CIT(A)’s order under challenge deleting Section 271D penalty in question. - Decided against revenue.
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2017 (2) TMI 1506
Sale transactions without holding the scrips - Suspension of the trading membership of the appellant - ban/prohibition from trading for 5 days - HELD THAT:- We have not permitted counsel for the appellant to raise that plea, because, firstly, no such plea was raised in the Review Application filed by the appellant before the DAC of NSE. Secondly, even if there are some discrepancies in the quantum of amounts moved from the clients beneficiary accounts, very fact that the appellant has moved funds and securities from the clients beneficiary accounts itself is sufficient to hold the appellant to be guilty of violating the norms required to be followed by a member of the exchange.
In the present case Naveen Kumar Gupta, operating on behalf of the appellant had executed sale transactions without holding the scrips and in fact, the appellant has accepted that the sale obligations of Naveen Kumar Gupta were met by using securities of other clients. Thus, it is established that in the present case securities belonging to the clients’ of the appellants have been utilized to meet the pay in obligation of Naveen Kumar Gupta which is in gross violation of the code of conduct prescribed for members of the exchange. Reliance placed by the appellant on the Circular of NSE dated June 27, 2013 is totally misplaced. The said circular clearly stipulates that serious action could be taken depending upon the gravity of the violations committed. In the present case, the violations committed by the appellant being serious DAC of NSE was justified in taking stern action.
Penalty of ₹ 10 lac and suspending the trading membership of the appellant for 5 trading days cannot be said to be unreasonable or excessive.
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2017 (2) TMI 1505
Seeking permanent injunction against the original tenant - restraint from constructing any permanent structure on the tenanted premises and further from subletting the same or transfer it in any manner - HELD THAT:- Filing of the plaint of earlier suit and proving it as per law is imperative to sustain the plea of Order 2 Rule 2 Code of Civil Procedure. Unless that is done, the stand would not be entertainable.
Though Mr. Tanmay Agarwal, learned Counsel for the Respondents has made enormous effort to distinguish the decision in GURBUX SINGH VERSUS BHOORALAL [1964 (4) TMI 110 - SUPREME COURT], the same is not distinguishable. It is mandatory that to sustain a plea under Order 2 Rule 2 of the Code of Civil Procedure, the Defendant is obliged under law to prove the plaint and the proof has to be as per the law of evidence.
Matter remanded to the High Court for proper appreciation of the material on record and to deal with the contentions raised by the Appellants therein in accordance with law within the parameters of the revisional jurisdiction - appeal allowed by way of remand.
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2017 (2) TMI 1504
Levying Dividend Distribution Tax (“DDT”) u/s 115-O - buy back of equity shares was treated as Distribution of Dividend under Section 2(22)(d) of the Act and consequently levy of Dividend Distribution Tax (‘DDT’) - Applicability of Section 115QA - amount remitted by the Appellant to its shareholders on account of buy-back of shares made in accordance with the provisions of section 77A of the Companies Act, 1956 - AO alleging that Appellant resorted to the use of colourable device to avoid payment of tax in India while distributing profits to its shareholders - HELD THAT:- There is no dispute that the holding company of the assessee based in Mauritius is holding more than 99.99% of the shares of the assessee. Therefore if any payment is made by the assessee to the holding company, the same would be treated and deemed as dividend in view of the provision of Section 2(22) of the Act however, in this case the payment in question has been made by the assessee to the holding company on account of buy back of shares. Therefore to the extent of the transaction of buy back of shares, the same cannot be classified as dividend as per the provisions of Section 2(22) when the exclusion clause (iv) of Section 2(22) has specifically excluded such a payment on purchase of its own shares from a shareholder in accordance with the provisions of Section 77A of the Companies Act from the definition of dividend.
After the insertion of Section 115QA, the purchase of its own shares by the company in accordance with the provisions of section 77A of the Companies Act shall be charged to DDT. Since this transaction in the case of the assessee is prior to 1.6.2013 therefore the said provision of Section 115QA is not applicable in the case of the assessee as it is explained by the CBDT vide Circular No.3/16.
CBDT has clarified that the consideration received on buy back of shares between the period 1.4.2000 to 31.5.2013 would be taxed as capital gain in the hands of the recipient in accordance with the provisions of Section 46A of the Act and no such amount shall be treated as dividend in view of the provisions of Section 2(22)(iv) - AO has accepted that the capital gain in the hand of the holding company is not chargeable to tax as per the provisions of Article 13(4) of Indo-Mauritius DTAA. Therefore on principle we are of the view that the transaction of buy back of shares prior to 1.6.2013 does not attract Section 115QA as well as Section 2(22) of the Act.
Payment on account of buy back made by the assessee to its holding company to the extent of the fair market price of the share of the assessee company - same would be treated as capital gain in the hand of the holding company as per the provisions of Section 46A and in view of the provisions of Indo-Mauritius DTAA the capital gains on account of sale of share is not chargeable to tax in India. The payment in the name of buy back of shares made by the assessee over and above the fair market price of the share of the assessee would not be treated as part of the purchase price because the transaction is between the two closely related parties and therefore the payment which is in excess of fair market price of the share of the assessee company would certainly fall in the ambit of Section 2(22)(e) of the Act. There is no dispute regarding the other condition of the holding company having a voting power of not less than 10% as it holds the shares of the assessee to the extent of 99.99%. In case the buy back price is not based on the real valuation and it is artificially inflated by the parties then it is certainly a device for transfer of the reserves and surplus to the holding company by avoiding the payment of tax and therefore it will be treated as a colourable device.
Buy back price paid by the assessee to its wholly owned holding company does not represent true fair market price of the share of the assessee then it is nothing but a dubious method of avoiding the tax in the garb of buy back. Thus if the buy back price paid to the holding company is unrealistic and highly inflated then to that extent the transaction of payment to the holding company has been given a colour of payment towards buy back. We find that neither the Assessing Officer nor the DRP has decided this issue of actual fair market price of the share of the assessee as on the date of buy back to ascertain whether the payment made by the assessee @ ₹ 2,85,108 per share is unrealistic and artificially inflated with the motive to avoid tax. Hence this issue of examination of the fair market price of the share vis-à-vis the buy back price of the assessee is set aside to the record of the Assessing Officer for adjudication as per law - Appeal of the assessee is partly allowed.
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