TMI Blog1990 (12) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... per share against the actual agreed and recorded sale consideration of Rs. 22,00,000 as declared by the petitioner company. 2. That on the facts and in the circumstances of the petitioner company s case, the leaned CIT(A) erred in law in holding that the sale during the previous year ended 30th Sept., 1982 of the aforesaid 10,000 equity shares of Hindustan Computers Limited was effected with the object of reduction of the liability under s. 45. of the IT Act, 1961. 3. The assessee company owned 10,000 shares including 5,000 shares received in May 1981 as bonus shares, of the face value of Rs.100 each of M/s Hindustan Computers Limited (here in after referred to as the HCL) The cost of acquisition of the original 5,000 shares was Rs. 5,00,000 During the year under consideration the assessee company claimed to have sold the said 10,000 shares @ 220 per share to certain individuals, firms and companies in which the directors of the assessee-company were directly interested, in terms of Boards resolution dt. 2nd July 1981 The ITO observed that the payments from some of the purchasers the consideration was not received till the end of the previous year On these facts, the ITO felt t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was an under statement of the sale consideration. After obtaining the approval of the IAC under s.52 of the IT Act, he worked out the sale price of all the 16,400 share @ Rs. 889,56 per share, i.e. the break up value of shares as on 30th June, 1982 which was the nearest point to the date of sale. On this basis the net capital gain was assessed at Rs. 1.19,13,784 as against capital gain of Rs. 17,00,000 shown by the assessee. 4. It would thus, be seen that there were two sets of shares, e.g.(1) 10,000 original shares purchased by the assessee company including 5,000 bonus shares and (2) 6,400 shares which were acquired subsequently and sold during the accounting period relevant to the assessment year under appeal. 10,000 shares were stated to have been sold @ Rs. 220 per share resulting in capital gain of Rs. 17 lakhs. 6,400 shares which were acquired subsequently at Rs. 339.85 per share, were transferred at the same rate resulting in no capital gain or loss. The share were transferred at the same rate resulting in no capital gain or loss. The Assessing Officer adopted the consideration for all the shares numbering 16,400 @ Rs. 889,56 per share The reasons for doing so have alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the learned CIT(A) which were supported by various resolutions of the company and the documents, photocopies of which were filed It was urged that the sale consideration was the real consideration and therefore the consideration could not be taken at enhanced figures Reliance in this connection, was placed before the learned CIT(A) on the following judicial pronouncements. K.P. Verghese vs. ITO (1981) 24 CTR (SC) 358 (1981) 131 ITR 597 (SC) CIT vs. C.C. Patel I.C. Patel (1986) 50 CTR (Bom) 209 (1986) 161 ITR 879 (Bom) (SC). CIT vs. Shivakami co. (P) Ltd.(1986) 52 CTR (SC) 108 (1986) 159 ITR 71 (SC) CIT vs. Hari Charan Shyam Sunder p. Ltd.(1986) 159 ITR 703 (Cal) Darshan Kumar Oswal vs. CIT (1985) 48 CTR (P H) 310 (1986) 159 ITR 513 (P H). It was therefore prayed that in the fitness of things the addition on account of deemed capital gains may be deleted, 6. The ld. CIT(A) after very careful consideration and analysis of the facts and material on record came to the conclusion that sale of 10,000 shares was understated. One thing which weighted upon his mind was that against sale of 2,730 shares out of 10,000 shares, the assessee had received payment of Rs. 8,50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereby sale price of the shares was provisionally fixed at Rs. 220 per share subject to change, if in case on finalisation of the accounts the value of these shares as on 30th June, 1981 as per the break up method difference was more or less by 10 per cent According to him, it was inconceivable as to how the assessee could make the near estimate of the value of the accounts on 2nd July, 1981 when the accounts were finalised only in December 1981. When the capital value was determined at Rs. 228. Further making such a correct estimate is a near impossibility since the shares were very volatile as these made a quantum jump in their value in the relevant previous year. He therefore, urged that this resolution was also an after though. He also referred to the resolutions dt. 2nd Sept., 1981 which according to the ld. Deptl Representative showed that all the buyers were not only ready to buy the shares offered to them i.e. first lot of 10,000 but were also desirous and clamouring for buying more which means that these shares were a premium item. Such an eager buyer will not only accept the offer made by the company immediately but, would also like to pay the amount to the company so as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that in respect of payments allegedly received prior to June, 1982 the mode of payment has not been mentioned. The payments received in June, and thereafter have been by cheques and cheque numbers have also been given. According to him the payments received prior to June 1982 were otherwise than by Cheque, i.e. by way of adjustment of accounts. The representative of the assessee could not classify this position in spite of query from the Bench. He also referred to the judgment of the Hon ble Madras High Court in the case of K.R. Loganathan Co. vs. Union of India Ors (1987) 65 CTR (Mad) 162 : (1988) 174 ITR 647 (Mad) to say that intention of a transaction has to be gathered from the facts and circumstances of a case, weighed in relation to each other and as a whole. He also referred to the provisions of s. (52)(1) and pointed out that it is applicable where transferee is connected with the assessee. According to hi, the transferees were all connected with the assessee and therefore, provisions of s. 52(1) were squarely applicable. He also pointed out that for proof of under consideration circumstantial evidence has to be taken into consideration. He therefore, urged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esolution in 1981 but at a later date. 10. Another fact which is very important is that the assessee purchased 6,400 shares of HCL at Rs. 339.85 per share which were purchased on14th Jan., 1982. UPLC is a Govt undertaking Not a finger can be pointed out the this transaction as Government is involved in the transfer of these shares When the Revenue has accepted the cost of acquisition of Rs. 6,400 shares @ Rs. 339.85 per share it seems illogical to adopt the sale consideration at Rs. 889.56 per share barely after 4-5 months. 11. Another fact which is still more important is that the Revenue has accepted the order of the CIT(A) in fixing sale consideration of 6,400 shares at Rs. 330.85 per share inasmuch as there is no ground of appeal against this conclusion. When according to Revenue the transfer of 10,000 shares as well as 6,400 shares took place in June, 1982 there could not be different values for shares of the same company. Since Deptt. itself has accepted the sale consideration of 6,400 shares at Rs. 339,85 per share the consideration of remaining 10,000 shares could not be more than this. In view of these discussions, we confirm the order of the CIT(A) in giving relief of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to attract the provisions of this section, the transaction of sale must be Mala fide or in other words, it must be concerted action directed towards the end of avoidance of liability for tax. As the sales of shares made by the petitioner were genuine and Bona fide the provisions of this section could not be invoked. He therefore, supported the orders of the CIT(A). 17. We have given our very careful consideration to the rival submissions. We are in complete agreement with the conclusion arrived at by the ld. CIT(A). We have already reproduced in the earlier part of the order his detailed discussions before deleting the addition, with which we are in agreement. No interference with the order of the CIT(A) is called for on this account. 18. This finishes up the appeal by the Revenue. We shall now take up the remaining grounds of appeal by the assessee. 19. The third ground of appeal by the assessee is that the ld. CIT(A) was wrong in upholding the action of the ITO for disallowance of amounts aggregating to Rs. 58,770 in respect of the sales tax. 19A. The ITO disallowed the sales tax liabilities aggregating to Rs. 58,770 as detailed below. (i) Penalty disallowed Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
