TMI Blog2010 (12) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... han, P.M. Jagtap, JJ. Sanjeev Dutt for the Appellant V. Mohan for the Respondent ORDER P.M. Jagtap: This appeal is preferred by the Revenue against the order of ld. CIT(A) -III, Mumbai dated 14.1.2008. 2. In ground No. 1, the Revenue has challenged the action of the ld. CIT(A) in treating the service charges of 18,86,77,689/- as income of the assessee from business as against income from other sources treated by the A.O. 3. At the time of hearing before us, the learned representatives of both the sides have agreed that the issue involved in ground No.1 is squarely covered in favour of the assessee and against the Revenue by the order of the Tribunal dated 28.9.07 passed in assessee's own case for A.Y. 1996-97 to 1999-2000 in ITA No.489 to 492/Mum/2004. A copy of the said order is also placed on record and a perusal of the same shows that a similar issue has been decided by the tribunal in favour of the assessee for the following reasons given in para No.35:- "The first issue in Revenue's appeals for all the years is that the CIT(A) erred in directing the assessing officer to treat on service charges received from tenants for various services s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and taken the same as lease from the assessee @ Rs.25 per sq. ft. while the same sister concern has let out the same premises at much higher rate. The learned CIT(A) noted that the transaction was not a normal transaction where the assessee was in free and vacant possession of the premises. The premises were encumbered and it was only after the sister concern put in special efforts that the old tenants were got evicted. In the process, the sister concern incurred sizeable expenditure. The learned CIT(A) therefore, held that the lease agreement with the sister concern deserves to be viewed in the context of these overriding factors and the encumbrances attaching to the property. Over and above the expenditure of Rs.11 crores the sister concern placed an interest free deposit of Rs.15 crores with the assessee. The CIT(A) considered the rent @ Rs.25/-per sq. ft. as the rent at which the property could have been expected to fetch owning to the basic facts peculiar to the case. This, in our view is the correct appreciation of the factual position that prevailed in the case. The department has not made out a case that the rent received by the assessee was ......received from the old te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares thus were sold by the assessee to its joint venture partner at a price of Rs.5.74 per share as against the face value of Rs.10/- per share at which the same had been purchased by it. The said sale transaction resulted in long term and short term capital loss to the assessee which was claimed in the return of income filed for the year under consideration. This claim of the assessee, however, was disallowed by the A.O., as, according to him, the transaction of sale of shares was only a device used by the assessee company to deliberately create long term and short term capital loss in order to set if off against long term capital gain earned in the year under consideration. He noted in this context that there was no basis whatsoever was given by the assessee for the value of Rs.5.74 per share at which the shares were sold to Egmont Publications Ltd. He also noted that the assessee could not give any satisfactory reason for deciding to exit from the joint venture. He further noted that just 6 months prior to exit from the joint venture, the assessee had invested Rs.1.20 crores in the same shares at the face value of Rs.10/- per share. According to the A.O., there was no reason for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany and the transaction for sale of shares with the said company being at arm's length price, there was no reason for the A.O. to doubt or dispute the same and to disallow the short term and long term capital loss claimed by the assessee arising from the said transaction. 11. The ld. CIT(A), found merit in the submissions made on behalf of the assessee company on this issue and deleted the disallowance made by the A.O. on account of assessee's claim for long term and short term capital loss arising from sale of shares to M/s Egmont International Holdings Ltd. for the following reasons given in para No.15 of his impugned order:- "I have perused the facts of the case, and I find that there is an explicit written agreement between appellant and Egmont International Holdings for purchase of shares held by appellant. In terms of this agreement, a lumpsum of Rs.1.6 crores has been decided. Apparently this lumpsum price is a negotiated price. The valuation of shares on 31.3.2000 in accordance with the balance of the company was only Rs.2 per share. Appellant has received more than Rs.5 per share. I also find that the transaction of sale of shares was undertaken with the involveme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... torily explained by the assessee company. He contended that even though the approval of FIPB was taken for transaction of sale of shares by the assessee company as required, the same by itself is not sufficient to establish the genuineness of the transaction. He contended that the assessee has clearly failed to establish that the transaction of sale of shares giving rise to short term and long term capital loss was at arm's length and keeping in view this failure of the assessee as well as other facts of the case, the genuineness of transaction of sale was rightly doubted by the A.O. and the claim of the assessee for loss was disallowed by him. In support of this contention, he relied on the decision of Hon'ble Supreme Court in the case of CIT vs. Karamchand Thapper and Bros 176 ITR 535 and that of Hon'ble Bombay High Court in the case of ITC Classic Finance Limited vs. DCIT 264 ITR 124. 13. The learned counsel for the assessee, on the other hand, strongly relied on the impugned order of the ld. CIT(A) in support of the assessee's case that the transaction of sale of shares was genuine transaction and the long term and short term capital loss arising there from was rightly clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the assessee company and the joint venture partner had introduced some additional funds in the form of share capital in the said company on the earlier occasion. Since the assessee company was not in a position to infuse more funds in the joint venture company, an understanding was reached by it with the joint venture partner whereby the joint venture partner agreed to purchase the shares held by the assessee in the joint venture company at a lumpsum consideration of Rs.1.76 crores. The terms and conditions of the said understanding were formalised in the form of an explicit agreement and the said agreement was approved by the FIPB. The A.O., however, doubted the genuineness of the transaction involving the transfer of shares of joint venture company by the assessee company and disallowed its claim for long term and short term capital loss arising from such transfer mainly for two reasons. Firstly, he held that the said transfer of shares was effected at a price of Rs.5.64 as against Rs.10/- per share paid by the assessee company itself while introducing additional funds just six months earlier. In this regard, it has been explained on behalf of the assessee company that there w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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