TMI Blog2012 (5) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(47) of the Income Tax Act, 1961. Cost indexation - capital gains - held that:- Section 48 denies the benefit of indexation to bonds and debentures other than capital indexed bonds issued by the Government. The four percent non-cumulative redeemable preference shares were not bonds or debentures within the meaning of that expression in Section 48 of the Income Tax Act, 1961. In these circumstances, the Tribunal was correct in its decision to that effect. - Decided in favor of assessee. - IT APPEAL NO. 5372 OF 2010 - - - Dated:- 27-4-2012 - DR. D.Y. CHANDRACHUD and MRS. MRUDULA BHATKAR, JJ. JUDGMENT Dr. D.Y. Chandrachud, J. This appeal arises from a decision of the Income Tax Appellate Tribunal dated 19 December 2008. The issue raised by the Revenue in the appeal which is under Section 260A of the Income Tax Act, 1961, arises from the assessment proceedings for Assessment Year 2002-03. The Revenue has raised the following questions of law: "A. Whether on the facts and in the circumstances of the case the Tribunal was right in law in deleting the addition of Rs. 70,60,209/- made by the Assessing Officer on account of outstanding brokerage payable by the Assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer came to the conclusion that the liability did not exist for Assessment Year 2002-03 and brought the amount to tax for that year. The CIT(A) agreed with the Assessing Officer. The Tribunal has noted that the only ground on which the addition was made was that the liability never existed in Assessment Year 2002-03. The Tribunal has on the other hand come to the conclusion that there was an error on the part of the Assessing Officer and the CIT(A) in making an addition under Section 41(1) as there was no remission or cessation of liability in question during Assessment Year 2002-03. The order of the Tribunal is evidently correct. There was no remission or cessation of liability during Assessment Year 2002-03. In these circumstances, Question (A) will not give rise to any substantial question of law. Re: Questions (B), (C ) and (D) . 4. The assessee had subscribed to the purchase of 4 lakh preference shares each of Rs. 100/- of an aggregate value of Rs. 4 crores from a company by the name of Enam Finance Consultants Pvt. Ltd. in 1992. The preference shares were to carry a dividend of four percent per annum and were to be redeemable after the expiry of ten years from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not genuine. There is no reason for this Court to differ with the finding of the Tribunal. The Revenue did not bring any material on record whatsoever to substantiate the contention that the transaction was sham. The Tribunal has adduced sufficient reasons for not doubting the authenticity and genuineness of the transaction. Question (B) will, therefore, not give rise to any substantial question of law. 6. As regards question (C), the judgment of the Supreme Court in Anarkali Sarabhai ( supra ) concludes the issue that a redemption of preference shares by a Company squarely comes within the ambit of Section 2(47) of the Income Tax Act, 1961, since it amounts to a transfer. Question (C) will, therefore, not give rise to any substantial question of law. 7. As regards question (D), Section 48 provides that the income chargeable under the head "capital gain" shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of a capital asset: (i) The expenditure incurred wholly and exclusively in connection with such transfer; and (ii) The cost of acquisition of the asset and the cost of any improvements thereto. The se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in clause (a), up to the date of the winding up or repayment of capital; and ( ii ) any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company. Explanation .- Capital shall be deemed to be preference capital, notwithstanding that it is entitled to either of both of the following rights, namely:- ( i ) that, as respects dividends, in addition to the preferential right to the amount specified in clause (a), it has a right to participate, whether fully or to a limited extent, with capital not entitled to the preferential right aforesaid; ( ii ) that, as respects capital, in addition to the preferential right to the repayment, on a winding up, of the amounts specified in clause (b); it has a right to participate, whether fully or to a limited extent, with capital not entitled to that preferential right in any surplus which may remain after the entire capital has been repaid." Section 86 provides that the share capital of a company limited by shares shall be of two kinds only namely : (i) Equity share capital; and (ii) Preference share capital. 9. There is fundamentally as a matter of first principle and in law a clear d ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
