TMI Blog2012 (7) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... Enhancement in the book value of shares - Sham transaction - cost of acquisition of the value of the investment of shares - held that:- This is a transactions solely between the parent company and the holding company, the same cannot be treated as a sham transaction as the shares have been transferred purely on the book value disclosed earlier. - addition made on account of short term capital gain by reducing the value of cost of acquisition of shares is uncalled for. - IT Appeal NO. 4306 (MUM.) of 2011 - - - Dated:- 11-7-2012 - R. S. Syal And Amit Shukla, JJ. ORDER Amit Shukla, Judicial Member This appeal has been filed by the assessee against order dated 25-3-2011, passed by the CIT(A)-12, Mumbai for the quantum of assessment passed under Section 143(3) for the assessment year 2007-08. 2. The assessee has raised two grounds of appeal with various sub grounds. In ground No. 1, the assessee has challenged the disallowance of ₹ 81,39,000/- on account of service tax and interest paid, which was disallowed on the ground that liability on account of service tax has not crystallized during the year under consideration. In ground No. 2, the assessee has c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of service tax and interest paid was a liability which was not crystallized during the year as there was no formal written order, but was paid in response to show cause notice only and further that whole matter was in dispute. He, therefore, held that same cannot be allowed as deduction in the current year either under section 37 or under section 43B. 4. In the first appeal, learned counsel submitted a copy of the show cause notice issued by the service tax authorities and also copies of challans which records the payments made by the assessee. It was also submitted that the payment was made to buy peace of mind and to avoid litigation. Learned CIT(A) also did not agree with the assessee's contention that same is allowable under Section 43B in this year and agreed with the reasoning given by the Assessing Officer that the liability was still under dispute and a disputed liability always crystallizes on the passing of a formal order by the authorities concerned. Mere payment on the basis of show cause notice does not mean that there was a liability to pay in this year. He, therefore, held that the payment can be termed as an advance deposited with the service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43B of the Act. Before the Apex Court the issue related to payment of sales tax as per the demand raised by the sales tax department and the assessee had deposited the liability of sale tax under dispute. The Hon'ble Apex Court held that merely because the assessee was disputing the liability would not mean that the liability had not accrued. Section 43B is non obstante clause which provides that :- Certain deductions to be only on actual payment. 43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- [(a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or] (b), [(c), [ (d), [(e) and [(f) ** ** ** shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him : 8. From the plain reading of the above, it is eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 1 Euro RSCG Targetmendia Pvt. Ltd. 8,000 18/01/2006 20/09/2006 Sale 16,000,000 16,000,000 0 TOTAL 16,000,000 16,000,000 (B) LONG TERM CAPITAL GAINS/(LOSS) Sl. No. Particular No. of Shares Date of Acquisition Date of sale Mode of Transfer Full Value of Consideration Exp Incidental to sale Net sale consideration Cost of Purchase u/s 48 Book Gain/ Loss Index Indexed cost of purchase Indexed LT Gain/ (Loss) 1 Euro RSCG Targetmendia Pvt. Ltd. 1,118 31/03/2002 20/09/2006 Sale 2,798,650 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which have been mentioned at page 8 of the assessment order. 10.1 In response to the query raised by the Assessing Officer as to why the cost of acquisition of the shares should not be taken as per the market value given in valuation certificate given before RBI, it was submitted that the shares were held by the company as a capital asset and in pursuance to share purchase agreement, it had transferred the shares of Euro TM at cost. It was pointed out that the shares of Euro TM have been transferred at a higher value than the fair market value based on the valuation carried out by the independent certified valuer. Since the transfer of shares was at the cost of acquisition in terms of agreement, hence, there was no profit or gain taxable under the Act. The date and cost of acquisition were given as under :- Date of acquisition No. of shares Cost of acquisition (Rs.) 31.3.2002 1,118 27,98,650 31.12.2002 1,282 54,26,645 18.1.2006 8,000 1,60,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CTO, reported in 154 ITR 148, he worked out the cost of acquisition of 8000 shares at ₹ 16,00,000/- and cost of acquisition of 2400 shares purchased in the year 2002 at ₹ 82,25,295/-. The sale consideration was taken @ 2330 per share and determined the sale consideration at ₹ 1,86,40,000/- and determined the short term capital gain at ₹ 1,70,40,000/-. However, on the long term capital gain on sale consideration of 2240 shares @ 2330/- per shares, he determined long term capital cost of ₹ 44,91,158/-, as per the working given at page 13 of the assessment order. 11. The CIT(A) confirmed the finding of the Assessing Officer after observing and holding as under :- 5.6 I have carefully considered he order of the assessing officer and the submission of the appellant. The order of the assessing officer as reproduced above I find carried weight for the reasons stated therein. I find that the appellant has not been able to explain the reason for arriving at the figures of sale and purchase with the parent company which is different from the valuation report of equity shares as on 31/12/2005. The appellant I find has also not been able to address the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquisition for determining the short term capital gain has to be taken as per the book value which was the actual consideration. Regarding computation of sales price, learned AR submitted that the same is not being disputed seriously. 13. On the other hand, learned CIT DR relied heavily upon the finding given by the CIT(A) and the Assessing Officer and submitted that once the valuation report, evaluating the shares at ₹ 208 was available, the Assessing Officer was fully justified in rejecting the book value shown by the assessee. He submitted that how a share of ₹ 10/- can have such a huge premium of 1.59 crores. Therefore, the entire transaction is colourable device. 14. We have carefully considered the rival submissions and perused the material on record and the findings of the CIT(A) as well as the Assessing Officer. From the facts as have been narrated above, it is quite evident that, so far as the date of acquisition, number of shares and cost of acquisition shown in the books of account as well as in the balance sheet, there seems to be no dispute or discrepancy. It is also not in dispute that cost of acquisition of shares as appearing in the balance sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
