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TMI Blog2012 (7) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... ement ("SPA‟, for short) dated 15.2.2006. The appellant had offered a sale consideration of Rs.60 lakhs being the price of 1500 shares at Rs.4,000/- per share. The SPA was concerned with the sale of 20,000 shares of the Orion Dialog of which the appellant held 1500 shares. The total consideration agreed upon in respect of each share of Rs.5750/- of which Rs.4000/- became payable on the execution of SPA and the balance was payable over a period of two years. 4. The Assessing Officer by assessment order dated 24.12.2008 held that the entire income accruing to the assessee was reckonable as capital gains. Aggrieved, the appellant approached the Commissioner of Income Tax (Appeals) who by the order dated 5.9.2011 allowed the appeal holding that such part of the consideration which was payable in future did not constitute income for the relevant assessment year and that the assessee would become entitled to it on the fulfillment of certain conditions which could not be predicated. On appeal by the Revenue, the ITAT in its impugned order took into consideration the submissions of both sides and posed the issue under : "6. We have considered the facts of the case and submissions m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot over-ride section 45 implicitly. The reason for lack of the year in latter provision is that all sums accruing or received in connection with transfer are liable to be taxed in the year in which transfer takes place. With these preliminary remarks, we may examine the cases relied upon by the ld. counsel. 6.2 In the case of CIT Vs. Ashokbhai Chimanbhai (1965) 56 ITR 42 (S.C.), the question before the court was-whether, on the facts and in the circumstances of this case, the five annas share of the income of Amrit Chemicals or any part thereof for the year 01.01.1955 to 31.12.1955, accrues to the assessee and whether it could be charged in his hand? At page 45 of the report, it is mentioned that under the Income Tax Act, income is taxable when it accrues, arises or is received, or when it is by fiction deemed to accrue, arise or is deemed to be received. Receipt is not the only test of chargeability to tax; if income accrues or arises it may become liable to tax. For the purpose of this case it is unnecessary to dilate upon the distinction between the income "accruing" and "arising". But there is no doubt that these two words are used to contra-distinguish the word "received". In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of such payments if already received. These contingent payments did not fall u/s 25(va). 6.5 This decision was a matter of writ petition before Hon'ble Madras High Court. The questions before the Hon'ble Court were as under:- "(i) Whether the gains arising from the transfer of 15,000 equity shares in M/s Vision Health Source India (P) Ltd. covered by the share purchase agreement dated 15th April, 2003 read with exhibits A and B namely which are share purchase agreement and associated employment agreement respectively is chargeable to capital gain taxes or not either wholly or in part ? (ii) If the aforesaid gains arising from the above transfer is liable to be charged to capital gain tax either wholly or in part, in which year of assessment does the liability to pay capital gain taxes arise for the following amount received/receivable as consideration for the transfer of shares aforesaid, which, in aggregate amounts to 93 lakh US dollars (9.3 million U.S. dollars) termed as purchase price as per clause 1 of the share purchase agreement dated 15th April, 2003? (i) Initial lump sum payment equal to 23 lakh US dollars (2.3 million US dollars) (referred in the share purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise or is deemed to be received. Section 45 contains a fiction that profits and gains arising from transfer of a capital asset shall be deemed to be the income of a previous year in which the transfer takes place. Therefore, the words "received" or "accruing" in section 48 shall have to be read in conjunction with the provision contained in section 45(1). This means that full value of consideration received or accruing in any year as a result of transfer of the capital asset shall be taxed in the year in which transfer takes place irrespective of the year of accrual or receipt. 6.8 In the case of Bharat Petroleum Corporation Ltd. (supra), it has been held that an income accrues when the assessee gets a legal right to enforce the amount against the debtor. In this sense, income might have accrued in different years but by dint of fiction contained in section 45(1), income accruing in different years or received in different years is chargeable in the year in which transfer takes place. 6.9 The decision in the case of Anurag Jain (supra) has been rendered under totally different set of facts. In this case, the payment for consideration of shares was inter-linked with the performanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermining the chargeable profits and gains. All transactions encompassed by section 45 must fall under the governance of its computation provisions. A transaction to which those provisions cannot be applied must be regarded as never intended by section 45 to be the subject of the charge. This inference flows from the general arrangement of the provisions in the Income-tax Act, where under each head of income the charging provision is accompanied by a set of provisions for computing the income subject to that charge. The character of the computation provisions in each case bears a relationship to the nature of the charge. Thus the charging section and the computation provisions together constitute an integrated code. When there is a case to which the computation provisions cannot apply at all, it is evident that such a case was not intended to fall within the charging section. Otherwise one would be driven to conclude that while a certain income seems to fall within the charging section there is no scheme of computation for quantifying it. The legislative pattern discernible in the Act is against such a conclusion. It must be borne in mind that the legislative intent is presumed to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for in different periods. The observations made by the Court as to what constitutes accrued for the purpose of income tax no doubt would apply but at the same time this Court notices that they are of a general character. 7. The reasoning of the Tribunal is premised upon the fact that capital assets were transferred on a particular date the asessees passed on the execution of the agreement. There is no material on the record or in the agreement suggesting that even if the entire consideration or part is not paid the title to the shares will revert to the seller. In that sense the controlling expression of "transfer" in the present case is conclusive as to the true nature of the transaction. The fact that the appellant assessee adopted a mechanism in the agreement that the transferee would defer the payments would not in any manner detract from the chargeability when the shares were sold. 8. It was lastly submitted that the Tribunal‟s findings are based upon its understanding about the characterization of the receipt and it has not dealt with the deeming fiction about the accrual which is dealt with by Section 48. We are unable to agree. The tenor of the Tribunal̶ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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