TMI Blog2012 (12) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... nds the income would have been capital gain again - principle company i.e. Shaw Wallace Company Ltd, as AO noted that the entire income has to be considered as income of SWCL substantially and in case it was upheld, the order in assessee’s case will be modified accordingly - order of the CIT (A)is uphold - held as taxable as LTCG - appeal by Revenue is dismissed. - ITA No.4214/Mum/2007 - - - Dated:- 7-11-2012 - D.K. Agarwal and B. Ramakotaiah, JJ. Appellant Rep by: Shri A.C. Tejpal, CIT(DR) Respondents Rep by: Shri J.D. Mistry/A.T. Jain/ Mahesh O Rajora ORDER Per: B Ramakotaiah: This is a Revenue appeal against the order of the CIT (A)-1 Mumbai, dated 29.03.2007. The Revenue has raised the following two grounds: "1. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in deleting the addition of Rs.298 crores received by transfer of Rs.18,26,505/- shares to M/s. Mysore Breweries Ltd as income from adventure in the nature of trade or business and holding that receipt is taxable as Long Term Capital Gain . 2. The learned CIT (A) further erred in admitting fresh evidence in contravention of Rule 46A witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diagrammatic chart as under: Holding structure prior to demerger of beer business and beer investments of PDPL: 4. There was a scheme of Arrangement between PDPL and assessee wherein it was decided to demerge the Beer Business and Investments in Beer Companies of PDPL i.e. SWBL and transfer it to assessee. The Scheme of Arrangement was approved by the High Court of Bombay vide its order dt. 01.08.2002 wherein the High Court approved the said scheme of arrangement w.e.f. 15.05.2002. Pursuant to such order the Beer Business along with all the investments in beer companies were transferred to assessee by PDPL. The shares of SWBL held by PDPL were also transferred to assessee in the same scheme of arrangement. Necessary entries were passed in the accounts of assessee to give effect to demerger of beer business. 5. During the year under consideration assessee sold shares of Shaw Wallace breweries Limited (SWBL) to Mysore Braveries Ltd, an Indian subsidiary of Sab Miller, South Africa and declared long term capital gain of Rs.187,06,52,136/- after claiming exemption under section 54EC of the Act by purchasing bonds amounting to Rs.108,00,00,000/-. The computation of long term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment is not material to decide whether assessee is a dealer in shares. f) The Scheme of Arrangement as approved by High Court is only on paper and not in reality and hence the process of execution of demerger is not free from suspicion as there was no transfer of beer business to assessee. In view of the above findings recorded by AO, in his elaborately discussed order he reached to the conclusion that the gain realized on sale of shares of SWBL represents profit from adventure in the nature of trade and not from investment as claimed by assessee. 7. Before the CIT (A), assessee submitted that AO has made several incorrect/irrelevant/self contradictory statements/ observations in the assessment order to draw conclusion that are pre-mediated. Assessee submitted the details which were extracted by the CIT (A) in Page 6 onwards. 8. After considering assessee s detailed submissions and examining the facts on record and law on the issue, the CIT (A) vide his detailed order running to 42 pages considered that assessee s income on sale of shares has to be taxed as Long Term Capital Gain and not as business income. He has rebutted each of the contentions raised by AO in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he country without the compliance of RBI regulations. Hence there would have been no need to file the petition before the Hon'ble High Court for the sanction of the demerger scheme as proposed by the Board of Directors of both the transferor and transferee companies. Therefore, even unveiling of the corporate veil to treat the PEPL as paper tiger does not alter the apparent facts of the case. Thus, the assessment of entire sale proceeds as profit from adventure in the nature of trade is totally against the facts of the case and law. (d) The appellant disclosed its full facts which have not been correctly appreciated by AO to accept the appellant s claim of the long term capital gain as available to the appellant as per the provisions of Income Tax Act, 1961 merely due to abnormally high profit on sale of above share. Such abnormal profits are always possible when corporate sector was aggressively engaged in amalgamation and demerger of companies in a free economy particularly in the beer business. Therefore, this sole criterion of abnormal profits cannot lead to conclude that the sale of asset was an adventure in the nature of trade . In fact the appellant was hugely b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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