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TMI Blog2012 (12) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... that capital gains is attracted even in case of part performance of the contract/agreement. 3. The only additional ground raised by the Revenue reads as under: "The Ld. CIT(A) has erred in to allow relief to the assessee relying upon certain additional evidence which was not submitted before the AO. This consists of copy of Termination Agreement dt. 26.3.2009 which was furnished to the CIT(A) as per rule 46A, the CIT(A) ought to have entertained the said additional evidence after allowing the AO a reasonable opportunity to examine such evidence filed by the assessee which was not done. Thus, the order of CIT(A) is not in consonance with the mandatory requirement of Rule 46A." 4. Briefly stated the facts of the case are that the assessee hold 1,03,500/- equity shares out of the 3,00,000 equity shares of Rs. 10 each in the share capital of Unisol Infraservices Pvt. Ltd. (UIPL). The entire shareholding of UIPL belonged to the members of Shete family and the holding of the assessee works out to 34.50%. For the year under consideration, the assessee filed return of income on 27.6.2006 declaring total income at Rs. 3,57,280/- which included Long Term Capital Gain arising on sale of U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s based on the multiple of average profit for the two preceding years less debt plus cash minus the consideration already paid. It was argued by the assessee that the accrual of the sale consideration is to take place in the subsequent years on various dates as per the agreement i.e. 30.6.2007, 30.6.2009 and so on till 30.6.2011. It was argued that the initial consideration and the deferred consideration arising to the Shete family in subsequent years has been capped at Rs. 20 crores which is the maximum amount that could be received as consideration for sale of shares but at the same time it is not the final consideration agreed upon. It was accordingly submitted before the Ld. CIT(A) that except for the initial consideration paid by RHSPL to the Shete family, no part of deferred consideration has either accrued or is received by the Shete family during the year ended 31st March, 2006 i.e. the year under consideration and therefore it was finally submitted before the Ld. CIT(A) that the computation of Capital Gains made by the AO is illegal and invalid. 5.1 After considering the submissions, Ld. CIT(A) held that only the initial consideration has been received by the Shete family ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue. The Counsel further argued that as per the agreement, only initial consideration has been provided whereas the deferred consideration is to be calculated as per the formula given in the said agreement. The Counsel further relied upon the provisions of Sec. 45(5) of the Act and stated that the law has taken care of future consideration as per the provisions of Sec. 45(5) and therefore any increase in the consideration in future would be taken care of by the provisions of Sec. 45(5) of the Act. 8. We have considered the rival submissions and perused the orders of lower authorities. It is an undisputed fact that the Shete family has agreed to transfer the entire holding of UIPL to RHSPL. The effective date of transfer has been accepted as 17 th February, 2006 which is well within the year under consideration. The main contention of the assessee is that she is liable for capital gain tax only on the amount of consideration actually received by her and not on future consideration which would depend upon future events. First let us consider the provisions of Sec. 45 (1) which states that "Any profits or gains arising from the transfer of a capital asset effected in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication of that Sec. 45(5) i.e. i) Capital gains must arise from the transfer of a capital asset by way of compulsory acquisition under any law , and ii) The compensation for such transfer is enhanced or further enhanced by any Court, Tribunal or other authority. Unless both these conditions concur, there is no question of application of Sec. 45(5) of the Act. 10. Clause 5 has been inserted to sec.45 to mitigate the hardship to the tax payers whose capital assets are acquired by the government bodies compulsorily under the land acquisition act or any other law , and when the compensation is in dispute and can be decided only by courts or tribunals in some future date . This enactment relates to the actions of the government bodies over which the assessees do not have any control and the legislative intent cannot be extended to transactions between private parties or between an assessee and government body , where the terms of agreements can be decided mutually . Further Sec. 45(5)(b) will be attracted only when the assessee receives the enhanced compensation in pursuance of final award/order of a court , Tribunal or other authority increasing the compensation. The pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale consideration in subsequent years. Further, the observation of the Ld. CIT(A) that in family members cases, for the capital gains arising out of the transfer of shares, the return of income have been accepted by the department under scrutiny assessment , cannot be accepted under the principles of consistency as we are not bound to follow the decisions of the authorities which are inconsistent with the provisions of section 45 [ 1 ] of the act . 13. The Ld. Counsel for the assessee also referred to the case of Shri Raju Shete which has been decided by the ITAT, Mumbai 'D' Bench in ITA No. 2902/M/2011 & 2904/M/2011 for assessment year 2006-07 and submitted that the Tribunal has accepted the capital gains as returned by the assessee. We find that in the said decision, the Tribunal was deciding on the applicability of the provisions of Sec. 263 vis - a - vis the applicability of the said section on the facts of the case. 14. However, we are not going into the merits of this case as we find that the CIT[A] has admitted certain additional evidence in violation of the provisions of Rule 46A without affording any opportunity to the AO and has decided the appeal on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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