TMI Blog2013 (12) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue did not press or make any headway. The suspicions raised remained in the realm of conjectures and surmises and do not have a firm basis. The substantial question of law has to be treated as partly answered in favour of the Revenue and against the respondent insofar as transfer of 77929 shares by HEICL to V.C. Vaidya or ATPPL is concerned, on which we have passed an order of remit to the tribunal. However, on other aspects/transactions of HEICL, the appeal is dismissed and the question of law is answered in favour of the respondent-assessee and against the appellant-Revenue. - Income Tax Appeal No. 20/2000, Income Tax Appeal No. 95/2002 - - - Dated:- 21-11-2013 - Sanjiv Khanna And Sanjeev Sachdeva,JJ. For the Appellant : Mr. Abhishek Maratha, Sr. Standing Counsel. For the Respondent : Through Nemo. JUDGMENT Sanjiv Khanna, J. Appeal by the Revenue being ITA No. 95/2002, which pertains to Assessment Year 1989-90, was admitted vide order dated 8th July, 2005 for determination of the following substantial question of law:- Whether ITAT was correct in deleting the addition of Rs.2,39,86,572/- being the difference between the sale price declared by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by bringing to tax the difference between market price and the sale consideration as declared. 6. HEICL did not succeed in the first appeal but has succeeded before the tribunal. We shall subsequently refer to the order of the tribunal. 7. ATPPL for the Assessment year 1989-90 had filed its return of income on 17th November, 1989, declaring income of Rs.10,28,136/-. 8. In the regular assessment proceedings, it was noticed that investments of ATPPL had increased from Rs.13,85,359/- to Rs.61,71,068/-. On query, it was explained that assessee-ATPPL had purchased 3,90,181 equity shares of HCL Limited for Rs.41,26,362/-, from different persons by way of private arrangements and no share broker was involved in the said transactions. The Assessing Officer took notice of these transactions and brought to tax an amount of Rs.26,48,017/- on account of difference between the sale consideration paid by the assessee and the quoted market price on the date of purchase. The Assessing Officer invoked Section 69B of the Act. These details are mentioned and recorded in the assessment order in form of a chart, which is as under:- Date Of purchase Number of shares Rate at w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mp Limited/principal promoters. Later on, Hindustan Computers Limited merged with three other companies namely, Hindustan Reprographics Ltd, Indian Computer Software Co. Ltd and Hindustan Instruments Ltd. to form a new company HCL Limited. UPLC, however, did not want to continue as a shareholder in the new company, HCL Limited. A tripartite agreement dated 29th January, 1987 was entered into between UPLC, Microcomp Limited and Hindustan Computers Limited to the effect that UPLC shall sell 4,000 shares of Rs.100/ each to Microcomp Limited or their nominee for consideration of Rs.1.27 crores. 12. Subsequently and as per the tripartite agreement, SBI Capital Markets Limited paid Rs.1.27 crores to UPLC on or before 31st December, 1987. It appears that Microcomp Limited did not have sufficient funds to make the said payment and they entered into an agreement dated 28th February, 1987 with SBI Capital Markets Limited for payment of the said amount to UPLC. This agreement was between SBI Capital Markets Limited, Hindustan Computers Limited and the three principal promoters. 4,000 shares were transferred and registered in the name of SBI Capital Markets Limited. 13. In the meanwhile, D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors of ATPPL, to whom the shares were sold. (ii) Ashim Kanth, attorney of Y.C. Vaidya and director of ATPPL on oath was unable to state why shares were sold at less than the market price. (iii) The shares were sold to ATPPL on the directions of promoter directors of HEICL for their personal gains at prices much below the market price. (iv) Dues of Citi Bank were liquidated by HEICL through payments from their bank account on different occasions. HEICL had deliberately delayed filing of return for the assessment year in question till 26th March, 1991, though their accounts were purportedly audited in May, 1989. They also delayed furnishing of information and asked for repeated adjournments. Their books were finally impounded by the Assessing Officer, Circle-1(ii). (v) As shares were sold at less than the market price, this constitutes breach of trusteeship and also results in violation of the provisions of the Companies Act, 1956 as the transactions could have been entered into only for the benefit of the employees and not for the benefits of the promoter directors. 4. The Assessing Officer worked out the market price of the shares in the stock exchange as on 1st August, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3; to sell or distribute the shares of HCL Ltd. which was earlier held by the principal promoters of Microcomp Ltd., to the employees of HCL Ltd. as per directions/instructions of the principal promoters of Microcomp Ltd. HEICL never acquired title or ownership of the shares. This was accepted and admitted by the Departmental Representative, who accepted the said legal position but had argued that HEICL was the best person in whose hands addition could be sustained. This, as per the tribunal, cannot be a ground to justify addition by treating the difference between the market price and sale price as taxable income in the hands of HEICL. The transaction was not sham and the consideration mentioned was the actual sale consideration received and to that extent there was no dispute. Revenue had not pleaded or argued that any consideration over and above the declared consideration was received by HEICL. HEICL could not have acquired ownership title as no payment was made by them from their own resources or by way of raising loan. As title of the shares never vested with HEICL, they were mere custodian of the shares, who had to distribute the shares. The shares were not registered in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntures, stocks, bonds and other securities to be held by or for the benefit of any person or class of persons or to be held by or for the benefit of employees of any company including any directors holding a salaried office or employment in any company. 25. Learned counsel for the respondent-assessee has also rightly drawn our attention to the tripartite agreement dated 28th February, 1987 between SBI Capital Markets Limited and the principal promoters and Hindustan Computers Limited in which it was stipulated as under:- (12) One of the conditions on which SBICAP agreed to purchase the said shares from UPLC at the request of the Principal Promoters is that the Principal Promoters shall arrange that the said shares of the Company or the shares of HCLL allotted to SBICAP on amalgamation in lieu thereof would be transferred to the said employees on payment of Rs.1,27,00,000/- on or before 31st December, 1987. XXXXX SBICAP shall acquire the said shares of the Company for the purpose of ultimately transferring the same or the Shares of HCLL an allotted in lieu thereof (as the case may be) to the employees of HCLL or the Company as hereinafter provided on receipt inter alia of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of Rs.1,27,00,000/- and other amounts as mentioned herein. 9. If the principal promoters fail to arrange for purchase of the Shares as mentioned in Clause 8 hereof on or before 31st December, 1987, as provided herein, it shall be at the option of SBICAP after giving one month s grace period to the Principal Promoters to sell the Shares at such price and to such persons or body corporate and/or to deal with the Shares in such manner as SBICAP in its sole discretion shall deem fit. 26. The agreement with Citi Bank has not been placed on record and it appears was also not filed before the tribunal. The clauses therein are not known. The Assessing Officer also did not call for the said agreement and the same is not referred to in the assessment order. The date on which payment was made to SBI Capital Markets Limited is not indicated or stated in the Tribunal‟s order and is not on record. 27. It is an undisputed position that the processing fee of 3.5% paid to SBI Capital Markets Limited was paid by principal promoters. The interest paid to Citi Bank was paid by HCL Limited but the quantum thereof has not been indicated or mentioned in the order of the tribunal. 28. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt that query with regard to gift was raised by the Assessing Officer but he did not dwell and go into the said aspect. (See reply dated 16th March, 1995 from R. Kumar Jain and Associates Chartered Accountants to the Assessing Officer). Yet there is another possibility that the HCL Ltd. had decided to declare dividend and the same had to be paid to the registered shareholders on the date of the closure of accounts and SBI Capital Markets Limited was the registered owner. The book transaction with regard to sale of shares in favour of ATPPL may have been backdated to avoid legal complications and to ensure that the dividend is paid and received by the said company. As Y.C. Vaidya was a non-resident Indian there may have been prohibition or requirement to obtain permissions etc. under the exchange regulations or the requirement that the payment should be made in convertible foreign currency. These aspects have remained unenquired for reasons best know to the Revenue but it would not be correct and proper to remand the case to the Assessing Officer stage. The matters pertains to the assessment year 1989-90 and it was an obligation and duty of the Assessing Officer as an investigator t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. has admitted to have sold these shares at the said price to the assessee company and the AO has not been able to establish that anything more than what has been admitted to have been paid and received has passed hands in order to invoke provisions of section 69-B. As nothing has been proved to show that any other amount than admitted has been paid by the assessee in order to buy 77929 shares of HCL Ltd. therefore, in view of facts and circumstances, we are of the view that CIT(A) was justified in deleting the addition while applying the ratio of judgment in the case of K.P. Varghese as referred to supra. While confirming the order of CIT (A) we dismiss the appeal of the revenue. As a result, appeal of the revenue gets dismissed. 33. We have noted above that 77,929 shares were allotted to Y.C. Vaidya. These shares have been registered in the name of ATPPL but without giving full details and particulars on how, the shares were transferred by Y.C. Vaidya to the said company ATPPL. The respondent-assessee in their letter dated 25th March, 1992 had stated that these shares were transferred in the records of HCL Ltd. in the name of ATPPL on 16th November, 1988 and they had also ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
