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TMI Blog2013 (12) TMI 1555X X X X Extracts X X X X X X X X Extracts X X X X ..... ater forfeiture of warrants on non payment of remaining amount. Reliance is placed on the decisions of the Hon'ble Supreme Court in Juggilal Kamlapat vs. CIT (1969) 73 ITR 702; and M/s McDowell & Co. Vs. ITO (1985) 154 ITR 148. iii) The Ld.CIT(A) has erred in aw and on facts in deleting addition of Rs. 9366/- made on of account of disallowance of extra depreciation claimed by the assessee on computer peripherals ignoring the fact that as per Income Tax Rules depreciation @ 60% is allowable only on computer and not on the accessories. iv) The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. 3. Apropos issue of deletion of addition of Rs. 5,75,00,000/- made on a/c of forfeiture of warrants. In this case the assessee is carrying on the business of purchase and sales of shares on its own account. Assessing Officer observed that the perusal of asstt. records and the Balance Sheet enclosed with the return reveals that the assessee co. has treated a sum of Rs. 5,75,00,000/- on a/c of Forfeiture of optionally convertible warrants as capital receipts; that the assessee co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way the whole affairs are manipulated in such a way that there is a capital loss in the hands of Mr. C.R. Bagri which has been set off with the short term capital gain on sale of shares for the year under consideration and on the other hand the co. after forfeiting the warrants has treated it as capital receipt and therefore its financial needs are also met. Thus it is a clear case of tax avoidance whereby the assessee used the colorable device in the nature of stage-managed transaction on a/c of issue of warrants, payment of part called up money and later forfeiture of warrants on non payment of remaining amount. In the case of tax avoidance, the tax payer apparently circumvents the law, without giving rise to a criminal offence, by the use of a scheme, arrangement or device, often of a complex nature but where the main purpose is to defer, reduce or completely avoid the tax payable under the law." 3.3 Further, the Assessing Officer referred to the decision of the Hon'ble Apex Court in the case of McDowell & Co. Ltd. vs. CTO (1985) 154 ITR 148 (SC) and CIT vs. Indian Express Newspapers (Madhurai) P Ltd. (1999) 238 ITR 70; decision of the Hon'ble Apex Court in the case of Workmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch receipt on forfeiture on account of the non exercise of the option to convert the warrant to equity shares could not change the character of receipt; that the same reflected in the books under the head 'capital reserve' and this fact has also been referred by the Auditors in their Report. He submitted that Assessing Officer in his order has added the aforesaid sum of Rs. 5,75,00,000/- by invoking the provisions of section 28(iv) of the I.T. Act by holding that the same is colorable device. He submitted that the Assessing Officer has failed to look into the transaction and his attempt though unsupported by any material "to look through" the transaction is also contrary to law laid down by the Hon'ble Apex Court in the case of Vodafone international Holdings BV vs. Union of India 341 ITR 129. He further submitted that there is no material for the Assessing Officer to hold that the transaction by the assessee is a colorable device. In this regard, Ld. Counsel of the assessee placed decision of the Hon'ble Apex Court in the case of Azadi Bachao Andolan vs. UOI 263 ITR 706. 6.1 The Ld. Counsel of the assessee further submitted that the Assessing Officer has invoked the provision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res were Mr. CR Bagri, who was the Managing Director of the assessee company and M/s BLB Limited which is one of the associated concerns of the assessee company. It was highlighted by the Assessing Officer that the loss on account of this forfeiture had resulted in a gain to the two investors i.e. Sh. CR Bagri and M/s BLB Limited. Accordingly, the Assessing Officer came to the conclusion that this amount of Rs. 5.75 crores should be treated as income of the assessee. 8. The Assessing Officer has also invoked the provision of section 28(iv) of the I.T. Act. We find that section 28(iv) provides that following amount shall be chargeable to income tax under the head profit and gains of business or profession, "the value of any benefit or perquisite convertible into money or not arising from business or the exercise of a profession". We fail to understand as to how section 28(iv) is applicable on the facts of the case. Section 28(iv) covers only the value of any benefit or perquisite and not any cash benefit, which is the case in the present context. In our considered opinion, Assessing Officer could not resort to this provision as the receipt was of capital nature. Hence, we hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also transferred it to the capital reserve account in the balance sheet, the amount cannot be taxed as income of the relevant financial year. 12. We further find that Assessing Officer has made allegation of tax avoidance and evasion on the part of the assessee company. This is on account of the fact that two investors viz. Sh. CR Bagri and M/s BLB Limited were closely related to the assessee company. Ld. Counsel of the assessee has submitted before the Ld. CIT(A) that this allegation of the Assessing Officer is not correct. Since in the case of M/s BLB Ltd. the total amount has been declared as income and no benefit has been derived out of this forfeiture. The short term capital gain or loss depends upon vagaries of the market and the allegation of the Assessing Officer that tax planning could be done on the basis of such vagaries does not appear to be logical. Thus, we find that tax avoidance/ tax evasion has not been substantiated by the Assessing Officer in terms of who has avoided the tax and in what manner. In any case, there is no evidence whatsoever that assessee company has resorted to any tax avoidance to make any clandestine gain. 13. We further find that Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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