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2016 (6) TMI 852 - BOMBAY HIGH COURT

2016 (6) TMI 852 - BOMBAY HIGH COURT - TMI - Sale consideration of the shares - treated as income under the head 'Capital Gains' OR' Income from other sources' - Held that:- The receipt of consideration by the respondent assessee is only on account of the sale of its shares in M/s. Chaitra Realty Ltd. to M/s. Vishal Nirman (India) Ltd. This consequent to the offer letter received by it from the buyer i.e. M/s. Vishal Nirman (India) Ltd. which in fact is a concurrent finding by the CIT(A) and the .....

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no attempt to show how the receipt of consideration by the respondent assessee is on revenue account to attract its classification as 'Income from other Sources'. - Decided against revenue - Income Tax Appeal No. 2361 of 2013, Income Tax Appeal No. 2363 of 2013 - Dated:- 14-6-2016 - M. S. Sanklecha And A. K. Menon, JJ. For the Appellant : Mr. P. C. Chhotaray For the Respondent : Mr. F. V. Irani a/w Mr. Sameer Dalal ORDER P. C. 1. This Appeal under Section 260A of the Income Tax Act, 1961 (the Ac .....

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Whether in the facts and circumstances of the case and in law, the Tribunal was right in holding that the income from the sale consideration of the shares has to be treated as income under the head 'Capital Gains' and not under the head 'Income from other sources'. (ii) Whether in the facts and circumstances of the case and in law, the Tribunal has erred in upholding the decision of the CIT(A) that the scheme drawn by BIFR for pledge / transfer of shares had not been altered with .....

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sion of the CIT(A) that the sum received by the assessee was from the sale of shares and not an appropriation of the surplus of the SPV which was not an asset in the hands of the assessee? (iv) Whether in the facts and circumstances of the case and in law, the Tribunal has erred in holding decision of the CIT(A) that the Prabhadevi property has not been sold when the Reconveyance deed of Prabhadevi property along with original documents of title had been acquired by the purchasers i.e. Vishal Ni .....

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es in the present appeals is whether the income on account of sale of shares has to be treated as 'Capital Gains' or as 'Income from other sources' i.e. question no.(i) as urged. The other questions are in the nature of arguments / submissions / evidence in support of question no.(i). 5. During the subject assessment years, the respondent assessees had declared capital gains arising out of sale of shares held by them in M/s. Chaitra Realty Ltd. to M/s. Vishal Nirman (India) Ltd. .....

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r the purposes of owning Prabhadevi property which originally belonged to M/s. Hindustan Spinning and Weaving Mills Ltd. It is pertinent to note that M/s. Hindustan Spinning and Weaving Mills Ltd. continues to exist till date owning property at Karad. On 20th February, 2007 M/s. Hindustan Spinning and Weaving Mills Ltd. came out of the B.I.F.R. as it ceased to be a sick unit. Thereafter, on 8th August, 2007 consequent to an offer letter received from one M/s. Vishal Nirman (India) Ltd. dated 31s .....

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placing reliance upon an Memorandum of Understanding (MoU) dated 8th May, 2006 to proceed on the basis that the MoU was executed by the respondent assessees along with others by which they undertook the sale of shares. It further proceeds on the basis that M/s. Vishal Nirman (India) Ltd. was providing funds to M/s. Chaitra Realty Ltd. to clear its encumbrances one by one. These funds were kept in Escrow by appointing an Escrow Agent and on getting sufficient security, the amounts were disbursed .....

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and not capital gains. Consequently, the claim for exemption under Section 54F of the Act as claimed was also denied. 6. Being aggrieved, the respondent assessee carried the issue in appeal to the Commissioner of Income Tax (Appeal) [CIT(A)]. In its appeal, the respondent assessee has urged as one of the grounds that the entire basis of the order of the Assessing Officer that the respondent assessee was a party to the MoU dated 8th May, 2006 was incorrect. The respondent assessee was not a party .....

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of the value of its underlying asset viz. land held by it. In the above view, the CIT(A) by an order dated 26th August, 2011 allowed the appeal of respondent assessees'. It held that the respondent assessees had sold their shares in M/s. Chaitra Realty Ltd. to M/s. Vishal Nirman (India) Ltd. and that gains arising from the sale thereof are to be taxed under the head capital gains . 7. Being aggrieved, the Revenue carried the issue in appeal to the Tribunal. The impugned order of the Tribunal .....

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on account of sale of shares to tax under the head 'capital gain' was upheld. 8. Mr. Chhotaray, learned Counsel appearing for the Revenue was at pains to point out that the impugned order passed by the Tribunal calls for interference. This on the ground that the real nature of the transaction was not a purchase of shares by M/s. Vishal Nirman (India) Ltd. but purchase of Prabhadevi land owned by M/s. Chaitra Realty Ltd. This according to him was not a one time sale but a result of conti .....

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Revenue that the existence of M/s. Chaitra Realty Ltd. has to be ignored. It is submitted that in view of the B.I.F.R. Scheme, the respondent assessees were prohibited from selling and / or disposing of its shares during the pendency of the reference before B.I.F.R.. It is submitted that these respondent assessees had agreed to sell its shares in the MoU dated 8th May, 2006. This was in violation / breach of the orders passed by the B.I.F.R. Thus, on the above basis, it is submitted that the imp .....

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of MoU dated 8th May, 2006. The entire case of the Revenue as canvassed before us as also noted by the Assessing Officer proceeded on the basis that the respondent assessee had transferred its shares in M/s. Chaitra Realty Ltd. by the MoU dated 8th May, 2006 to M/s. Vishal Nirman (India) Ltd. This has been factually found to be incorrect by both the CIT(A) and the Tribunal in the impugned order. Nothing has been shown to us which even remotely indicate that this finding of the authorities is co .....

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