TMI Blog2016 (8) TMI 900X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure of the company for sale of shares - Held that:- As we have already seen the sale of the property was sought to be achieved by sale of shares of M/S.Khaitan & Co.Consulting Ltd., which was held by the Assessee to the extent of 99.97%. The bill issued by the broker contained a description that it was sale of the property. In our view this description in the bill issued by the broker to whom commission was paid is insignificant. The fact remains and it is not disputed that Mr.Manish B.Thakkar, acted as an intermediary in the transaction and was paid brokerage. Capital gain declared by the Assessee arises out of the same transaction. In such circumstances, the claim of the Assessee for deduction could not have been refused by the AO. The CIT(A) in our view has rightly allowed the deduction claimed by the Assessee. We do not find any grounds to interfere with the order of the CIT(A).- Decided against revenue - ITA No. 2796/Kol/2013 - - - Dated:- 8-7-2016 - Shri N. V. Vasudevan, JM And Shri M.Balaganesh, AM For the Appellant : Shri K.K.Tripathi, JCIT, Sr.DR For the Respondent : Shri R.N.Bajoria, Sr.Counsel Shri A.K.Gupta, FCA ORDER Per N. V. Vasudevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y . (5) The share capital of M/S.Khaitan Co. Consulting Ltd., were held by the following persons: Issued and Paid Up Equity Shares of ₹ 10(Rupees Ten) each : Sr. No Name Number of Shares held in the Company Distinctive Nos. %(Approx.) 1. Mr.Ram Kishore Choudhury/Khaitan Consultants Limited. 1 230671-230671 0.0004 2. Mr.Sudip Mullick/ Khaitan Consultants Limited. 1 230672-230672 0.0004 3. Me.,Padam Khaitan/ Khaitan Consultants Limited. 1 230673-230673 0.0004 4. Mr.Haigreve Khaitan/ Khaitan Consultants Limited. 50 230421-230470 0.021 5. Mr.Ajoy Gupta/ Khaitan Consultants Limited. 10 1-10 0.004 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest attached thereto. 2.2 On the Effective Date, the Purchasers shall pay the Sale Consideration to the Seller in the following manner: 2.2.1 a sum Of ₹ 1,60,00,000 (Rupees One crore sixty lacs) has already been paid by the Purchasers to the Seller on or before the execution hereof, as Earnest Money towards the purchase of the Sale Shares in the Company vide Pay Order No. 516321 dated 3 September 2009 drawn on the Bank of Baroda, Nariman Point Branch, Mumbai in favour of the Company (the receipt whereof the Seller does hereby admit and acknowledge); 2.2.2 a sum of ₹ 1,00,00,000 (Rupees One crore) ( Escrow Amount ) shall be paid by the Purchasers to and placed in escrow with the Escrow Agent, which shall be administered as per the provisions of clause 3 hereof; 2.2.3 a sum of ₹ 4,S7,25,928 (Rupees Four Crores ninety seven lakhs twenty five thousand nine hundred twenty eight) to the Seller towards repayment of loans made by the Seller to the Company and such amount shall be treated as a loan repayment by the Company; and 2.2.4 balance amount of the Sale Consideration, being a sum of ₹ 7,80,09,705 (Rupees Seven Crores eighty la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect. The Assessee placed reliance on the decision of the ITAT Mumbai Bench in the case of Voltas Ltd. Vs. ACIT (2010) 4 ITR (Trib.)(Mumbai). In the aforesaid decision the facts were that Voltas Limited (VL) along with Voltas International Ltd. (VIL) had promoted a company named Premium Granite Ltd. (PGL). Investments were made by VL and VIL in the said company, PGL from time to time. They had also advanced loans to the said company, PGL on various occasions. Due to continued loss suffered by PGL, VL and VIL decided to sell all the shares of PGL for Re.1/- only to Zass Exports (Pvt.)Ltd. (ZES). It was further agreed that the purchaser would infuse loan into PGL which would be used to repay loan given by it to VL and VIL and one of the bankers, State Bank of India totalling to ₹ 5,40,00,000. The AO treated the sale price at ₹ 5,40,00,000 i.e., the consideration as well as the repayment of loan. The tribunal after discussing the issue in detail held that the amount of ₹ 5.4 Crores infused by ZES in PGL to repay the loans cannot be added to the consideration and as such the loss claimed by VL was to be allowed. 5. The AO however did not agree with the aforesaid sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically mentioned in the sale agreement that lump sum sale consideration of share is ₹ 15,37,3S,633/- 1.15. In view of the above, the contention of the assessee is rejected and I recompute the capital gains with sale consideration at ₹ 15,37,3S,633.00. Hence an amount of R.4,97,2S,928/- is added back being difference of ₹ 15,37,3S,633/- (-) ₹ 10,40,09,705/- 6. On appeal by the Assessee, the CIT(A) agreed with the stand taken by the Assessee and held that the full value of consideration received on transfer should be adopted only at ₹ 10,40,09,705. The following were the relevant observations of the CIT(A): 2.4. I have heard the rival contentions, perused the material on record and duly considered factual matrix of the case and also applicable legal position. In the light of the aforesaid basic facts the issue is to be considered. The agreement provides for a total consideration which is a lump sum amount of ₹ 15,37,35,633/-. If out of such lump sum the amount of ₹ 4,97,25,928 is deducted, then the balance remains is ₹ 10,40,09,705/-. The sum of ₹ 4,97,25,928 has not been received by the appellant directly f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax vs. Hooghly Mills Co. Ltd. reported in 287 ITR 333 wherein at page 335 it was held as follows:- Thus in the same agreement of sale of the undertaking it was not only mentioned that the vendee will pay to the vendor the sum of ₹ 2 crores as a consideration but in addition to this it will also take over the accrued and future gratuity liability of the employees. It is well-settled that an agreement has to be read as a whole. Hence the consideration for the sale was not only ₹ 2 crores but in addition the gratuity liability of the vendor as well. The Mumbai Tribunal decision in the case of Voltas (Supra) also supports the view taken above. 2.7 In the circumstances, the finding of the A.a. that the said sum of ₹ 15,37,35,633 represented the consideration only for the sale of shares of KCCL cannot be supported. If there would have been any evidence to show that either the said loan to KCCL of ₹ 4,97,25,928 remained outstanding and/or was discharged otherwise by any separate payment there could have been some basis for such a view. In the circumstances, the treatment of entire sum of ₹ 15,37,35,633 as the sale c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... virtue of the said agreement, the amount was apportioned among the heads of three larger heads of land, buildings and plant and machinery. The assessee claimed that since this amount of ₹ 3.5 crores towards gratuity was capital expenditure it was entitled to depreciation on the sum under section 32 of the Incometax Act. The Commissioner of Appeal, Tribunal held that accrued gratuity was a part of consideration and allowed its distribution to the cost of acquisition for different assets and depreciation on reworked amount which was upheld by the High Court of Calcutta. On further appeal by the Revenue, the Hon ble Supreme Court held that claim for depreciation was not to be allowed. Referring to the agreement entered into between the parties, the Supreme Court held that the agreement had to be read as a whole and, hence, the consideration for the sale was not only ₹ 2 crores but also included the gratuity liability of the vendor as well. However, on the issue of claims of depreciation, the Supreme Court ruled in favour of the revenue. Referring to the agreement of sale entered into between the parties, the Supreme Court observed that the agreement itself separately ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roker based on which the Assessee made the aforesaid payment of commission, the AO noticed that the bill contained the following service rendered for which brokerage was paid by the Assessee: Being your premise at Meher Chambers.3rd 5th Floor, R.KMarg, Bellard Estate, sold to our client Mr. Gulabsi Ratansi Khimji Mrs. Devyani gulabsi Bhatia. Our remuneration charges are lump sum . 12. The AO was of the view that the brokerage in question was paid in connection with services rendered for sale of property and not for sale of shares. The Assessee submitted before AO the Brokerage Bill by mistake mentioned that it is for sale of premises but in fact it was with reference to the transaction of sale of shares by the Assessee. 13. The AO however refused to believe the plea of the Assessee that there was a mistake in the bill since payment of brokerage was made on the basis of the said bill. In case there was mistake which is easily identifiable it would have sought rectification thereof or obtain revised bill. Even during the course of hearing, the assessee did not produce revised/rectified bill although sufficient time and opportunity was granted to the assessee. The cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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