TMI Blog2016 (10) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... atio of shares held. Therefore the claim is not only untenable but also appears to be a device invented to reduce tax liability in the hands of assessee. Decided against the assessee. - ITA No.172/Bang/2013 - - - Dated:- 26-8-2016 - SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER and SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER For The Appellant : Shri V.Srinivasan, Advocate. For The Respondent : Shri Sunil Kumar Agarwala, JCIT(DR) ORDER Per INTURI RAMA RAO, AM : This is an appeal filed by the assessee directed against the order of the CIT(A)-I, Bangalore, dated 31/10/2012 for the assessment year 2009-10. 2. The assessee raised the following grounds: 1. The order of the Honourable Commissioner of Income-tax, Appeals I, Bangalore is opposed to the law on the facts of the case. 2. Disallowances of ₹ 90,74,103/- of Taxes paid in accordance with agreement executed with Soham Renewable Energy India Pvt Ltd.,: The Honourable Commissioner of Income-tax, Appeals I, Bangaloreought to have appreciated that the Assessee has entered into an agreement with Soham Renewable Energy for transfer of shares held by the assesse in following companies: a. Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period up to the Closing Date and in the event of the Company receiving and refund of any Taxes in respect of the period up to the Closing Date, the same shall be forthwith passed on the Sellers, failing which the Sellers obligation to reimburse the Taxes under this Agreement shall cease to exist. The Honourable Commissioner of Income-tax, Appeals , Bangalore ought to have appreciated the fact that expenditure in-connection transfer is allowed as expenditure in accordance with Section 48(1) of the Income-tax Act, 1961, Section 48(1) states as follows: The income chargeable under the head Capital gains shall be computed, by deducting from the full value of the consideration 47 received or accruing as a result of the transfer of the capital asset the following amounts, namely: (i) expenditure incurred wholly and exclusively in connection with such transfer 48; ................................... General: 3. The appellant craves leave to modify and add to those grounds of appeal. PRAYER For these and any other grounds that be urged before Honourable Tribunal, it is prayed that the taxes discharged by the assesse is an expenditure incurred in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 90,74,103/- as expenditure incurred wholly and exclusively in connection with transfer of such shares u/s 48 of the Income-tax Act,1961 [ the Act for short]. The said explanation was negative by the AO by holding as under: The explanation given by the assessee is not acceptable for the following reasons:- i) The assessee owned shares of various companies which were transferred during the previous year and earned capital gains aggregating to ₹ 1,66,32,278- (without indexation). Over above, the cost of acquisition and cost of transfer the assessee claimed a sum of ₹ 90,74,103/- as expenses incurred. i) It is seen that the alleged expenditure is not related to the acquisition of capital asset as claimed by the assessee. ii) The income tax paid on behalf of M/s. Ground Technical Services Pvt. Ltd. has been claimed as expenditure relating to capital gains. It must be mentioned here that the income tax liability of the said company has to be borne by the company itself and not by its share holders individually. iii) As per the provisions of section 48 (i) or (ii) the allowable expenditures are the cost of acquisition of asset, the cost of improvement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the expenditure cannot be treated as incurred wholly and exclusively in connection with such transfer of shares. In the instant case it is the assessee who sold the shares and it is not explained what are the tax liabilities which are reimbursed by the appellant in respect of the period up to the closing date in connection with the seller of the said investments. No attempt has been made by the appellant in this regard to demonstrate the allowability by giving the nature and details of the expenditure. the taxes paid on various dates mentioned in the assessment order are on account of the transfer. The nexus of the taxes paid by the assess in connection with the transfer has not been established. The Hon'ble High Court of Delhi in the case of Smt. Sita Nanda(251 ITR 575) explained the wordings in the section 48(i)of the Act, The crucial words in the section are in connection with such transfer . The expression means intrinsically linked with the transfer. Such expenditure has some nexus with transfer does not qualify for deduction unless it is wholly and exclusively in connection with transfer. In the instant case there is no material available on record to show that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to say, obligation to discharge income-tax liability of a private limited company lies with the company alone. If the company is unable to discharge the tax liability, burden to discharge the tax liability shifts to directors of the company in certain specified circumstances. In this case, clause 7(1) of share purchase agreement entered by the company and the shareholders reads as under: 7.1 The Sellers shall be liable to reimburse the Companies for all taxes that may be levied on the Companies (consisting of both the Aviation Business and the power business) in respect of the period up to the Closing Date and in the event of the Companies receiving any refund of any taxes in respect of the period up to the Closing Date, the same shall be forthwith passed on to the Sellers, failing which, the Sellers' obligation to reimburse the taxes under this Agreement shall cease to exist. The above clause clearly stipulates that sellers i.e. assessee and others are liable to reimburse company for all the taxes that may be levied on the company in respect of period up to the closing date and in the event of company receiving any refund of any tax in respect of period up to the closin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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