9911796707
TMI Blog2016 (1) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... to the notice issued by him. During the re-assessment proceedings, the assessee raised objections about re-opening of the assessment as well as on merits.The AO completed the assessment u/s. 144C(1) r.w.s. 143(3) and 147 of the Act, determining the income of the assessee at Rs. 2,26,02,228/-. Facts of the case: 2.On perusal of the record, after completing the original assessment proceedings, the AO found that the assessee had tendered Rs. 13,79,979/- shares of I-flex Solution Ltd. held by it to Oracle Global (Mauritius) Ltd.(Oracle)under the open offer, that it had received additional consideration of Rs. 2.20 crores from Oracle for delay in making payment of sales consideration. He held that the additional consideration was not linked to original consideration and hence it was to be treated separately, that amount received by the assessee was penal in nature, that while making the payment of additional consideration the deductor i.e., Oracle had deducted TDS, that the deduction of tax proved that it was not part of sales consideration,that the 'penal interest' had to be taxed @41.82 %. 3.Before us, the Authorized Representative (AR) argued that the additional consideration wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the record. He relied upon the cases of Kelvinator of India Ltd.(320ITR561) and Coca Cola Export Corporation (231 ITR 200). The Department Representative (DR) contended that additional consideration was received for delay in making the payment of sales consideration, that it could not be taken as part of total sale value, that Oracle had deducted TDS while making payment to the assessee, that deduction of tax at source indicated that the amount was not part of sale consideration but represented the interest portion for delayed payments, that same had to be treated as income from other sources, that the letter of offer made by Oracle talked about interest payment of Rs. 11.35 per share, that the assessee had accepted the open offer, that there was debtor/creditor relationship between the assessee and Oracle, that the buyer of the share should have paid the whole amount as per the scheduled dates of payments, that the nature of all consideration received by assessee was in the nature of interest that it was governed by Article-11 of the India Mauritius DTAA Treaty, that it could not be taxed under Article-22 of the treaty under the head "other income', that the additional consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share, but because of the delay in making the open offer and dispatch the letter of the offer, same was later enhanced to Rs. 16.00 per share. Thus, there was increase in the offer price of the shares. It is a fact that the regulatory authority i.e. SEBI had approved the transaction, that the transaction could not be completed in due time because of certain reasons, that Oracle had revised the offer price Considering all these factors, we are of the opinion that additional consideration received by the assessee is part and parcel of the total consideration. It cannot be segregated under the heads 'original sale consideration' and 'penal interest received from Oracle. The business world is governed by its own rules and conventions. If considering the time factor Oracle decided to increase the share price in the offer letter it has to be taken as a part of original transaction. It is noteworthy that in the original offer interest @ Rs. 11.35 per share was offered by Oracle. After considering the delay in dispatch letter and other relevant factors if it decided to increase the interest @ of 16 per share it was a business decision. The assesse had no control over the decision making p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o take steps to make public offer to the shareholders of Castrol India Ltd. On 11.12.2000 Castrol UK made open offer for acquisition of 20% of the issued capital of Castrol India Ltd. with SEBI indicating the offer price of Rs. 311.91 per equity share based on the market price as on 7.7.2000. Thereafter on 16.2.2001 the SEBI inter alia directed the Castrol UK to revise the minimum offer price taking 14.3.2000 as the relevant date and the price as on that date is Rs. 350.02. The holding company challenged the order of SEBI by filing an appeal before the Securities Appellate Tribunal (SAT). The Securities Appellate Tribunal upheld SEBI's directions vide order dated 27.4.2001 against which the holding company filed an appeal before the Hon'ble Jurisdiction High Court. In the meantime, on 23.7.2001 the SEBI directed the merchant banker to proceed with the offer formalities and pay interest @ 15% per annum on offer price period from 14.3.2000 till the actual date of payment of consideration. The Hon'ble High Court upheld the SEBI directions to revise the offer price based on the price on 14.3.2000 @ Rs. 350.02 per equity share vide its decision dated 8.8.2001. The holding co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment by the acquirer as per the time schedule prescribed under SEBI regulations. It is clear that this payment of interest @ 15% was not on account of any accretion in the value of the asset in question because the market price of the share is determine as per the rates prevailing on stock exchange. The consideration for acquiring the shares under open offer was determined at Rs. 350.02 which was the market price as on 14.3.2000 when the holding company made a public announcement of acquisition. However, the case in hand the interest received by the assessee is for the period prior to the tendering of shares and acceptance of the same therefore, the interest relates to the delay in completing the process of buy back of shares under open offer. There is a difference between the interest which can be treated at par of consideration and the interest which is different form compensations or consideration. If the interest is paid for delay in making the payment then it cannot be treated as part of consideration. In the case in hand the delay for which the interest has been received by the assessee is in the process of buy back of shares in the open offer after announcement of the intent ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
