TMI Blog2003 (11) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... otional benefit in determining the full value of the consideration that accrues or arises as a result of the transfer? 2. Whether capital gains would be chargeable only on the full value of the monetary consideration accruing or arising to an assessee and whether any incidental or remote benefit which benefit does not flow directly to the appellant is to be ignored in determining the chargeability to tax of the capital gains? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the full value of the consideration accruing to the appellant on the transfer of the shares of Piramal Rasayan Limited would be Rs. 16,23,000 and not rupee 1 which was the amount that the appellant received as a result of the transfer? 4. Whether the Tribunal having found that there was no evidence brought on record to justify that the appellant had received any monetary consideration in excess of rupee one was yet justified in determining the full value of the consideration at Rs. 16,23,000?" The assessee is an individual belonging to the Piramal family ("Piramal group" for short). The said Piramal group consisted of six family members including the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income-tax (Appeals) upheld the assessment. On further appeal filed by the assessee, the Tribunal confirmed the order passed by the authorities below, but directed the Assessing Officer to recompute the capital gains by adopting the sale value at Rs. 20 per share and work out the capital gains accordingly. Hence, this appeal. Mr. Mistry, learned counsel appearing for the assessee, submitted that under the Income-tax Act, the capital gains are to be computed by taking full value of consideration actually received or accrued to the assessee on transfer of the capital asset. He submitted that there is no provision under the Income-tax Act to make additions to the full value on account of the incidental or ancillary benefits, if any received, to the full value of consideration received c by the assessee. He submitted that capital gains can be taxed only with reference to the amount actually received on transfer of shares. He submitted that the only provision under which the full value received by the assessee can be disturbed is under section 52(2) of the Income-tax Act if the Revenue establishes that something more than what is declared is actually received by the D assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecuring loans to M/s. Piramal Rasayan Limited does not constitute benefit and in any event it does not constitute benefit to the assessee. Mr. Mistry submitted that the Tribunal has in fact recorded a finding that on account of repayment of loan or on account of release of the guarantees given by Dr. Mohanlal Piramal no substantial benefit is received by the assessee. Therefore, having held that no substantial benefit is received by the assessee on account of the above clauses 2 and 3 of the sale agreement, the Tribunal could not have inferred that the consideration declared by the assessee was understated so as to invoke section 52(2) of the Income-tax Act. As regards surrender of tenancy, Mr. Mistry submitted that, firstly, the surrender of tenancy was not a consideration for the sale of shares, secondly, the surrender of tenancy was to the landlord, namely, Piramal Spinning and Weaving Mills Limited and not to the assessee, and thirdly, even assuming that the Piramal group had substantial interest in Piramal Spinning and Weaving Mills Limited who were the landlords, even then no benefit accrued to the Piramal group, because under the Rent Act on surrender of tenancy no considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upheld the contention of the Revenue that the assessee has received consideration in the form of benefits and, therefore, the market value of the shares should be taken for the purpose of computing the long-term capital gains. He submitted that as the Revenue has failed to establish that the assessee has actually received more than what is declared, the provisions of section 52(2) could not be invoked. He submitted that the Tribunal could not have arbitrarily fixed the fair market value of the shares at Rs. 20 per share. Accordingly, it was submitted that the order of the Tribunal being totally perverse, the same be quashed and set aside. Mr. Desai, learned senior advocate appearing on behalf of the respondents, on the other hand, submitted that in view of the concurrent findings of facts given by the authorities below that apart from cash consideration of Re. 1, the assessee has received consideration in the form of benefits, it was evident that there was understatement regarding the full value received on sale of shares and, therefore, the Revenue was justified in adopting the market value in respect of the sale of the shares. He submitted that at the relevant time the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 131 ITR 597 and it was, inter alia, held as follows: "We think that, having regard to this well recognised rule of interpretation, a fair and reasonable construction of section 52, sub-section (2), would be to read into it a condition that it would apply only where the consideration for the transfer is understated or, in other words, the assessee has actually received a larger consideration for the transfer than what is declared in the instrument of transfer and it would have no application in the case of a bona fide transaction where the full value of the consideration for the transfer is correctly declared by the assessee." Thus, to invoke section 52(2) it is not only necessary for the Revenue to establish that the fair market value of the capital asset transferred by the assessee exceeds the full value of the consideration declared in respect of the transfer by not less than 15 per cent, of the value so declared, but it is also necessary for the Revenue to establish that the full value of the consideration declared by the assessee is less than the amount actually received by the assessee. In other words, even if the market value of the capital asset on the date of its transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement. Once it is established by the Revenue that on the sale of shares the assessee, apart from cash consideration of Re. 1 has received other consideration, then it is not necessary for the Revenue to establish as to how much additional consideration was actually received by the assessee. When the consideration is received in kind, it will be impossible for the Revenue to establish as to how much consideration is actually received by the assessee in kind. Once the conditions set out in the sale deed are complied with by the purchasers, then the consideration flowing therefrom stand received by the assessee. In such circumstances, it will not be open to the assessee to contend that no consideration flows on performance of clauses 2, 3 and 4 of the sale agreement. The contention of the assessee that because Piramal Rasayan Limited was consistently making losses for 10-12 years, the shares have been sold for a nominal price of Rs. 6 cannot be accepted. Mr. Mohanlal Piramal, chairman of the company in the "directors' report" as recorded in the eleventh annual report of the company has stated that the turnover of the company for the year ended March 31, 1985, stood at Rs. 5.13 crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on should go to the Piramal group the assessee cannot say that no benefit accrued on the sale of shares. It may be that the additional consideration may not be capable of evaluation in terms of money but that does not mean that there is no consideration at all. Once it is accepted by the assessee that fulfilling the obligation contained in the sale agreement constituted consideration then, it is not necessary to evaluate the actual consideration flowing from each of the clauses in the sale agreement. Thus, in the facts of the present case, the Revenue has established that the market value of the shares sold by the assessee was more than the value declared by the assessee and the Revenue has also established that the assessee on the sale of shares has received consideration more than what is declared. Therefore, all the conditions set out in section 52(2) of the Income-tax Act being satisfied, the authorities below were justified in invoking the provisions of section 52(2) of the Income-tax Act. In this view of the matter, in the facts and circumstances of the present case, we are of the opinion that instead of answering the larger issues raised in the appeal, it would be just and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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