TMI Blog2018 (8) TMI 1760X X X X Extracts X X X X X X X X Extracts X X X X ..... le without these services rendered by qualified , experienced and independent professionals and hence these costs are allowable as cost within provisions of Section 48 while computing long term capital gains earned by the assessee. The assessee succeeds in this appeal. Non allowability of long term capital loss suffered by assessee - non allowance to be set off by AO against long term capital gains earned by the assessee during the previous year under consideration - Held that:- As observed that in one of the correspondence filed by the assessee with revenue vide letter dated 26.12.2013 which is post assessment order , the assessee has claimed that this long term capital loss of ₹ 75,83,082/- was incurred on sale of shares of M/s Ramanasekhar Steels Limited in Ay 2009-10 which was duly declared in the return for AY 2009-10 as also the same was duly claimed in the return of income for impugned AY 2011-12 by way of set off against long term capital gains earned on sale of shares of LICMF-AMC. These contention of the assessee need verification from the records available with Revenue and we are of the considered view that the matter need to be set aside and restored to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g direction to the Assessing Officer to set off and adjust the unabsorbed carry forward long term capital loss for assessment year 2009-10 against the long term capital gains earned on the sale of shares of LIC Asset Management Company Ltd., and LIC Mutual Fund Trustee Company Limited. 3) The appellant craves leave to add to, modify or delete the above grounds of appeal each of which are independent of the other. 3. The brief facts of the case are that the assessee derives income from housing finance business. The assessee is a listed company having its shares listed on Stock Exchanges. During the course of assessment proceedings conducted by the AO u/s. 143(3) r.w.s. 143(2) of the 1961 Act, it was observed by the AO that the assessee has shown long term capital gains of ₹ 85,79,09,196/- on account of sale of 1120 shares of LIC Mutual Fund Asset Management Company Ltd. of face value of ₹ 10,000/- each and on sale of 300 shares of LIC Mutual Fund Trustee Co. Private Ltd. of face value of ₹ 10 each ( for short such shareholding of the assessee in these two entities collectively referred to as LICMF-AMC ) , held by the assessee in said two entities . The AO o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder dated 22.10.2013 passed by the AO u/s 143(3) of the 1961 Act. 4. Aggrieved by the assessment order dated 22.10.2013 passed by the AO u/s 143(3) of the 1961 Act , the assessee filed first appeal with Ld. CIT(A) . The assessee made detailed submissions before Ld. CIT(A). The assessee submitted additional evidences before learned CIT(A) vide submissions dated 30.08.2014(pb/page 235) and prayed for its admission vide Rule 46A(1)(d) of Income-tax Rules, 1962 as these additional evidences in the opinion of the assessee goes to the root of the matter. The Ld. CIT(A) admitted these additional evidences and called for remand report from AO . The AO submitted remand report dated 24.07.2015 and relevant extracts thereof are reproduced as under:- 14.1. Legal Consultant (Amarchand Mangalds Suresh A Shroff CO.)- ₹ 1,91,49,387/- a. The assessee has submitted letter of the party Amarchand Mangaldas dt. 06.08.2008 addressed to LIC AMC. The same is a proposed mandate of the firm Amarchand Mangaldas for appointment by LiC AMC as legal counsels for the proposed investment by Nomura Holdings inc in the company. The said letter specifies the scope of work as negotiating, drafting, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The same specifies the scope of work which covers matters relating to the completion of the envisaged transaction i.e. induction of a strategic investor through either a divestment of a minority stake or issuance of fresh shares in LIC AMC. b. The invoices/bills enclosed as additional evidence are as under: Thus as is clear from the above discussion, that the bills /invoices do not specify the purpose for which the said professional fee payment was made, and as such it cannot be held that the said expenditure was incurred by the assessee wholly and exclusively towards earning of income shown under the head long term capital gain by it. d. It can also be seen that the total invoices submitted amount to ₹ 1,42,04,260 whereas the claim of the expense is only ₹ 1,36,42,460/-. A careful examination reveals SNo Reference Amount Remarks 1 Letter of PwC dt 31,3.2008 addressed to LIC AMC regarding invoices raised 11,23,600 The said letter has a general remark that the said payment is towards professional fees. No details as to the purpose for which the said services were rendered is given. In the sub it is merely mentioned that the project is 'Project Cash I&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said expenditure. b. It is clear from the above discussion, the bills/invoices do not specify the purpose for which said payments were made and as such it cannot be held that the said expenditure was incurred the assessee wholly and exclusively towards earning of income shown under the head long term capital gains by it. 14. 4. Valuation AMC( Chaturvedi Co.) ₹ 46.878 a. Assessee has furnished valuation note of Chaturvedi and Co dt 24,7.2010 of shares of LIC AMC as on 31.3.2010. The same specifies that the purpose of valuation is to determine the fair value of shares of LIC AMC for the proposed acquisition of shares by Nomura in LIC AMC. b. The invoices/bills enclosed as additional evidence are as under: SNo Reference Amount Remarks 1 Letter of Chaturvedi Co dt 25.8.2009 addressed to LIC AMC regarding invoices raised 2,758 The said letter mentions that the payment is towards ascertaining the net worth for FY 2008-09 and is clearly not relatable to the transaction under consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 of Nomura addressed to the assessee regarding the sharing of costs relating to the JV with selling shareholders which gives a break up of costs incurred w.r.t this transaction which is to be shared by it. The figures are the same as specified in the column giving the total expenses incurred in Table 1, Para 7 above. 15. This report is submitted after due examination of additional evidence furnished by the assesse. The lacunae in the assessee's submissions are clearly pointed out. Other than the invoices as discussed in Para 14.1(d) above, which appear to be in order, the assessee has not been able to establish that the remaining expenditure claimed as deduction has been incurred wholly and exclusively for earning the income taxed under the head long term capital gain,and therefore its claim remains unsubstantiated. The copy of remand report of the AO was furnished by Ld. CIT(A) to the assessee for rejoinder. The assessee in rejoinder submitted following reply which is reproduced hereunder:- On the basis of the remand report received and subsequent to the examination of the additional evidence submitted, the Appellant requests you to consider the claim of ₹ 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 800/- has been excluded from the total amount of ₹ 1,42,04,260/-with respect to the invoices submitted Para 1 of Page 5 of the engagement letter dated 21.01.2008 with Price Waterhouse Coopers Private Limitedstates that an amount of ₹ 5,00,000 is payable on acceptance of non-binding priced proposal from the investor. The said amount was excluded on account of the reimbursement of same being receivable from the investor (in this case Nomura Mutual Fund-Purchaser). Therefore, the same was excluded from the claim of expenses as the cost pertaining to the same was required to be borne by the investor. 2. With respect to the balance invoices amounting to ₹ 1,36,42,4607- , the letter contains a general remark of payment towards professional fees and in the subject it is mentioned as Project Cash The engagement letter dated 21.08.2008 with Price Waterhouse Coopers Private Limited clearly specifies the advisory services to be provided for divestment of minority stake in LIC Asset Management Company, Therefore, raising of invoices and its payment thereon was merely a formality ,based on the milestones as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nals of the said firm. Also the Appellant cannot be made liable for disallowance of expenditure on account of the invoices, tickets and boarding passes being not provided by the said firm for each and every trip incurred by the said company with respect to the services provided. iv) Valuation AMC (Chaturvedi Co.)-Rs. 46,878/~ Sr No. Assessing Officer's Findings Appellant's Response 1. Invoice include payment made towards ascertaining net worth for F.Y 2008-09 and is not relatable to the transaction under consideration The Appellant specifies that it had entered into arrangement with the LIC Housing Finance Limited, LIC Asset Manangement Company in financial year 2008-09 itself. A valuation of the net worth and the shares was required considering the strategic nature of investment, although the sale of shares was carried out only in financial year 2010-11. Also the valuation of shares has been carried out as per guidelines of Reserve Bank of India Thus, the expenditure incurred by the Appellant is wholly and exclusively for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in connection with such transfer. v.) Valuation Trustee Co.(Shah Gupto Co)-Rs. 57,908/- Sr No. Assessing Officer's Findings Appellant's Response 1. Invoice mentions valuation analysis on 11.07.2009 and accordingly it is unrelatable to the transaction The Appellant specifies that it had entered into arrangement with the concerned parties in financial year 2008-09 itself. Thus valuation of shares was required considering the strategic nature of investment, although the sale of shares was carried out only in financial year 2010-11 Also the valuation of shares has been carried out as per the guidelines of Reserve Bank of India. Thus, the expenditure incurred by the Appellant is wholly and exclusively for the purpose of carrying out the transaction pertaining to the sale of shares. Similarly, discussion for eligibility of claim of expense is already supported by the judgement as discussed above. 2. The invoice is with respect to valuation analysis as on 11.07.2010. No details including the share valuation note is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Terms Agreement dared 11.07.2009.This letter further satisfies the claim made by the Appellant that the cost incurred by the selling shareholders relates to the capital gain transaction under consideration and is wholly and exclusively connected with the sale of shares and hence eligible for deduction under section 48(i) of the Act. 5. The Ld. CIT(A) after considering the submissions of the assessee partly granted relief to the assessee vide appellate orders dated 21.10.2015, by holding as under:- I have considered the findings of the Assessing Officer as well as rival submission of the appellant and also Remand Report counter representation of the Ld. Authorised Representative. I find that during the year appellant has sold out 1120 shares of LIC Asset Management Co. Ltd. and 300 shares of LIC Mutual Funds Trustee Co. Ltd.. These shares were sold in a consortium of arrangement made by Life Insurance Corporation of India and were sold out to M/s. LIC Nomura Mutual Assets Management Co. Ltd. at the agreed price by all the members of the consortium. Because of sale of investment, there is a Capital Gain of ₹ 85,79,09,196/-. Against this Capital Gains, appellant has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness expenditure but certainly not related to transfer of shares. Similarly, the expenditure shown in the name of Rathi Associates of ₹ 2,82,996/-does not pertain to the transfer of shares. Further in rejoinder, it has been mentioned that such expenditure is incurred for business purposes which means, appellant admits that these expenditure is not at all related to transfer of shares. If approval from shareholders was pre-requisite that does not means that such bill raised by Rathi Associates is necessarily related to transfer of investments. Thus, I find no convincing reason or verifiable evidence to support the contention of the appellant The contention that appellant cannot be made liable for disallowance of expenditure on account of invoices, tickets and boarding passes being not provided by Rathi Associates, it is pertinent to mention that if any expenditure is claimed, it is the responsibility of the claimant to furnish all the reliable evidence. Apparently, appellant has not substantiated the contention with necessary evidences, hence the stand of the Assessing Officer deserves approval. Similarly, expenditure of ₹ 46,878/- claimed to be valuation of AMC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has not been able to establish its claim w.r.t. ₹ 1,47,68,156 [8,42,700+1,36,42,460 + 2,82,906]____(ii) Assessee's Share of Cost which is to be disallowed = (ii) X (B/A) =1,47,68,156 X 0.290898 =42,96,032 Further balance sums as per the table above have also found to be disallowable. Hence Total disallowance amounts to = 42,96,032 + 13,637 +4,964 + 33,090 =43,47,723/- 5.7. The above working is based on same proportion as adopted by the appellant file submitted letter dated 13.04.2011 to the Assessing Officer that covering letter ted 06.06.2011 Thus the total disallowable expenditure is restricted to ₹ 43,47,723/-. Thus, appellant gets relief of ₹ 53,25,385/-. 6. The assessee has filed second appeal before tribunal being aggrieved by appellate order dated 21.10.2105 passed by learned CIT(A) in partly upholding the additions as were made by the AO by rejecting claim of the assessee w.r.t. sharing of costs incurred towards transfer of shares of LICMF-AMC albeit claimed by the assessee to be incurred wholly and exclusively in connection with transfer of shares of LICMF-AMC . The assessee has also come before tribunal by filing appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olding in favour of Nomura . Our attention was drawn to various clauses of these agreements placed in paper book . It was submitted that the assessee along with other consortium parties jointly appointed professionals to avoid duplication of work and costs in connection with the advises for induction of strategic investor in LICMF-AMC through divestment / issuance of shares of minority stake in LICMF-AMC , due diligence of LICMF-AMC, documentation with respect to transaction of divestment and induction of strategic investor in LICMF-AMC , valuation of the shares of LICMF-AMC and also seeking necessary regulatory approvals/clearances from relevant authorities for successfully completing the aforesaid transaction of sale of shares of LICMF-AMC to Nomura by assessee and consortium parties . It was submitted that the said expenses for hiring professionals for induction of strategic investor in LICMF-AMC, valuation of shares of LICMF-AMC , documentation related to the transaction for sale of shares, due diligence and for seeking regulatory approvals/clearances for the transaction were shared by all consortium parties in ratio of sale proceeds received by each of these consortium parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order dated 22.10.2013 has disallowed the entire expenses incurred by the assessee which was in the form of share of cost borne by the assessee along with consortium parties towards fees/expenses paid to these professionals for advises in connection with induction of strategic investor in LICMF-AMC, due diligence of LICMF-AMC, documentation , valuation of shares of LICMF-AMC, regulatory clearances/approvals towards transfer/sale of shares of LICMF-AMC , wherein the AO held that these expenses were not incurred wholly and exclusively in connection with transfer of shares of LICMF-AMC by assessee . While in Remand Report , the learned AO accepted that partly these costs were incurred wholly and exclusively in connection with transfer of shares and accordingly part relief was granted by Ld. CIT(A) which was mainly towards share of assessee in payments made to Amarchand Mangadas and Suresh A Shroff‟ to the tune of ₹ 1.83 crores out of total payment of ₹ 1.91 crores made to said professional firm. Thus, so far as Amarchand Mangadas and Suresh A Shroff‟ is concerned , the dispute which now remains is with respect to share of assessee in the payment to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3;s share in rest of payment of ₹ 1,83,06,607/- to Amarchand Mangaldas Suresh A.Shroff Co‟ stood allowed by learned CIT(A) based on remand report submitted by the AO. It was submitted that Revenue is not in appeal before the tribunal against part relief granted by learned CIT(A). It was submitted that said concern namely Amarchand Mangaldas Suresh A.Shroff Co‟ codenamed this assignment as Project Life‟ and they were instrumental in documentation of the entire transaction for sale/transfer of shares held in LICMF-AMC by consortium parties to Nomura and advising that the said transaction is legally compliant of all applicable laws. With respect to assessee‟s share in payment of ₹ 1,36,42,460/- made to PWC, it was submitted that the entire share of the assessee costs by way of fees/expenses paid to PWC stood disallowed by learned CIT(A). It was submitted that project was codenamed Project Cash I‟ by PWC and they were lead advisor to transaction of induction of strategic investor in LICMF-AMC through a divestment/issuance of minority stake in LICMF-AMC in favour of strategic investor, assisting in due diligence of LICMF-AMC and valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon decision of Hon‟ble Bombay High Court in the case of CIT v. Smt. Shakuntala KantiLal reported in (1991) 58 Taxman 106(Bom.): (1991) 190 ITR 56(Bom.). With respect to the Second issue related to non allowability of long term capital loss suffered by assessee of ₹ 75,83,082/- in earlier years which was not allowed to be set off by AO against long term capital gain earned by the assessee during the previous year under consideration , our attention was drawn to appellate order of the Ld. CIT(A) , wherein Ld. CIT(A) has refused to give administrative directions to the AO to allow the said loss and rather held that if the loss is genuine, the AO is duty bound to allow set off of the said long term capital loss of the earlier years against long term capital gains of this year. On being asked by the Bench about the back ground of this long term capital loss of ₹ 75,83,082/- incurred by the assessee in earlier assessment years , the Ld. counsel for the assessee submitted that said loss was duly claimed to be set off against the long term capital gain earned by the assessee during the impugned assessment year. Our attention was drawn to page no. 1 of the pape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd LIC Care Homes Limited who also sold their shareholding in LICMF-AMC to Nomura under a consortium arrangement entered into with assessee and Nomura. LICHFL sold part of its shareholding in LICMF-AMC to Nomura while on the other hand LICHFL Care Homes Limited sold its entire shareholding in LICMF-AMC to Nomura by taking complete exit from LICMF-AMC. LIC through its seven nominees was major shareholder of LICMF-AMC who continued in LICMF-AMC along with LICHFL and incoming strategic investor Nomura. Nomura now came in as a new strategic investor in LICMF-AMC wherein it took minority stake in LICMF-AMC by buying stake from existing shareholders namely assessee, LICHFL and LICHFL Care Homes Limited as well along side new shares were allotted to Nomura by LICMF-AMC. The assessee earned long term capital gains of ₹ 85,79,09,196/- on sale of shares of LICMF-AMC . So far so good as there is no dispute between rival parties till this point. The dispute arose between rival parties when assessee sought to adjust certain legal and professional costs incurred by it from long term capital gains earned by assessee from sale of shares of LICMF-AMC to Nomura wherein assessee invoked provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of LICMF-AMC to Nomura. Para 10.3 of SATA clearly speaks of sharing of the costs of professionals/ advisors borne by LIC Asset Management Company Limited(for short LIC AMC) in connection with this transaction amongst LIC AMC , LICHFL and the assessee. Similarly, para 10.3 of SPA speaks of sharing of costs of professionals / advisors borne by LIC AMC amongst LICHFL, LIC Care Homes Limited and the assessee. Thus, under SATA and SPA , the assessee was obligated under contract to share these legal and professional costs along with other selling shareholders and the assessee in discharge of its contractual obligation paid its share of said costs to LIC Asset Management Company Limited. Perusal of agreements entered into with these professionals/advisors which are placed in paper book filed with the tribunal clearly reveals that these professionals/advisors provided services by way of advise/assistance in connection with induction of new strategic investor into LICMF-AMC , due diligence, valuation of shares, Regulatory approvals/clearances , compliances of various applicable laws, rules and regulations as applicable to transaction , documentation of the transaction , approvals of sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.282,996/- iv. Valuation AMC (Chaturvedi Co.) Rs.46,878/- v. Valuation Trustee Co. (Shah Gupta Co.) ₹ 57,908/- Rs.331,79,629/- The AO disallowed the entire expenses of ₹ 96,73,108/- claimed by the assessee towards its share of expenses claimed to be incurred in connection with transfer of shares of LICMF-AMC to Nomura , while learned CIT(A) based on remand report submitted by the AO during appellate proceedings granted part relief and finally an amount of ₹ 43,47,723/- stood disallowed which was held to be not allowable as expenses incurred wholly and exclusively in connection with transfer of shares by learned CIT(A). The major relief was granted by learned CIT(A) with respect to payments made to Amarachand and Mangaldas Suresh A. Shroff‟ wherein only ₹ 8,42,700/- was held to be not allowable and accordingly share of assessee in ₹ 8,42,700/- stood disallowed by learned CIT(A) so far as payments to Amarachand and Mangaldas Suresh A. Shroff‟ are concerned. With Respect to payments of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired under law . It is also a matter of fact that Nomura is an international company having large presence in the field of financial services. The other selling shareholder viz. LICHFL is also listed company whose shares are also listed on recognized stock exchanges. It also needs to be stated that much hype is created by Revenue when it highlighted that these professionals have codenamed these assignments as Project Life‟ or Project-Cash-I‟ etc and it is said that there is no correlation between these codenamed projects with these assignment of induction of new strategic investor in LICMF-AMC and consequent divestment by selling shareholders including assessee. It is also pertinent to mention here that proceedings have already passed through three stages viz. Firstly assessment proceedings u/s 143(3) r.w.s. 143(2) before AO, Secondly Remand Report proceedings before the AO during the course of appellate proceedings before learned CIT(A) and Thirdly the appellate proceedings before learned CIT(A). It is no more res-integra that the powers of learned CIT(A) are co-terminus with the powers of learned AO. Reference is drawn to provisions of Section 251(1)(a) of the 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplete understanding between the parties with respect to induction of Nomura as strategic investor in LICMF-AMC and consequent divestment by existing stake holders as set out above. The condition precedents and warranties of the parties to the agreement are set out in this agreement . The said condition precedent provided that the parties to this agreement have obtained requisite approvals vide corporate resolutions and also special resolutions from shareholders authorising the execution and implementation of this transaction. The conditions precedent are agreed by selling shareholders that there are no changes in shareholding patterns and no changes in applicable laws have taken place. It is also agreed that LIC Mutual Fund Asset Management Company Limited and LICHFL have agreed to first business plan presented by Nomura. It also specifies that the documents related to this transactions were duly executed and approved delivered to Nomura . It is also specified that appropriate amendments to Memorandum and Articles of Association shall be appropriately carried out which also included that LIC Mutual Fund Asset Management Company Limited shall carry out such activities as are permit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by law or by government authorities. Vide clause 10.3, the agreement SATA speaks of sharing of cost and expenses associated with this transaction borne by LIC Mutual Fund Asset Management Company Limited which shall be borne pro-rata amongst LIC Mutual Fund Asset Management Company Limited , LICHFL and the assessee. Thus , in nutshell it elaborately laid down understanding arrived at amongst consortium parties and the manner of concluding transaction of inducting Nomura as strategic investor in LICMF-AMC and consequent divestment by selling shareholders. Similar is the SPA dated 11-07-2009 which is by and between LICHFL,LICHFL Carehomes Limited, the assessee , Nomura and LIC Mutual Fund Trustee Company Private Limited which deals with acquisition of equity shares of LIC Mutual Fund Trustee Company Private Limited of ₹ 10 each held by LICHFL, the assessee and LICHFL Carehomes Limited being acquired by Nomura. Broadly the terms are similar to SATA and hence the same are not repeated and it broadly represented the complete understanding between and amongst the consortium parties and the manner in which the transaction shall be executed. The SPA is placed in paper book/page 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders in terms of clause 10.3 of SATA and SPA. This letter also specified that these professionals charged service tax on services rendered by them while LIC Nomura Mutual Fund Asset Management Company Private Limited deducted income-tax at source as per provision of the 1961 Act while making payments to these legal and financial professionals/advisors. While detailing itemised billing done by these professionals , broad reference to type of services such as legal services, consultant and advisor services, scrutinizer to the postal ballot obtained from unit holders , valuation(AMC) services , valuation (Trustee Company) services and charges for services by authorised dealer for FC-TRS documentation as per RBI requirement for AMC and Trustee Company are found mentioned in these invoices. Then comes the itemised invoices issued by these professionals and we found mention of the names of the professional who worked for the assignment and the name of the assignment is code named as Project Life‟ or Project Cash I‟. Then come invoices raised by these professional for valuation, acting as scrutinzer for postal ballots , services in connection with amendment in trust deed et ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roposed investment by Nomura Holdings, Inc. In LIC-MF. It outlined scope of work of Amarchand Mangaldas Suresh A Shroff Co.‟ which included providing advice and legal services towards negotiating , drafting , reviewing and finalising term sheet, share purchase subscription agreements , share purchase agreements and shareholders agreement along with ancillary documents , if any required to complete the transaction. The scope of work also included advising about legal perspective in India regarding the transaction as well also negotiating with investors counsel and analysis of all aspects of all laws necessary to complete and conclude the transaction. It also stipulate legal team who will work on this assignment and it outlined the fee chargeable for the assignment. It also provided for advance payment of ₹ 7,50,000/- on acceptance of this offer by Amarchand Mangaldas Suresh A Shroff Co.‟ to enable said professionals to start the work in relation to the transaction. The share of the assesee in the costs to be shared between selling shareholders attributable to this advance payment of ₹ 7,50,000/- + service tax ( totalling ₹ 8,42,700/- ) pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial professional fees/expenses which were claimed to be incurred in connection with transfer/sale of shares of LICMF-AMC by the assessee to Nomura can be considered to be incurred wholly and exclusively in connection with transfer/sale of shares so as it could be considered to satisfy mandate of Section 48 of the 1961 Act and also it is to be seen whether the assessee by producing these documents/evidences which it produced before the authorities below had discharged its onus as is cast under the provisions of the 1961 Act and whether now the onus has shifted to Revenue to bring on record cogent incriminating material to discredit the version of the assessee to fasten tax liability on the assessee. Thirdly, we have to see whether these costs were incurred in connection with transfer/sale of shares by assessee and whether the nexus of these costs with the assignment of induction of strategic investor in LICMF-AMC and consequently with the sale of shareholding in LICMF-AMC by these consortium parties to Nomura stood proved. Before we proceed further, it is pertinent to mention that the assessee is a company whose shares are listed on Bourses. The assessee is holding shares in LI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial interest either in investee company or incoming strategic investor or outgoing shareholdres. After getting valuation done from independent valuers, the selling shareholders can negotiate price with the incoming investor subject to applicable regulatory pricing guidelines. Similarly, new investor will also have comfort with a price discovered by independent qualified and experienced professionals who are well versed with the task of valuing enterprises and also it addresses conflict of interest issues. The induction of strategic investor also requires due diligence done of the investee company and several warranties are to be given by the selling shareholders to the incoming strategic investor as to the state of affairs of the investee company and vice versa, which also involves execution of several documentations which are required to be handled by these independent experienced , well versed and qualified professionals who can give independent opinion and assessment based on their independent evaluation and assessment of existing state of affairs of the investee company which give assurance to incoming strategic investors and assist them in making decision as to making investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be visited with penalties, prosecutions, class action suits etc as litigation is very expensive and time consuming affair. No doubt some of these work can be executed in-house by tax-payer by availing services of its legal and professional team employed by tax-payer but once the commercial decision is taken by tax-payer to hire outside and independent professionals to render such services, the Revenue cannot be allowed to sit in the arm chair of business and question the prudence of the tax-payer decision in hiring outside independent professionals instead of utilising the services of in-house legal team . Hon‟ble Supreme Court decision in the case of Hero Cycles Private Limited v. CIT reported in (2015) 379 ITR 347(SC) is relevant to that effect . It is also to be understood that assessee being a listed company these divestments decisions are price sensitive information and any breach of confidentiality of this price sensitive information can have huge repercussion, volatility and fluctuations in share prices of the assessee‟s shares on Bourses and such breach of confidentiality of price sensitive information can be visited with heavy penalties and prosecution under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices in the invoices has no legs to stand. There are valid reasons and justifications of code naming the project or not mentioning of the details of services in the invoices. If the Revenue was so particular and was not satisfied with the contentions of the assessee backed with evidences placed by the assessee as to the services rendered by these professionals in connection with the transaction relating to induction of strategic investor in LICMF-AMC and consequent exit of assessee from LICMF-AMC by selling its entire shareholding in LICMF-AMC to Nomura, then nothing prevented Revenue from issuing summons u/s 131 or notices u/s 133(6) of the 1961 Act to these professionals or to other consortium parties to produce evidences directly as to what these code name stands for and whether the services rendered by these professionals are directly and inextricably connected with transaction of induction of strategic investor in LICMF-AMC and consequent exit of assessee from LICMF-AMC. These plea‟s of the Revenue are out rightly rejected. We have also observed that revenue has entered into an arena of suspicion while upholding disallowance of these costs and we would like to lay stress ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held by the assessee in favour of strategic investor Nomura could not have been successfully concluded as the most important and crucial aspect in these type of price sensitive transactions is to conclude them successfully with confidentiality in transparent manner which is in compliance with all relevant and applicable laws, rules and regulations both domestic and cross border laws which can withstand the tests of scrutiny by Courts for which proper documentations, term sheets, agreements , valuation, due diligence, regulatory approvals/clearances etc are must which can only be executed in these type of complex transactions which are governed and regulated by several web of complex laws having inter-play by these well versed, qualified and experienced independent legal and financial professionals/advisors to not only satisfy technical competencies to execute these transactions successfully but also avoid conflict of interest. The assessee‟s transaction of sale of shares in LICMF-AMC were approved by RBI, shareholder consents were obtained through postal ballots, SATA and SPA were executed , valuation reports from qualified chartered accountants were obtained, due diligence w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 26.12.2013 which is post assessment order , the assessee has claimed that this long term capital loss of ₹ 75,83,082/- was incurred on sale of shares of M/s Ramanasekhar Steels Limited in Ay 2009-10 which was duly declared in the return for AY 2009-10 as also the same was duly claimed in the return of income for impugned AY 2011-12 by way of set off against long term capital gains earned on sale of shares of LICMF-AMC. These contention of the assessee need verification from the records available with Revenue and we are of the considered view that the matter need to be set aside and restored to the file of the AO for verification of the claim of the assessee on merits in accordance with law and allow relief if contentions of the assessee are found to be correct and the said loss is otherwise eligible for set off against long term capital gains earned by the assessee within mandate of provisions of the 1961 Act in accordance with law. Needless to say that the AO shall grant proper and adequate opportunity of being heard to the assessee while verifying the claim of the assessee on merits in accordance with law and evidence filed by the assessee in support of its contentions s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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