TMI Blog2020 (2) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... and acquired the new residential house by 31.03.017 for a sum of ₹ 5.79 crores within the permissible period of three years from the end of the relevant assessment year and the balance amount was admitted for tax in the A.Y.2017-18. Since the investment was made for acquiring the plots and construction of house, we hold that the assessee is entitled for deduction u/s 54F. Further, in the instant case, the amount paid to VUDA for acquiring the plots was not returned to the assessee till such time of acquiring the new house. The said amount was remained with the VUDA. The Department also did not place any evidence to show that the assessee had received the money back from the VUDA and utilized for personal purpose. Therefore, we do not see any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. - Decided against revenue - I.T.A.No.238/Viz/2019 - - - Dated:- 29-1-2020 - Shri V. Durga Rao, Judicial Member And Shri D.S. Sunder Singh, Accountant Member For the Appellant : Shri V.Naga Prasad, AR For the Respondent : Shri S.Ravi Shankar Narayan, CIT, DR ORDER PER SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER : This appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment made to Barclays, the expenditure incurred towards the sale of shares required to be met by the share holders but not by company. Since the company paid the expenditure out of its taxed profits the proportionate share of the expenses out of the total expenditure of ₹ 28.81 crores paid to M/s Barclays Bank required to be taxed in the hands of the directors u/s 2(24)(iv) of the Act. Accordingly, the AO issued show cause notice and the assessee filed objections. 3.1. Not being convinced with the explanation of the assessee, the AO held that the payment made by the company to M/s Barclays Bank is the benefit received by the assessee directly, hence taxed the same as income u/s 2(24)(iv) of the Act amounting to ₹ 3,96,18,099/-. 4. Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) deleted the addition made by the AO holding that there is no case for invocation of provisions of 2(24)(iv) of the Act in the instant case since the payment was made by the company as per the agreement entered into by the company with Barclays Bank and the assessee has not made any agreement with Barclays Bank. For the sake of clarity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l other items in addition to success fee payable to M/s. Barclays. The draft report consists of adjustment to be done to the working capital Considering these two, the consultant worked out total net debt/cash, final net debt , working capital adjustment, final working capital delta, and equity value and also suggested adjustment in the form of success fee and arrived at final delta, A reconciliation statement of sale consideration has been worked out which gives the summary of consideration to be received by the appellant including other shareholders The gross consideration as per the agreement was at ₹ 1700,00,00,000/-/-. Out of this net debt and working capital adjustments were made and arrived at equity Value at ₹ 17O9,57,41,721/-. Out of this Barclays fee of ₹ 28,81,31,631/- has been deducted to arrive at net equity value and consideration at ₹ 1680,76,10,090/-. Success fee payment to Barclays is an obligation cast on M/s. TMPPL and it is a liability on the company. This liability has to be considered, for adjustment of debt as provided under SPA. The consultant company proposed this adjustment having regard to the clauses in SPA. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had entered into agreement for investment with First Carlyle Group on 10.04.2010. Accordingly, Carlyle Group has made the investments and the company was obliged to give exit option to the investors as per Clause 13.1 of the agreement. For the purpose of honouring the commitment, the company had engaged M/s Barclays Bank Pvt. Ltd. for financial advice and possible transaction to study the market and find a way to provide exit route to Carlyle Group. The scope of EL was appointment of M/s Barclays as a sole financial advisor in connection with the transaction and to assist the client in identifying and liaising with potential buyer. As per the terms and conditions, the success fee would be paid only on completion of transaction from the proceeds received from sale of the business of the company partly / fully. As per Clause 2.2. the company agrees that it shall be responsible for all costs and expenses and the Barclays has raised invoice on client in accordance with the EL. M/s Barclays identified the potential buyer, i.e BSA International Ltd to take over the company not only the interest of Carlyle Group but also expressed its interest to take over the shares of ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consultant who will not have any say in the success fee. In view of this clause also, the contention of AO that the success fee was the obligation of the assessee is incorrect. As mentioned in the share purchase agreement (SPA), cost of transfer of shares should be borne by the assessee. Accordingly, the expenses in relation to the negotiation, finalization and execution of SPA have to be borne by the shareholders including the assessee. The success fee was for engaging the services of Barclays as per EL dated 05.07.2013 and the share purchase agreement was entered on 04.11.2013, much ahead of SPA, hence, the success fee cannot be treated as the expenditure incurred in connection with the SPA. From plain reading of SPA and the EL, it is established that the assessee has no obligation to make any payment towards success fee paid to Barclays, hence, it cannot be held that the assessee got any benefit from the success fee paid by the TMPPL as observed by the Ld.CIT(A). Accordingly, we uphold the order of the Ld.CIT(A) and dismiss the revenue s ground on this issue. 7. The next contention raised by the Ld.AR during the appeal hearing is that the success fee is to be paid only on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the Barclays was not in relation to transfer of shares. Accordingly, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue. 5.1. Since the facts are identical, respectfully following the view taken by this Tribunal, we hold that there is no case for invoking the provisions of section 2(24)(iv) of the Act and there is no case for taxing the income under the head income from other sources, accordingly, we uphold the order of the Ld.CIT(A) and dismiss the appeal of the revenue on this ground. 6. Ground No.5 is related to the investment in acquiring the residential house and claim of deduction u/s 54F of the Act. The AO found that the assessee had claimed deduction u/s 54F to the extent of 14.34 crores by acquiring residential house. The AO noticed that the assessee s son had participated in the auction of the plots held by VUDA and paid an amount of ₹ 14.34 crores and the funds for the bid amounts were transferred from assessee s account. As per section 54F, exemption is available only when the assessee purchases residential house or for construction of residential house. During the course of assessment proceedings, the AO asked the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t scheme in the interim period. Advancing the argument, the Ld.AR argued that the assessee s son had participated in the VUDA auction for acquiring the plot for construction of residential house for which the assessee had made the payment from his account. Since the assessee s son participated in the auction and the payment was made by the assessee from his account, the assessee is entitled for deduction u/s 54F of the Act. The assessee intended to construct the house by acquiring the plots. Therefore, there is no wrong in making the payment for acquiring the plot even though his son had participated in the VUDA auction. Once, the plot is acquired, the assessee ought to have made the investment for construction and made necessary arrangements for transfer of plot in the assessee s name if necessary as per law. The Ld.AR further submitted that even the assessee acquires plots in the name of son also, the assessee is entitled for deduction u/s 54F of the Act. Further, the Ld.AR submitted that since the amount was paid to VUDA till such time the amounts were received back, the investment continued to be made for acquiring the house, therefore, the assessee could not make investment in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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