TMI Blog2020 (10) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... x the respondent-assessee in the subject assessment year 2006-07. What has to be taxed is the amount received or accrued and not any notional or hypothetical income. As observed by the Apex Court in CIT v. Shoorji Vallabhdas Co [ 1962 (3) TMI 6 - SUPREME COURT] Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which liability to tax is attracted, viz., the accrual of its income or its receipt; but the substance of the matter is income, if income does not result, there cannot be a tax, even though in book-keeping an entry is made about a hypothetical income, which does not materialize. In this case ₹ 20 crores cap in the agreement is not income in the subject assessment year. In this case the amount of ₹ 20 crores is neither received nor it has accrued to the respondent-assessee during the subject assessment year. We are informed that for the subsequent assessment year (save Assessment Year 2007-08 for which there is no deferred consideration on application of formula), the Assessee has offered to tax the amounts which have been received on the application of formula provided in the agreement dated 25th Janua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .) is an investment company belonging to the Global Telesystems Ltd. (GTL). In this case, the regular assessment was completed by the AO u/s 143(3) on 30.03.2004 determining the total income at ₹ 240,84,19,450/- as against the gross total income of ₹ 74,18,37,910/- shown by the assessee. The business of the assessee during the year under consideration was investment in stocks and shares. The assessee had 31,34,000 of GTL shares as on 31.03.2000 as opening balance. During the year the assessee had sold its 5,94,100 shares on which capital gains was offered to tax. Further, during the year, the Classic Credit Ltd. (CCL) had requested the assessee vide letter dated 19.10.2000 to advance 5,00,000 shares as a loan. CCL had stated that it would return on 04.11.2000. However, the same was not returned to the assessee. It is seen that Leesha Investment Pvt. Ltd. (LIPL) had 2,62,500/- of GTL shares as on 31.03.2000 as opening balance. Also Global Credit Corporation Pvt. Ltd. (GCCPL) had 3,08,780 of GTL shares as on 31.03.2000 as opening balance. On 01.12.2000, LIPL sold their 75,000 shares of GTL and GCCPL sold their 75,000 shares of GTL @ ₹ 1000/- per share (75,000 shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that no opportunity thus was given by the A.O. to the assessee in this regard to file the confirmation of CCL before completing the assessment and despite this factual position, the confirmation letter obtained by the assessee company from CCL and produced before the id. CIT (A) in the form of additional evidence has not been considered by him while deciding this issue. Keeping in view these submissions made by the assessee, we are of the view that the additional evidence filed by the assessee in the form of confirmation letter issued by CCL which is vital to decide the issue under consideration can appropriately be admitted. The Id. D.R. has not raised any material objection in this regard. He, however, has contended that if the additional evidence is admitted by the Tribunal, an opportunity may be given to A.O. to examine/verify the same. We find merit in this contention of the Id. D. R. Moreover, as submitted by the Id. Counsel for the assessee, 1,50,000 shares adjusted by CCL against sale of shares by two group companies as per request made by the assessee company have been subsequently received back by the assessee company from the said two group companies. The observat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. CIT(A). We find that vide order dated 01.03.2013, the Ld. CIT(A) observed that (i) the AO s action in his order u/s 254 dated 24.10.2012 to restore the addition made in the original assessment order is based on contradictions in his findings at para 10 where he says that Classic could not be traced and at para 11, the AO mentions that it is difficult to accept that there were no transfer from the assessee to Classic and further not examining the additional evidence admitted by the ITAT, (ii) the CIT(A) vide order dated 10.12.2004 has decided that the identity of Classic is established and further held with respect to 3,50,000 shares that there is no evidence on record to show that the debt is created in favour of the assessee or right to receive payment has been acquired by the assessee and taxing capital gain on notional income is not permissible under the law and that the computation of capital gain with respect to 3,50,000 shares are not valid, (iii) so far as the balance of 1,50,000 shares are concerned, the two group companies sold those shares to Classic and payments of ₹ 15 crores were received not by the assessee but by the two group companies and the said amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessed as capital gains, (iv) remaining 3,50,000 shares which were lent to CCL were never received back, nor any consideration was received. Relying on the decision in the case of CIT v. Mrs. Hemal Raju Shete (2016) 239 Taxman 176 (Bom) (HC), it is argued that capital gain can be assessed only if consideration is received and in the present case, as the assessee has not received any consideration, capital gains cannot be assessed. Also reliance is placed by him on the decision in CIT v. Texspin Engg. Mfg. Works (2003) 263 ITR 345 (Bom) (HC) and CIT v. Reliance Communication Infrastructure Ltd. (2012) 254 CTR 251 (Bom) (HC). Thus stating that the details as called for by the AO were furnished during the course of assessment proceedings, the Ld. counsel submits that the order passed by the CIT(A) be affirmed. 7. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. As mentioned earlier, the assessee had advanced 5,00,000 shares of GTL by way of loan vide letter dated 19.10.2000. We find that 1,50,000 shares are with the assessee and hence cannot be assessed as capital gains ; remaining 3,50,000 shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer on the ground that it is notional. On further appeal, the Tribunal upheld the findings of the Commissioner (Appeals) inter alia holding that as there is no certainty of receiving any amount as deferred consideration, the bringing to tax the maximum amount of ₹ 20 crores provided as a cap on the consideration in the agreement dated 25-1- 2006 is not tenable. Tribunal further held that what amount has to be brought to tax is the amount which has been received and/or accrued to the respondent-assessee and not any notional or hypothetical income as the revenue is seeking to tax the respondent-assessee in the subject assessment year 2006-07. On appeal by the Revenue, Their Lordships held as under: 8. In the present case, from the reading of the above clauses of the agreement the deferred consideration is payable over a period of four years i.e. 2006-07, 2007-08, 2008-09 and 2009-10. Further the formula prescribed in the agreement itself makes it clear that the deferred consideration to be received by the respondent-assessee in the four years would be dependent upon the profits made by M/s. Unisol in each of the years. Thus in case M/s. Unisol does not make net profit in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correctly held that what has to be taxed is the amount received or accrued and not any notional or hypothetical income. As observed by the Apex Court in CIT v. Shoorji Vallabhdas Co. [1962] 46 ITR 144 Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which liability to tax is attracted, viz., the accrual of its income or its receipt; but the substance of the matter is income, if income does not result, there cannot be a tax, even though in book-keeping an entry is made about a hypothetical income, which does not materialize. In this case ₹ 20 crores cap in the agreement is not income in the subject assessment year. It has been observed by the Apex Court in the case of K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 that one has to read capital gain provision along with computation provision and the starting point of the computation is the full value of the consideration received or accruing . In this case the amount of ₹ 20 crores is neither received nor it has accrued to the respondent-assessee during the subject assessment year. We are informed that for the subsequent assessment year (save Assessment Year 2 ..... 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