TMI Blog2021 (3) TMI 599X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to avoid payment of tax do not contravene any statutory provision and the same is within four corners of law it cannot be found fault with. There were two ways in which the shares of NCCPL held by 13 partners of BVRE to be transferred to Godrej Beverages and Foods Ltd., firstly, that 13 partners in their individual capacity could transfer the shares to NCCPL held by them to Godrej Beverages and Foods Ltd. at a price the shares were ultimately sold to Godrej Beverages and Foods Ltd. through NCSPL and secondly, the manner in which the assesses have transferred the shares through medium of the firm BVRE. The later course would definitely result in lesser tax burden to the assessee but the aforesaid course is permissible in law. It is pertinent to note that there was a lacuna in law which has been addressed by Finance Act, 2012 by introducing clause (xiii) to sub clause(e) of Section 49(1) with effect from 01.04.1999. Before the aforesaid amendment, the assessment was complete. It is also pertinent to mention that during the previous year relevant to Assessment Year 2007-08, there is no transfer of shares by the assessee (individual /HUF) in favour of Godrej Beverages and F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that the entire series of transactions by which the shares of Nutrine Confectionary Co. P Ltd were ultimately transferred to GBFL were all valid and such a course was permitted and within the frame work of law and that the transaction was not colourable or dubious device or subterfuge and were legal and valid without completely appreciating the complete though process and motive behind the series of transactions entered in to by the assessee and family members? . (v) Whether in the given facts and circumstances of the case, the Tribunal is correct in law in allowing the appeal of the assessee with reference to addition on account of non existent liability amount to ₹ 1,77,778/- without appreciating that the assessee had not been able to prove the same beyond doubt? . 2. Facts leading to filing of this appeal briefly stated are that M/s Neuprine Confectionary Company P. Ltd. (Hereinafter referred to as 'the NCCPL' for short) was incorporated on 14.02.1952. The said company was engaged in the business of manufacture and sale of confectionary products under the brand name 'Neutrine'. Thereafter on 14.07.1971, M/s B.V.Reddy Enerprises (Firm) was forme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted with reference to the position prevailing on 01.03.2006 contemplating transfer of shares to Godrej Beverages and Foods Ltd. for a sum of ₹ 270 Crores. NCCPL also filed a similar declaration under Section 187C of the Companies Act, 1956 on 29.03.2006. With effect from 05.05.2006, the firm viz., BVRE was succeeded by NCSPL taking over the entire business lock stock and barrel including all its assets and liabilities for a consideration of ₹ 270 Crores in accordance with provisions of Chapter IX of the Companies Act, 1956. Thereafter, under a share purchase agreement dated 10.06.2006, the shares in NCCPL were transferred by NCSPL to Godrej Beverages and Foods Ltd. for a consideration of ₹ 265 Crores and the transfer of shares was effective with effect from 29.06.2006. On 18.08.2006, M/s NCSPL changed its name to M/s B.V.R.E.P.L. 4. The aforesaid NCSPL / B.V.R.E.P.L filed the return of income for the Assessment Year 2007-08 declaring the capital loss on sale of shares of NCCPL of ₹ 33,22,70,041/-. The Assessing Officer by an order dated 30.12.2009 inter alia held that entire exercise of transfer of shares held by the assessee in NCCPL to firm viz., BVRE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held the entire paid up capital of NCCPL. It is also pointed out that from perusal of Annexure-1 to MoU, it is evident that aforesaid 16 persons were shareholders of NCCPL. The finding recorded by the tribunal that MoU has been superseded with share purchase agreement is perverse and in the MoU details have been given about the consideration to be paid for transfer of shares and the same is based on the details contained in Annexure 2 to the agreement. It is also submitted that MoU contains a non compete clause and provides time limit for transfer of shares. Our attention has also been invited to clause 8.1. of the MoU and it has beenurged that the MoU is not binding until duly authorized by definitive agreements to be executed by both the parties and the fact that ultimately the transfer of shares took place on the same terms which are contained in MoU. It has also been pointed out that the deed of partnership does not contain any clause by which 13 partners were to bring in their shareholding in NCCPL as capital contribution of the firm. 7. It is further submitted that Mr.V.Vikram Reddy and Mr.V.Vikram Reddy (HUF) in the course of assessment proceedings in answer to question N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax gains arising out of sale of shares of NCCPL to Godrej Beverages and Foods Ltd. Both in the hands of assessee (individual / HUF) as well as in the hands of B.V.R.E.P.L. and the revenue has not disputed the existence of B.V.R.E.P.L or its genuineness. Therefore, the aforesaid issue has reached finality. It is also submitted that it is open to the assessee to mitigate its tax burden instead of adopting a particular mode of carrying out a transaction, he adopts another mode whereby transaction is carried out as desired but with a lesser tax burden. It is also contended that the assessee has not contravened any statutory provision and has adopted tax planning which is within four corners of law and the transaction is neither sham nor unreal. It is pointed out that after noticing the loophole that by Finance Act, 2012, Clause (xiii) in Sub Clause (3) of Section 49(1) with effect from 01.04.1999 has been inserted and as per the aforesaid clause, the cost of acquisition of capital asset has to be reckoned from the date of computing capital gains when a transfer of capital gains take place in the manner referred to in Clause (xiii) of Section 47 of the Act. It is also pointed out that d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hargeable under the head Capital gains shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :- (i) expenditure incurred wholly and exclusively in connection with such transfer; (ii) the cost of acquisition of the asset and the cost of any improvement thereto: 49. (1) Where the capital asset became the property of the assessee- (e) under any such transfer as is referred to in clause (iv) or clause (v) or clause (vi) or clause (via) or clause (viaa) or clause (viab) or clause (vib) or clause (vic) or clause (vica) or clause (vicb) or clause (vicc) or clause (xiii) or clause (xiiib) or clause (xiv) of section 47 .. The cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be. 10. After having noticed relevant statutory provisions, we may advert to the legal principles. The Supreme Court in AZADI BACHAO ANDOLAN supra held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Godrej Beverages and Foods Ltd., firstly, that 13 partners in their individual capacity could transfer the shares to NCCPL held by them to Godrej Beverages and Foods Ltd. at a price the shares were ultimately sold to Godrej Beverages and Foods Ltd. through NCSPL and secondly, the manner in which the assesses have transferred the shares through medium of the firm BVRE. The later course would definitely result in lesser tax burden to the assessee but the aforesaid course is permissible in law. It is pertinent to note that there was a lacuna in law which has been addressed by Finance Act, 2012 by introducing clause (xiii) to sub clause(e) of Section 49(1) with effect from 01.04.1999. Before the aforesaid amendment, the assessment was complete. It is also pertinent to mention that during the previous year relevant to Assessment Year 2007-08, there is no transfer of shares by the assessee (individual /HUF) in favour of Godrej Beverages and Foods Ltd. The tribunal on the basis of meticulous appreciation of evidence on record has recorded a conclusion in favour of the assessee in para 84 of the order. In our considered view, the aforesaid finding which is a finding of fact can be term ..... X X X X Extracts X X X X X X X X Extracts X X X X
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