TMI Blog2021 (5) TMI 791X X X X Extracts X X X X X X X X Extracts X X X X ..... ong Term Capital loss and that the ld AO had not accepted the same. This is evident from the detailed reply given by the ld AO to the Revenue Audit Party vide his letter dated 3.7.2017. We find that the ld PCIT had invoked revision jurisdiction u/s 263 of the Act on the very same point of allowability of LTCL. Hence it could be safely concluded that the revision proceedings has been invoked by the PCIT u/s 263 of the Act based on audit objection, which is nothing but borrowed satisfaction. Hence the said revision proceedings u/s 263 of the Act need to be construed as bad in law. Appeal of the assessee is allowed. - ITA No. 1964/Mum/ 2019 - - - Dated:- 24-5-2021 - SHRI MAHAVIR SINGH, VP And SHRI M.BALAGANESH, AM Assessee by : Shri Ronak Doshi and Ms. Gunjan Kakkad Revenue by : Shri Anadi Varma and Shri Micheal Jerald ORDER PER M. BALAGANESH (A.M): This appeal in ITA No.1964/Mum/2019 for A.Y.2013-14 preferred by the order against the revision order of Pr. Commissioner of Income Tax, Central-1, Mumbai u/s.263 of the Act dated 27/03/2019 for the A.Y.2013- 14. 2. Though the assessee had raised various grounds of appeal before us, we find that the effectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue of allowability of LTCL to be carried forward to subsequent years on the ground that the ld AO had taken an incorrect view based on improper and incomplete appreciation and verification of facts and therefore unsustainable in law. We find that the ld PCIT also relied on Explanation 2(a) to section 263 of the Act which came into effect from 1.6.2015 to support his conclusion. Ultimately, the ld PCIT set aside the order of the ld AO as erroneous and prejudicial to the interest of the revenue with a direction to the ld AO to carry out complete verification of the legal tenability of the SPV created on 21.2.2013, the source of finances of SPV to acquire the shares of Aditya Birla Minacs Worldwide Limited (ABMWL), the valuation of shares of ABNL IT ITES Ltd and sale of shares, if any, on 14.3.2013. 5. We find that the assessee in its return of income had claimed Long Term Capital loss (LTCL) arising on account of sale of shares of Aditya Birla Minacs Worldwide Ltd (ABMWL) to ABNL IT ITES Ltd. These details were duly disclosed by the assessee in the return of income filed as well as in the computation of income filed together with its detailed workings. For the sake of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,60,287 (9,98,957) 3 Pantaloons Fashion Retail Limited Indigold Trade and Services Limited (Note 3) 27.02.2010 01.06.2012 5,00,000 50,00,000 632 852 67,40,506 50,00,000 TOTAL 4,44,52,49,149 (7,10,56,49,829) 4,44,56,09,436 3,60,287 (2,67,17,80,899) 6. We find that in the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany ABNL IT ITES Ltd. ( ABNL IT ITES‟) (Special Purpose Vehicle (SPV) on 21st February 2013 with the capital of ₹ 5,00,000 held by the Assessee Company (95%) and ABNL Investment Ltd (5%), ABNL Investments Ltd is another 100% subsidiary of the Assessee Company. 4.4. On 14th March 2013, 2,56,62,266 shares of Minacs India were sold to ABNL IT ITES Limited at cost of ₹ 172.87 (Cost of ₹ 443,63,44,411 divided by 2,56,62,266 shares) which was substantially higher than the networth of Minacs India. The book value of Minacs India as on 31 March 2013 (proximate to date of sale) is computed as under:- Total Networth (Rs.in lakhs) 19,418.21 Total Equity share outstanding (nos. in lakhs) 257.26 Book Networth / share (Rs.) Approx. 75.48 4.5. The treatment of sale transaction given by the Assessee Company as per books of accounts and as per tax is as follow: Particulars As per Books of Accounts As per Tax Sale Consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,002,853,083 426 2,005,706,166 2004-05 3,440 126,282 480 224,151 2008-09 463,240 33,024,192 582 48,344,693 2009-10 482,686 28,438,503 632 38,337,982 2010-11 200,367 12,002,161 711 14,382,336 6,461,402 1,076,444,221 A 2,106,995,328 Aditya Birla Minacs Worldwide Ltd., (Transworks Information Services Ltd) Year of purchase Nos of Shares Cost Cost Inflation Index in the year of purchase Indexed Cost (F.Y.12- 13=852) 2003-04 15,738,378 687,787,270 463 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded on 15.12.2016 enclosed in Page 179 of the factual paper book filed before us. 8. One more excruciating fact to be considered in the instant appeal is that the ld AO vide letter dated 3.7.2017 had addressed a letter to The Deputy Director, RA-1, ITRA, C-25, Audit Bhavan, Bandra-Kurla Complex, Bandra(E ) , Mumbai 400051 objecting to the audit objection raised by the audit party . In this letter, the ld AO had actually accepted to the entire contentions of the assessee by placing all facts and legal points thereon before the Audit Party. For the sake of convenience, the said letter dated 3.7.2017 addressed by the ld AO to the audit party is reproduced hereunder:- Kindly refer to the above. The Revenue Audit has raised audit objection as under: As per section 47(iv) of the Act, any transfer of capital asset by a company to its Indian subsidiary company is not regarded as transfer if the parent company or its nominees hold the whole of the share capital of the subsidiary company. In the instant case, the assessment was completed under section 143(3) r.w.s. 144C of the Act determining taxable income at ₹ 3,66,01,24,600. It was seen that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parent company or its nominees hold the whole of the share capital of the subsidiary company. In the instant case, the assessment was completed under section 143(3) r.w.s. 144C of the Act determining taxable income at ₹ 3,66,01,24,600. It was seen that the assessee claimed and was allowed Long Term Capital loss of ₹ 2,67,17,80,899/- to be carried forward to future years. This LTCL of ₹ 2,67,17,80,899/- included LTCL of ₹ 2,67,07,81,942 on sale of 25662266 shares of Aditya Birla Minacs Worldwide Limited to ABNL IT ITES Ltd., It was seen that the transferee ABNL IT ITES Ltd., was a 100 percent subsidiary of the assessee. As the said transaction is not to be treated as transfer under section 47, the allowance of Long Term Capital Loss was not in order. By generating LTCL in violation of the Act, the assessee would be able to reduce future LTCG tax liability by this action. Non disallowance of the irregular claim of LTCL on account of transfer of assets to its subsidiaries resulted in excess carry forward of LTCL by ₹ 2,67,07,81,942 with a consequent short levy of tax of ₹ 57,76,90,134/- (potential). The Department did not ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence it could be safely concluded that the ld AO had taken one of the possible view. Once a possible view has been taken by the ld AO, his order cannot be termed as erroneous warranting revision proceedings u/s 263 of the Act. In any case, we find that there is no dispute that the Revenue Audit Party had indeed raised an objection on the very same subject of allowability of Long Term Capital loss and that the ld AO had not accepted the same. This is evident from the detailed reply given by the ld AO to the Revenue Audit Party vide his letter dated 3.7.2017 reproduced supra. We find that the ld PCIT had invoked revision jurisdiction u/s 263 of the Act on the very same point of allowability of LTCL. Hence it could be safely concluded that the revision proceedings has been invoked by the ld PCIT u/s 263 of the Act based on audit objection, which is nothing but borrowed satisfaction. Hence the said revision proceedings u/s 263 of the Act need to be construed as bad in law. Reliance in this regard has been rightly placed by the ld AR on the decision of Hon ble Jurisdictional High Court in the case of CIT vs Maharashtra Hybrid Seeds Co. Ltd reported in 102 taxmann.com 48 (Bom). The rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment proceedings and also before the Revenue Audit Party which is evident from the reply to audit objection as reproduced supra. Reliance in this regard is placed on the following decisions, the operative portion are not reproduced for the sake of brevity:- a) Decision of Co-ordinate Bench of this Tribunal in the case of Narayan Tatu Rane vs ITO reported in 70 taxmann.com 227 (Mumbai) ( Paras 19 20) b) Decision of Co-ordinate Bench of Delhi Tribunal in the case of Hero Honda Motors Ltd vs DCIT in ITA No. 2148/Del/2009 dated 2.2.2017 (Paras 14 to 17) 11. In view of the aforesaid elaborate observations and respectfully following the various judicial precedents relied upon hereinabove, we hold that a) Adequate enquiries were indeed carried out by the ld AO in the original assessment proceedings and hence the ld PCIT was not justified in invoking revisionary jurisdiction u/s 263 of the Act ; b) A possible view has been taken by the ld AO on the issue of LTCL on the facts of the case and also by placing reliance on the available case laws on the subject and hence the ld PCIT was not justified in invoking revisionary jurisdiction u/s 263 of the Act merel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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