TMI Blog2023 (8) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee does not find place in the Escrow Agreement is due to the fact that in addition to the assessee, there are other share holders, who are party to the Escrow Agreement. Therefore, the excess payment made to the assessee could not have formed part of the Escrow Agreement. However, undeniably, the assessee was holding the controlling block of shares of EKPL When documentary evidences indicate that both the vendor and the vendee, i.e., the assessee and DLF Ltd. have treated the payment of Rs. 7.20 crores as control premium on sale of shares, there is no occasion for the Assessing Officer to rewrite the terms of agreement between the parties unilaterally. Moreover, the Assessing Officer has observed that the amount of Rs. 7.20 crores was paid to the assessee for some other purpose. The aforesaid observation of the Assessing Officer clearly indicates that he himself was not sure for what purpose the payment was made. Thus, when the Assessing Officer had no other material in his possession to disprove the claim of the assessee that the amount was received towards sale consideration of shares, he could not have disallowed the claim - Decided against revenue. Accepting the Fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B) Ld. CIT(A) has erred in directing to include Rs. 7.2 crore as part of sale consideration without considering the fact that the issue was dealt in detail in the assessment order where it was established by the AO that payment of Rs. 7.2 crores made by DLF to Sh. Gun Nidhi Dalmia was not related to sale of equity shares of EKT, but for some other purposes. (C) Ld. CIT(A) has erred in directing the AO to treat FMV of shares of EKL at Rs. 16,750/- instead of Rs. 10/- as on 01.04.1981 without considering the fact that the issue was already examined in details in the assessment order where the facts and circumstances for adopting the FMV of shares of EKL as on 01.04.1981 at Rs. 10/- are clearly enumerated. 3. Insofar as ground no. A is concerned, briefly the facts are, the assessee is a resident individual. For the assessment year under dispute, the assessee filed its return of income on 27.07.2006, declaring income of Rs. 9,21,24,691/-. In course of assessment proceedings, while perusing the return of income filed by the assessee, the Assessing Officer observed that while computing income from long term capital gain on sale of unquoted equity shares of M/s Edward Keventers (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utedly, in course of assessment proceeding, the assessee had furnished the details of expenditure incurred with supporting bills/vouchers. It is further observed, the Assessing Officer has neither doubted the fact that the assessee has incurred expenditure nor has found any deficiency or discrepancy in the supporting evidences. The Assessing Officer has merely observed that the expenditure incurred is unreasonable and cannot be considered to be wholly in relation to the transfer of shares. At the same time, the Assessing Officer has not disputed the fact that the assessee has incurred expenditure towards availing professional services in relation to transfer of shares, as, he has himself allowed an amount of Rs. 12,000/-, though, purely on estimate basis. Whereas, learned Commissioner (Appeals) has allowed expenditure of Rs. 23,62,750/- towards payment made to solicitor firm M/s. Luthra Luthra. 6. Facts on record reveal that the assessee, indeed, had availed professional services from M/s. Luthra Luthra, a firm of lawyers, who have been engaged to facilitate the transfer of shares. It is observed, M/s. Luthra Luthra has made legal research, arranged documentation, held dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. and letter dated 25th May, 2006 from DLF Ltd. to the assessee. Thus, it was submitted by the assessee that the extra amount of Rs. 7.20 crores, being payment made towards sale of shares, is taxable under the head long term capital gain . The Assessing Officer, however, did not accept assessee s claim. He observed that in the Escrow Agreement, there is no mention about the extra payment of Rs. 7.20 crores to the assessee towards his controlling interest in the shares. Further, he observed that an amount of Rs. 7,07,92,500/- was paid to the assessee on 18.06.2005 as an advance for purchase of land. It is further evident from Board Resolution, dated 04.12.1987 of EKL, as per which, the assessee was entitled for special consideration of 7.5% on sale of land, though, the resolution was revoked on 30.05.2005 in another Board Meeting. Thus, finally the Assessing Officer observed that assessee s claim that he has received the amount of Rs. 7.20 crores towards sale of equity shares is a concocted story, hence, not believable. Thus, ultimately, he concluded that the amount of Rs. 7.20 crores was received by the assessee not for sale of shares but for some other purpose. Accordingly, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initially received towards advance for sale of land is totally unfounded as the Board Resolution referred to by him was never implemented since the land was never sold by EKPL. When documentary evidences indicate that both the vendor and the vendee, i.e., the assessee and DLF Ltd. have treated the payment of Rs. 7.20 crores as control premium on sale of shares, there is no occasion for the Assessing Officer to rewrite the terms of agreement between the parties unilaterally. Moreover, the Assessing Officer has observed that the amount of Rs. 7.20 crores was paid to the assessee for some other purpose. The aforesaid observation of the Assessing Officer clearly indicates that he himself was not sure for what purpose the payment was made. Thus, when the Assessing Officer had no other material in his possession to disprove the claim of the assessee that the amount was received towards sale consideration of shares, he could not have disallowed the claim on conjectures and surmises. Further, learned counsel has brought to our notice judicial precedents, wherein, it has been held that controlling interest is an incidence of share holding, hence, the consideration received is required to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions of the assessee. He observed that the assessee has not given any basis for revaluation of lease hold rights in the land. He observed the valuation report of Accurate Surveyors, dated 18th October, 2005 compared the rates of residential land with the dairy farming land. He further observed that, by no stretch of imagination, the use of land could have been taken as residential instead of dairy farming as on 1st April, 1981. 16. Insofar as valuation of land by Accurate Surveyor, the Assessing Officer observed that Valuer has referred to a number of immovable property transactions claiming to be properties in the same locality. Whereas, none of the properties were as large as the property under consideration. He further observed, under the Income Tax Act, no specific formula is laid down to determine the FMV of the unquoted shares. Therefore, in absence of any specific procedure, other acts are to be examined, in which the procedure has been laid down. Having held so, he referred to Rule 1D of the Wealth Tax Rules and held that the valuation report of Accurate Surveyors obtained much after the date of relevant balance sheet is not relevant at all in determining the FMV of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date. Thus, going by the definition of FMV, it cannot be said that the value of asset shown at the balance sheet can be the FMV. Therefore, in our view, the Assessing Officer could not have referred to cost/value of land and building as shown in the balance sheet for determining the FMV of the equity shares. More so, when section 55(2)(b) of the Act provides an option to the assessee to adopt the cost of acquisition as per FMV. It is further noticed that the Assessing Officer has made a fundamental error in determining the value of shares by referring to Rule 1D of the Wealth Tax Rules. It is observed, the said Rule stood omitted from the statute w.e.f. 01.04.1989. Therefore, the Assessing Officer has erred in law in determining the FMV by referring to Rule 1D of Wealth Tax Rules. He has committed further error by saying that there is no mode and mechanism for determining the FMV under the Income Tax Act. Whereas, section 55(2)(b) read with section 2(22B) of the Act provides mechanism for determining the cost of acquisition. In any case of the matter, to support the FMV of the shares as on 01.04.1981, the assessee has furnished valuation report of experts. Whereas, without taking a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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