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Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI OM PRAKASH KANT & MS. KAVITHA RAJAGOPAL
This appeal by the Revenue is directed against order dated 20.12.2022 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2013-14, raising following grounds:
1. "Whether on the facts and circumstances of the case the Ld. CIT(A) erred in holding that sale consideration received on account of sale of shares of M/ Trivector Origio Scientific Pvt. Ltd. (TOSPL) amounting to Sangeeta Dilip Patil 2 ITA No. 551/M/2023 Rs.11,03,10,171/ Rs.11,03,10,171/-is capital gain only and not is capital gain only and not business income as per provision of section u/s ess income as per provision of section u/s ess income as per provision of section u/s 28(il)(a) of the Act, 1961, holding that the income 28(il)(a) of the Act, 1961, holding that the income 28(il)(a) of the Act, 1961, holding that the income received only sale of shares without appreciating the received only sale of shares without appreciating the received only sale of shares without appreciating the fact that when the assessee sold entire share held by fact that when the assessee sold entire share held by fact that when the assessee sold entire share held by herself, the managerial control itself terminated and herself, the managerial control itself terminated and herself, the managerial control itself terminated and the assessee no more part of the management of the the assessee no more part of the management of the the assessee no more part of the management of the said company." said company." 2. "Whether on the facts and circumstances of the case "Whether on the facts and circumstances of the case "Whether on the facts and circumstances of the case the Ld.CIT(A) erred in holding that the assessee has the Ld.CIT(A) erred in holding that the assessee has the Ld.CIT(A) erred in holding that the assessee has not received any income for termination of her not received any income for termination of her not received any income for termination of her management control in the ongoing com management control in the ongoing company without pany without appreciating the fact that consideration received appreciating the fact that consideration received appreciating the fact that consideration received includes the income received on termination of her includes the income received on termination of her includes the income received on termination of her management control as she has sold entire shares management control as she has sold entire shares management control as she has sold entire shares held by her." held by her." 3. "Whether on the facts and circumstances of the case "Whether on the facts and circumstances of the case "Whether on the facts and circumstances of the case the Ld.CIT(A) has erred in the Ld.CIT(A) has erred in not appreciating the CBDT not appreciating the CBDT Circular Circular Circular F.No.225/12/2016/ITA.I| F.No.225/12/2016/ITA.I| F.No.225/12/2016/ITA.I| dated dated dated 02.05.2016." 02.05.2016."
We have heard rival submission of the parties on the issue We have heard rival submission of the parties on the issue We have heard rival submission of the parties on the issue-in- dispute and perused the relevant material on record. In the case, dispute and perused the relevant material on record. In the case, dispute and perused the relevant material on record. In the case, dispute is regarding gain on sale of the shares dispute is regarding gain on sale of the shares of M/s Trivector of M/s Trivector Origio Scientific Pvt. Ltd. (TOSPL) amounting to Rs.11,03,10,171/- Origio Scientific Pvt. Ltd. (TOSPL) amounting to Rs.11,03,10,171/ Origio Scientific Pvt. Ltd. (TOSPL) amounting to Rs.11,03,10,171/ whether it has to be taxed under the head ‘capital gain’ as claimed whether it has to be taxed under the head ‘capital gain’ as claimed whether it has to be taxed under the head ‘capital gain’ as claimed by the assessee or under the head ‘profit and gains of the business’ under the head ‘profit and gains of the business’ under the head ‘profit and gains of the business’ u/s 28(ii)(a) of the Income u/s 28(ii)(a) of the Income-tax Act, 1961 (in short ‘the Act’) as held t, 1961 (in short ‘the Act’) as held by the Assessing Officer and confirmed by the Ld. CIT(A). We find by the Assessing Officer and confirmed by the Ld. CIT(A). We find by the Assessing Officer and confirmed by the Ld. CIT(A). We find that the Ld. CIT(A) has decided the issue in favour of the assessee that the Ld. CIT(A) has decided the issue in favour of the assessee that the Ld. CIT(A) has decided the issue in favour of the assessee following his own finding in assessment year 2015 following his own finding in assessment year 2015-16. The relevant 16. The relevant finding of the Ld. CIT(A) is reproduced as under: CIT(A) is reproduced as under:
“5.11 Further it is seen that the appellant's own case for 5.11 Further it is seen that the appellant's own case for 5.11 Further it is seen that the appellant's own case for the A.Y 2015 the A.Y 2015-16, the CIT(A) has passed the order in favor 16, the CIT(A) has passed the order in favor Sangeeta Dilip Patil 3 ITA No. 551/M/2023 of the appelant on similar issue. I find that the issue has of the appelant on similar issue. I find that the issue has of the appelant on similar issue. I find that the issue has been discussed threadbare in AY 2015 been discussed threadbare in AY 2015-16. Releva 16. Relevant extract of the order is reproduced as under: extract of the order is reproduced as under: "Thus, the appellant has rightly offered the LTCG for "Thus, the appellant has rightly offered the LTCG for "Thus, the appellant has rightly offered the LTCG for taxation, which is supported by the CBDT circular F. No. taxation, which is supported by the CBDT circular F. No. taxation, which is supported by the CBDT circular F. No. 225/12/2016/ITA.Il dated 02/05/2016 where in it was 225/12/2016/ITA.Il dated 02/05/2016 where in it was 225/12/2016/ITA.Il dated 02/05/2016 where in it was clarified that in case of sale of unlisted sh clarified that in case of sale of unlisted shares, following ares, following procedure of taxation should be adopted to maintain procedure of taxation should be adopted to maintain procedure of taxation should be adopted to maintain consistency thereby taxing the profits on sale of shares consistency thereby taxing the profits on sale of shares consistency thereby taxing the profits on sale of shares as capital gain. The above said circular vide para 2 as capital gain. The above said circular vide para 2 as capital gain. The above said circular vide para 2 clearly stated that "for determining the tax treatment of clearly stated that "for determining the tax treatment of clearly stated that "for determining the tax treatment of income arising from income arising from transfer of unlisted shares for which transfer of unlisted shares for which no formal market exists for trading, a need has been felt no formal market exists for trading, a need has been felt no formal market exists for trading, a need has been felt to have a consistent view in assessments pertaining to to have a consistent view in assessments pertaining to to have a consistent view in assessments pertaining to such income. It has been accordingly decided that the such income. It has been accordingly decided that the such income. It has been accordingly decided that the income arising from transfer of unlisted shares wou income arising from transfer of unlisted shares wou income arising from transfer of unlisted shares would be considered under the head 'capital gain, irrespective of considered under the head 'capital gain, irrespective of considered under the head 'capital gain, irrespective of period of holding, with a view to avoid disputes / period of holding, with a view to avoid disputes / period of holding, with a view to avoid disputes / litigation and to maintain uniform approach". litigation and to maintain uniform approach". Therefore, keeping in view of the various submissions Therefore, keeping in view of the various submissions Therefore, keeping in view of the various submissions made by the appellant and following the ra made by the appellant and following the ratios held in tios held in the case laws mentioned supra and also the CBDT the case laws mentioned supra and also the CBDT the case laws mentioned supra and also the CBDT circular as mentioned above. Therefore, the AO is circular as mentioned above. Therefore, the AO is circular as mentioned above. Therefore, the AO is directed to delete the addition made treating the sale directed to delete the addition made treating the sale directed to delete the addition made treating the sale consideration received on account of sale of shares of consideration received on account of sale of shares of consideration received on account of sale of shares of TOSPL which was offered by the appe TOSPL which was offered by the appellant to tax as long llant to tax as long- term capital gain, treated by the assessing officer as term capital gain, treated by the assessing officer as term capital gain, treated by the assessing officer as business income us. 28()(a) of the I. T Act. Therefore A. O. business income us. 28()(a) of the I. T Act. Therefore A. O. business income us. 28()(a) of the I. T Act. Therefore A. O. is directed to treat the same as consideration received on is directed to treat the same as consideration received on is directed to treat the same as consideration received on sale of shares under the head 'capital gain." sale of shares under the head 'capital gain." 5.12 It is fur 5.12 It is further noted that similar issue also came up in ther noted that similar issue also came up in the case of appellant's husband for A.Y.2015 the case of appellant's husband for A.Y.2015-16, where 16, where the appellant's husband got relief from the Ld.CIT(A) who the appellant's husband got relief from the Ld.CIT(A) who the appellant's husband got relief from the Ld.CIT(A) who held that the offering of long held that the offering of long-term capital gain is proper term capital gain is proper and correct and the provisions of sect and correct and the provisions of section 28(il)(a) of the ion 28(il)(a) of the I.T. Act are not at all attracted. I find that the issue is I.T. Act are not at all attracted. I find that the issue is I.T. Act are not at all attracted. I find that the issue is therefore covered by the decision of CIT(A) in the therefore covered by the decision of CIT(A) in the therefore covered by the decision of CIT(A) in the appellant's own case for A.Y. 2015 appellant's own case for A.Y. 2015-16. Therefore, 16. Therefore, following the order in assessee's own case for AY 2015 following the order in assessee's own case for AY 2015 following the order in assessee's own case for AY 2015- 16, the AO is direc 16, the AO is directed to delete the addition made ted to delete the addition made treating the sale consideration received on account of treating the sale consideration received on account of treating the sale consideration received on account of Sangeeta Dilip Patil 4 sale of shares of TOSPL as business income u/s 28(i)(a) sale of shares of TOSPL as business income u/s 28(i)(a) sale of shares of TOSPL as business income u/s 28(i)(a) of the IT.Act 1961. The AO is directed to treat the same of the IT.Act 1961. The AO is directed to treat the same of the IT.Act 1961. The AO is directed to treat the same as consideration received on sale of shares. The ground as consideration received on sale of shares. The ground as consideration received on sale of shares. The ground of appeal on this ground no 1 is therefore allowed. of appeal on this ground no 1 is therefore allowed. of appeal on this ground no 1 is therefore allowed.”
3. Before us, the Ld. Counsel of the assessee submitted that the Before us, the Ld. Counsel of the assessee submitted that the Before us, the Ld. Counsel of the assessee submitted that the Tribunal in ITA No. 6557/M/2019 for assessment year 2015-16 in Tribunal in ITA No. 6557/M/2019 for assessment year 2015 Tribunal in ITA No. 6557/M/2019 for assessment year 2015 the case of the assessee has upheld the order of the Ld. CIT(A) and the case of the assessee has upheld the order of the Ld. CIT(A) and the case of the assessee has upheld the order of the Ld. CIT(A) and dismissed the appeal of the Revenue observing as under: ed the appeal of the Revenue observing as under: ed the appeal of the Revenue observing as under:
“6. We have heard rival submission of the parties and We have heard rival submission of the parties and We have heard rival submission of the parties and perused the relevant material on record. The issue before us, perused the relevant material on record. The issue before us, perused the relevant material on record. The issue before us, is whether the gain arising from sale of shares of M/s is whether the gain arising from sale of shares of M/s is whether the gain arising from sale of shares of M/s Trivector Origio Trivector Origio India Pvt. Ltd. is taxable under the head India Pvt. Ltd. is taxable under the head ‘capital gain’ or under the head ‘profit and gains of the ‘capital gain’ or under the head ‘profit and gains of the ‘capital gain’ or under the head ‘profit and gains of the business’ u/s 28(2)(a) of the Act. The Tribunal (supra) in the business’ u/s 28(2)(a) of the Act. The Tribunal (supra) in the business’ u/s 28(2)(a) of the Act. The Tribunal (supra) in the case of the husband of the assessee on identical issue has case of the husband of the assessee on identical issue has case of the husband of the assessee on identical issue has held as under: held as under: 9. We have analysed the nature of transaction to d the nature of transaction to determine the character of the receipts to be assessed determine the character of the receipts to be assessed determine the character of the receipts to be assessed under the head business under section 28(ii)(a) of the under the head business under section 28(ii)(a) of the under the head business under section 28(ii)(a) of the Act.
This is established position of law that any such 10. This is established position of law that any such 10. This is established position of law that any such receipt which is described in section 28(i)(a) is duly receipt which is described in section 28(i)(a) is duly receipt which is described in section 28(i)(a) is duly covered as capital asset as defined in sec 2(14). On covered as capital asset as defined in sec 2(14). On covered as capital asset as defined in sec 2(14). On such type of receipt being asset first charge on assessee such type of receipt being asset first charge on assessee such type of receipt being asset first charge on assessee will be under the head capital gain only. If assessee is will be under the head capital gain only. If assessee is will be under the head capital gain only. If assessee is not offering such receipt under the head capital gains, not offering such receipt under the head capital gains, not offering such receipt under the head capital gains, then only it is chargeable to ta then only it is chargeable to tax under sec 28()(a). x under sec 28()(a). Chargeability of such type of receipt under sec. 28(i)(a) Chargeability of such type of receipt under sec. 28(i)(a) Chargeability of such type of receipt under sec. 28(i)(a) was introduced with a motive to cover the loopholes was introduced with a motive to cover the loopholes was introduced with a motive to cover the loopholes where income is neither chargeable to tax under the where income is neither chargeable to tax under the where income is neither chargeable to tax under the head capital gains nor in any other head. Whereas such head capital gains nor in any other head. Whereas such head capital gains nor in any other head. Whereas such type of transactio type of transactions categorically covered by the finance ns categorically covered by the finance act 1997 i.e., with effect from A Y 1998 act 1997 i.e., with effect from A Y 1998-99 through sec, 99 through sec, 55(2)(a). 55(2)(a).
From the transactions and covenants of agreement 11. From the transactions and covenants of agreement 11. From the transactions and covenants of agreement observed, it clearly emanates that the business was observed, it clearly emanates that the business was observed, it clearly emanates that the business was Sangeeta Dilip Patil 5 ITA No. 551/M/2023 being carried out by M/s. TOPL and assessee was being carried out by M/s. TOPL and assessee being carried out by M/s. TOPL and assessee simply a shareholder and not directly into the business simply a shareholder and not directly into the business simply a shareholder and not directly into the business so it can be affirmed that the transactions of assessee so it can be affirmed that the transactions of assessee so it can be affirmed that the transactions of assessee with M/s. Ori M/s Origio A/S Denmark was transfer of with M/s. Ori M/s Origio A/S Denmark was transfer of with M/s. Ori M/s Origio A/S Denmark was transfer of shares and not of business itself. In this regard we shares and not of business itself. In this regard we shares and not of business itself. In this regard we relied upon the decisions ofGrania relied upon the decisions ofGranialowing Hon'ble High lowing Hon'ble High Court/Apex Court. Court/Apex Court. i. CIT Vs New India Assurance Company Ltd 122 IT CIT Vs New India Assurance Company Ltd 122 IT CIT Vs New India Assurance Company Ltd 122 IT 633 (Mum.) 633 (Mum.) ii. SIN) CIT Vs F.X. Periera and Sons (Travancore) Pvt SIN) CIT Vs F.X. Periera and Sons (Travancore) Pvt SIN) CIT Vs F.X. Periera and Sons (Travancore) Pvt Ltd. 184 ITR 461 (Ker.) Ltd. 184 ITR 461 (Ker.) iii. CIT Vs West Coast Chemicals and Industries Ltd CIT Vs West Coast Chemicals and Industries Ltd CIT Vs West Coast Chemicals and Industries Ltd 46 ITR 135 (S.C) 46 ITR 135 (S.C) iv. CIT Vs Mugni Ram Bangu CIT Vs Mugni Ram Bangur and Co 57 ITR 299 r and Co 57 ITR 299 (S.C) (S.C) v. West Coast Electric Supply Corporation Ltd Vs CIT West Coast Electric Supply Corporation Ltd Vs CIT West Coast Electric Supply Corporation Ltd Vs CIT 107 ITR 483 (Mad.) 107 ITR 483 (Mad.) vi. Syndicate Bank Ltd Vs CIT 155 [TR 681 (Kar.) Syndicate Bank Ltd Vs CIT 155 [TR 681 (Kar.) Syndicate Bank Ltd Vs CIT 155 [TR 681 (Kar.) vii. Indian Bank Ltd Vs CIT 153 ITR 282 (Mad.) Indian Bank Ltd Vs CIT 153 ITR 282 (Mad.) Indian Bank Ltd Vs CIT 153 ITR 282 (Mad.) viii. ACIT vs. Savita N. Mandhana & Ors., vs. Savita N. Mandhana & Ors., ITA No. ACIT vs. Savita N. Mandhana & Ors., ITA No. 3900/Mum/2010 3900/Mum/2010 ix. Rohitasava Chand Rohitasava Chand Vs. CIT 306 ITR 242 (Del.) Vs. CIT 306 ITR 242 (Del.) x. CIT Vs. Saroj Kumar Poddar 279 ITR 573 (Cal.) CIT Vs. Saroj Kumar Poddar 279 ITR 573 (Cal.) CIT Vs. Saroj Kumar Poddar 279 ITR 573 (Cal.) xi. CIT Vs. Shiv Raj Gupta 372 ITR 337 (Del.) CIT Vs. Shiv Raj Gupta 372 ITR 337 (Del.) CIT Vs. Shiv Raj Gupta 372 ITR 337 (Del.) 12. The jurisdictional ITAT in the case of similar facts, held 12. The jurisdictional ITAT in the case of similar facts, held 12. The jurisdictional ITAT in the case of similar facts, held in the case of Hami Aspi Balsara Vs ACIT 126 ITD 100, in the case of Hami Aspi Balsara Vs ACIT 126 ITD 100, in the case of Hami Aspi Balsara Vs ACIT 126 ITD 100, held held as as under"Admittedl under"Admittedly, y, in in the the share share purchase purchase agreement no consideration was assigned towards non agreement no consideration was assigned towards non agreement no consideration was assigned towards non- compete fees and the parties had entered into the share compete fees and the parties had entered into the share compete fees and the parties had entered into the share purchase agreement after mutually settling the price of purchase agreement after mutually settling the price of purchase agreement after mutually settling the price of shares. This clause clearly shows that in the purchase shares. This clause clearly shows that in the purchase shares. This clause clearly shows that in the purchase price of sha price of shares, consideration towards Restraint Clause res, consideration towards Restraint Clause was embedded. Admittedly, assessee on her own was not was embedded. Admittedly, assessee on her own was not was embedded. Admittedly, assessee on her own was not carrying on business and it was the company in which she carrying on business and it was the company in which she carrying on business and it was the company in which she was shareholder was carrying on the business, ... Thus, was shareholder was carrying on the business, ... Thus, was shareholder was carrying on the business, ... Thus, section 28 would be attracted where the asses section 28 would be attracted where the asses section 28 would be attracted where the assessee was carrying on business and not where assessee only had carrying on business and not where assessee only had carrying on business and not where assessee only had right to carry on business in the form ofcapital asset." right to carry on business in the form ofcapital asset." right to carry on business in the form ofcapital asset."
In view of the above facts, pronouncement of Hon'ble 13. In view of the above facts, pronouncement of Hon'ble 13. In view of the above facts, pronouncement of Hon'ble High Court and jurisdictional ITAT, we are of the High Court and jurisdictional ITAT, we are of the High Court and jurisdictional ITAT, we are of the considered considered view view that tha the assessee ee had had rightly rightly Sangeeta Dilip Patil 6 declaredincome under the head Capital gains. No portion of income under the head Capital gains. No portion of income under the head Capital gains. No portion of considerations can considerations can be attributated for the purposes of sec. for the purposes of sec. 28 hence we confirm the findings of ld. 28 hence we confirm the findings of ld. 28 hence we confirm the findings of ld. CIT(A) and dismissed the grounds of appeal raised by the Revenue. dismissed the grounds of appeal raised by the Revenue. dismissed the grounds of appeal raised by the Revenue.” 6.1 As identica As identical issue of the sale of the shares of the same l issue of the sale of the shares of the same company is involved in the case of the assessee, therefore, company is involved in the case of the assessee, therefore, company is involved in the case of the assessee, therefore, respectfully following the finding of the Tribunal (supra) the respectfully following the finding of the Tribunal (supra) the respectfully following the finding of the Tribunal (supra) the grounds of appeal of the Revenue are dismissed. grounds of appeal of the Revenue are dismissed.” 3.1 Since, the finding of the Ld. CIT( Since, the finding of the Ld. CIT(A) on the issue A) on the issue-in-dispute is in confirmation with the order of the Tribunal (supra) and therefore in confirmation with the order of the Tribunal (supra) and therefore in confirmation with the order of the Tribunal (supra) and therefore we do not find any error in the same and accordingly we uphold the we do not find any error in the same and accordingly we uph we do not find any error in the same and accordingly we uph same. The grounds of appeal of the Revenue are accordingly same. The grounds of appeal of the Revenue are accordingly same. The grounds of appeal of the Revenue are accordingly dismissed.