N.DHEENADHAYAALAN,CHENNAI vs. ITO NON CORPORATE WARD 16(5), CHENNAI
No AI summary yet for this case.
Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI V. DURGA RAO, HON’BLE & SHRI G. MANJUNATHA, HON’BLE
आदेश / O R D E R PER G. MANJUNATHA, AM: This appeal filed by the assessee is directed against the order of the
Commissioner of Income Tax (Appeals)-4, Chennai, dated 18.09.2017 and
pertains to assessment year 2012-13.
The assessee has raised the following grounds of appeal:
1 The Assessment Order of the Income Tax Officer Non Corporate Ward 16(5) and appellate order of CIT (Appeal-4) Chennai is contrary to the facts and circumstances of the case hence bad in law. 2. The CIT Appeal has not considered the agreement of sale of shares and adopted sale consideration of equity shares Rs.4,00,40,384/- instead of Rs.3,03,74,383/- actually received by the assessee.
ITA No.928/Chny/2018 :: 2 ::
The Inflated Index Value Rs.1,18,56,770/- as calculated by the Assessing Officer himself was not considered while completing the Assessment but taken Rs.1,00,51,440/- as wrongly calculated by the Assessee. 4. Assessing Officer has disallowed 50% of the renovation expenses which was not contested by the Assessee but the CIT Appeal has only allowed Rs.4,50,000/- as renovation Expenses and enhance the Assessed Income, which is against the law. 5. The CIT Appeal wrongly enhance the income by Rs.36,74,206/-. 6. The Assessee craves the leave adducing additional grounds of appeal at the time of hearing appeal. 3. The brief facts of the case are that during the Financial Year relevant
to the AY 2012-13, the assessee had entered into a Memorandum of
Understanding (in short “MoU") with M/s.Tecpro Systems Ltd., for transfer
of shares in M/s.Ambica Projects (India) Pvt. Ltd., for a consideration of
Rs.8,28,47,887/-. The said MoU has been acted upon by entering into
Share Purchase Agreement between the assessee and M/s.Tecpro Systems
Ltd., on 19.08.2011 and agreed to transfer shares of M/s.Ambica Projects
(India) Pvt. Ltd., for a consideration of Rs.8,28,47,887/-. As per Clause-
2.3 of said Share Purchase Agreement, it was further stated that
shareholders of M/s.Ambica Projects (India) Pvt. Ltd., acknowledged the
receipt of a sum of Rs.6,28,47,887/- and shared in the ratio of their
shareholding. The assessee has computed capital gains from sale of shares
by adopting 48.33% share of consideration of Rs.6,28,47,887/- which
works out to Rs.3,03,74,383/-. The assessee, while computing capital gains
has claimed deduction towards brokerage paid amounting to
Rs.18,85,437/-. The assessee had also claimed indexed cost of acquisition
at Rs.1,00,51,440/- and arrived at long term capital gains of
Rs.1,12,35,820/- after claiming exemption u/s.54F of the Act, for
ITA No.928/Chny/2018 :: 3 ::
Rs.1,55,98,415/-. The AO, however, was not convinced with the details
filed by the assessee for computation of capital gains and thus, on the basis
of evidences filed by the assessee has re-computed assessee’s share of
consideration for transfer of shares at Rs.4,00,40,384/- by adopting
Rs.8,28,47,887/- as consideration for transfer of 100% shares of
M/s.Ambica Projects (India) Pvt. Ltd. The AO while computing capital gains
has allowed deduction towards brokerage expenses of Rs.18,85,437/- to
the share of assessee of Rs.9,11,231/- being 48.33% of total brokerage
paid for transfer of shares. The AO had also computed indexed cost of
acquisition at Rs.1,18,56,770/-, however, restricted the claim of cost of
acquisition at Rs.1,00,51,414/- as claimed by the assessee. Thus, the AO
has arrived at long term capital gains of Rs.2,90,77,713/- and then, allowed
deduction u/s.54F of the Act, at Rs.1,13,27,719/- and determined taxable
long term capital gains at Rs.1,77,49,994/-.
Being aggrieved by the assessment order, the assessee preferred an
appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee has filed
all details, including MoU between parties followed by Share Purchase
Agreement and other relevant details, including computation of indexed
cost of acquisition, expenses of transfer being brokerage paid for transfer
of shares and amounts spent for purchase of another residential property
to claim deduction u/s.54F of the Act. The Ld.CIT(A) after considering
relevant submissions of the assessee and also taken note of various facts
upheld, full value of consideration adopted by the AO at Rs.4,00,40,384/-
ITA No.928/Chny/2018 :: 4 ::
as against assessee’s claim of Rs.3,03,74,383/- by holding that the
assessee could not adduce any evidences for non-consideration of balance
Rs.2 Crs. consideration withheld by the purchaser for non-fulfillment of
certain conditions of Share Purchase Agreement. The Ld.CIT(A) had also
restricted indexed cost of acquisition as allowed by the AO at
Rs.1,00,51,440/-, although, he had admitted that the correct amount of
indexed cost of acquisition works out to Rs.1,18,56,770/-. The Ld.CIT(A)
had also upheld deduction u/s.54F of the Act, as allowed by the AO on the
ground that the assessee could not adduce any evidence for balance
amount spent for purchase of property. However, the Ld.CIT(A) has
enhanced the assessment by disallowing deduction claimed u/s.54F of the
Act, and also by disallowing total expenditure incurred for brokerage
expenses on the ground that the assessee could not file any evidences to
prove payment of brokerage amounting to Rs.18,85,437/-. Being
aggrieved by the assessment order, the assessee preferred an appeal
before the Ld.CIT(A).
The Ld.Counsel for the assessee submitted that the Ld.CIT(A) erred
in upholding the action of the AO in adopting sale consideration transfer of
equity shares at Rs.4,00,40,384/- instead of Rs.3,03,74,383/- actually
received by the assessee. The Ld.Counsel for the assessee referring to
recitals of Share Purchase Agreement submitted that the parties have
reduced in writing revised consideration for transfer of shares and as per
which, the agreed consideration for transfer of shares is Rs.8,28,47,887/-.
ITA No.928/Chny/2018 :: 5 ::
Out of which, a sum of Rs.6,28,47,887/- has been paid to the sellers. The
balance amount of Rs.2 Crs. has been withheld for fulfillment of certain
conditions and agreed that in case, the assessee and other sellers does not
satisfy the conditions, the balance amount of Rs.2 Crs. shall not be paid to
the sellers. The Ld.Counsel for the assessee further referring to letter from
M/s.Tecpro Systems Ltd., dated 14.05.2012 submitted that the purchasers
have confirmed that the final sale consideration for transfer of shares of
M/s.Ambica Projects (India) Pvt. Ltd., has been agreed at Rs.6,28,47,887/-
. The AO and the Ld.CIT(A) ignoring the above facts simply computed
capital gains on the basis of conditional price agreed by the parties and
computed long term capital gains. The Ld.Counsel for the assessee further
referring to indexed cost of acquisition submitted that the AO and the
Ld.CIT(A) accepted the fact that correct amount of indexed cost of
acquisition works out to Rs.1,18,56,770/-. However, allowed a sum of
Rs.1,00,51,440/- only on the ground that the assessee has claimed the
amount ignoring the fact that while computing capital gains, the AO should
allow correct amount of cost of acquisition. The Ld.Counsel for the assessee
further referring to enhancement of assessment by the Ld.CIT(A) submitted
that although, the AO has allowed brokerage expenses of Rs.9,11,231/-,
but the Ld.CIT(A) enhanced the assessment and disallowed entire amount
of brokerage expenses of Rs.18,85,437/- without appreciating the fact that
the assessee has filed necessary evidences for payment of brokerage.
ITA No.928/Chny/2018 :: 6 ::
The Ld.DR, on the other hand, supporting the order of the Ld.CIT(A),
submitted that the assessee could not adduce any evidences except letter
from the buyers that the consideration has been restricted to
Rs.6,28,47,887/-. Further, when the assessee has agreed to transfer the
shares for consideration Rs.8,28,47,887/-, how it has been reduced to 6.28
Crs. has not been explained, except stating that parties have agreed to
reduce the sale price for non-fulfillment of certain conditions. Therefore,
the AO has rightly adopted consideration as agreed between the parties
and computed capital gains after allowing indexed cost of acquisition and
expenses of transfer and their orders should be upheld.
We have heard both the parties, perused the materials available on
record and gone through orders of the authorities below. There is no
dispute with regard to the fact that as per MoU between the assessee and
M/s.Tecpro Systems Ltd., dated 30.06.2011, the parties have agreed to
transfer 100% equity share capital of M/s.Ambica Projects (India) Pvt. Ltd.
for a consideration of Rs.10,28,47,887/-. It was also not in dispute as per
Share Purchase Agreement that said consideration has been reduced in
writing, to an amount of Rs.8,28,47,887/- for the reasons stated in Share
Purchase Agreement vide Clause-2.1(a). It was also not in dispute as per
Share Purchase Agreement Clause-2.3 that the purchaser has paid an
amount of Rs.6,28,47,887/- only. Further, as per Clause-2.2 of Share
Purchase Agreement, a sum of Rs.2 Crs. will be payable by the Purchaser
to sellers as variable consideration on fulfilling certain conditions. It was
ITA No.928/Chny/2018 :: 7 ::
the arguments of the assessee before the AO and the Ld.CIT(A) that
because of non-fulfillment of conditions prescribed in Share Purchase
Agreement, the final price for transfer of shares has been restricted to
Rs.6,28,47,887/- only. To this effect, the assessee has filed a letter from
M/s.Tecpro Systems Ltd., dated 14.05.2012, where it was confirmed that
final sale consideration stands reduced to Rs.6,28,47,887/- after reducing
the conditional variable payment of Rs.2 Crs. for non-fulfillment of certain
conditions. From the above, it appears that the parties have finally agreed
to reduce the price for transfer of equity shares of M/s.Ambica Projects
(India) Pvt. Ltd., to Rs.6,28,47,887/- only. But, fact remains that whether
letter from the buyer M/s.Tecpro Systems Ltd., was made available to the
AO or not, is not forthcoming from the records. Therefore, we are of the
considered view that the matter needs to be re-examined by the AO to
ascertain correct amount of sale consideration and thus, we set aside the
issue to the file of the AO and direct the AO to re-consider the issue of
computation of capital gains from sale of shares after ascertaining correct
amount of consideration from the buyer and if necessary, the AO may
obtain all information by exercising his powers conferred u/s.131 & 133(6)
of the Act. As regards deduction towards indexed cost of acquisition, we
find that the AO as well as the Ld.CIT(A) did not dispute the fact that the
correct amount of indexed cost of acquisition works out to Rs.1,18,56,770/-
. However, restricted deduction to the extent of amount claimed by the
assessee at Rs.1,00,51,440/-. We find that the AO and the Ld.CIT(A)
ITA No.928/Chny/2018 :: 8 ::
grossly erred in not allowing correct amount of indexed cost of acquisition,
even though, both admitted the fact that what was claimed by the assessee
is not correct amount of indexed cost of acquisition. In our considered
view, the AO while computing capital gains should allow deduction towards
correct amount of cost of acquisition, even in a case, where the assessee
has made an incorrect claim of cost of acquisition and thus, we direct the
AO to allow correct amount of cost of acquisition at Rs.1,18,56,770/-
instead of amount claimed by the assessee at Rs.1,00,51,440/-. As regards
deduction towards expenses of transfer being brokerage, although, the AO
has allowed assessee’s share of expenses of Rs.9,11,231/-, but the
Ld.CIT(A) enhanced the assessment and disallowed 100% of expenses at
Rs.18,85,437/-, even though, the assessee has submitted necessary
evidences to prove the claim of expenses of transfer and thus, we direct
the AO to allow brokerage expenses incurred by the assessee in connection
with share transfer while computing long term capital gains.
In the result, appeal filed by the assessee is allowed for statistical
purposes.
Order pronounced on the 15th day of February, 2023, in Chennai.
Sd/- Sd/- (वी. दुगा� राव) (जी. मंजूनाथा) (G. MANJUNATHA) (V. DURGA RAO) लेखा सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER चे�ई/Chennai, �दनांक/Dated: 15th February, 2023. TLN
ITA No.928/Chny/2018 :: 9 :: आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 4. आयकर आयु�/CIT 2. ��यथ�/Respondent 5. िवभागीय �ितिनिध/DR 3. आयकर आयु� (अपील)/CIT(A) 6. गाड� फाईल/GF
