MOHAN RAJASHEKAR,BANGALORE vs. ITO WARD 5(1)(1), BANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE – PRESIDENT AND SHRI KESHAV DUBEY, JUDICIAL MEMBER ITA No. 176/Bang/2026 Assessment Year : 2018-19

Shri Mohan Rajashekar, B2012, Forest Breeze Apartments, The Income Tax Officer, 165/6, 3rd Main Road, Ward – 5(1)(1), Vs. Krishnaraju Layout, Bengaluru. Bengaluru – 560 076. PAN: ADJPM3490Q APPELLANT RESPONDENT : Sri Bharadwaj Sheshadri – Advocate Assessee by & Sri K. Sheshadri - CA : Sri Subramanian S– JCIT DR Revenue by

Date of Hearing : 06-05-2026 Date of Pronouncement : 21-07-2026

ORDER PER PRASHANT MAHARISHI, VICE – PRESIDENT

ITA No.176/Bang/2026 Page 2 of 8 b) The learned Commissioner of Income Tax (Appeals) erred in confirming the Assessing Officer’s action of denying deduction of the success fee of ₹1,47,50,000 and treating it as brokerage commission. c) The learned CIT(A) failed to appreciate that the Assessing Officer did not afford the assessee an opportunity to cross-examine Varroc Polymers and disregarded the evidence relating to that party. d) The learned Commissioner of Income Tax (Appeals) ought to have noted that the statement of Varroc Polymers recorded under section 133(6) does not support the conclusion drawn against the assessee.

ITA No.176/Bang/2026 Page 3 of 8 6. In response, the assessee submitted a copy of the engagement letter issued by Singhi Advisors Private Limited and the confirmation received from that consultant. The confirmation stated that Singhi Advisors Private Limited had been appointed by Shri Mohan Rajashekar to provide advisory services in connection with the divestment of his shareholding in Team Concepts Private Limited, on the terms set out in the engagement letter dated 19 August 2016. Upon successful completion of the transaction, the consultant charged and collected a success fee of ₹1,47,50,000, which it stated was included in its income for services rendered in relation to the sale of 13,770 equity shares of Team Concepts Private Limited by Shri Mohan Rajashekar to Varroc Polymers Private Limited for ₹25,76,43,000. 7. The Assessing Officer observed that. a. Singhi Advisors Private Limited had not stated in any document submitted before him that it had introduced Varroc Polymers Private Limited as the buyer of the shares of Team Concepts Private Limited. b. Varroc Polymers Private Limited clearly denied the involvement of any middleman or agent in the purchase of shares of Team Concepts Private Limited. c. Varroc Polymers Private Limited purchased 90% of the shares of Team Concepts Private Limited, including 13,770 shares from the assessee, Shri Mohan Rajashekar, and 30,770 shares from Shri Mahendra Jolapara. The Assessing Officer held that, if the buyer had acquired the shares through an agent or intermediary, the buyer would have disclosed that fact. d. The buyer submitted its financial records, and no expenditure relating to brokerage or commission was found recorded in its accounts. Further, the buyer’s income-tax return for the relevant year had been scrutinised without any adverse observation on this issue. e. The Assessing Officer also noted that the agreement relied upon was between Singhi Advisors Private Limited and Team Concepts Private Limited, and not between Singhi Advisors Private Limited and the assessee in his individual capacity. Therefore, according to the Assessing Officer, the material on record did not establish that the agreement was between the assessee and the alleged agent for the assessee’s personal share sale.

ITA No.176/Bang/2026 Page 4 of 8 f. The Assessing Officer further observed that the engagement was between Singhi Advisors Private Limited and Team Concepts Private Limited, and that the offer letter was addressed to Shri Mohan Rajashekar in his capacity as Chairman and Director of Team Concepts Private Limited. He therefore held that the arrangement had no nexus with the sale of shares by Shri Mohan Rajashekar in his individual capacity. g. If Singhi Advisors Private Limited rendered services under that agreement, the expenditure, according to the Assessing Officer, belonged to Team Concepts Private Limited and not to the assessee. Referring to the scope of work in the engagement letter, the Assessing Officer concluded that Singhi Advisors Private Limited had not brought the buyer for the sale of Shri Mohan Rajashekar’s shares. 8. Accordingly, he disallowed ₹1,47,50,000 on account of the commission paid by the assessee. The assessment order under section 143(3) was passed on 7 April 2021, determining the assessee’s total income at ₹21,78,53,090. 9. Aggrieved, the assessee filed an appeal before the learned CIT(A). Before the learned CIT(A), the assessee reiterated the submissions made before the lower authority and contended that the addition deserved to be deleted. The learned CIT(A) held that the assessee had not filed any new material before him and that all evidence filed before the Assessing Officer had already been considered. He further observed that Singhi Advisors Private Limited had not produced its ledger account statement either before the Assessing Officer or before him to confirm receipt of the amount from the assessee. Although the assessee had filed a confirmation letter from Singhi Advisors Private Limited stating that it had received commission, no copy of its income-tax return was filed. The learned CIT(A) therefore confirmed the action of the Assessing Officer. 10. Aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. The learned authorised representative filed written submissions running into six pages and a paper book containing 181 pages. He submitted that Singhi Advisors Private Limited had rendered advisory services in relation to the sale of the assessee’s shares in Team Concepts Private Limited. Since the shares sold belonged to the assessee, the services were rendered to him, and the engagement letter covered the same transaction. He further submitted that the Assessing Officer’s inquiry regarding the alleged intermediary was misconceived,

ITA No.176/Bang/2026 Page 5 of 8 as there was no relationship between Varroc Polymers Private Limited and Singhi Advisors Private Limited According to him, the engagement letter was issued for the sale of shares of Team Concepts Private Limited held by the assessee. He also submitted that the learned CIT(A)’s adverse finding was unjustified because the assessee had filed the consultant’s confirmation, and email correspondence involving Varroc Polymers Private Limited was also placed before the Assessing Officer to show the consultant’s participation. He contended that the notice issued under section 133(6) to Varroc Polymers Private Limited and the information received in response could not be relied upon adversely without granting the assessee an opportunity to cross-examine that party. Therefore, the authorities below ought not to have denied the deduction. 11. The learned authorised representative further submitted that the other shareholder, Shri Mahendra Jolapara, had been allowed an identical deduction by the Assessing Officer in his case under the order dated 24 February 2021. 12. The learned Departmental Representative supported the orders of the lower authorities. He submitted that, while the assessee sold shares to Varroc Polymers Private Limited, the engagement with Singhi Advisors Private Limited was between that consultant and Team Concepts Private Limited. Accordingly, the expenditure had no nexus with the assessee’s sale of shares to Varroc Polymers Private Limited. He therefore contended that the orders of the lower authorities called for no interference. 13. We have carefully considered the rival submissions and perused the material on record. The assessee sold 13,770 shares of Team Concepts Private Limited to Varroc Polymers Private Limited for ₹25,76,43,000. It is not in dispute that Varroc Polymers Private Limited purchased a substantial shareholding [ 90 %]in Team Concepts Private Limited, including the shares sold by the assessee. From the sale consideration, the assessee claimed selling expenses, including commission of ₹1,47,50,000 paid to Singhi Advisors Private Limited. The allowability of this commission is the issue in dispute in the present appeal. The assessee relies on the engagement letter, invoices, confirmation, and related correspondence to contend that Singhi Advisors Private Limited rendered advisory services in connection with the divestment transaction. 14. Team Concepts Private Limited was incorporated on 23 February 2000 with an authorised share capital comprising 2,000 equity shares of ₹100 each. Shri

ITA No.176/Bang/2026 Page 6 of 8 Mohan Rajashekar and Shri Mahendra Jolapara each held 17,000 shares and were also directors of the company. They executed an engagement letter dated 19 August 2016 with Singhi Advisors Private Limited, appointing it as financial adviser in connection witha possible strategic partnership, joint venture, or investment in the business ofTeam Concepts Private Limited. The scope of work included preparing the information memorandum, identifying and coordinating with potential investors or strategic partners, assisting in commercial negotiations on broad transaction parameters such as valuation, size and nature of investment, and terms of association, working with the company’s legal counsel to prepare definitive agreements, representing the company during the assignment, coordinating with independent third-party firms for due diligence and valuation services, and achieving deal closure at appropriate value and terms. Under the engagement letter, an advance payment of ₹5,00,000 and a monthly retainer fee of ₹2,00,000 were payable. A success fee of 3% of the transaction value was also agreed, subject to a minimum fee of ₹1,00,00,000. It is not in dispute that the agreement was entered into by the assessee in his capacity as Chairman and Director of Team Concepts Private Limited. On 29 November 2017, Singhi Advisors Private Limited raised a pro forma invoice on the assessee for success fee of ₹1,25,00,000, which, after service tax, amounted to ₹1,47,50,000. The invoice was raised on the assessee and not on the company, and the assessee paid the amount by cheque from his personal bank account on 5 December 2017. On 6 March 2021, Singhi Advisors Private Limited issued a certificate stating that it had been appointed by Shri Mohan Rajashekar as adviser for identifying strategic partners and providing advisory services for divestment of his shareholding in Team Concepts Private Limited, on the terms and conditions set out in the engagement letter dated 19 August 2016 and as mutually agreed. The certificate further confirmed that, upon successful completion of the divestment of the assessee’s shares in Team Concepts Private Limited, Singhi Advisors Private Limited charged and collected from him a success fee of ₹1,47,50,000, inclusive of taxes, which was included in its income and offered to tax. It also confirmed that the success fee related to advisory services for the successful sale of 13,770 equity shares of Team Concepts Private Limited held by the assessee to Varroc Polymers Private Limited for consideration of ₹25,76,40,000 in November 2017.The assessee also relied on

ITA No.176/Bang/2026 Page 7 of 8 newspaper reports and email correspondence involving Varroc Polymers Private Limited to demonstrate the participation of Singhi Advisors Private Limited in the transaction. The confirmation received from Varroc Polymers Private Limited merely stated that no person was engaged as a middleman or agent. However, Singhi Advisors Private Limited was engaged as a consultant and not as an agent or broker. 15. The substance of the engagement letter was the divestment of shares of Team Concepts Private Limited. The assessee was one of the two shareholders who sold their shares to Varroc Polymers Private Limited.The success fee was borne by the assessee in proportion to his share of the total fee payable to Singhi Advisors Private Limited. In substance, Singhi Advisors Private Limited rendered advisory services to the assessee by facilitating the sale of his shares in Team Concepts Private Limited to Varroc Polymers Private Limited, a third-party buyer. The transaction was, in effect, a sale of shares by the assessee and the other shareholder to Varroc Polymers Private Limited, with the shareholding in Team Concepts Private Limited being the subject matter of the transfer. Accordingly, the services rendered by Singhi Advisors Private Limited had a direct nexus with the assessee’s sale of shares to Varroc Polymers Private Limited. We therefore find no basis for the Revenue authorities to hold that the success fee paid by the assessee to Singhi Advisors Private Limited was bogus or that it was not allowable as a deduction while computing long-term capital gains arising from the sale of shares of Team Concepts Private Limited to Varroc Polymers Private Limited. 16. Section 48(i) of the Income-tax Act provides that capital gains shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of a capital asset, the expenditure incurred wholly and exclusively in connection with such transfer. In the present case, the assessee incurred the expenditure wholly and exclusively in connection with the sale of shares of Team Concepts Private Limited to Varroc Polymers Private Limited. Accordingly, the assessee is entitled to deduction of the said expenditure while computing capital gains under section 48 of the Income-tax Act. 17. In the result, grounds nos. 1 to 4 of the assessee’s appeal are allowed. The Assessing Officer is directed to grant the assessee deduction of the success fee of ₹1,47,50,000 paid to Singhi Advisors Private Limited while computing capital

ITA No.176/Bang/2026 Page 8 of 8 gains arising from the sale of shares of Team Concepts Private Limited to Varroc Polymers Private Limited. 18. Accordingly, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 21st July, 2026.

Sd/- Sd/- (KESHAV DUBEY) (PRASHANT MAHARISHI) JUDICIAL MEMBER VICE-PRESIDENT Bangalore, Dated, the 21st July, 2026. *TNTS* Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. CIT(A) By order

Assistant Registrar, ITAT, Bangalore