COMMISSIONER OF INCOME TAX -5 vs. ANUSANDHAN INVESTMENTS P. LTD.

ITXA6781.10

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 6781 OF 2010 Commissioner of Income Tax – 5, ] 5th Floor, Room No.559, Aayakar Bhavan, ] M.K. Road, Mumbai – 400 020 ]... Appellant Vs M/s. Anusandhan Investments Pvt. Ltd. ] 51, 3rd Floor, Tardeo A C Market, ] Tardeo Road, Tardeo, Mumbai – 400 034. ]... Respondent Ms. S.V. Bharucha with Ms. Padma Divakar for the Appellant. Mr. B.D. Damodar i/b Kanga & Co. for the Respondents. CORAM : S.J. VAZIFDAR, & M.S. SANKLECHA, JJ. WEDNESDAY, 20TH JUNE, 2012 ORAL JUDGMENT. : [Per S.J. Vazifdar, J.] 1. This is an appeal under section 260-A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal (ITAT). The appellant contends that the following questions of law arise in this appeal : SRP                                                                                                                                                           1/6 CNR No : HCBM020245982010 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:55:35

ITXA6781.10 (A) Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal is justified in law in holding that transfer of shares by the assessee took place on 22-12-1992 and not on 3-1-1992 thereby directing to delete the addition made by the AO? (B) Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal is correct in law in holding that Circulars issued by the CBDT to the extent of giving relief to the assessee are binding but where they impose an additional burden not contemplated in the Act they are not binding? (C) Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal is correct in law in holding that the assessee is SRP                                                                                                                                                           2/6 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:55:35

ITXA6781.10 entitled for deduction u/s 47(v) of the Act; without proper appreciation of the evidence brought out and discussed in the assessment order? 2. It is not necessary to decide question (B) in view of our finding in favour of the respondent and against the department in respect of the finding on question (A). As we have answered question (A) sought to be raised, against the appellant, the answer to question (C) must also be against the appellant. 3. The main question here is whether the transfer of the shares by the assessee took place on 22nd December, 1992 as contended by the appellant, or on 3rd January, 1992 as contended by the respondent/ assessee. 4. The respondent held 4,07,320 shares of a company by the name of M/s. Amal Rasayan Limited. An agreement dated 3rd January, 1992 was entered into between the respondent and another company M/s. Ameer Trading Corporation Limited (ATCL). The appellant contends SRP                                                                                                                                                           3/6 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:55:35

ITXA6781.10 that the shares stood transferred to ATCL on the date of the said agreement dated 3rd January, 1992. The submission is not well founded. The agreement is an agreement to sell and not an agreement of sale as is evident from the relevant terms of the agreement. Some of the terms of the agreement read as under :- “(1) the Vendor agrees to sell and the purchaser agrees to purchase subject to the purchaser receiving the permission of the Central Government under section 372 and such other applicable provisions of the Companies Act, 1956, 4,07,320 shares of Rs.60/- per share. (2) the purchaser has this day paid to the vendor, the sum of Rs.1200/- as and by way of earnest money and balance of purchase money amounting to Rs.2,44,38,000/- shall be paid at the time of completion of the purchase. (3) The purchaser agrees to obtain the permission

of the Central Government and pay the balance money to the vendor and complete the transactions within three months from the date hereof or such other extended period as may be mutually agreed by the parties. (4) The vendor agreed to deliver the share certificates for 4,07,320 shares of Rs.10/- each of Amal Rasayan Limited along with duly signed transfer deed to the purchaser upon the purchaser making payment of the balance amount mentioned in Clause (2) above. (5) The parties hereby agree that this agreement shall be null and void if the purchaser fails to obtain the permission of the Central Government within the SRP                                                                                                                                                           4/6 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:55:35

ITXA6781.10 time stipulated in Clause (3) above and the earnest money paid as per Clause (2) above shall be forfeited by the Vendor.” [emphasis supplied] 5. The above clauses indicate clearly that there were several conditions to be performed by the parties as a condition precedent to the shares vesting in the purchaser. The agreement was subject to ATCL receiving permission from the Central Government under the provisions of the Companies Act, including section 372 thereof. Had the permission been refused, the agreement could not have gone through. The agreement on its terms was to be null and void if the purchaser failed to obtain permission from the Central Government. Only earnest money was paid under the agreement. The clauses expressly state that the balance is to be paid “at the time of completion of the purchase”, indicating clearly, therefore, that the sale had not been completed. Moreover, the share certificates were to be delivered with duly signed transfer deeds only upon the purchaser making full payment. In the circumstances it is clear that the agreement dated 3rd January, 1992 was an agreement to sell and not an agreement of sale. SRP                                                                                                                                                           5/6 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:55:35

ITXA6781.10 6. Admittedly permission of the Central Government under section 372 of the Companies Act was granted by the Central Government only on 9th July, 1992. It was only thereafter on 22nd December, 1992 that the respondent effected a transfer of the shares to ATCL and received the balance consideration in respect thereof. The respondent declared the capital gain in respect of the transaction in the assessment year 1993-94. 7. ATCL i.e. the purchaser became a holding company of the respondent on 20th November, 1992. Thus, as on the date of the transfer of the shares viz. 22nd December, 1992, ATCL was a subsidiary of the respondent. The respondent was, therefore, entitled to the benefit of the provisions of section 47 of the Act. 8. The appeal is, therefore, dismissed. M.S. SANKLECHA, J. S.J. VAZIFDAR, J. SRP                                                                                                                                                           6/6 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:55:35 Powered by TCPDF (www.tcpdf.org)