GIC HOUSING FINANCE LTD,MUMBAI vs. ADDL CIT RG 2(1), MUMBAI

O R D E R

PER RAMIT KOCHAR, Accountant Member:

2. The grounds of appeal

raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the tribunal”) read as under:- “ 1) On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeal) -4, Mumbai has erred in confirming the additions made by the Assessing Officer on account of expenditure amounting to Rs. 43,47,723/- incurred in connection with the sale of shares of M/s LIC Mutual Fund Asset Management Co. Limited and M/s LIC Mutual Fund Trustee Co. Limited, without appreciating the facts of the case and the submissions made during the course of the assessment /remand/appeal proceedings. 2) On the facts and circumstances of the case and in law, the learned Commissioner of Income -tax - (Appeal) -4, Mumbai erred in not giving direction to the Assessing Officer to set off and adjust the unabsorbed carry forward long term capital loss for assessment year 2009-10 against the long term capital gains earned on the sale of shares of LIC Asset Management Company Ltd., and LIC Mutual Fund Trustee Company Limited. 3) The appellant craves leave to add to, modify or delete the above grounds of appeal each of which are independent of the other.”

3. The brief facts of the case are that the assessee derives income from housing finance business. The assessee is a listed company having its shares listed on Stock Exchanges. During the course of assessment proceedings conducted by the AO u/s. 143(3) r.w.s. 143(2) of the 1961 Act, it was observed by the AO that the assessee has shown long term capital gains of Rs. 85,79,09,196/- on account of sale of 1120 shares of LIC Mutual Fund Asset Management Company Ltd. of face value of Rs. 10,000/- each and on sale of 300 shares of LIC Mutual Fund Trustee Co. Private Ltd. of face value of Rs. 10 each ( for short such shareholding of the assessee in these two entities collectively referred to as “LICMF-AMC”) , held by the assessee in said two entities . The AO observed while computing long term capital gains on sale of LICMF-AMC shares, the assessee had claimed legal cost for transfer of these afore-stated shares of LICMF-AMC to the tune of Rs 96,73,108/- which was claimed as deduction while 2 computing long term capital gains on sale of shares of LICMF-AMC held by assessee. The assessee on being asked by the AO submitted that it shared legal cost, professional advisors cost, financial advisors costs with respect to transfer of these LICMF-AMC shares with other parties to the sale transaction of the shares held by them in LICMF- AMC . The AO observed that total legal cost, professional advisors, financial advisors costs incurred in connection with the transaction of sale was Rs. 3,31,79,629/- and the share of the assessee towards these costs came to Rs. 96,73,108/- which was paid by the assessee. The details of these expenses was detailed by the assessee which is reproduced hereunder:- i. Legal Consultant (Amarchand Mangaldas Rs.1,91,49,387/- Suresh A Shroff & Co.) ii. Consultant and advisor (Price Waterhouse Rs.136,42,460/- Coopers P Ltd. iii. Scrutinizer to the postal ballot obtained Rs.282,996/- From unitholders (Rathi & Associates) iv. Valuation AMC (Chaturvedi & Co.) Rs.46,878/- v. Valuation Trustee Co. (Shah Gupta & Co.) Rs 57,908/-___ Rs.331,79,629/- The AO observed that as per Provision of Section 48 of the 1961 Act , only the expenditure incurred wholly and exclusively in connection with transfer of capital assets is allowed as deduction while computing capital gains. The AO observed that in the instant case , the expenses incurred of Rs. 96,73,108/- were in the form of fee paid towards legal consultancy, professional advisors and financial advisors costs which are not incurred wholly and exclusively in connection with transfer of shares of LICMF-AMC. The AO disallowed the claim of expenses of Rs. 96,73,108/- as the same cannot be allowed as deduction u/s 48 of the 1961 Act being not incurred wholly and exclusively in connection with transfer of shares of LICMF-AMC, which was consequently added by the AO to the income of assessee , vide assessment order dated 22.10.2013 passed by the AO u/s 143(3) of the 1961 Act.

4. Aggrieved by the assessment order dated 22.10.2013 passed by the AO u/s 143(3) of the 1961 Act , the assessee filed first appeal with Ld. CIT(A) . The assessee made detailed submissions before Ld. CIT(A). The assessee submitted additional evidences before learned CIT(A) vide submissions dated 30.08.2014(pb/page 235) and prayed for its admission vide Rule 46A(1)(d) of Income-tax Rules, 1962 as these additional evidences in the opinion of the assessee goes to the root of the matter. The Ld. CIT(A) admitted these additional evidences and called for remand report from AO . The AO submitted remand report dated 24.07.2015 and relevant extracts thereof are reproduced as under:-

“14.1. Legal Consultant (Amarchand Mangalds Suresh A Shroff & CO.)- Rs. 1,91,49,387/- a. The assessee has submitted letter of the party Amarchand Mangaldas dt. 06.08.2008 addressed to LIC AMC. The same is a proposed mandate of the firm Amarchand Mangaldas for appointment by LiC AMC as legal counsels for the proposed investment by Nomura Holdings inc in the company. The said letter specifies the scope of work as negotiating, drafting, advising the client as well as proposed fee chargeable by them. b. The assessee has submitted letter dt 1.11.2011 of Amarchand Mangaldas addressed to LIC AMC.GIC MFC, LIC MFC and Nomura( the purchaser). The same specifies that Amarchand Mangaldas have acted as legal advisers to LIC AMC and pursuant to instructions from LIC AMC they have also acted as legal advisers for and on behalf of LiC, LICHFL and GIC HFL in relation to investment by Nomura. The said document pertains to the legal opinion given by Amarchand Mangaldas w.r.t the same. c. The invoices/bills enclosed as additional evidence are as under: S Reference Amount Remarks No 1 Letter of LIC AMC dt 14.8.2008 w.r.t. 8,42,700 Only letter dt 8.8.2008 is advance payment amount. It specifies that the mentioned. Details of letter of acceptance of mandate dt 8.8.2008. services rendered and purpose are not specified 2 Letter of LIC AMC received on 20.4.2009 21,57,300 The said letter mentions w.r.t payment vide cheque no -1876 dt that the payment is fees 17.4.2009 towards net payment(after TDS for legal counseling for deduction) of Rs 19,12,878. Project Life which as per the letter of the party is the name given to the said transaction 3 Invoice raised for Project Life dt 2.4.2009 Amt same as - As above- above 4 Invoice raised for Project Life dt 13.9.2010 78,54,827 - As above- 5 Invoice raised for Project Life dt25.1.2011 82,94,560 - As above- TOTAL 1,91,49,387 d. As specified above, the invoices raised as specified in S No 2 to 5 appear to be in order. However, for the invoice specified at S No 1 it cannot be established that the same was payment was related to the relevant transaction of long term capital gain. 14.2. Consultant and advisor (Price Waterhouse Coopers P Ltd) Rs 1,36,42,460 a. The assessee has submitted a letter dt 21.1.2008 of Price Waterhouse Coopers. The same specifies the scope of work which covers matters relating to the completion of the envisaged transaction i.e. induction of a strategic investor through either a divestment of a minority stake or issuance of fresh shares in LIC AMC. b. The invoices/bills enclosed as additional evidence are as under:

SNo Reference Amount Remarks addressed to L/C AMC regarding Cash 1 185421 1 Letter of PwC dt 31,3.2008 addressed to 11,23,600 The said letter has a general remark that the said invoices raised LIC AMC regarding invoices raised payment is towards professional fees. No details as to the purpose for which the said services were rendered is given. In the sub it is merely 3 Letter of PwC dt 24.9.2008 addressed to 6,66,235 -As Above- mentioned that the project is 'Project Cash I' L/C AMC regarding invoices raised 4 Letter of PwC dt 11.9.2009 addressed 1,17,01,727 -As Above - to L/C AMC regarding invoices 2 Letter of PwC of 2008( dt is not clear in 5,61,800 -As Above-. In the subject line the project name is raised the Xerox) mentioned as Project 5 Letter of PwC dt 24.2.2011 addressed to 1,50,898 -As Above- c L/C AMC regarding invoices raised . TOTAL 1,42,04,260 T c Thus as is clear from the above discussion, that the bills /invoices do not specify the purpose for which the said professional fee payment was made, and as such it cannot be held that the said expenditure was incurred by the assessee wholly and exclusively towards earning of income shown under the head long term capital gain by it. d. It can also be seen that the total invoices submitted amount to Rs 1,42,04,260 whereas the claim of the expense is only Rs 1,36,42,460/-. A careful examination reveals that the same is due to the exclusion of invoice amounting to Rs 5,61,800/- specified in the table above. However even the other invoices do not establish that the expenditure was incurred for the relevant transaction and the expenditure claim is therefore not allowable. 14.3. Scrutinizer to the postal ballot obtained from unit holders (Rathi & Associates) Rs 2.82.996 a. In this regard the assessee has submitted copies of bills/invoices raised by Rathi and Associates which are analyzed as under: S No Reference Amount Remarks 1 Letter of Rathi and 2,20,600 The said letter mentions that the Associates dt 6.9.2010 invoice is w.r.t professional addressed to LIC AMC charges received with respect to regarding invoices raised postal ballot process of unitholders. However the same is regarding proposed amendment of Trust deed dt 20.4.1989, alongwith deed of modification dt 25.3.1004 and 6.10.2003 entered between LIC and LIC MF Trustee Co and is unrelated to the capital gain transaction under consideration 2 Letter of Rathi and 62,396 The same are invoices raised for Associates dt 7.9.2010 reimbursement of air travel addressed to L/C AMC expenses by Rathi and regarding invoices raised Associates. It only mentions the name and amount of persons. There is no reference of the purpose for which the said air travel was made, how it is related to the transaction under consideration, details of travel etc. and it cannot be established that the same was incurred for the capital gains transaction under consideration. Without prejudice to the same no supporting bills/invoices ,tickets, boarding passes etc are enclosed to support the genuineness of the said expenditure. b. It is clear from the above discussion, the bills/invoices do not specify the purpose for which said payments were made and as such it cannot be held that the said expenditure was incurred the assessee wholly and exclusively towards earning of income shown under the head long term capital gains by it. 14.

b. The invoices/bills enclosed as additional evidence are as under: Reference Amount Remarks SNo 1 Letter of Chaturvedi & Co dt 2,758 The said letter mentions that the payment is 25.8.2009 addressed to LIC towards ascertaining the net worth for FY 2008- AMC regarding invoices raised 09 and is clearly not relatable to the transaction under consideration 2 22,060 Letter of Chaturvedi & Co dt The said letter mentions that the payment is 5.9.2009 addressed to LIC towards valuation of shares as on 31.3.2009 and AMC regarding invoices raised is clearly not relatable to the transaction under consideration which involved valuation of shares as on 31.3.2010 as stated in Para 11.4(aj above. 3 Letter of Chaturvedi & Co dt 22,060 The said letter mentions that the payment is towards valuation of shares as on 31.3.2010. 30.7.2010 addressed to LIC AMC regarding invoices raised .

14.5. Valuation Trustee co(Shah Gupta & Co.)Rs57.908 In this regard the assesse has only submitted copies of bills/invoices raised by Rathi and Associates which are analyzed as under: Reference Amount Remarks SNo 1 Letter of Shah Gupta & Co dt 28,954 The said letter mentions that the invoice is w.r.t 1.10,2009 addressed to LIC valuation analysis as on 11.7,2009and similar to AMC regarding invoices raised the discussion in Para 11.4 above is unrelatable to the transaction under consideration 2 28,954 Letter of Shah Gupta & Co dt The said letter mentions that the invoice is w.r.t 6.9.2010 addressed to UC AMC valuation analysis as on 11.7.2010. No details regarding invoices raised such as share valuation note are furnished to establish if the same was done in regular course of business or for the specific purpose of earning income under the head capital gains and as such the said document cannot be treated as proof that the expenditure was incurred wholly and exclusively for earning of income under the head capital gains 14.6. Authorised dealer(lClCl} charges for FC-TRS Documentation as per RBl requirement for AMC and Trustee Co. Rs 33,090 Assesses has furnished letter of RBl dt 24.5.2010, stating that there is no objection to the acquisition by Nomura of shares of LIC AMC from GIC HFL, UC HF and Care homes. No proof of payment has been submitted by the assessee in this regard. 14,7. Other evidence furnished by the assessee The assessee has furnished letter dt 28.4.2011 of Nomura addressed to the assessee regarding the sharing of costs relating to the JV with selling shareholders which gives a break up of costs incurred w.r.t this transaction which is to be shared by it. The figures are the same as specified in the column giving the total expenses incurred in Table 1, Para 7 above.

“ On the basis of the remand report received and subsequent to the examination of the additional evidence submitted, the Appellant requests you to consider the claim of Rs.96,73,108/- being expenses included by the Appellant on sale of shares, the break up of which is as under:- SI.No. Particulars Total Amount (Rs.) Expenditure borne by GIC and claim disallowed (Rs.) i. 1,91,49,387 96,51,417 Legal Consultant (Amarchand Mangaldas Suresh A. Shroff & Co.) 1,36,42,460 a. Consultant and Advisor (Price Waterhouse Coopers Private Ltd.) 2,82,996 Hi. Scrutinizer to Postal Ballot (Rathi & Associates) A detailed response pertaining to the genuineness of the claim of each item of expenditure s iv. Valuation of AMC (Chaturvedi& Co.) 46,878 13,637 L V. e Valuation Trustee Co. (Shah Gupta & Co.) 57,908 4,964 g a NIL 33,090 vi. AuthorisedDealer Charges for FC-TRS l documentation as per RB! requirement for C AMC and Trustee Co, (ICICI Bank) o n 3,31,79,629 96,73,108 Total s u l A detailed response pertaining to the genuineness of the claim of each item of expenditure specified in (i-vi) above is made hereunder: i) Legal Consultant (Amarchand Mangaldas Suresh A Shroff & Co)-R$, 1,91.49,387 (out of which an amont of Rs. 8,42,700 is disallowed): Sr Assessing Officer's Finding Appellant's Response No.

1. Amount of Rs. 8,42,700 for It may be noted that a mandate was given by the invoice 1 towards advance parties(named as 'Project Life')to the transaction {for payment not allowed as it sale of shares in LIC Mutual Fund Asset cannot be established that the Management Company and LIC Mutual Fund same was payment related to Trustee Co. Ltd. to Nomura Mutual Fund) to the relevant transaction of long term leading law firm, Amarchand Mangaidas.The scope of capital gain. Also details of service work to be carried out by the Legal consultant a!ong rendered has not been specified with the terms of payment were communicated vide letter no. 7647 dated August 6, 2008 which letter has been confirmed by the Assessing Officer in the remand report. Page 2 of the said mandate clearly specifies the requirement of making an advance payment (of Rs. 7,50,000 add service tax at 12.36% amounting to Rs. 92,700 and the aggregate is Rs. 8,42,700/-) on the acceptance of the mandate in order to enable them to start providing the advisory and legal services. Accordingly, UC Mutual Fund Asset Management Company made the advance payment of Rs. 8,42,700/- under the cover of the letter dated August 14, 2008- the subject of the letter was 'Project Life-Advance Payment'. This makes it abundantly clear that the payment is towards the advance due for the mandate given for 'Project Life'.

ii) Consultant and advisor_(_Price Waterhouse Coopers Private Limited}- Rs. 1,36,42,460 Sr Assessing Officer's Finding Appellant's Response No.

1. An amount of Rs. 5,61,800/- has Para 1 of Page 5 of the engagement letter dated been excluded from the total 21.01.2008 with Price Waterhouse Coopers Private amount of Rs. 1,42,04,260/-with Limitedstates that "an amount of Rs. 5,00,000 is respect to the invoices submitted payable on acceptance of non-binding priced proposal from the investor." The said amount was excluded on account of the reimbursement of same being receivable from the investor (in this case Nomura Mutual Fund-Purchaser). Therefore, the same was excluded from the claim of expenses as the cost pertaining to the same was required to be borne by the investor.

2. Only invoices pertaining to The Appellant contends that the claim for reimbursement of expenses reimbursement of expenses is supported by the provided without explaining the invoice of M/s Rathi& Associates and as agreed purpose for which travel was between them as regards the services rendered by the made and how it is related to the professionals of the said firm. Also the Appellant capital gain transaction under cannot be made liable for disallowance of expenditure consideration. Further, no on account of the invoices, tickets and boarding supporting bills/ invoices, tickets, passes being not provided by the said firm for each boarding passes etc were and every trip incurred by the said company with enclosed to support genuineness respect to the services provided. of said expenditure iv) Valuation AMC (Chaturvedi & Co.)-Rs. 46,878/~ Sr No. Assessing Officer's Findings Appellant's Response

1. Invoice include payment The Appellant specifies that it had made towards entered into arrangement with the ascertaining net worth LIC Housing Finance Limited, LIC for F.Y 2008-09 and Asset Manangement Company in is not relatable to financial year 2008-09 itself. A the transaction under valuation of the net worth and consideration the shares was required considering the strategic nature of investment, although the sale of 2. The invoice includes shares was carried out only in valuation of shares as financial year 2010-11. Also the on 31,03.2009 and is valuation of shares has been carried not relatable to out as per guidelines of Reserve transaction under Bank of India Thus, the expenditure consideration incurred by the Appellant is wholly and exclusively for the purpose of carrying out the transaction pertaining to the sale of shares- The Appellant further draws your attention to section 48 of the Act which is as under: The income chargeable under head "Capital gains" shall be computed by deducting from the full value of consideration received or accruing as a result of the transfer of capital asset namely:- i) Expenditure incurred wholly and exclusively in connection with such transfer ii) …… Thus, the word "expenditure" used in section mandates it should be distinctly related and integrally connected with the transfer of shares. It does not specify that the expenditure incurred will be eligible for deduction if it is made during the year in which the sale of shares is carried out. Also, the Bombay High Court in the case of CIT vs. ShakuntalaKantilal (190 ITR 56,59), has held that the expression 'in connection with such transfer' is wider and more liberal in meaning than the phraseology 'for the transfer.' By reason of employing such a wide expression i.e. 'in connection with', something more than what is attributable to the final act of transfer of shares is also admissible for deduction provided the intimate connection between the expenditure and the act of transferring shares is established. For instance, if the services of legal or other professional services extended to the process of valuation of shares or the participation in the deliberations that led to the settlement concerning the transfer of shares, the legal charges on that account will also be allowable as deduction. 3. The invoices specified The Assessing Officer has merely the payments is made stated that the payment is made towards valuation of towards the valuation of shares as shares as on on 31.03.2010 through invoice dated 31.03.2010 30.07.2010. The share valuation note issued by Chaturvedi& Co. clearly specifies that the valuation was carried out in relation to the sale 11 transaction under consideration and accordingly no disallowance of expenditure can be made since the expenditure is wholly and exclusively incurred in connection with such transfer. v.) Valuation Trustee Co.(Shah Gupto & Co)-Rs. 57,908/- Sr Assessing Officer's Appellant's Response No. Findings 1. Invoice mentions The Appellant specifies that it had valuation analysis on entered into arrangement with the 11.07.2009 and concerned parties in financial year accordingly it is 2008-09 itself. Thus valuation of unrelatable to the shares was required considering the transaction strategic nature of investment, although the sale of shares was carried out only in financial year 2010-11 Also the valuation of shares has been carried out as per the guidelines of Reserve Bank of India. Thus, the expenditure incurred by the Appellant is wholly and exclusively for the purpose of carrying out the transaction pertaining to the sale of shares. Similarly, discussion for eligibility of claim of expense is already supported by the judgement as discussed above.

2. The invoice is with The Appellant contends that the respect to valuation invoice specifies the valuation analysis as on analysis carried out on 11.07.2010, 11.07.2010. No details the Assessing Officer cannot take a including the share stand that since no share valuation valuation note is note is furnished the expenditure has furnished to establish not been incurred wholly and the fact that the exclusively for earning of income expenditure was under the head capital gains. Your incurred wholly and attention is highlighted to clause exclusively for earning 3.2(k) of page 48 of the share income under the head purchase agreement wherein it has capital gains been agreed by the parties to the valuation certificate to be issued by a registered Chartered Accountant as per the Reserve Bank of India guidelines. Thus the opinion formed by the Assessing Officer that the 12 expenditure is not wholly and exclusively for carrying out the sale transaction is incorrect.. vi) Authorised Dealer (ICICI) charges for EC TRS documentation as per RBI requirement for AMC and Trustee CO. Rs. 33,090/- Sr Assessing Officer's Appellant's Response No. Findings 1. Assesse has only The Appellant states that the furnished no objection Reserve Bank of India is the certificate from statutory authority responsible for Reserve Bank of India management of foreign exchange dated 24.05 2010 transactions in India. The Appellant No proof of has furnished the no objection payment has been certificate received from Reserve submitted by the Bank of India for which it had assesse in this regard. appointed ICICI Bank for carrying out the FC-TRS documentation. Thus, merely rejecting the claim of assesse on account of not furnishing the proof of payment would be prejudicial to the Appellant since the expenditure is wholly and exclusively related to the capital gain transaction. vii) Other Evidences:- The Appellant has furnished the letter from LIC Nomura Mutual Fund dated 28.04,2011 wherein all the above fees being paid to the professionals engaged by the selling shareholders (including the Appellant) have been agreed to be shared on pro-rata basis. Furthermore, the Assessing Officer has already acknowledged the submission regarding the sharing of cost with respect to the transaction with LIC AMC vide letter dated 05.09.2013 and the Share Acquisition Terms Agreement dared 11.07.2009.This letter further satisfies the claim made by the Appellant that the cost incurred by the selling shareholders relates to the capital gain transaction under consideration and is wholly and exclusively connected with the sale of shares and hence eligible for deduction under section 48(i) of the Act.”

I have considered the findings of the Assessing Officer as well as rival submission of the appellant and also Remand Report & counter representation of the Ld. Authorised Representative. I find that during the year appellant has sold out 1120 shares of LIC Asset Management Co. Ltd. and 300 shares of LIC Mutual Funds Trustee Co. Ltd.. These shares were sold in a consortium of arrangement made by Life Insurance Corporation of India and were sold out to M/s. LIC Nomura Mutual Assets Management Co. Ltd. at the agreed price by all the members of the consortium. Because of sale of investment, there is a Capital Gain of Rs.85,79,09,196/-. Against this Capital Gains, appellant has shown expenditure of Rs.96,73,108/- u/s.48 of the Income-tax Act. The Assessing Officer has disallowed the expenditure on the ground that during the course of assessment proceeding, the assessee has not explained the expenditure related to sale of investments. By letter dated 05.09,2013, appellant has only given information related to sharing of cost, total legal cost comprises Legal Consultancy Charge, Advisory Charge, Fees of Scrutinizer and Valuation AMC Charge, totaling to Rs.3,31,79,629/-. The appellant proportionately claimed the expenditure to the extent of Rs.96,73,108/-However, the Assessing Officer has held that appellant has faded to establish that the legal cost claimed to be expenditure incurred in connection with transfer of shares, hence he has disallowed entire expenditure claimed by the appellant. During the course of appellate proceedings, appellant has submitted various details and evidences, hence matter was remanded to the Assessing Officer by letter dated 08.09.2014. In compliance the Assessing Officer has submitted a Remand Report dated 24.07.2015 which has been reproduced earlier. The copy of Remand Report was given to the appellant and appellant has given rejoinder by letter dated 08.09.2015. A careful perusal of Remand Report as well as counter representation reveals that findings of the Assessing Officer in the Assessment Order is not fully approvable. The Ld. Assessing Officer has mentioned in Remand Report para 14.1. d that SI.No.2 to 5 appear to be in order which means an amount of Rs.8,42,700/- out of Rs.1,91,49,387/- is not at all related to transaction. As regards receipt of the expenditure shown in the name of Price Waterhouse Coopers P. Ltd. & Other Expenditure", the stand of the Assessing Officer is found to be convincing one. It can be seen from the rejoinder that Ld. Authorised Representative has objected the disallowable expenditure but it is very evident from the report of Ld. Assessing Officer that this expenditure of Rs. 1,36,42,4607- is not directly related to the "transfer of assets". The invoices/bills possesses general information like payments towards Professional Fees. It means there is no specific reference to the Here, is not the question related to authenticity of the bill, is not relevant. It does not explain the connection of expenditure with transfer of shares. This may be business expenditure but certainly not related to transfer of shares. Similarly, the expenditure shown in the name of Rathi & Associates of Rs.2,82,996/-does not pertain to the transfer of shares. Further in rejoinder, it has been mentioned that such expenditure is incurred for business purposes which means, appellant admits that these expenditure is not at all related to transfer of shares. If approval from shareholders was pre- requisite that does not means that such bill raised by Rathi & Associates is necessarily related to transfer of investments. Thus, I find no convincing reason or verifiable evidence to support the contention of the appellant The contention that appellant cannot be made liable for disallowance of expenditure on account of invoices, tickets and boarding passes being not provided by Rathi & Associates, it is pertinent to mention that if any expenditure is claimed, it is the responsibility of the claimant to furnish all the reliable evidence. Apparently, appellant has not substantiated the contention with necessary evidences, hence the stand of the Assessing Officer deserves approval. Similarly, expenditure of Rs.46,878/- claimed to be valuation of AMC is not at all related to transfer of shares. If any valuation is done, an expenditure incurred, same may be related to the business activities and definitely is not related to transfer of shares, hence such expenditure cannot be allowed u/s.48 of the Income-Tax Act. Similar is the fact in respect of expenditure of Rs.57,908/- related to Valuation Trustee Co. As regards Authorised dealer (ICICI) charges for FC-TRS, no proof has been submitted by the appellant before the Assessing Officer, hence such expenditure also cannot be allowed. Now, actual expenditure related to such transfer is to be worked out for allowance. 5.6. During the course of appellate proceeding, it was reviewed and found that all the expenditure claimed by the appellant totalling to Rs.96,73,108/- is not allowable, hence as discussed hereinabove, disallowable expenditure has to be worked out. The working of disallowable expenditure is as under:- Head AmountfRs.) Expenditure to be borne by GIG HFL Legal Consultant (Amarchand Mangaldas 1,91,49,387 96,21,417 Suresh A. Shroff & Co.) Consultant and Advisor (Price Waterhouse 1,36,42,460 Coopers P. Ltd.) Scrutinizer to the postal ballot obtained 2,82,996 from unit holders (Rathi & Associates) Valuation AMC (Chaturvedi & Co.) 46,878 13,637 15 Valuation Trustee Co. (Shah Gupta & Co.) 57,908 4,964 Authorised dealer (ICICI) charges for FC-TRS 33,090 Documentation as per RBI requirement for --- AMC and Trustee Co. TOTAL 3,31,79,629 96,73,108 .

Total Sale Consideration (A) = 3,08,01,61,151 Assessee's share of sale (B) = 89,60,13,813 consideration Ratio (B/A) = 0.290898 Out of total cost of Rs.3,30,74,843 [1,91,49,387 + 1,36,42,460 + 2,82,996] Assessee's share of cost = Rs.3,30,74,843 X ( B/A ) = Rs.3,30,74,843 X 0.290898 = 96,21,417 ________ (i) Out of total cost of Rs.3,30,74,843, the assessee has not been able to establish its claim w.r.t. Rs.1,47,68,156 [8,42,700+1,36,42,460 + 2,82,906]____(ii) Assessee's Share of Cost which is to be disallowed = (ii) X (B/A) =1,47,68,156 X 0.290898 =42,96,032 Further balance sums as per the table above have also found to be disallowable. Hence Total disallowance amounts to = 42,96,032 + 13,637 +4,964 + 33,090 =43,47,723/- 5.7. The above working is based on same proportion as adopted by the appellant file submitted letter dated 13.04.2011 to the Assessing Officer that covering letter ted 06.06.2011 Thus the total disallowable expenditure is restricted to Rs.43,47,723/-. Thus, appellant gets relief of Rs.53,25,385/-.”

c) At page 171-173/pb is a letter dated 13-04-2011 written by LIC Nomura Mutual Fund Asset Management Co. Limited to the assessee in connection with sharing of costs amongst selling shareholders as per contractual obligation under SATA and SPA. Reference was drawn in this letter itself to clause 10.3 of SATA and SPA with respect to sharing of cost towards fees/expenses of these legal and financial professionals/advisors amongst selling shareholders under consortium arrangement. It determined the total sales consideration with respect to LICMF-AMC accruing to the selling shareholders under consortium agreement to the tune of Rs. 308.02 crores and the total costs incurred towards professional fees/expenses which was paid by LIC Mutual Fund Asset Management Company Private Limited to the tune of Rs. 3.31 crores to these legal and financial professionas and the assessee share in accordance with clause 10.3 of SATA and SPA was worked out at Rs. 96,73,108/- and finally request was made to reimburse the cost to LIC Nomura Mutual Fund Asset Management Company Private Limited as per terms of contract i.e. SATA and SPA. d) At page 174-175/paper book is letter dated 28.04.2011 written by LIC Nomura Mutual Fund Asset Management Company Private Limited to assessee in reply to letter dated 13.04.2011 written by the assessee . In this letter dated 28.04.2011 written by LIC Nomura Mutual Fund Asset Management Company Private Limited to the assessee, itemised billing by these professionals are specified and copy of invoices raised by the assessee are enclosed for reference and record of the assessee(page 176-192/pb ). In this letter dated 28.04.2011 written by LIC Nomura Mutual Fund Asset Management Company Private Limited to assessee , again request is made to the assessee to make its share of cost towards fee/expenses payable to these legal and financial professionals/advisors amongst selling shareholders in terms of clause 10.3 of SATA and SPA. This letter also specified that these professionals charged service tax on services rendered by them while LIC Nomura Mutual Fund Asset Management Company Private Limited deducted income-tax at source as per provision of the 1961 Act while making payments to these legal and financial professionals/advisors. While detailing itemised billing done by these professionals , broad reference to type of services such as legal services, consultant and advisor services, scrutinizer to the postal ballot obtained from unit holders , valuation(AMC) services , valuation (Trustee Company) services and charges for services by authorised dealer for FC-TRS documentation as per RBI requirement for AMC and Trustee Company are found mentioned in these invoices. Then comes the itemised invoices issued by these professionals and we found mention of the names of the professional who worked for the assignment and the name of the assignment is code named as „Project Life‟ or „ Project Cash I‟. Then come invoices raised by these professional for valuation, acting as scrutinzer for postal ballots , services in connection with amendment in trust deed etc which are clearly indicating that these expenses have their roots and nexus to the work concerning induction of Nomura as strategic investor in LICMF-AMC and consequent divestment of stake by existing stakeholders. e) At page 193-28/pb is placed an offer letter dated 21.01.2009 written by PWC to LIC Asset Management Co. to provide lead advisory services for the divestment of minority stake in LIC Asset Management Company. It speaks of the proposed transaction of inducting strategic investor through a divestment/issuance of shares of a minority stake in LIC Asset Management Company Limited and interest of PWC to act as lead advisors to the aforesaid transaction. It speaks of the PWC being retained for this proposed transaction and summarises their understanding of the engagement , scope of work and professional fee for said services. The scope of work at para 4 refers to engagement as lead advisor to completion of the envisaged transaction in the capacity of exclusive lead advisors for inducting strategic investor in LICMF- AMC. The scope of work included arriving at a fair valuation of shares of LICMF-AMC which will entail reviewing management projections , reviewing audited financial statements and then arriving at a fair valuation of the business. The scope of work also included planning and communication with investor which will include assisting LICMF- AMC in preparing Information Memorandum and also assisting in communication and discussions with the investor , assisting LICMF- AMC in due diligence review, recommendation/advise in connection of structuring of the deal in the capacity as financial advisors , assistance in review of transaction documentation etc.. The said offer letter provided for fees payable to PWC and personnel to be deployed etc by PWC for successfully rendering the services. This agreement also provided for confidentiality clauses about PWC maintaining strict confidentiality . At page 209/pb is the letter dated 21.07.2008 written by PWC to LIC Mutual Fund Asset Management Company Limited extending the tenure of their engagement to act as lead advisor to proposed disinvestment process by another six months. f) At page 210-212/pb is a letter dated 06-06-2008 written by „Amarchand & Mangaldas & Suresh A Shroff & Co.‟(signed on 08-08- 2018) to LIC Nomura Mutual Fund Asset Management Company Private Limited in connection with proposed investment by Nomura Holdings, Inc. In LIC-MF. It outlined scope of work of „Amarchand & Mangaldas & Suresh A Shroff & Co.‟ which included providing advice and legal services towards negotiating , drafting , reviewing and finalising term sheet, share purchase subscription agreements , share purchase agreements and shareholders agreement along with ancillary documents , if any required to complete the transaction. The scope of work also included advising about legal perspective in India regarding the transaction as well also negotiating with investors counsel and analysis of all aspects of all laws necessary to complete and conclude the transaction. It also stipulate legal team who will work on this assignment and it outlined the fee chargeable for the assignment. It also provided for advance payment of Rs. 7,50,000/- on acceptance of this offer by „Amarchand & Mangaldas & Suresh A Shroff & Co.‟ to enable said professionals to start the work in relation to the transaction. The share of the assesee in the costs to be shared between selling shareholders attributable to this advance payment of Rs. 7,50,000/- + service tax ( totalling Rs. 8,42,700/- ) paid to „Amarchand & Mangaldas & Suresh A Shroff & Co.‟ along with letter dated 14-08-2008 issued by LIC Asset Management Company Limited is under dispute between rival parties which was finally disallowed by learned CIT(A) so far as payments to „Amarchand &Mangaldas & Suresh A Shroff & Co‟. are concerned. g) At page 213-226 is placed letter dated 11.01.2011 written by „Amarchand & Mangaldas & Suresh A Shroff & Co.‟ which is written to LIC Mutual Fund Trustee Company Limited , LIC, LICHFL, the assessee and LICHFL Care Homes Limited and Nomura, confirming that said „Amarchand & Mangaldas & Suresh A Shroff & Co.‟ acted as legal advisors to LIC Mutual Fund Trustee Company Private Limited and also legal advisors on behalf of LIC, LICHFL, Carehomes and the assessee, in relation to the investment made by Nomura by way of share purchase in the company pursuant to various agreements and letters as set out in the annexure hereto. It also stipulates that LICHFL, the assessee and Carehomes were selling their shares to Nomura. h) At page 227-232/pb is placed valuation report dated 24-7-2010 issued by „Chaturvedi and Company‟ valuing shares of LIC Mutual Fund Asset Management Company Limited as on 31st March 2010. i) At page 233-234/pb are placed two RBI approvals both dated 24-05- 2010 approving the proposed transaction for acquisition by Nomura Asset Management Strategic Investment Pte. Ltd. , a non-resident entity of the fully paid up equity shares of face value of Rs. 10,000 each of LIC Mutual Fund Asset Management Company Limited at a price of Rs. 8,00,000/- per share from (a) 1120 equity shares from GIC Housing Finance Limited(the assessee) (b) 1730 equity shares from LIC Housing Finance Limited.

The second RBI approval dated 24-05-2010 is with respect to approving the proposed transaction for acquisition by Nomura Asset Management Strategic Investment Pte. Ltd. , a non-resident entity of the fully paid up equity shares of face value of Rs. 10 each of LIC Mutual Fund Trustee Company Private Limited at a price of Rs. 46.04 per share from (a) 300 equity shares from GIC Housing Finance Limited(the assessee) (b) 2000 equity shares from LIC Housing Finance Limited and (c) 1200 equity shares from LICHFL Care Homes Limited.

With this background , we have to proceed to see that whether these costs towards legal and financial professional fees/expenses which were claimed to be incurred in connection with transfer/sale of shares of LICMF-AMC by the assessee to Nomura can be considered to be incurred wholly and exclusively in connection with transfer/sale of shares so as it could be considered to satisfy mandate of Section 48 of the 1961 Act and also it is to be seen whether the assessee by producing these documents/evidences which it produced before the authorities below had discharged its onus as is cast under the provisions of the 1961 Act and whether now the onus has shifted to Revenue to bring on record cogent incriminating material to discredit the version of the assessee to fasten tax liability on the assessee. Thirdly, we have to see whether these costs were incurred in connection with transfer/sale of shares by assessee and whether the nexus of these costs with the assignment of induction of strategic investor in LICMF-AMC and consequently with the sale of shareholding in LICMF-AMC by these consortium parties to Nomura stood proved. Before we proceed further, it is pertinent to mention that the assessee is a company whose shares are listed on Bourses. The assessee is holding shares in LICMF-AMC as strategic investor wherein LIC and its affiliates are the main promoting companies of LICMF-AMC.It is also pertinent to mention that LICHFL is also a listed company. Nomura is an international company having large presence in financial services sector. It is to be understood that induction of new strategic investor either through divestment of existing shareholders or through issuance of fresh shares involves several steps , inter-alia, including identifying the value of shares of the investee company. It is to be understood that the price/valuation of block of shares which is to be offered to strategic investor either by way of divestment of existing shares or by way of issue of fresh shares depends upon inter-play of several complex factors and need not necessarily be a prices of shares prevailing on bourses but several other consideration weighs for arriving at price of block of shares such as intrinsic worth, present value of assets, future growth potential, premium which management or incoming strategic investor commands, controlling premium etc.. The process of identifying a strategic investor who has synergies with the investee company and who can add significant value in the growth of investee company in itself is a highly complex task which need professional skills and experience apart from discovering the true value of shares which itself is a complex task. The regulatory authorities such as SEBI has placed several conditions and restrictions on professionals/advisors including mandatory registrations with SEBI through web of regulations to ensure that only well qualified, experienced and registered intermediaries are only allowed to render such services. The LICMF-AMC was an unlisted company and its valuation is to be undertaken by professionals who are independent and are legally qualified and experienced to handle valuation . The regulatory requirements also requires valuation as per prescribed methods such as discounted cash flows which are to be certified by qualified independent professionals. The engagement of these independent qualified and experienced professionals to undertake these assignments not only ensures that the well versed experienced personnels are deputed to conclude these complex transaction but also addresses conflict of interest issue so that valuations are arrived at by independent professionals having no beneficial interest either in investee company or incoming strategic investor or outgoing shareholdres. After getting valuation done from independent valuers, the selling shareholders can negotiate price with the incoming investor subject to applicable regulatory pricing guidelines. Similarly, new investor will also have comfort with a price discovered by independent qualified and experienced professionals who are well versed with the task of valuing enterprises and also it addresses conflict of interest issues. The induction of strategic investor also requires due diligence done of the investee company and several warranties are to be given by the selling shareholders to the incoming strategic investor as to the state of affairs of the investee company and vice versa, which also involves execution of several documentations which are required to be handled by these independent experienced , well versed and qualified professionals who can give independent opinion and assessment based on their independent evaluation and assessment of existing state of affairs of the investee company which give assurance to incoming strategic investors and assist them in making decision as to making investment in the investee company as also about the correctness of fair valuation paid for acquiring strategic investments in investee company and also addresses conflict of interest issues. The independent professionals who are experienced , well versed and specialises in these type of strategic disinvestments and capital/money market transactions also gave assistance to management in identifying and thereafter complying with various applicable laws, rules and regulations and also help in identifying and seeking several regulatory clearances/approvals from authorities which are required to be obtained from various agencies in order to ensure that transactions are successfully concluded which is compliant of law. The assessee is a listed company whose shares are listed on Bourses and the assessee was strategic investor in LICMF- AMC while Nomura is a non resident entity who came in as strategic investor by acquiring stake from selling shareholders including assessee under consortium agreements viz. SATA and SPA . This transaction of acquisition under factual matrix of the case could possibly required several laws to be complied with such as Securities Laws, SCRA, SEBI Act etc, , Compliances under Companies Act, 1956, compliances of regulations and rules of stock exchanges, compliances and approvals from Reserve Bank of India under FEMA and applicable regulations for selling shares to Non Resident entity, clearances from Foreign Investment Promotion Board, clearances under CCI Act , compliances of various tax laws such as Income-tax Act, 1961, TDS compliances, GST compliances , stamp duty compliances and registration requirements etc. , which all aspects are to be properly analysed and documented well in advance by these professionals/advisors on behalf of consortium parties in context of transaction proposed to be undertaken by tax-payer and then advise their clients as to the applicable legal compliances to be undertaken and approvals/clearances required to be obtained from regulatory authorities. These independent qualified and experienced professionals who are well versed in executing these transactions in context of documentations, legal and regulatory compliances play a very crucial role for successfully concluding these transactions which are compliant of law , otherwise later on non compliances of law can prove to be very expensive and costly affair which may be visited with penalties, prosecutions, class action suits etc as litigation is very expensive and time consuming affair. No doubt some of these work can be executed in-house by tax-payer by availing services of its legal and professional team employed by tax-payer but once the commercial decision is taken by tax-payer to hire outside and independent professionals to render such services, the Revenue cannot be allowed to sit in the arm chair of business and question the prudence of the tax-payer decision in hiring outside independent professionals instead of utilising the services of in-house legal team . Hon‟ble Supreme Court decision in the case of Hero Cycles Private Limited v. CIT reported in (2015) 379 ITR 347(SC) is relevant to that effect . It is also to be understood that assessee being a listed company these divestments decisions are price sensitive information and any breach of confidentiality of this price sensitive information can have huge repercussion, volatility and fluctuations in share prices of the assessee‟s shares on Bourses and such breach of confidentiality of price sensitive information can be visited with heavy penalties and prosecution under SEBI Act, 1992 , securities law and other applicable corporate laws and may even lead to class action suits by investors against assessee and even against these professionals. These professionals can also be visited by suit for damages/compensation by the contracting parties for breach of confidentiality. Thus, mere use of code name by these professionals to the assignment or non mentioning of the exact services in the invoices cannot be cause of blame as these professionals are bound to maintain secrecy and confidentiality of the assignment awarded to them w.r.t. induction of strategic investor and divestment of the stake by existing shareholders and code name can also be given for administrative convenience. On the other hand if the details are openly divulged in correspondences or in invoices concerning induction of strategic investor or divestment by existing stakeholder will bear the risk of leakages of price sensitive information and breach of confidentiality which could have wide ranging serious adverse ramifications for the assessee as well for these professionals. What is relevant to be seen is that whether these expenses towards professional fees / expenses paid to these professionals by consortium parties are in connection with the assignment of induction of strategic investor in LICMF-AMC and consequently sale of shares by the selling shareholders including assessee whether or not the project name was coded by these professionals or the exact details of services are not mentioned in the invoices. The Revenue cannot operate in a vacuum dehors the factual realities of present day‟s complex business and legal environment wherein both domestic and international laws have application to complex financial transaction because of participation of cross border entities. The assessee on its part has brought sufficient material/evidence on record to evidence that the project codenamed as „Project Life‟ and „Project Cash 1‟ by these professionals are nothing but the assignment awarded by consortium parties to these professionals in connection with induction of strategic investor in LICMF-AMC and consequent exit of assessee from LICMF-AMC, which assignments were coded by these professionals for varied reasons outlined above. Thus , huge hue and cry made by Revenue as to codenaming of project by professionals or non mentioning of detailed services in the invoices has no legs to stand. There are valid reasons and justifications of code naming the project or not mentioning of the details of services in the invoices. If the Revenue was so particular and was not satisfied with the contentions of the assessee backed with evidences placed by the assessee as to the services rendered by these professionals in connection with the transaction relating to induction of strategic investor in LICMF-AMC and consequent exit of assessee from LICMF-AMC by selling its entire shareholding in LICMF-AMC to Nomura, then nothing prevented Revenue from issuing summons u/s 131 or notices u/s 133(6) of the 1961 Act to these professionals or to other consortium parties to produce evidences directly as to what these code name stands for and whether the services rendered by these professionals are directly and inextricably connected with transaction of induction of strategic investor in LICMF-AMC and consequent exit of assessee from LICMF- AMC. These plea‟s of the Revenue are out rightly rejected. We have also observed that revenue has entered into an arena of suspicion while upholding disallowance of these costs and we would like to lay stress that suspicion howsoever strong cannot take place of proof which is a well settled proposition of law. So far, three stages have passed and none of the authorities have considered proper and appropriate to issue notices u/s 133(6) or summons u/s 131 of the 1961 Act to these professionals or to consortium parties to unearth truth and we are afraid that now at this stage no more opportunity can be provided to the Revenue to re-start the exercise of denovo assessment and to burden the assessee with one more round of litigation which is not warranted at this stage more-so sufficient material/evidences by way of agreements, invoices , correspondences etc are already brought on record by the assessee which is speaking loudly that these payments were towards the fee/expenses paid to these legal professionals and financial advisors for handling the task of induction of strategic investor in LICMF-AMC and consequently exit of assessee as shareholder of LICMF-AMC wherein assessee sold its shares to Nomura while the case of revenue is built on suspicion . The parties to sale of shares to Nomura acted as consortium parties and they have vide SATA and SPA agreements both dated 11-07-2009 , clause 10.3 in both these agreements agreed to share the cost of these professionals which falls within arena of their contractual obligation. There is no dispute as to the inter-se agreement between consortium parties to share these costs of professionals as well to distribution ratio of share of assessee to bear these cost. The learned CIT(A) has accepted the share distribution ratio adopted by consortium parties and Revenue is not in appeal before us with accepting of share distribution ratio by learned CIT(A) nor any cross objections are filed by Revenue. Now , after analysing the whole spectrum of services rendered by these independent , qualified and experienced professionals , we are of considered view that these services are inextricably linked to the transaction of sale of shares of LICMF-AMC by assessee to Nomura based on material on record and these services were rendered wholly and exclusively in connection with transfer/sale of shares by the assessee within mandate of Section 48 of the 1961 Act as without availing of these legal and financial services from these legal professionals and financial advisors , in our considered view , the transfer/sale of shares of LICMF-AMC held by the assessee in favour of strategic investor Nomura could not have been successfully concluded as the most important and crucial aspect in these type of price sensitive transactions is to conclude them successfully with confidentiality in transparent manner which is in compliance with all relevant and applicable laws, rules and regulations both domestic and cross border laws which can withstand the tests of scrutiny by Courts for which proper documentations, term sheets, agreements , valuation, due diligence, regulatory approvals/clearances etc are must which can only be executed in these type of complex transactions which are governed and regulated by several web of complex laws having inter-play by these well versed, qualified and experienced independent legal and financial professionals/advisors to not only satisfy technical competencies to execute these transactions successfully but also avoid conflict of interest. The assessee‟s transaction of sale of shares in LICMF-AMC were approved by RBI, shareholder consents were obtained through postal ballots, SATA and SPA were executed , valuation reports from qualified chartered accountants were obtained, due diligence was undertaken etc.. The above relevant documents are placed in paper book filed with tribunal. The payment of its share of such cost to the tune of Rs.96,73,108/- by assessee vide cheque through banking channel and it is not the case of the Revenue that no payments were made by assessee and the bogus claim is set up by the assessee. In our considered view keeping in view factual matrix of the case as is emanating from records before us, the assessee has duly discharged its burden cast under provisions of 1961 Act by producing all relevant evidences to substantiate its claim that the payments were made towards share of cost which the assessee was obligated under an agreement to pay towards fees/expenses of these legal and financial professionals and advisors for rendering services in connection with transaction of induction of Nomura as strategic investor in LICMF and consequently complete exit of assessee by way of sale of its shareholding in LICMF AMC to Nomura and we also hold that these services are inextricably linked to aforesaid sale of shares by assessee to Nomura and these expenses are wholly and exclusively incurred in relation to transfer/sale of shares by assessee to Nomura which satisfied the mandate of Section 48 of the 1961 Act as transfer/sale of shares of LICMF-AMC by assessee to Nomura which is compliant with all applicable laws, rules and regulations could not have been possible without these services rendered by qualified , experienced and independent professionals and hence these costs are allowable as cost within provisions of Section 48 while computing long term capital gains earned by the assessee. The assessee succeeds in this appeal . We order accordingly.