The ITO, Alappuzha V. Sri. Sureshkumar N, Alappuzha

ITA 106/COCH/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8616 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2016
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 10-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 13-02-2015
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: C B M WARRIER
• Keywords: Share purchase agreement; Cost of acquisition; Valuation report
• Section: 133A

Judgement Text

ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI B P JAIN, AM & GEORGE GEORGE.K, JM I.T.A. NO. NAME OF THE ASSESSEE REVENUE A.Y. CIT(A) AND THE DATE OF THE ORDER 104&119/COCH/2015 C.T. NARAYANAN, P/O, M/S. CTN & CO., GENERAL MERCHANTS & COMMISSION AGENTS, MARKET WARD, ALAPPUZHA-688 011. I.T.O.,WARD-3, ALLEPPEY 2010-11 CIT(A) V, KOCHI 14/11/2014 103&118/COCH/2015 SHRI HARI NARAYANAN N., CHAKKARATHU VEEDU, NORTH KULAMAKKAL, MO WARD, ALAPPUZHA-688 001. [PAN: ABAPN 3017F]. -DO- 2010-11 -DO- 105&120/COCH/2015 SHRI SREEKUMAR N. BASERA, P/O M/S. CTN & CO., GENERAL MERCHANTS & COMMISSION AGENTS, MARKET WARD, ALAPPUZHA-688 001. [PAN: AAZPN 9780D]. -DO- 2010-11 -DO- 106&117/COCH/2015 SHRI SURESHKUMAR N. CAKKARATHU VEEDU, NORTH KULAMAKKAL, MO WARD, ALAPPUZHA-688 001. [PAN:ACSPN 4672M]. -DO- 2010-11 -DO- 107&115/COCH/2015 SMT. HONEY RAHULAN, BASERA, NORTH KULAMAKKAL, MO WARD, ALAPPUZHA-688 001. [PAN NO. AAMPH1713P]. -DO- 2010-11 -DO- 108&116/COCH/2015 SHRI RADHAKRISHNAN N., CHAKKARATHU VEEDU, NORTH KULAMAKKAL, MO WARD, ALAPPUZHA-688 001. -DO- 2010-11 -DO- ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 2 ASSESSEE BY SHRI C.B. M. WARRIER, CA REVENUE BY SHRI K P GOPAKUMAR, SR DR DATE OF HEARING 10/05/2016 DATE OF PRONOUNCEMENT 24/05/2016 ORDER PER BENCH: THESE SIX APPEALS OF THE REVENUE AND SIX APPEALS OF THE ASSESSES ARE ARISING FROM DIFFERENT ORDERS OF THE CIT(A) IN THE CASE OF SIX ASSESSEES AS PER THE DETAILS GIVEN HEREINABOVE. 2. ALL THE APPEALS OF THE REVENUE AND THE ASSES SEES ARE HAVING COMMON AND IDENTICAL GROUNDS OF APPEAL AND THEREFORE, WE PROCE ED TO DECIDE ALL THE APPEALS IN THE CASE OF THE ASSESSES AND THE REVE NUE BY THIS CONSOLIDATED ORDER. FOR THE SAKE OF CONVENIENCE, WE REPRODUCE H EREINBELOW THE GROUNDS OF APPEAL TAKEN IN I.T.A. NO. 104 & 119/COCH/2015 IN T HE CASE OF C.T. NARAYANAN. I.T.A. NO. 119/COCH/2015 : ASSESSEE : A.Y 2010-11 1. THE APPELLANT IS NARAYANAN C.T., P/O M/S. C.T. N ARAYANAN & CO., GENERAL MERCHANTS & COMMISSION AGENTS, MARKET WARD, ALAPPUZ HA-688001 AND IN REGARD TO THE ASSESSMENT YEAR 2010-11, THE COMMISSI ONER OF INCOME-TAX (APPEALS)-IV, KOCHI HAS GONE WRONG IN DETERMINING T HE ASSESSABLE CAPITAL GAIN. ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 3 2. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS CON SIDERED ONLY EXPENDITURE INCURRED BY THE APPELLANT UP TO 31.03.2009 AND EXPE NDITURE INCURRED AFTER THAT DATE TILL THE SALE OF SHARE IS TO BE CONSIDERED IN DETERMINING THE COST OF SHARES. 3. THE APPELLANT HAS INVESTED SUBSTANTIAL AMOUNT AF TER 31.03.2009 AND BEFORE TRANSFER SHOULD BE ALLOWED AS DEDUCTION FROM THE AM OUNT OF CAPITAL GAIN TO BE ASSESSED. 4. FOR THE ABOVE REASONS AND OTHER ARGUMENTS THOSE MAY BE PUT FORWARD AT THE TIME OF HEARING THE APPELLANT MAY REQUEST TO CO NSIDER THE VALUE OF IMPROVEMENTS IN THE PROPERTY TILL THE DATE OF TRANS FER OF SHARE SHOULD BE REDUCED FROM SALE PROCEEDS TO DETERMINE THE CAPITAL GAIN ON THE SALE OF SHARES. I.T.A. NO. 104/COCH/2015 : REVENUE: AY 2010-11 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS)-IV, KOCHI IN SO FAR AS THE POINTS STATED BELOW ARE CONCERNED, IS OPPOSED TO LAW ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DIRECTING THAT IN COMPUTING THE CAPITAL GAIN ON TRANSFER OF SHARES BY THE ASSESSEE, THE ASSESSING OFFICER HAS TO REDUCE THE VALUE OF WORK-IN-PROGRESS OF RS.3,49,05,380/- FROM THE NET VALUE OF CONSIDERATION OF RS.5.45 CRORE RECEIVE D BY THE SHAREHOLDERS. 3. THE LD. CIT(A) HAS ERRED IN CONSIDERING THE WORK -IN-PROGRESS AS ON 31-3-2009 (APPEARING IN THE BALANCE SHEET OF M/S. CTN AGRO & COIR PVT. LTD. AND M/S. CITRUS HOTELS KERALA PVT. LTD.) AS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION THE TRANSFER OF SHARES OF THE SHAREHOLDERS OF THE COMPANY. 4. THE LD. CIT(A) OUGHT TO HAVE NOTED THAT HE NET VALUE OF CONSIDERATION OF RS.5.45 CRORE WAS ARRIVED AT AFTER REDUCING SECURED AND UNSECURED LOAN FROM ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 4 THE FULL VALUE OF CONSIDERATION OF RS.9,75,00,000/- DETERMINED AS PER THE VALUATION REPORT MUTUALLY ACCEPTED BY THE SELLER AN D PURCHASER. THERE WAS NO MENTION ANYWHERE ABOUT THE VALUE OF ANY FUTURE CONS TRUCTION TO THE TUNE OF RS.4.93 CRORE TO BE EXPENDED OUT OF NET CONSIDERATI ON OF RS.5.45 CRORE (OTHER THAN RS.71 LAKH REFLECTED IN THE VALUATION REPORT). 5. THE COST OF WIP OF RS.3,49,05,380/- APPEARING I N THE BALANCE SHEET ALREADY STANDS MET OUT OF THE FUNDS OF THE COMPANY AND NOT BE THE SHAREHOLDERS. WHATEVER LIABILITY TOWARDS THE SHAREHOLDERS BY THE COMPANY (UNSECURED LIABILITY) ALSO STOOD DISCHARGED BY THE PURCHASERS DIRECTLY. 6. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THAT IF W-I-P IS TO BE REDUCED, IT SHOULD BE FROM THE GROSS CONSIDERATION AS THE GROSS PRICE OF SHARES INCLUDES THE LIABILITIES TO BE DISCHARGED. REDUCTION OF BOTH WIP (ON THE ASSETS SIDE) AND LIABILITIES (OTHER THAN SHARE CAPITAL) ON THE LIABI LITY SIDE OUGHT NOT TO HAVE BEEN ALLOWED. 7. THE LD. CIT(A) HAS ALSO NOT CONSIDERED THE FINDI NG OF THE ASSESSING OFFICER IN PARA 9 OF THE ASSESSMENT ORDER THAT THE SELLERS DIR ECTLY AS WELL AS INDIRECTLY INVESTED ABOUT 4.85 CRORE AFTER RECEIVING THE CONSI DERATION FOR SHARE TRANSFER. THIS ALSO PROVED THAT THE SELLERS HAD NO SOURCE TO EXPEND RS.4.93 CRORE FOR THE SO-CALLED CONSTRUCTION WORK. 8. WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THAT WHAT IS PERMISSIBLE UNDER THE INCOME TAX ACT IS EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH TRANSFER AND NO EXPENDITURE WAS CLAIMED IN THE RETURN OF INCOME NOR THE SO-CALLED EXPENSES OF RS.4.93 CRORE ALLEGED TO HAVE BEEN EXPENDED AFTER THE DATE OF SHARE PURCHASE AGREEMENT WERE PROVED TO THE SATISFACTION OF THE ASSESSING OFFICER DURING THE CO URSE OF ASSESSMENT. THE SHARE PURCHASE AGREEMENT IS THE FINAL ONE SUPERSEDING ALL EARLIER AGREEMENTS. 9. THE COMMISSION AND BROKERAGE WERE NEITHER CLAIM ED IN THE RETURN OF INCOME NOR IN THE GROUNDS OF APPEAL. THE LD. CIT(A ) ALLOWED THE CLAIM BASED ON THE PAPER BOOK FILED BY THE ASSESSEE WITHOUT GIV ING AN OPPORTUNITY TO VERIFY THE GENUINENESS OF THE CLAIM. ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 5 FOR THESE AND OTHER GROUNDS THAT MAY BE ADVANC ED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THE ABOVE POINTS MAY BE SET ASIDE AND THAT OF THE ASSESSING O FFICER MAY BE RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT M/S. CTN AGRO AND COIR PRIVATE LIMITED, ALLEPPEY WAS INCORPORATED AS A PRIVATE LIMITED COM PANY ON 24-06-2015. THE SAID COMPANY WAS ENGAGED IN THE EXPORTS OF COIR PRO DUCTS. THE ASSESSEE PURCHASED 5.6 ACRES OF AGRICULTURAL LAND FOR THE PU RPOSE OF THE CONSTRUCTION OF A TOURIST RESORT. THEREAFTER, THE SAID PROPERTY OF T HE SAID COMPANY STARTED INCURRING EXPENDITURE. THE ASSESSEE COMPANY HAS SIX SHAREHOL DERS HAVING SHARE RATIO AS UNDER: 1) CT NARAYANAN 20% 2) RADHAKRISHNAN N. 20% 3) HARINARAYANAN N. 20% 4) SURESHKUMAR N. 20% 5) SREEKUMAR N. 10% 6) HONEY RAHULAN 10% 4. THERE WAS A SURVEY U/S. 133A OF THE ACT IN TH E CASE OF THE SAID COMPANY, CTN AGRO & COIR PVT. LTD. ON 31/10/2011. DURING THE SURVEY, SHARE PURCHASE AGREEMENT (SPA) AND MEMORANDUM OF UNDERSTANDING (MO U) WERE FOUND AND IMPOUNDED WHICH SHOWED THAT ALL THE SHAREHOLDERS OF THE COMPANY HAD ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 6 AGREED TO SELL THEIR SHARES TO A MUMBAI BASED COMPA NY NAMED TWINKLE, HOSPITALITY PVT. LTD. THE PRICE AGREED UPON AS PER THE SPA AND THE MOU VARIED WIDELY BEING RS. 1362.50 PER SHARE AND RS.1837.50 R ESPECTIVELY. THE ASSESSMENT PROCEEDINGS WERE STARTED AND SUMMON U/S. 131(1)(D) OF THE ACT WAS ISSUED TO THE DEPARTMENTAL OFFICER AT MUMBAI. FROM THE INFOR MATION, IT WAS GATHERED THAT ALL THE SHAREHOLDERS HAD TOGETHER RECEIVED RS. 5.45 CRORES BEING THE CONSIDERATION OF THE SALE OF 40,000 SHARES OF THE C OMPANY. THE RECEIPT OF EACH SHAREHOLDER WAS PROPORTIONATE TO THE NUMBER OF THE SHARES HELD. 5. AS PER THE MOU, THE PURCHASER, MIRA HOSPITALI TY GROUP AGREED FOR A SALE CONSIDERATION OF RS. 9.75 CRORES. AFTER TAKING BANK LOAN OF RS. 2.4 CORES AND OTHER LOAN OF RS.1.90CRORES, THE NET CONSIDERATION WAS AR RIVED AT RS. 5.45 CRORES PAID TO THE ASSESSEE GROUP. 6. IN THE RETURN OF INCOME, THE ASSESSEES HAD NO T DISCLOSED THEIR PROPORTIONATE SHARE FROM THE NET AMOUNT OF CONSIDERATION, BEING R S.5.45 CRORES. INSTEAD, THEY HAD DECLARED A TOTAL SUM OF RS. 5.2 LAKHS ONLY. THE ASSESSEES HAD CLAIMED THAT THEY HAD SPENT AN AMOUNT OF RS.4.93 CRORES BEING EX PENSES INCURRED BY THEM FOR DEVELOPING THE PROPERTY AFTER ENTERING INTO THE SPA. ACCORDING TO THE ASSESSING OFFICER, NO PROPER VOUCHERS/BILLS WERE PR ODUCED TO SUBSTANTIATE THE CLAIM. IT WAS ALSO FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD MADE SUBSTANTIAL INVESTMENTS IN OTHER IMMOVABLE PROPERTI ES (RS.3.35 CRORES) AND SBI ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 7 MUTUAL FUND RS.1.50 CRORES TOTALING TO NEARLY RS. 4 .85 CRORES) PURSUANT TO THIS TRANSACTION. THE ASSESSING OFFICER ACCORDINGLY ADJU DICATED THAT THE ACTUAL SALES CONSIDERATION HAS TO BE TAKEN AT THE PROPORTIONATE SHARE OF RS.5.45 CRORES. THE INDEXED VALUE OF COST OF ACQUISITION OF THE SHARES WAS REDUCED FROM THE AMOUNT AND THE RESULTANT AMOUNT WAS ASSESSED AS LONG TERM CAPITAL GAIN. 7. ON FIRST APPEAL BEFORE THE LD. CIT(A), THE CI T(A) ALLOWED THE AMOUNT OF RS.11,40,000/- AND BROKERAGE OF RS.7.08 LAKHS FROM THE GROSS AMOUNT AS DEDUCTIBLE FROM RS.5.45 CRORES. THE AMOUNT OF RS.3 ,49,05,380/- BEING THE WORK- IN-PROGRESS AS ON 31 ST MARCH 2009 WAS DEDUCTED FROM THE GROSS RECEIPTS OF RS.5.45 CRORES AND ACCORDINGLY, ALLOWED. 8. BOTH THE ASSESSEES AND THE REVENUE ARE IN APPE AL BEFORE US IN THE CASE OF THE APPEALS MENTIONED HEREINABOVE. 9. THE REVENUE HAS RAISED THE GROUND THAT THE L D. CIT(A) HAS WRONGLY ALLOWED THE CLAIM OF WORK-IN-PROGRESS AS ON 31 ST MARCH 2009 TO BE DEDUCTED FROM THE SALES CONSIDERATION. THE REVENUE HAS CLAIMED THAT THE LD. CIT(A) DID NOT TAKE INTO COGNIZANCE THE FACT THAT THE SO CLAIMED EXPENS ES WERE INCURRED AFTER THE SPA. THE REVENUE HAS ALSO RAISED THE PLEA THAT THE INVESTMENTS MADE BY THE ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 8 ASSESSEE OF RS.4.85 CRORES, TAKEN AS A CORROBORAT IVE FACT BY THE ASSESSING OFFICER, HAS NOT BEEN TAKEN COGNIZANCE OF BY THE L D. CIT(A). 10. ON THE OTHER HAND, THE ASSESSEE HAS RAISED T HE GROUND THAT THE EXPENSES INCURRED AFTER 31-03-2009 ALSO SHOULD HAVE BEEN ALL OWED BY THE LD. CIT(A) TO BE DEDUCTED FROM THE SALES CONSIDERATION OF RS. 5.45 C RORES. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. THE LD. AR HAS RELIED UPON THE SUBMISSIONS MADE BEF ORE THE AUTHORITIES BELOW AND THE LD. DR RELIED UPON THE ORDERS OF BOTH THE A UTHORITIES BELOW. 12. AFTER HEARING BOTH THE PARTIES AND PERUSAL O F RECORD, WE FIND THAT M/S. CTN AGRO & COIR PVT. LTD., ALLEPPEY BEING INCORPORATED ON 24-06-2005, PURCHASED 5.6 ACRES OF LAND BEARING NO. 181/6, 181/5, 181/4, 181/1, FOR THE PURPOSE OF CONSTRUCTION OF A TOURIST RESORT. AFTER PURCHASE O F THE SAID PROPERTY, IT WAS STATED THAT THE COMPANY WAS INCURRING EXPENDITURE FOR THE RAISING OF LOW LYING LAND WHICH WAS WATER-LOGGED. ON THE FRONT SIDE OF THE PR OPERTY, POOKAITHA RIVER AND ON THE SOUTHERN SIDE THERE IS A CANAL. ON THE OTHER TWO SIDES THERE ARE PADDY FIELDS AND PROPERTY OWNED BY OTHERS. DURING THE A SSESSMENT YEAR, 40000 EQUITY ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 9 SHARES OF RS.10 EACH WERE SOLD BY SHRI C.T. NARAYAN AN TO VARIOUS COMPANIES AS PER DETAILS BELOW: SL. NO. NAME OF THE TRANSFEROR SHARE HOLDER NO. OF SHARES TRANSFERRED NAME OF THE TRANSFEREE TOTAL CONSIDERATION (RS.) 1. C.T. NARAYANAN 4000 M/S. MIRAH HOSPITALITY 54,50,0 00 C.T. NARAYANAN 3000 OMPRAKASH GOENKA, PARVATI INDUSTRIAL ESTATE, LOWER PAREL (W), MUMBAI 40.87,500 C.T. NARAYANAN 1000 OMPRAKASH GOENKA, PARVATI INDUSTRIAL ESTATE, LOWER PAREL (W), MUMBAI 13,62,500 2. N. RADHAKRISHNAN 8000 M/S. MIRAH HOSPITALITY 1,09,0 0,000 3. HARI NARAYANAN 8000 M/S. MIRAH HOSPITALITY 1,09,0 0,000 4. SURESH KUMAR N. 8000 M/S. MIRAH HOSPITALITY 1,09,0 0,000 5. SREEKUMAR N. 4000 M/S. MIRAH HOSPITALITY 54,50 ,000 6. HONEY RAHULAN 4000 M/S. MIRAH HOSPITALITY 54,50, 000 TOTAL 5,45,00,000 THE CONSIDERATION PAYABLE FOR THE SHAREHOLDERS AS P ER THE SPA IS FIXED AT RS.5.45 CRORES AND THE SHARES WERE TRANSFERRED ON 22-12-200 9 WHICH WAS RECEIVED BY THE ASSESSES AS UNDER:- NAME DATE BANK/A/C NO AMOUNT C.T. NARAYANAN 06/01/2009 SBI 30428878352 20,00,000 ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 10 C.T. NARAYANAN 06/01/2009 SBI 30428878352 5,00,000 C.T. NARAYANAN 06/01/2009 SBI 30428878352 15,00,000 C.T. NARAYANAN 26/12/2009 SBI 30428878352 24,50,000 C.T. NARAYANAN 26/12/2009 SBI 30428878352 6,12,500 C.T. NARAYANAN 26/12/2009 SBI 30428878352 18,37,500 C.T. NARAYANAN 15/03/2010 UBI 36805010055 10,00,000 C.T. NARAYANAN 15/03/2010 UBI 36805010055 7,50,000 C.T. NARAYANAN 15/03/2010 UBI 36805010055 2,50,000 HARI NARAYANAN 05/01/2009 SBT 67075935828 40,00,000 HARI NARAYANAN 30/12/2009 SBT 57035281896 49,00,000 HARI NARAYANAN 19/03/2010 SBI 30428879741 20,00,000 HONEY RAHULAN 06/01/2009 DLB9503000000053 20,00,000 HONEY RAHULAN 24/12/2009 DLB9503000000053 24,50,000 HONEY RAHULAN 15/03/2010 DLB9503000000053 10,00,000 SURESH KUMAR N. 07/01/2009 FBL10150100119685 40,00,000 SURESH KUMAR N. 24/12/2009 FBL10150100119685 49,00,000 SURESH KUMAR N. 15/03/2010 FBL10150100119685 20,00,000 N.SREEKUMAR 06/01/2009 DLB9503000000920 20,00,000 N.SREEKUMAR 24/12/2009 DLB9503000000920 24,50,000 N.SREEKUMAR 15/03/2010 DLB9503000000920 10,00,000 RADHAKRISHNAN 19/01/2009 DLB950300002724 40,00,000 RADHAKRISHNAN 24/12/2009 DLB950300002724 49,00,000 RADHAKRISHNAN 15/03/2010 DLB950300002724 20,00,000 . 5,45,00,000/- ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 11 13. AS PER THE VALUATION REPORT DATED 03.11.2008, THE VALUE OF THE PROPERTY AND ASSETS OF THE COMPANY WAS FIXED AT: 1. LAND 6,81,60,000.00 2. BUILDING 2,22,96,000.00 3. GENERATOR, TRANSFORMER AND OTHER ASSETS 11,00,0 00.00 4. DRAINAGE SYSTEM AND WATER TANK ETC. 60,00,000.00 TOTAL VALUE 9,75,56,000.00 FIXED AT 9,75,00,000.00 14. SHRI C.T. NARAYANAN AND OTHERS HAD ENTERED INTO A SHARE PURCHASE AGREEMENT ON 22.12.2009 BY TRANSFERRING THE SHARES OF THE COMPANY FOR A TOTAL CONSIDERATION OF RS.5.45 CRORES AS IS EVIDENT FROM THE SHARE PURCHASE AGREEMENT AVAILABLE AT PB PG. 11. THE WORKS TO BE DONE BY M/ S. CTN AGRO & COIR PVT. LTD. (REFER PB PGE. 42) AS PER THE MOU, THE FOLLOWING AR E THE DEVELOPMENT OF THE PROPERTY TO BE DONE: 1. 33 ROOMS AND 1 TREE HOUSE WITH ALL CIVIL WORK INCLUD ING BATHROOMS 2. RESTAURANT AND KITCHEN WITH ALL CIVIL WORK 3. SWIMMING POOL WITH ALL CIVIL WORK ADMEASURING 70 F T X 30FT AND KIDS POOL 4. WALKWAYS AND BUNDS IN THE PADDY FIELD 5. MINI BRIDGES (3) 6. WATER LILLY POND ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 12 7. LANDSCAPING AND LAWN 8. ELECTRICITY POWER WITH TRANSFORMER OF 150 KVA WITH POWER SUPPLY TO ALL ELECTRIC POINTS ON THE PROPERTY INCLUDING METERS AND SUB METERS. DEDICATED GENERATOR OF 100 KVA 9. CONSTRUCTION OF ROAD FROM NATIONAL HIGHWAY TO THE PR OPERTY ADMEASURING 3 METERS IN WIDTH. 10. WATER STORAGE TANKS HAVING CAPACITY OF 30,000 LI TERS FOR UNDERGROUND TANKS AND 10,000 LITER FOR OVERHEAD TANKS 11. SEWAGE TREATMENT PLANT 12. DRAINAGE TREATMENT PLANT 13. WATER PURIFICATION/FILTRATION PLANT TOTAL BUILD-UP CONSTRUCTION OF (1 TO 13) SHALL BE 30,000 SQ. FEET. 15. THE EXPENDITURE FOR THE DEVELOPMENT WILL INCRE ASE THE SHARE VALUE CORRESPONDINGLY. THE VALUE OF BUILDING CONSTRUCTIO N UPTO 22.12.2009, BEING THE DATE OF TRANSFER OF SHARES WAS RS.3,67,41,621/-. TH E VALUE OF CONSTRUCTION UPTO 31- 03-2009 WAS RS.3,49,05,380/- AS PER THE BALANCE SHE ET AS ON 31/03/2009 (PB PG. 43). WHEREAS THE LD. CIT(A) HAS ADOPTED THE EXPENDI TURE UPTO 31/03/2009 FOR THE PURPOSE OF COMPUTING CAPITAL GAIN. AS PER CLAU SE 3.11 OF SHARE PURCHASE AGREEMENT AVAILABLE AT PB PG. 13, THE TOTAL VALUE O F THE ASSETS OF THE COMPANY AS ON 22.12.2009 IS AS UNDER: BUILDING 36741621 CURRENT ASSETS 6764879 TOTAL RS.43506500 ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 13 THEREFORE, ACCORDING TO US, THIS VALUE SHOULD BE A DOPTED FOR THE PURPOSE OF VALUING OF THE SHARES. 16. AS REGARDS THE LIABILITY OF THE COMPANY TO T HE STATE BANK OF TRAVANCORE INCURRED FOR THE PURPOSE OF CONSTRUCTION OUTSTANDIN G AS ON THE DATE OF SHARE TRANSFER AMOUNTING TO RS.2,41,06,560/- AND ALSO UN SECURED LOANS OF RS.1.90 CORES DUE BY THE COMPANY HAS BEEN PAID BY THE BUYERS DIRE CTLY 17. AS REGARDS THE EXPENSES ON ACCOUNT OF BROKERA GE FOR THE PURPOSE OF TRANSFERRING THE SHARES, COMMISSION HAS BEEN PAID A S UNDER: 1) COMMISSION PAID BY C.T. NARAYANAN RS.2,08,335.00 2) COMMISSION PAID BY HARI NARAYANAN R S.2,08,335.00 3) COMMISSION PAID BY RADHAKRISHNAN RS.2 ,08,335.00 4) COMMISSION PAID BY N.SREEKUMAR RS.1,53,335.00 5) COMMISSION PAID BY SURESH KUMAR RS.2,08,335.00 6) COMMISSION PAID BY HONEY RAHULAN R S.1,53,335.00 TOTAL RS.11,40,010.00 ALL THE PAYMENT ARE MADE BY CHEQUE AND THE RECEIPTS WERE OBTAINED FROM THE PARTIES WHICH ARE PLACED AT PB PG. 50 TO 127. THER EFORE, THIS EXPENDITURE SHOULD BE REDUCED FROM THE SALE PROCEEDS OF THE SHARES. ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 14 18. AS REGARD BROKERAGE, WHICH HAS BEEN PAID ON A CCOUNT OF TRANSFER OF SHARES IS AS UNDER: 1) C.M. ANSARI RS.1,18,00 0.00 2) DHARMARAJ DAS RS.1,18,000.00 3) SUBRAMANIAN RS.1,18,000.00 4) SHAMEEN KHAN RS.1,18,000.00 5) CHACKO JOSE RS.1,18,000.00 RS.7,08,000.00 AS PER THE DETAILS ARE AVAILABLE AT PB PG. 128, THE CIT(A) HAS ALLOWED THE SAID EXPENDITURE IN THE APPELLATE ORDER WHICH WE FIND IS CORRECT AND WE DO NOT WANT TO INTERFERE WITH THE SAME. 19. AS PER THE AGREEMENT, THE CONSTRUCTION AND DEVELOPMENT WORK WAS NOT COMPLETED WITHIN THE TIME FRAME AND THE BUYERS REDU CED RS.25 LAKHS FROM THE TOTAL AMOUNT PAID. IN THIS CONNECTION, COPY OF THE LETTER DATED 26-03-2013 FROM M/S. CITRUS HOTEL REGARDING THE PERFORMANCE OF THE DEVELOPMENT WORK AS PER THE CONDITIONS AND THE DEDUCTION OF RS.25 LAKHS FOR NON PERFORMANCE OF THE CONDITIONS IS PLACED ON RECORD AT PB PG. 40-42. I N OUR VIEW, THE ASSESSING OFFICER ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 15 IS DIRECTED TO RECOMPUTE THE CAPITAL GAIN AS DISCUS SED HEREINABOVE AS UNDER:IN THE CIRCUMSTANCE AND FACTS OF THE CASE,THE APPEAL O F THE REVENUE ARE DISMISSED AND THAT OF THE ASSESSES MENTIONED HEREIN ABOVE ARE ALLOWED FOR STATISTICAL PURPOSES. TOTAL RECEIPT : (RS.9,75,00,000 LESS THAN 25,00,000 NO T PAID) 95,000,000 LESS : COMMISSION 1, 140,000 BROKERAGE 708,000 1,84 8,000 93,152,000 SBT LOAN LESS: SETTLEMENT 24,106,580 LOAN REPAYMENT DIRECTORS AND OTHERS AS PER PARA 6.2.4 OF SHARE PURCHASE AGREEMENT 19,000, 000 43,106,560 (PAPER BOOK PAGE NO:13) SALES CONSIDERATION OF SHARES 50,045,440 SALES CONSIDERATION PER SHARE (5 ,00,45,440/40000 RS.1251.14 VALUE OF ASSETS AS PER PARA 6,2,4 OF SHARE PURCHASE 43,506,560 AGREEMENT (PAPER BOOK PAGE NO. 13 COST OF IMPROVEMENT PER SHARE (43506560/40000) RS.1087.66 INDEXED COST OF SHARE (RS.10 X 632/437) RS.14.46 (SHARE ISSUED IN THE F.Y. 2005-06 & SOLD IN F.Y. 2009-1 0) TOTAL COST PER SHARE (1087.66 +14.46 1,102.12 CAPITAL GAIN PER SHARE (1251.14 1102.12) 149.02 ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 16 NAME NUMBER OF SHARES CAPITAL GAIN PER SHARE CAPITAL GAIN HARI NARAYANAN 8000 149.02 1,192 ,160 C.T. NARAYANAN 8000 149.02 1,192, 160 SREE KUMAR 4000 149.02 596.080 SURESH KUMAR N. 8000 149.02 1,192 .160 N.RADHAKRISHNAN 8000 149.02 1,192,160 HONEY RAHULAN 4000 149.02 596,0 80 TOTAL 5,960,800 THE ABOVE CAPITAL GAIN MAY BE ADOPTED IN THE ASSESSMENT OF THE PERSONS: HARI NARAYANAN, C.T. NARAYANAN, SREEKUMAR N., SURESH KU MAR N., N. RADHAKRISHNAN AND HONEY RAHULAN. 21. IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE DISMISSED AND ALL THE APPEALS OF THE ASSESSES ARE ALLOWED FOR STATISTIC AL PURPOSES. 22. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 2 4.05.2016 SD/- SD/ - (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : COCHIN DATED: 24 TH MAY, 2016 GJ COPY TO: 1. SHRI C.T. NARAYANAN, P/O, M/S. CTN & CO., GENER AL MERCHANTS & COMMISSION AGENTS, MARKET WARD, ALAPPUZHA-688 011. 2. SHRI RADHAKRISHNAN N., CHAKKARATHU VEEDU, NORTH KULAMAKKAL, MO WARD, ALAPPUZHA-688 001. 3. SHRI HARI NARAYANAN, CHAKKARATHU VEEDU, NORTH K ULAMAKKAL, MO WARD, ALAPPUZHA-688 001. 4. SHRI SURESHKUMAR N. CAKKARATHU VEEDU, NORTH KULA MAKKAL, MO WARD, ALAPPUZHA-688 001. 5. SHRI SREEKUMAR N. BASERA, P/O M/S. CTN & CO., GE NERAL MERCHANTS & COMMISSION AGENTS, MARKET WARD, ALAPPUZHA-688 001. . 6. SMT. HONEY RAHULAN, BASERA, NORTH KULAMAKKAL, M O WARD, ALAPPUZHA-688 001. 7. THE INCOME TAX OFFICER, WARD- 3, ALAPPUZHA. 8. THE COMMISSIONER OF INCOME-TAX(APPEALS)-V, KOCHI , ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 17 9. THE COMMISSIONER OF INCOME-TAX, KOCHI. 10.5. THE DR/ITAT, COCHIN BENCH. 11. GUARD FILE. BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 18 1.DATE OF DICTATION : 12/05/2016 2.DATE ON WHICH THE TYPED DRAFT IS PLACED 18/05/2016 BEFORE THE DICTATING MEMBER OTHER MEMBER: 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . PS/PS: 18/05/2016 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER : 18/05/2016 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. PS/PS : 24/05/2016 6. DATE ON WHICH THE FILE GOES TO BENCH CLERK: 25/0 5/2016 7. DATE ON WHICH THE FILE GOES TO HEAD CLERK: 8. DATE ON WHICH THE FILE GOES TO ASSISTANT REGISTR AR 9. DATE OF DISPATCH OF THE ORDER: ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 19 SL. NO. NAME OF THE TRANSFEROR SHARE HOLDER NO. OF SHARES TRANSFERRED NAME OF THE TRANSFEREE TOTAL CONSIDERATION (RS.) 1. C.T. NARAYANAN 4000 M/S. MIRAH HOSPITALITY 54,50,0 00 C.T. NARAYANAN 3000 OMPRAKASH GOENKA, PARVATI INDUSTRIAL ESTATE, LOWER PAREL (W), MUMBAI 40.87,500 C.T. NARAYANAN 1000 OMPRAKASH GOENKA, PARVATI INDUSTRIAL ESTATE, LOWER PAREL (W), MUMBAI 13,62,500 2. N. RADHAKRISHNAN 8000 M/S. MIRAH HOSPITALITY 1,09,0 0,000 3. HARI NARAYANAN 8000 M/S. MIRAH HOSPITALITY 1,09,0 0,000 4. SURESH KUMAR N. 8000 M/S. MIRAH HOSPITALITY 1,09,0 0,000 5. SREEKUMAR N. 4000 M/S. MIRAH HOSPITALITY 54,50 ,000 6. HONEY RAHULAN 4000 M/S. MIRAH HOSPITALITY 54,50, 000 TOTAL 5,45,00,000 ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 20 NAME DATE BANK/A/C NO AMOUNT C.T. NARAYANAN 06/01/2009 SBI 30428878352 20,00,000 C.T. NARAYANAN 06/01/2009 SBI 30428878352 5,00,000 C.T. NARAYANAN 06/01/2009 SBI 30428878352 15,00,000 C.T. NARAYANAN 26/12/2009 SBI 30428878352 24,50,000 C.T. NARAYANAN 26/12/2009 SBI 30428878352 6,12,500 C.T. NARAYANAN 26/12/2009 SBI 30428878352 18,37,500 C.T. NARAYANAN 15/03/2010 UBI 36805010055 10,00,000 C.T. NARAYANAN 15/03/2010 UBI 36805010055 7,50,000 C.T. NARAYANAN 15/03/2010 UBI 36805010055 2,50,000 HARI NARAYANAN 05/01/2009 SBT 67075935828 40,00,000 HARI NARAYANAN 30/12/2009 SBT 57035281896 49,00,000 HARI NARAYANAN 19/03/2010 SBI 30428879741 20,00,000 HONEY RAHULAN 06/01/2009 DLB9503000000053 20,00,000 HONEY RAHULAN 24/12/2009 DLB9503000000053 24,50,000 HONEY RAHULAN 15/03/2010 DLB9503000000053 10,00,000 SURESH KUMAR N. 07/01/2009 FBL10150100119685 40,00,000 SURESH KUMAR N. 24/12/2009 FBL10150100119685 49,00,000 SURESH KUMAR N. 15/03/2010 FBL10150100119685 20,00,000 N.SREEKUMAR 06/01/2009 DLB9503000000920 20,00,000 N.SREEKUMAR 24/12/2009 DLB9503000000920 24,50,000 N.SREEKUMAR 15/03/2010 DLB9503000000920 10,00,000 RADHAKRISHNAN 19/01/2009 DLB950300002724 40,00,000 RADHAKRISHNAN 24/12/2009 DLB950300002724 49,00,000 RADHAKRISHNAN 15/03/2010 DLB950300002724 20,00,000 . 5,45,00,000/- ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 21 1. LAND 6,81,60,000.00 2. BUILDING 2,22,96,000.00 3. GENERATOR, TRANSFORMER AND OTHER ASSETS 11,00,0 00.00 4. DRAINAGE SYSTEM AND WATER TANK ETC. 60,00,000.00 TOTAL VALUE 9,75,56,000.00 FIXED AT 9,75,00,000.00 1. 33 ROOMS AND 1 TREE HOUSE WITH ALL CIVIL WORK INCLUD ING BATHROOMS 2. RESTAURANT AND KITCHEN WITH ALL CIVIL WORK 3. SWIMMING POOL WITH ALL CIVIL WORK ADMEASURING 70 F T X 30FT AND KIDS POOL 4. WALKWAYS AND BUNDS IN THE PADDY FIELD 5. MINI BRIDGES (3) 6. WATER LILLY POND 7. LANDSCAPING AND LAWN 8. ELECTRICITY POWER WITH TRANSFORMER OF 150 KVA WITH POWER SUPPLY TO ALL ELECTRIC POINTS ON THE PROPERTY INCLUDING METERS AND SUB METERS. DEDICATED GENERATOR OF 100 KVA 9. CONSTRUCTION OF ROAD FROM NATIONAL HIGHWAY TO THE PR OPERTY ADMEASURING 3 METERS IN WIDTH. 10. WATER STORAGE TANKS HAVING CAPACITY OF 30,000 LI TERS FOR UNDERGROUND TANKS AND 10,000 LITER FOR OVERHEAD TANKS 11. SEWAGE TREATMENT PLANT ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 22 12. DRAINAGE TREATMENT PLANT 13. WATER PURIFICATION/FILTRATION PLANT TOTAL BUILD-UP CONSTRUCTION OF (1 TO 13) SHALL BE 30,000 SQ. FEET. BUILDING 36741621 CURRENT ASSETS 6764879 TOTAL RS.43506500 1) COMMISSION PAID BY C.T. NARAYANAN RS.2,08,335.00 2) COMMISSION PAID BY HARI NARAYANAN R S.2,08,335.00 3) COMMISSION PAID BY RADHAKRISHNAN RS.2 ,08,335.00 4) COMMISSION PAID BY N.SREEKUMAR RS.1,53,335.00 5) COMMISSION PAID BY SURESH KUMAR RS.2,08,335.00 6) COMMISSION PAID BY HONEY RAHULAN R S.1,53,335.00 TOTAL RS.11,40,010.00 1) C.M. ANSARI RS.1,18,000.00 2) DHARMARAJ DAS RS.1,18,000.00 3) SUBRAMANIAN RS.1,18,000.00 4) SHAMEEN KHAN RS.1,18,000.00 5) CHACKO JOSE RS.1,18,000.00 RS.7,08,000.00 TOTAL RECEIPT : (RS.9,75,00,000 LESS THAN 25,00,000 NO T PAID) 95,000,000 LESS : COMMISSION 1, 140,000 ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 23 BROKERAGE 708,000 1,84 8,000 93,152,000 SBT LOAN LESS: SETTLEMENT 24,106,580 LOAN REPAYMENT DIRECTORS AND OTHERS AS PER PARA 6.2.4 OF SHARE PURCHASE AGREEMENT 19,000, 000 43,106,560 (PAPER BOOK PAGE NO:13) SALES CONSIDERATION OF SHARES 50,045,440 SALES CONSIDERATION PER SHARE (5 ,00,45,440/40000 RS.1251.14 VALUE OF ASSETS AS PER PARA 6,2,4 OF SHARE PURCHASE 43,506,560 AGREEMENT (PAPER BOOK PAGE NO. 13 COST OF IMPROVEMENT PER SHARE (43506560/40000) RS.1087.66 INDEXED COST OF SHARE (RS.10 X 632/437) RS.14.46 (SHARE ISSUED IN THE F.Y. 2005-06 & SOLD IN F.Y. 2009-1 0) TOTAL COST PER SHARE (1087.66 +14.46 1,102.12 CAPITAL GAIN PER SHARE (1251.14 1102.12) 149.02 NAME NUMBER OF SHARES CAPITAL GAIN PER SHARE CAPITAL GAIN HARI NARAYANAN 8000 149.02 1,192 ,160 C.T. NARAYANAN 8000 149.02 1,192 ,160 SREE KUMAR 4000 149.02 596.080 SURESH KUMAR N. 8000 149.02 1,19 2.160 N.RADHAKRISHNAN 8000 149.02 1,192,160 HONEY RAHULAN 4000 149.02 596 ,080 TOTAL 5,960,800 THE ABOVE CAPITAL GAIN MAY BE ADOPTED IN THE ASSESSMENT OF THE PERSONS: ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 24 HARI NARAYANAN, C.T. NARAYANAN, SREEKUMAR N., SURESH KU MAR N., N. RADHAKRISHNAN AND HONEY RAHULAN. 1. C.T. NARAYANAN 20% 2. 20% 3. 20% 4. 20% 5. 10% 6. 10% THERE WAS A SURVEY U/S. 133A OF THE ACT IN THE CASE OF THE SAID COMPANY, CTN AGRO & COIR PRODUCTS PVT. LTD. ON 31/10/2011. DURIN G THE SURVEY, SHARE PURCHASE AGREEMENT (SPA) AND MEMORANDUM OF UNDERSTANDING (MO U) WERE FOUND AND IMPOUNDED WHICH SHOWED THAT ALL THE SHAREHOLDERS OF THE COMPANY HAD AGREED TO SELL THEIR SHARES TO A MUMBAI BASED COMP ANY, HOSPITALITY, PRICE AGREED UPON AS PER THE SPA AND THE MOU BEING RS. 1362.50 AND RS.1877.50 RESPECTIVELY. THE ASSESSMENT PROCEEDINGS WERE STAR TED AND SUMMON U/S. 131(1)(D) OF THE ACT WAS ISSUED TO THE DEPARTMENTAL OFFICER AT . FROM THE INFORMATION, IT WAS GATHERED THAT ALL THE SHAREHOLD ERS HAD TOGETHER RECEIVED RS.5.45 CRORES BEING THE CONSIDERATION OF THE SALE OF 10,000 SHARES OF THE COMPANY. RECEIPT OF EACH SHAREHOLDER WAS APPRO PRIATED TO THE ACCOUNT OF THE SHAREHOLDER . AS PER THE MOU, THE PURCHASER F OR A CONSIDERATION OF RS. 9.71 ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 25 CRORES. AFTER TAKING BANK LOAN OF RS. 2.4 CORES AND OTHER LOAN OF RS.1.90CRORES, THE NET CONSIDERATION WAS ARRIVED AT RS. 5.4 CRORES PAID TO THE ASSESSEE GROUP. IN THE RETURN OF INCOME, THE ASSESSEE HAD HARDL Y DISCLOSED THEIR SHARE FROM THE NET AMOUNT OF CONSIDERATION BEING RS.5.45 CRORE S. INSTEAD THEY HAD DECLARED A TOTAL SUM OF RS. 6.2 LAKHS ONLY. THE ASS ESSEE HAD CLAIMED THAT THEY HAD SPENT AN AMOUNT OF RS.4.53 CRORES BEING EXPENSE S INCURRED BY THEM FOR DEVELOPING THE PROPERTY AFTER ENTERING INTO THE SPA . ACCORDING TO THE ASSESSING OFFICER, NO PROPER VOUCHERS/BILLS WERE PRODUCED TO SUBSTANTIATE THE CLAIM. IT WAS ALSO FOUND BY THE ASSESSING OFFICER THAT THE A SSESSEE HAD MADE SUBSTANTIVE INVESTMENT IN OTHER PROPERTY (RS.3.35 CRORES) AND S BI MUTUAL FUND RS.1.50 LAKHS TOTALING TO NEARLY RS. 4,000 5 LAKHS PURSUANT TO TH IS TRANSACTION. THE ASSESSING OFFICER ACCORDINGLY CONCLUDED THAT THE ACTUAL SALE CONSIDERATION HAS TO BE TAKEN AT THE OF RS.45.45 CRORES. THE VALUE OF C OST POSITION OF THE SHARE WAS REDUCED FROM THE AMOUNT AND THE AMOUNT ASSESSE D AS LONG TERM CAPITAL GAIN. ON FIRST APPEAL BEFORE THE LD. CIT(A), THE CIT( A) ALLOWED THE AMOUNT F RS.11,40,000/- AND BROKERAGE OF RS.7.08 LAKHS FROM THE GROSS AMOUNT AS DEDUCTIBLE FROM RS.5.45 CRORES. THE AMOUNT OF RS.3 ,49,05,380/- BEING THE WORK-IN- PROGRESS AS ON 31 ST MARCH 2005. ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 26 BOTH THE ASSESSEES AND THE REVENUE ARE IN APPEAL BEFORE US IN THE CASE OF THE APPEALS MENTIONED HEREIABOVE. THE REVENUE HAS RAISED THE GROUND THAT THE LD. CIT(A) HAS WRONGLY ALLOWED THE CLAIM OF WORK-IN-PROGRESS AS ON 31 ST MARCH 2005 TO BE DEDUCTED FROM THE SALE CONSIDERATION. THE REVENUE HAS CLAIMED THAT T HE LD. CIT(A) DID NOT TAKE INTO COGNIZANCE THE FACT THAT THE SO CLAIMED EXPENS ES WERE INCURRED AFTER THE SPA. THE REVENUE HAS ALSO RAISED THE PLEA THAT THE INVESTMENTS MADE BY THE ASSESSEE WAS RS.4.85 CRORES TAKEN AS CUMULATIVE E FFECT BY THE ASSESSING OFFICER HAS NOT BEEN TAKEN COGNIZANCE OF BY THE LD. CIT(A). ON THE OTHER HAND, THE ASSESSEE HAS RAISED THE G ROUND THAT THE EXPENSES INCURRED AFTER 31 ST MARCH, 2009 ALSO SHOULD HAVE BEEN ALLOWED BY THE L D. CIT(A) TO BE DEDUCTED FROM THE SALE CONSIDERATION OF RS. 5 .45 CRORES. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE LD. AR HAS RELIED UPON THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND THE LD. DR RELIED UPON THE ORDERS OF BOTH THE AUTHO RITIES BELOW. B AFTER HEARING BOTH THE PARTIES AND PERUSAL OF R ECORD, WE FIND THAT THE FACTS OF M/S. CTN AGRO & COIR PRODUCTS PVT. LTD., ALLEPPEY B EING INCORPORATED ON 24 TH ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 27 JUNE, 2005, WHO PURCHASED 5.6 ACRES OF LAND BEARI NG NO. 181/6, 181/5, 181/4, 181/1, FOR THE PURPOSE OF CONSTRUCTION OF A TOURIST SPOT. AFTER PURCHASE OF THE SAID PROPERTY, IT WAS STATED THAT THE COMPANY WAS I NCURRING EXPENSES FOR THE REASON OF LOW LYING LAND WHICH WAS WATER-LOGGED. ON THE FRONT SIDE OF THE PROPERTY, THERE IS A AND ON THE OTHER SIDE THERE I S A CANAL. ON THE OTHER TWO SIDES AND PROPERTY OWNED BY OTHERS. FORTY EQUITY SHARES OF RS.10 EACH WERE SOLD BY SHRI C.T. NARAYANAN TO VARIOUS COMPANIES AS PER DETAILS BELOW: THE CONSIDERATION PAYABLE FOR THE SHAREHOLDERS AS P ER THE SPA IS FIXED AT RS.5.45 CRORES AND THE PAYMENTS WERE TRANSFERRED ON 22 ND DECEMBER, 2007 WHICH WAS RECEIVED BY THE SELLERS AS SHARES TO THE ASSESSES A S UNDER:- A PER THE FOLLOWING REPORT DATED 03.11.2008, THE VA LUE OF THE PROPERTY AND ASSETS OF THE COMPANY WERE DETERMINED AT A SHRI C.T. NARAYANAN AND OTHERS HAD ENTERED INTO A S HARE PURCHASE AGREEMENT ON 22.12.2009 BY TRANSFERRING THE SHARES OF THE COM PANY FOR A TOTAL CONSIDERATION OF RS.5.45 CRORES AS IS EVIDENT FROM THE SHARE PURC HASE AGREEMENT AVAILABLE AT PB PG. 11. THE WORKS TO BE DONE BY CTN AGRICULTURA L & COIR PRODUCTS PVT. LTD. (REFER PB PGE. 42) AS PER THE MOU OF THE FOLLOWING ARE DEVELOPMEJT OF THE PROPERTY ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 28 THE EXPENSES FOR THE DEVELOPMENT WILL INCREASE THE VALUE CORRESPONDINGLY THE VALUE OF BUILDING CONSTRUCTION UPTO 22.12.2009, BEI NG THE DATE OF TRANSFER OF SHARESOF 3,67,41,621/-. THE VALUE OF CONSTRUCTION U PTO 31 ST MARCH, 2009 WAS RS.3,45,05,380/- AS PER THE BALANCE SHEET AS AT MAR CH, 2005 (PB PG. 43) WHEREAS THE LD. CIT(A) HAS DEDUCTED THE EXPENSES UPTO 31 ST MARCH, 2009 FOR THE PURPOSE OF COMPUTING CAPITAL GAIN. AS PER CLAUSE 3.11 OF S HARE PURCHASE AGREEMENT AVAILABLE AT PB PG. 43, THE TOTAL VALUE OF THE ASSE T OF THE COMPANY AS ON 22.12.2009 IS AS UNDER: THEREFORE, ACCORDING TO US, VALUE SHOULD BE COM PUTED FOR THE PURPOSE OF VALUE OF SHARES. AS REGARDS THE LIABILITY OF THE COMPANY TO THE INCURRED FOR THE PURPOSE OF OUTSTANDING AS AND OF SHARE TRANSFER AMOUN TING TO RS.2,41,06,.- HAS BEEN BY THE AND ALSO RS.1,90 CRORES BEING FOR PAID B Y HE COMPANYDIRECTLY AS REGARDS THE EXPENSES ON ACCOUNT OF BROKERAGE FO R THE PURPOSE OF TRANSFERRING THE WHICH HAS BEEN PAID AS UNDER: ALL THE PAYMENT ARE MADE BY CHEQUE AND THE RECEIPTS RECEIVED E, SSESOF WHICH ARE PLAED AT PB PG. 50 TO 127. THEREFORE, TH IS EXPENDITURE SHOULD BE ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 29 REDUCED FROM THE SALE PROCEEDS OF THE SHARES. AS R EGARD BROKERAGE, WHICH HAS BEEN PAID ON ACCOUNT OF TRANSFER OF SHARES IS AS UN DER: AS THE DETAILS ARE AVAILABLE AT PB PG. 128, THE CIT (A) HAS ALLOWED THE SAID EXPENDITURE IN THE APPELLATE ORDER WHICH WE FIND IS CORRECT AND WE DO NOT INTERFERE WITH THE SAME. AS PER THE AGREEMENT, THE CONSTRUCTION AND DEVE LOPMENT WERE COMPLETED WITHIN THE TIME FRAME REDUCED RS.25 LAKHS FROM THE TOTAL AMOUNT. IN THIS CONNECTION, COPY OF THE LETTER DATED 20 TH MARCH 2013 FROMM/S. REGARDING THE PURPOSE OF DEVELOPMENT WORK. AS PER THE CONTENT OF THE LETTER THE NON PERFORMANCE OF THE IS PLACED ON RECORD AT PB PG. 42 . IN OUR VIEW, THE AO IS DIRECTED TO RECOMPUTED THE CAPITAL GAIN AS DISCUSSE D HEREINABOVE AS UNDER.IN THE CIRCUMSTANCE AND FACTS OF THE CASE,THE APPEAL O F THE REVENUE ARE DISMISSED AND THAT OF THE ASSESSES MENTIONED HEREIN ABOVE ARE ALLOWED FOR STATISTICAL PURPOSES. ITA NOS. 103-108/COCH/2015 & 115-120/COCH/2015 30