ACIT (OSD) 8(3), MUMBAI V. ASIANET HOLDINGS P. LTD, MUMBAI

ITA 1178/MUM/2010

• Counselvise Citation: 117819914 RSA 2010
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 20-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 12-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAVAN VED
• Assessee Lawyers: SHAILESH S SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIB UNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI D.K.AGARWAL, JM ITA NO.1178/MUM/2010 : ASST. YEAR 2006-2007 THE ASSTT.COMMISSIONER OF INCOME-TAX RANGE 8(3) MUMBAI. M/S.ASIANET HOLDINGS PRIVATE LIMITED JAY CHAMBERS, 3 RD FLOOR, SERVICE ROAD VILE PARLE (EAST), MUMBAI 400 057. PAN : AABCR3246B. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI PAVAN VED RESPONDENT BY : SHRI SHAILESH S.SHAH DATE OF HEARING : 20.12.2011 DATE OF PRONOUNCEMENT :23.12.2011 O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 24.11.2009 IN RELATION TO THE ASSESSMENT YEAR 2006-2007. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE DELETION OF ADDITION OF ` 5,61,07,750 MADE BY THE ASSESSING OFFICER ON ACCOUN T OF DIFFERENCE IN VALUATION OF SHARES SOLD BY THE ASSESSEE. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE SOLD 17,75,000 SHARES OF M/S.ASIANET COMMUNICATIONS LIMITED AT THE RATE OF ` 13 PER SHARE TO M/S.ANJALI TECHNOLOGY HOLDINGS PRIVATE LIMITED, IN WHICH SHRI RAJI MENON, THE MAIN SHAREHOLDER IN THE ASSESSEE-COMPANY, HELD SUBSTANTIAL SHAREHOLDING. THE ASSESSING OFFICER OBSERVED THAT THE BOOK VALUE OF THE SHARES OF M/S.ASIANET COMMUNICATIONS LIMITED WAS ` 31.29 AND ` 44.61 PER SHARE AS ON 31.3.2005 AND 31.3.2006 RESPECTIVELY. THIS BOOK VAL UE WAS COMPUTED BY CONSIDERING THE ERSTWHILE SCHEDULE III OF THE WEALT H-TAX ACT. ON BEING CALLED UPON TO EXPLAIN AS TO WHY THE DIFFERENCE OF ` 31.61 PER SHARE ( ` 41.61 ` 13) BE ITA NO.1178/MUM/2010. M/S.ASIANET HOLDINGS PRIVATE LIMITED. 2 NOT TREATED AS ASSESSEES INCOME FROM OTHER SOURCES , THE ASSESSEE STATED THAT IT WAS A NEGOTIATED TRANSACTION AND THERE WAS NO UNDER VALUATION OF SHARES AS THE ASSESSEE-COMPANY PURCHASED THE SHARES OF SAME COMPA NY AFTER A GAP OF LESS THAN TWO MONTHS AT THE RATE OF ` 10.57 PER SHARE. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION ON THE GROUND THAT M/S.ASIANE T COMMUNICATIONS LIMITED WAS A SISTER CONCERN OF THE ASSESSEE AND IT WAS A M AKE BELIEVE ARRANGEMENT. APPLYING THE SALE PRICE AS ` 44.61 PER SHARE, THE A.O. MADE ADDITION OF ` 5,61,07,750 AT THE RATE OF ` 31.61 PER SHARE UNDER THE HEAD `INCOME FROM OTHER SOURCES. THE LEARNED CIT(A) ORDERED FOR THE DELETI ON OF ADDITION. 4. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD IT IS NOTED THAT M/S.ASIANET COMMUNICATIONS LIMITED IS NOT LISTED ON THE STOCK EXCHANGE. THE ASSESSING OFFICER HAS APPLIED T HE RATE OF ` 44.61 PER SHARE AS THE PRICE WHICH WOULD HAVE BEEN EARNED BY THE AS SESSEE IF SOLD AT AN ARMS LENGTH BASIS. THE LEARNED A.R. STATED THAT THE CALC ULATION OF ` 44.61 PER SHARE WAS WRONGLY MADE INASMUCH AS THE ASSESSING OFFICER FAILED TO CONSIDER THAT THERE WAS A CONTINGENT LIABILITY OF THE COMPANY AND IF THE SAME WAS TAKEN INTO CONSIDERATION, THE BOOK VALUE OF SHARES WOULD TURN OUT TO BE NEGATIVE FIGURE OF ` 28 PER SHARE AS ON 31.03.2005 AND NEGATIVE FIGURE O F ` 16 PER SHARE AS ON 31.3.2006. THIS SUBMISSION WAS MADE BEFORE THE LEAR NED FIRST APPELLATE AUTHORITY ALSO. NO MATERIAL HAS BEEN PLACED BEFORE US BY THE LEARNED DEPARTMENTAL REPRESENTATIVE TO CONTROVERT THIS FACT UAL POSITION. ANOTHER IMPORTANT POINT WHICH CANNOT BE LOST SIGHT OF IS TH AT THE ASSESSEE SOLD 17.75 LAKH SHARES AT ` 13 PER SHARE AS ON 29.9.2005 AND AGAIN WITHIN A GAP OF LESS THAN 2 MONTHS I.E. ON 22.11.2005 IT PURCHASED 29.29 LAKH S HARES OF THE SAME COMPANY AT THE RATE OF ` 10.57 PER SHARE. THE SAID ACQUISITION OF SHARES BY THE ASSESSEE AT A LOWER RATE HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. THESE FACTS FAIRLY INDICATE THAT THE TRANSACTION WAS ENTERED INTO BETW EEN THE TWO COMPANIES AT AN ARMS LENGTH. IF THE DEPARTMENT HAS ACCEPTED THE RA TE OF ` 10.57 PER SHARE AS ITA NO.1178/MUM/2010. M/S.ASIANET HOLDINGS PRIVATE LIMITED. 3 REASONABLE FOR MAKING PURCHASE, THERE IS NO LOGIC I N NOT ACCEPTING A HIGHER RATE OF ` 13 PER SHARE AS SALE PRICE FOR THE SAME SHARES AND THAT TOO WITHIN A GAP OF LESS THAN TWO MONTHS. UNDER SUCH CIRCUMSTANCES WE A RE OF THE CONSIDERED OPINION THAT THE LEARNED CIT(A) WAS JUSTIFIED IN DE LETING THIS ADDITION. 5. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS 23 RD DAY OF DECEMBER, 2011. SD/- SD/- (D.K.AGARWAL) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 23 RD DECEMBER, 2011. DEVDAS* SD/- (R.K.PANDA) AM (NOMINATED) COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A)-XVIII, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.