The Assistant Commissioner of Income Tax, Circle-2(1), Guntur V. Battini Nageswara Rao, Narasaraopet

ITA 12/VIZ/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7918 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 07-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SONOWAL
• Assessee Lawyers: V NAGAPRASAD
• Keywords: Salary income; Share purchase agreement; Fair market value; Set aside

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 11 /VIZ/201 9 ( / ASSESSMENT YEAR : 20 1 4 - 1 5 ) ASST.COMMISSIONER OF INCOME TAX CIRCLE - 2(1) GUNTUR VS. SRI DANDA BRAHMANANDAM 13AJ BLOCK, 5 TH STREET SANTHI COLONY ANNANAGAR, CHENNAI [PAN : AESPD2628B ] ( / APPELLANT) ( / RESPONDENT) ./ I .T.A.NO. 12/VIZ/2019 ( / ASSESSMENT YEAR : 2014 - 15) ASST.COMMISSIONER OF INCOME TAX CIRCLE - 2(1) GUNTUR VS. SRI BATTINI NAGESWARA RAO D.NO.11 - 15 - 8, RAMIREDDY PET NARSARAOPET GUNTUR [PAN : AFLPB1688P ] ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : S HRI D.K.SONOWAL , CIT DR / RESPONDENT BY : SHRI V.NAGA PRASAD, AR / DATE OF HEARING : 01 . 07. 201 9 / DATE OF PRONOUNCEMENT : 19 .07. 201 9 2 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR / O R D E R P ER SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER : THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 1, GUNTUR VIDE APPEALNO.103/2016 - 17AND NO.109/2016 - 17 DATED 22.10.2018 FOR THE ASSESSMENT YEAR (A.Y.) 2014 - 15. SINCE THE GROUNDS RAISED IN THESE APPEALS ARE COMMON, THESE APPEALS ARE CLUBBED, HEARD TOGETHER AND A COMMON ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AS UNDER. I.T.A. NO.11/VIZ/2019, A.Y.2014 - 15 2. THE ASSESSEE IS AN INDIVIDUAL, DERIVING INCOME FROM SALARY, ADVISORY FEES, HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES FILED HIS RETURN OF INCOME ADMITTING TOTAL INCOME OF RS.168,83,71,070/ - ON 27.09.2014. THE CASE WAS SELECTED FOR SCRUTIN Y AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) FOUND THAT THE ASSESSEE WA S A MAJOR STAKE HOLDER, HOLDING 10.34% OF SHARES IN M/S TIRUMALA MILK PRODUCTS PVT. LTD. (M/S TMPPL) AND IS ALSO A PROMOTER - DIRECTOR. DURING THE YEAR, THE ASSESSEE ALONG WITH ALL OTHER INDIVIDUAL SHAREHOLDERS AND A FOREIGN COMPANY ENTERED INTO AN AGREEMENT DATED 04.11.2013 FOR SALE OF 3 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR HIS TOTAL SHARES IN M/S TMPPL TO M/S BSA INTERNATIONAL. IN THE PROCESS, M/S TMPPL HAS GIVEN E NGAGEMENT L ETTER (EL) DATE D 05.07.2013 TO M/S BARCLAYS BANK PLC (IN SHORT BARCLAYS) FOR EVALUATING THE VALUE OF ITS SHARES, SEARCHING A PROBABLY BUYER TO HAVE CONTROL OVER ITS INVESTMENTS OR IN ITS AFFAIRS AND RECEIPT OF SALE CONSIDERATION ETC.. THE TERMS OF THE AGREEMENT ENTERED INTO ARE THAT THE BARCLAYS BANK HAS TO EVALUATE THE SHARES, TO ASSIST THE ASSESSEE IN IDENTIFYING THE POTENTIAL BUYER AND ACT AS A SOLE FINANCIAL ADVISER OF THE COMPANY. ON FINALIZATION OF THE TRANSACTION THE COMPANY M/S TMPPL HAS TO PAY SUCCESS FE E TO M/S BARCLAYS BANK AS PER THE INVOICE RAISED. ACCORDINGLY, AT THE END OF THE TRANSACTION, M/S BARCLAYS RAISED AN INVOICE OF RS.28,81,31,631/ - AS SUCCESS FEE FOR THE TRANSACTION AND THE SAME WAS MET BY M/S TMPPL. THE AO OBJECTED FOR THE PAYMENT OF SU CCESS FEE OF RS.28.81 CRORES BY THE COMPANY M/S TMPPL FOR SALE OF SHARES OF INDIVIDUAL STAKEHOLDERS OF THE COMPANY. THE AO IS OF THE VIEW THAT THE PAYMENT OF SUCCESS FEE WAS THE OBLIGATION OF THE SHARE HOLDERS. FROM THE FINANCIALS OF M/S TMPPL, THE AO OBS ERVED THAT THE AMOUNT OF RS.28.81 CRORES, INTER - ALIA WAS SHOWN AS PAYMENT DOWN THE LINE OF PROFITS. TO ELABORATE M/S TMPPL IN THE AUDITED FINANCIALS FOR THE A.Y. 2014 - 15 ARRIVED AT PROFIT OF RS.58,55,28,292/ - AND DOWN THE LINE, SHOWN THE AMOUNT 4 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR OF RS.28,8 1,31,631/ - AS PAID TOWARDS PROFESSIONAL FEE UNDER EXCEPTIONAL ITEMS. FROM THE PROFIT AND LOSS ACCOUNT, THE AO FOUND THAT THE COMPANY HAS NOT CLAIMED THIS AMOUNT AS EXPENDITURE IN ITS HANDS. THE AO FURTHER OBSERVED THAT THE EXPENDITURE TOWARDS SALE OF SH ARES WAS MADE BY THE COMPANY OUT OF ITS TAXED PROFITS. THE AO FURTHER OPINED THAT THE SUM OF RS.28.81 CRORES PAID BY M/S TMPPL TO M/S BARCLAYS BANK REQUIRED TO BE CONSIDERED IN THE HANDS OF THE ASSESSEE PROPORTIONATELY U/S 2(24)(IV) OF THE INCOME TAX ACT. ACCORDINGLY, THE AO ISSUED SHOW CAUSE LETTER CALLING FOR THE EXPLANATION OF THE ASSESSEE AS TO WHY THE AMOUNT SHOULD NOT BE TREATED AS INCOME IN THE HANDS OF THE ASSESSEE. IN RESPONSE, THE ASSESSEE FILED REPLY STATING THAT THE INTENTION BEHIND THE TRANSA CTION WAS TO SELL THE BUSINESS OF THE COMPANY FULLY OR PARTLY TO A PROBABLE BUYER AND IT WAS NOT FOR SALE OF SHARES BY INDIVIDUALS OR PROPOSAL TO SELL THE SHARES OF THE ASSESSEE TO M/S BSA INTERNATIONAL LTD. THE COMPANY, M/S TMPPL IS RESPONSIBLE FOR PAYMEN T OF FEE UPON SUCCESS OF THE EL . IT IS THE OBLIGATION OF THE COMPANY TO PAY TO M/S BARCLAYS FOR EVALUATING IT S ASSETS AS ON PARTICULAR DATE LIKE ANY OTHER LIABILITY AND THE PAYMENT OF FEE TO BARCLAYS WAS SHOWN AS LIABILITY FOR THE COMPANY WHILE ARRIVING AT THE VALUE OF THE SHARES OF THE COMPANY. THE ASSESSEE FURTHER SUBMITTED THAT HE IS NOT THE DIRECTOR AT THE TIME OF 5 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR RAISING INVOICE BY M/S BARCLAYS BANK AND ALSO AS ON THE DATE OF PAYMENT AND ARGUED THAT THE PROVISIONS OF SECTION 2(24) (IV) CANNOT BE IN VOKED IN HIS CASE. ALTERNATIVELY, THE ASSESSEE SUBMITTED THAT IN CASE THE PAYMENT MADE TO M/S BARCLAYS BANK IS TO BE TREATED AS INCOME IN THE HANDS OF THE ASSESSEE , THE SAME IS TO BE ALLOWED AS EXPENDITURE FOR TRANSFER OF SHARES U/S 48(1) OF THE ACT. THE AO CONSIDERED THE OBJECTIONS AND FOUND THAT THE SUBMISSIONS MADE BY THE ASSESSEE ARE NOT IN LINE WITH THE TREATMENT GIVEN BY M/S TMPPL IN ITS BOOKS OF ACCOUNTS. THE SAID AMOUNT WAS NOT DEBITED TO EXPENDITURE ACCOUNT BUT WAS SHOWN AS DOWN THE LINE OF ADJUSTMENTS. THE ACTUAL EL WITH M/S BARCLAYS WAS DATED 05.07.2013 AND THE PARTIES TO THIS TRANSACTION WE RE M/S TIRUMALA MILK PRODUCTS (P) LTD., AND M/S BARCLAYS BANK PLC. IT WAS MENTIONED IN THE EL THAT M/S BARCLAYS WAS ENGAGED BY M/S TMPPL TO PROVIDE FINANCIAL ADVICE AND RELATED ASSISTANCE IN CONNECTION WITH A POSSIBLE TRANSACTION. THE AO OBSERVED THAT THE FACTUAL DEVELOPMENT PURSUANT TO THE EL THAT HAD TAKEN PLACE WA S THAT THE CONTROL OVER M/S TMPPL HAS BEEN SHIFTED FROM THE INDIVIDUAL SHAREHOLDERS TO M/S BSA INTERNATIONAL LTD., BY OF SALE OF SHARES HELD BY VARIOUS STAKE HOLDERS OF M/S TMPPL. THE ASSESSEE BEING ONE OF THE PROMOTE - DIRECTOR HOLDING 10.34% OF THE STAKE IN M/S TMPPL , SOLD HIS SHARES PURSUANT TO THE EL AND 6 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR RECEIVED THE SALE CONSIDERATION , T HE BENEFIT OF WHOLE TRANSACTION OF ENTERING INTO AGREEMENT, GETTING THE VALUE OF SHARES EVALUATED, TRANSFER OF SHARES OF INDIVIDUAL SHARES TO M/S BSA WA S CERTAINLY DERIVED BY THE INDIVIDUAL SHARE HOLDERS, INCLUDING THE ASSESSEE AND NOT THE COMPANY. IT IS FOR THIS REASON, THE AO VIEWED THAT THE COMPANY HA S NOT CLAIMED ANY EXPENDITURE OUT OF THE TRANSACTION AND RIGHTLY SHOWN THE SAME AS PAID OUT OF THE TAXED PROFITS, BELOW THE L INE OF ADJUSTMENT. THE AO ALSO OBSERVED THAT NO ASSETS OF THE COMPANY W ERE SOLD BY SETTLEMENT, BUT ONLY SHAREHOLDING OF THE COMPANY WAS SHIFTED FROM 41 INDIVIDUAL STAKE HOLDERS AND ONE FOREIGN ENTITY TO ONE M/S BSA INTERNATIONAL LTD, THEREFORE, VIEWED THE SAID AGREEMENT AS A CUSTOMARY EXERCISE AND NO IMPORTANCE CAN BE ATTACHED AT ANY STRETCH AND ACCORDINGLY HELD THAT THE PROPORTIONATE AMOUNT OF PAYMENT MADE BY THE COMPANY IS TO BE TREATED AS INCOME IN THE HANDS OF THE ASSESSEE U/S 2(24)(IV) OF THE ACT . 2.1. THE ASSESSEES ALTERNATE ARGUMENT THAT HE WAS NOT THE DIRECTOR AS ON THE DATE OF TRANSACTION OR AT THE TIME OF R AISING INVOICE BY M/S BARCLAYS WA S ALSO NOT FOUND FAVOUR BY THE AO . THE AO OBSERVED THAT THOUGH THE ASSESSEE WAS NOT DIRECTOR AT THE TIME OF RAISING THE INVOICE, HE WAS THE DIRECTOR AS ON THE DATE OF ENTERING THE AGREEMENT AND HELD THAT HE CERTAINLY DERIVED THE 7 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR BENEFIT AND THE SAME REQUIRED TO BE BROUGHT TO TAX UNDER SECTION 2(24)(IV) OF THE ACT AND ACCORDINGLY , THE PROPORTIONATE AMOUNT OF RS.2,9 7,92,811 PAID BY M/S TMPPL ON SALE OF SHARES OF THE ASSESSEE WA S TREATED AS HIS INCOME AND ASSESSED UNDER THE HEAD OTHER SOURCES. 3. AGAINST THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) GONE THROUGH THE EL AND FOU ND THAT THE EL WAS BETWEEN M/S TMPPL AND M/S BARCLAYS WHICH AND EXECUTED ON 05.07.2013. M/S BARCLAYS WAS ENGAGED TO PROVIDE FINANCIAL ADVICE RELATED ASSISTANCE TO CLIENTS IN CONNECTION WITH THE POSSIBLE TRANSACTION. THE CIT(A) OBSERVED FROM THE EL THAT I T WAS NOT EXCLUSIVELY MEANT FOR TRANSFER OF SHARES. THE EL PROVIDES FOR SALE OF BUSINESS OR ASSETS AND ALSO STATES THAT THE ENGAGEMENT WAS FOR POSSIBLE TRANSACTIONS. AS PER THE EL , THE SUCCESS FEE HAS TO BE PAID BY M/S TMPPL ON COMPLETION OF TRANSACTION. THE LD.CIT(A) OBSERVED THAT SUBSEQUENT ACT OF TRANSFER OF SHARES BY THE INDIVIDUAL SHAREHOLDERS TO M/S BSA CANNOT BE READ INTO THE CLAUSE OF EL TO UNDERSTAND THE INTENTION, AS DONE BY THE AO AND THE EL IS AN ENFORCEABLE DOCUMENT BETWEEN THE TMPPL & BARCLA YS BANK. THEREFORE, THE LD.CIT(A) HELD THAT THE AOS FINDING THAT THE ASSESSEE HAD SOLD THE SHARES PURSUANT TO EL AND RECEIVED THE SALE CONSIDERATION IS MISUNDERSTANDING OF THE WHOLE TRANSACTION. ACCORDINGLY, 8 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR THE LD.CIT(A) HELD THAT THE AOS FINDING THAT THE CERTAIN BENEFIT ACCRUED TO THE ASSESSEE WITH REFERENCE TO THE SUCCESS FEE PAID BY M/S TMPPL IS INCORRECT. THE LD.CIT(A) ALSO DID NOT ACCEPT THE CONTENTION OF AO THAT THE ASSESSEE WAS THE DIRECTOR AT THE TI ME OF RAISING THE INVOICE, AND HELD THAT SECTION 2(24)(IV) IS INAPPLICABLE IN THE ASSESSEES CASE. THE LD.CIT(A) VIEWED THAT THE PAYMENT WAS MADE AFTER THE ASSESSEE WAS CEASED TO BE DIRECTOR AND SHAREHOLDER IN THE COMPANY AND THE VIEW POINT OF THE AO ON T HE ISSUE WAS ALSO INCORRECT. ACCORDINGLY, ALLOWED THE APPEAL OF THE ASSESSEE. 4. AGAINST THE ORDER OF THE LD.CIT(A), THE REVENUE FILED APPEAL BEFORE THIS TRIBUNAL. ALL THE GROUNDS OF APPEAL ARE RELATED TO THE TREATMENT GIVEN BY THE AO IN RESPECT OF THE A MOUNT OF RS.2,97,92,811/ - TAXING THE SUM U/S 2(24)(IV) OF THE A CT. 4.1. DURING THE APPEAL HEARING, THE LD.DR ARGUED THAT THE ASSESSEE COMPANY M/S TMPPL HAS PAID THE SUM OF RS.28.81 CRORES TO M/S BARCLAYS BANK . THE ASSESSEE BEING THE DIRECTOR AND SHAREH OLDER OF 10.34%, THE ASSESSEE GOT INDIRECT BENEFIT WHICH REQUIRED TO BE TAXED U/S 2(24)(IV) OF THE ACT. THE LD.DR FURTHER SUBMITTED THAT THOUGH THE ASSESSEE CLAIMED THAT HE WAS NOT THE DIRECTOR AS ON THE DATE OF RAISING THE INVOICE, IT IS A FACT THAT 9 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR AS O N THE DATE OF ENTERING THE AGREEMENT, THE ASSESSEE WAS DIRECTOR, HENCE SECTION 2(24)(IV) ATTRACTS IN ASSESSEES CASE. THOUGH THE AGREEMENT WAS ENTERED INTO BETWEEN M/S TMPPL AND M/S BARCLAYS BANK, NO ASSET WAS TRANSFERRED AND IT WAS ONLY THE SHARES OF TH E INDIVIDUAL SHAREHOLDERS WHICH WERE TRANSFERRED, THEREFORE, THE CONTENTION OF THE ASSESSEE THAT THE AGREEMENT ENTERED TO PROVIDE FINANCIAL ASSISTANCE AND RELATIVE ASSISTANCE IN CONNECTION WITH POSSIBLE TRANSACTION IS NOTHING BUT A MAKE BELIEVE ARRANGEMENT AND THE ASSESSEE GOT DIRECT BENEFIT BY WAY OF TRANSFER OF SHARES. THEREFORE, ARGUED THAT THE AO RIGHTLY MADE THE BENEFIT DERIVED BY THE ASSESSEE INDIRECTLY U/S 2(24)(IV) OF THE ACT. EVEN THE COMPANY DID NOT DEBIT THE EXPENDITURE IN ITS BOOKS OF ACCOUNTS AND THE COMPANY ALSO SHOWN THE PAYMENT DOWN BELOW THE TAXED PROFITS AND REDUCED FROM THE TAXED PROFITS WHICH ESTABLISHES THAT THE SAID EXPENDITURE WAS MET ON BEHALF OF THE SHAREHOLDERS . THE LD.DR FURTHER ARGUED THAT THE CONTENTION OF THE LD.CIT(A) IS NOT ACCEPTABLE WITH REGARD TO HIS OBSERVATION THAT THE ASSESSEE WAS NOT A DIRECTOR AT THE TIME OF RAISING THE INVOICE, SINCE, HE WAS ONE OF THE DIRECTORS AT THE TIME OF ENTERING INTO AGREEMENT, HE ARGUED THAT THE PROVISIONS OF SECTION 2(24)(IV) REQUIRED TO B E APPLIED IN THE CASE OF THE ASSESSEE AND THE BENEFIT DERIVED BY THE ASSESSEE TO BE BROUGHT TO TAX. 10 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR ACCORDINGLY, THE LD.DR SUBMITTED THAT THE AO HAS RIGHTLY REDUCED THE PROPORTIONATE AMOUNT PAID TO M/S BARCLAYS BANK FROM THE LONG TERM CAPITAL GAINS AND TA XED THE SAME AS INCOME FROM OTHER SOURCES. HENCE, ARGUED THAT THE LD.CIT(A) IS INCORRECT IN HOLDING THAT THE ASSESSEE DID NOT DERIVE ANY BENEFIT AS PER THE AGREEMENT ENTERED INTO BY M/S TMPPL. ACCORDINGLY REQUESTED TO SET ASIDE THE ORDER OF THE LD.CIT(A) AND RESTORE THE ASSESSMENT ORDER. 5. ON THE OTHER HAND, THE LD.A R SUBMITTED THAT THE COMPANY HAD ENTERED INTO SHARE PURCHASE AGREEMENT WITH FIRST CARLYLE GROWTH VII, FIRST CARLYLE VENTURES III AND OTHERS AS ON 10 TH APRIL , 2010 TO RAISE THE ADDITIONAL FUN DS FOR ITS EXPANSION PLANS AND REQUESTED THE INVESTORS TO MAKE FINANCIAL INVESTMENT IN THE COMPANY BY SUBSCRIBING TO THE INVESTOR PREFERENCE SHARES, DIFFERENTIAL EQUITY SHARES AND PURCHASING INVESTOR EQUITY SHARES FOR WHICH THE CARLYLE GROUP HAS AGREED SUB JECT TO THE TERMS AND CONDITIONS OF AGREEMENT ENTERED INTO BETWEEN THE PARTIES ON 10.04.2010. THE AGREEMENT ALSO PROVIDED FOR EXIT ROUTE WHICH IS DISCUSSED IN CLAUSE NO.13, 13.1. 13.2 OF THE AGREEMENT. AS PER THE EXIT ROUTE, THE COMPANY AND THE PROMOTERS SHALL MAKE THEIR BEST EFFORTS TO PROVIDE AN EXIT ROUTE TO THE INVESTORS BEFORE 31.03.2014 THROUGH QIPO OR QSS OR WITH INVESTOR CONSENT, AN IPO OR A 11 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR STRATEGIC SALE. THE PROMOTERS ALSO AGREED THAT IF REQUIRED FOR THE PURPOSE OF COMPLYING WITH THE PROVISION S OF LAW, THE PROMOTERS SHALL OFFER THE PROMOTER S SHARES FOR SALE IN QIPO, IPO, QSS OR STRATEGIC SALE AS THE CASE MAY BE. IF THE COMPANY DOES NOT PROVIDE EXIT ROUTE AS PER CLAUSE 13.1., THE COMPANY AND THE SHARE HOLDERS ARE REQUIRED TO EXTEND ALL COOPERATI ON AND MAKE ARRANGEMENTS FOR SALE OF SHARES OF THE INVESTORS EVEN BY USING ALL ITS RESOURCES. FOR THE SAKE OF CLARITY, CLAUSE 13.2 READS AS UNDER. 13.2. NO EXIT ROUTE . IF THE COMPANY DOES NOT PROVIDE AN EXIT ROUTE TO THE INVESTORS AS PROVIDED IN CLAUSE 13.1 ABOVE WITHIN THE EXI T ROUTE PERIOD, THEN AT THE SOLE OPTION OF THE INVESTORS, THE INVESTORS MAY REQUIRE A. THE COMPANY AND THE EXISTING SHAREHOLDERS TO COOPERATE TO ARRANGE AN OFFER FOR SALE OF ALL SHARES HELD BY THE INVESTORS THROUGH AN IPO AT A RECO GNISED STOCK EXCHANGE AN TERMS AND CONDITIONS DETERMINED BY THE INVESTORS WITHIN A PERIOD OF 120 (ONE HUNDRED AND TWENTY) DAYS OF RECEIPT OF A NOTICE FROM THE INVESTORS; AND/OR B. SUBJECT TO APPLICABLE LAW, THE PROMOTERS SHALL EXERCISE ALL THEIR VOTING AND :OTHER RIGHTS IN A MANNER SUCH THAT THE COMPANY USES ALL OF ITS SURPLUS FUNDS , FREE CASH FL OWS AND RESERVES AVAILABLE FOR EACH YEAR TO FIRST BUYBACK THE SHARES OF THE INVESTORS AT THE HIGHER OF THE VALUATION SET OUT IN DEFINITION OF QIPO VALUATION OR FAIR MA R KET V ALUE ('FMV'), I. PROVIDED, HOWEVER, THAT, NOTWITHSTANDING ANYTHING ELSE CONTAINED HEREIN, THE 'EXISTING SHAREHOLDERS SHAL L ABSTAIN FROM OFFERING THEIR SHARES IN A BUY - BACK OF SHARES BY THE COMPANY AS PROVIDED IN CLAUSE 13 . 2(B) ABOVE; II. IN RESPECT OF INVESTOR PREFERENCE SHARES, THE FMV FOR SUCH INVESTOR PREFERENCE SHARES SHALL BE DETERMINED BASED ON THE FMV OF THE UNDERLYING EQUITY SHARES. THE COMPUTATION OF THE FMV OF THE EQUITY SHARES SHALL BE DONE BY ANY INVESTMENT BANKER OF INTERNATIONAL REPUTE TO BE NOMINATED MUTUALLY BY THE INVESTORS AND THE COMPANY IN ACCORDANCE WITH GENERALLY ACCEPTED VALUATION PRINCIPLES. 12 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR 5.1. AS PER CLAUSE 13.4, ALL COSTS AND EXPENSES RELATING TO THE EXIT BEING PROVIDED TO THE INVESTORS UNDER THIS CLAUSE 13 SHALL BE BORNE BY THE COMPANY. THEREFORE, THE LD.AR ARGUED THAT EXIT ROUTE HAS NOT GIVEN ANY OPTION TO THE COMPANY AND THE PROMOTERS AND THEY ARE BOUND BY AGREEMENT FOR OFFERING THEIR SHARES AS PER THE AGREEMENT REACHED BETWEEN THE COMPANY AND THE INVESTORS TO HONOUR THE COMMITMENT. THEREFORE, THE COMPANY M/S TMPPL HA S ENTERED INTO AN ARRANGEMENT WITH M/S BARCLAYS BANK THROUGH EL TO PROVIDE FINANCIAL ADVICE AND RELATED ASSISTANCE TO THE CLIENT IN CONNECTION WITH POSSIBLE TRANSACTION INVOLVING THE CLIENT. FOR THE PURPOSE OF THIS EL , THE TRANSACTION MEANS THE SALE, HOWSOEVER EFFECTED AND WHETHER UNDERTAKEN IN ONE OR SERIES OF TRANSACTIONS OF THE CLIENT OR OF ALL OR ANY PART OF THE CLIENTS BUSINESS AND ASSETS AND OR ANY OTHER MEANS BY WHICH CONTROL OF OR AN INVESTMENT IN, THE CLIENT IS OBTAINED. THE SCOPE OF ENGAGEMENT WAS FINANCIAL ADVISOR IN CONNECTION WITH THE TRANSACTION, ASSIST THE CLIENT IN IDENTIFYING AND LIAISING WITH THE POTENTIAL PURCHASERS. FROM PLAIN READING OF THE EL , IT IS VERY CLEAR THAT THE COMPANY M/S TMPPL HAS ENGAGED M/S BARCLAYS AS A FINANCIAL ADVISOR FOR POSSIBLE BUSINESS TRANSACTION. THE LETTER WAS NOT FOR THE SALE OF SHARES, IT I S FOR IDENTIFYING AND LIAISONING THE POTENTIAL BUYER AND ITS ADVISORS FOR THE TRANSACTION. 13 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR THERE WAS NO AGREEMENT BETWEEN THE ASSESSEE AND M/S BARCLAYS TO EVALUATE THE SHARES AND I T WAS FOR VALUATION OF THE ASSETS FOR A POSSIBLE TRANSACTION FOR IDENTIFYING THE ASSETS TO BE SOLD TO THE POTENTIAL BUYER. 5.2. THE LD.AR FURTHER STATED THAT THOUGH THE ASSESSE E WAS FORCED TO SELL THE SHARES IN ACCORDANCE WITH THE AGREEMENT ENTERED WITH THE CARLYLE GOUP, THE ASSESSEE WAS PUT INTO LOSS PERSONALLY SINCE THERE IS NO PLAN S MADE BY THE ASSESSEE TO INVEST SUCH HUGE AMOUNT. THE COMPANY HAS TO PROVIDE EXIT ROUTE TO CAR LYLE GROWTH BY 31.03.2014. FOR THE PURPOSE OF HONOURING THE OBLIGATION, M/S TMPPL HAS ISSUED EL TO M/S BARCLAYS BANK PLC FOR FINANCIAL ADVICE AND POSSIBLE TRANSACTION, TO STUDY THE MARKET AND FIND THE WAY TO PROVIDE THE EXIT ROUTE TO CARLYLE GROUP. THE INTENTION OF ENTERING INTO EL WITH BARCLAYS BANK WAS TO FIND STRATEGIC INVESTOR WHO COULD BUY THE ENTIRE SHAREHOLDING OF CARLYLE GROUP WITH A PRE DETERMINED EVALUATION AGREEABLE. AS PER THE TERMS OF THE E L , IT WAS ENTITLED FOR SUCCESS FEE, IF THEY ARE S UCCESSFUL IN FINDING THE STRATEGIC INVESTOR. BARCLAY WAS SUCCESSFUL IN IDENTIFYING THE INVESTOR NAMELY BSA INTERNATIONAL BUT IT WAS RELUCTANT TO BUY THE SHAREHOLDING OF CARLYLE ALONE, INSTEAD , INSISTED ON BUYING THE ENTIRE SHAREHOLDING OF TMP P L INCLUDING THAT OF CARLYLE GROUP AND 41 PROMOTERS FOR THE TRANSACTION TO MATERIALIZE. TMPPL HAVING 14 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR COMMITTED TO THE CARLYLE GROUP IN THE PE AGREEMENT TO FIND EXIT ROUTE BY 31.03.2014, CONVINCED ITS PROMOTERS TO SELL THEIR SHAREHOLDING MUCH AGAINST THEIR WISH. NEITH ER THE ASSESSEE NOR OTHER CO PROMOTERS WERE PARTIES TO THE EL ISSUED TO THE BARCLAYS BANK. 5.3. THE LD.AR ADVANCING THE ARGUMENT THAT THE ASSESSEE WAS NOT THE DIRECTOR AT THE TIME OF RAISING THE INVOICE AND TO INVOKE THE PROVISIONS OF SECTION 2(24)(IV) OF THE ACT STATED THAT AS PER THE UNDERSTANDING, THE ASSESSEE AND OTHER PROMOTER DIRECTORS HAVE RESIGNED FROM THE BOARD OF DIRECTORS OF TMPPL W.E.F. 07.01.2014 AND THE REPRESENTATIVES OF BSA INTERNATIONAL TOOK OVER THE MANAGEMENT OF TMPPL IMMEDIA TELY. THE PROCESS OF TRANSFER OF SHARES WAS COMPLETED ON 07.01.2014 AND THE CONSIDERATION WAS TRANSFERRED TO THE ASSESSEE. AT THE TIME OF HAPPENING BOTH THE INCIDENTS OF RAISING THE INVOICE AND MAKING THE PAYMENT TO BARCLAYS BY TMPPL THE ASSESSEE CEASED TO BE THE SHAREHOLDER / DIRECTOR OF THE COMPANY. BARCLAYS HAS RAISED INVOICE ON TMPPL REGARDING SUCCESS FEE OF RS.28 . 81 CRORES ON 08.01.2014 AND TMPPL HAS PAID TO BARCLAYS BANK SUBSEQUENTLY. BOTH THE INCIDENTS OF RECEIVING THE INVOICE AND MAKING PAYMENT TO B ARCLAYS BY TMPPL HAD HAPPENED AFTER THE ASSESSEE CEASED TO 15 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR BE THE DIRECTOR OF THE COMPANY. NO BENEFIT WHATSOEVER WAS RECEIVED DIRECTLY OR INDIRECTLY BY THE ASSESSEE FROM TMPPL ON ACCOUNT OF SUCCESS FEE PAID TO BARCLAYS BANK. THE PROPORTIONATE SUCCESS FEE W AS RECOVERED BY THE BUYERS FROM THE CONSIDERATION PAYABLE TO ASSESSEE MUCH AHEAD OF RECEIVING INVOICE) THEREFORE, THE LD.AR ARGUED THAT THE LD.CI T(A) HAS RIGHTLY HELD THAT THERE WAS NO DUTY OR OBLIGATION CAST UPON THE ASSESSEE FOR PAYMENT OF SUCCESS FEE AN D THE SAME CANNOT BE TREATED AS INCOME IN THE HANDS OF THE ASSESSEE SINCE THE AMOUNT WAS ALREADY RECOVERED FROM THE NET CONSIDERATION PAID TO THE ASSESSEE. NO BENEFIT WAS DERIVED BY THE ASSESSEE AND IT WAS REDUCED BEFORE RECEIVING THE CONSIDERATION BY THE ASSESSEE. EVEN OTHERWISE ALSO, THE ASSESSEE WAS CEASED TO BE DIRECTOR AS ON THE DATE OF RAISING THE INVOICE, HENCE, THE QUESTION OF ATTRACTING 2(22)(IV) DOES NOT ARISE, ACCORDINGLY ARGUED THAT THERE IS NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LD. CIT(A) AND THE ORDER OF THE LD.CIT(A) TO BE UPHELD. WHILE RELEASING THE CONSIDERATION, BUYERS CALCULATED THE PROPORTIONATE AMOUNT OF RS.2,97,92,811 FROM THE CONSIDERATION PAYABLE FOR THE SHARES HELD BY THE ASSESSEE AND RELEASED THE NET CONSIDERATION TO THE ASSESSEE, EVEN THOUGH THE PAYMENT OF SUCCESS FEE WAS THE OBLIGATION OF TMPPL AND NOT THAT OF THE ASSESSEE. THUS THE LD.AR ARGUED THAT SUCCESS FEE 16 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR WAS DEDUCTED AT SOURCE FROM THE FUNDS OF THE SHAREHOLDERS, HENCE, NO BENEFIT WHATSOEVER RECEIVED BY THE SHAR E HOLDERS AND NO NEED TO TAX THE SAME U/S 2(24)(IV) OF THE ACT. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THE INSTANT CASE, THE ASSESSEE HAS TRANSFERRED 23,74,457 SHARES HELD BY HIM IN M/S TMPPL TO M/S BSA INTERNATIONAL FOR A CONSIDERATION OF RS.179,84,85,978/ - AND THE ENTIRE SALE CO NSIDERATION RECEIVED BY THE ASSESSEE WAS OFFERED FOR LONG TERM CAPITAL GAINS. THE COMPANY M/S TMPPL HAD ENTERED INTO AGREEMENT FOR INVESTMENT WITH FIRST CARLYLE GROUP ON 10.04.2010. ACCORDINGLY, CARLYLE GROUP HAS MADE THE INVESTMENTS AND THE COMPANY WA S OBLIGED TO GIVE EXIT OPTION TO THE INVESTORS AS PER CLAUSE 13 . 1 OF THE AGREEMENT. FOR THE PURPOSE OF HONOURING THE COMMITMENT, THE COMPANY HAD ENGAGED M/S BARCLAYS BANK PVT. LTD. FOR FINANCIAL ADVICE AND POSSIBLE TRANSACTION TO STUDY THE MARKET AND FIND A WAY TO PROVIDE EXIT ROUTE TO CARLYLE GROUP. THE SCOPE OF EL WAS APPOINTMENT OF M/S BARCLAYS AS A SOLE FINANCIAL ADVISOR IN CONNECTION WITH THE TRANSACTION AND TO ASSIST THE CLIENT IN IDENTIFYING AND LIAISING WITH POTENTIAL BUYER . AS PER THE TERMS AND CO NDITIONS, THE SUCCESS FEE WOULD BE PAID ONLY ON COMPLETION OF TRANSACTION FROM THE PROCEEDS RECEIVED FROM SALE OF THE BUSINESS OF THE 17 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR COMPANY PARTLY / FULLY. AS PER CLAUSE 2.2. THE COMPANY AGREES THAT IT SHALL BE RESPONSIBLE FOR ALL COSTS AND EXPENSES AND THE BARCLAYS HAS RAISED INVOICE ON CLIENT IN ACCORDANCE WITH THE EL . M/S BARCLAYS IDENTIFIED THE POTENTIAL BUYER, I.E BSA INTERNATIONAL LTD TO TAKE OVER THE COMPANY NOT ONLY THE INTEREST OF CARLYLE GROUP BUT ALSO EXPRESSED ITS INTEREST TO TAKE OVER THE SHARES OF INDIVIDUAL SHAREHOLDERS , THEREBY TAKING HOLD OF THE ENTIRE COMPANY. IT WAS STATED BY THE ASSESSEE THAT BSA INTERNATIONAL WAS RELUCTANT TO BUY THE SHAREHOLDING OF CARLYLE GROUP ALONE . THEREFORE AS EXPLAINED BY THE LD.AR, TMPPL HAS CONVINCED ITS PROMOTERS TO SELL THEIR SHAREHOLDING AGAINST THEIR WILL. THE SHAREHOLDERS DID NOT ENGAGE THE BARCLAYS AND THE INTENTION OF THE EL WAS TO IDENTIFY THE POTENTIAL BUYER AS OBSERVED BY THE LD.CIT(A). EL WAS EXECUTED ON 05.07.2013 AND IT WAS NOT MEANT FOR TRANSFER OF SHARES. IT PROVIDES FOR SALE OF BUSINESS OR ASSETS AND FOR POSSIBLE TRANSACTION AND THERE WAS NO CERTAINTY WITH REGARD TO POSSIBLE TRANSACTION AT THE TIME OF EXECUTION OF THE EL. AS PER THE EL, SUCCESS FEE IS TO BE PAID BY M /S TMPPL ON COMPLETION OF THE TRANSACTION. SUBSEQUENT TO IDENTIFYING THE POTENTIAL BUYER OF THE COMPANY, THE INDIVIDUAL SHAREHOLDERS WERE COMPELLED TO SELL THE SHARES TO BSA INTERNATIONAL WHICH CANNOT BE HELD AGAINST THE ASSESSEE TO HOLD THAT THE ASSESSEE GOT THE BENEFIT . SINCE THE 18 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR ASSESSEE WAS NOT THE PARTY TO BARCLAYS FOR EL , THERE IS NO LEGAL OBLIGATION ON THE PART OF THE ASSESSEE TO MAKE THE PAYMENT AND THE SAME IS NOT ENFORCEABLE AGAINST THE ASSESSEE. THE AGREEMENT IS BETWEEN THE BA RCLAYS BANK AND M/S TMPPL, BUT NOT BETWEEN THE SHAREHOLDERS AND THE BARCLAYS. THUS, THERE WAS NO LEGAL LIABILITY OF SHAREHOLDERS TO MAKE THE PAYMENT. THE AO DID NOT FURNISH ANY MATERIAL TO SHOW THAT THE ASSESSEE HA D ENGAGED THE BARCLAYS AND THE COMPANY MADE THE PAYMENT ON BEHALF OF THE ASSESSEE TO DERIVE THE BENEFIT DIRECTLY OR INDIRECTLY. AS PER SECTION 2(22)(IV) OF THE ACT, ANY SUM PAID BY ANY SUCH COMPANY IN RESPECT OF ANY OBLIGATION WHICH IS REQUIRED TO BE PAID FOR THE DIRECTOR OR SHAREHOLDER HAS TO BE TREATED AS INCOME IN THE HANDS OF SUCH DIRECTOR. IN THE INSTANT CASE, THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAD ENTERED INTO AGREEMENT FOR TRANSFER OF SHARES OR THE ASSESSEE WA S OBLIGED TO MAKE PAYMENT TO BARCLAYS. AS PER THE EL , BARCLAYS WA S ENGAGED AS A SOLE FINANCIAL ADVISOR IN CONNECTION WITH THE TRANSACTION AND NO OTHER PERSON SHOULD BE APPOINTED BY TMPPL. IT WAS ALSO MADE CLEAR THAT THE PROMOTERS OR THE CLIENT MAY CHOOSE AND APPOINT THEIR OWN CONSULTANT OR ADVISOR. SUCH CONSULTANT HAS NO RIGHT TO CLAIM THE FEE, RIGHT TITLE FOR THE PURPOSE OF CARRYING OUT THE SERVICES CONTEMPLATED. THE DIRECTORS OR SHAREHOLDERS ARE PERMITTED TO APPOINT THEIR OWN 19 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR CONSULTANT WHO WILL NOT HAVE ANY SAY IN THE SUCCESS FEE. IN VIEW OF THIS CLAUSE ALSO, THE CO NTENTION OF AO THAT THE SUCCESS FEE WA S THE OBLIGATION OF THE ASSESSEE IS INCORRECT. AS MENTIONED IN THE SHARE PURCHASE AGREEMENT (SPA) , COST OF TRANSFER OF SHARES SHOULD BE BORNE BY THE ASSESSEE. ACCORDINGLY, THE EXPENSES IN RELATION TO THE NEGOTIATION, FINALIZATION AND EXECUTION OF SPA HAVE TO BE BORNE BY THE SHAREHOLDERS INCLUDING THE ASSESSEE. THE SUCCESS FEE WAS FOR ENGAGING THE SERVICES OF BARCLAYS AS PER EL DATED 05.07.2013 AND THE SHARE PURCHASE AGREEMENT WAS ENTERED ON 04.11.2013, MUCH AHEAD OF SPA , HENCE, THE SUCCESS FEE CANNOT BE TREATED AS THE EXPENDITURE INCURRED IN CONNECTION WITH THE SPA. FROM PLAIN READING OF SPA AND THE EL , IT IS ESTABLISHED THAT THE ASSESSEE HAS NO OBLIGATION TO MAKE ANY PAYMENT TOWARDS SUCCESS FEE PAID TO BARCLAYS, HENCE, IT CANNOT BE HELD THAT THE ASSESSEE GOT ANY BENEFIT FROM THE SUCCESS FEE PAID BY THE TMPPL AS OBSERVED BY THE LD.CIT(A). ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD.CIT(A) AND DISMISS THE REVENUES GROUND ON THIS ISSUE . 7. THE NEXT CONTENTION RAISED BY T HE LD.AR DURING THE APPEAL HEARING IS THAT THE SUCCESS FEE IS TO BE PAID ONLY ON THE COMPLETION OF THE TRANSACTION BARCLAYS HAS RAISED THE INVOICE ON THE COMPANY ON COMPLETION OF THE TRANSACTION. BY THE TIME THE INVOICE WAS RAISED AND THE SUBSEQUENT 20 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR PAYM ENT MADE , ALL THE DIRECTORS HAVE RELINQUISHED AND THEY WERE NO MORE DIRECTORS. HENCE ARGUED THAT HAVING CEASED TO BE THE DIRECTOR OF THE COMPANY BY THE TIME THE PAYMENT WAS MADE, SECTION 2(24)(IV) HAS NO APPLICATION IN ASSESSEES CASE. THE AO REJECTED THE CONTENTIO N OF THE ASSESSEE STATING THAT THE OBLIGATION OF THE ASSESSEE AROSE ON THE DATE OF AGREEMENT DATED 05/07/2013 WHEN THE ASSESSEE WAS A DIRECTOR OF THE COMPANY AND HOLDING SUBSTANTIAL STAKE IN THE COMPANY, HENCE REJECTED THE ARGUMENT OF THE ASSESSEE. AS PER THE DISCUSSION MADE IN THE PRECEDING PARAGRAPHS WE HAVE HELD THAT THE THERE WAS NO BENEFIT DERIVED BY THE ASSESSEE AND ONCE IT IS HELD THAT THE ASSESSEE DID NOT DERIVE ANY BENEFIT THE ISSUE BECOMES INFRUCTUOUS. HOWEVER, I T IS ALSO A FACT THAT THE ASSESSE E CEASED TO BE DIRECTOR /SHAREHOLDER BY THE TIME THE INVOICE WAS RAISED AND THE PAYMENT WAS MADE . THE NEW DIRECTORS TAKEN THE DECISION TO MAKE THE PAYMENT. HENCE IT IS INCORRECT TO APPLY THE PROVISIONS OF SECTION 2(24) (IV) IN THE CASE OF THE ASSESSEE. 8 . THE NEXT CONTENTION RAISED BY THE LD.AR DURING THE APPEAL HEARING IS THAT THE SUCCESS FEE PAID BY THE COMPANY WAS ALREADY RECOVERED FROM THE NET CONSIDERATION PAID TO THE SHAREHOLDERS, HENCE, THERE IS NO CASE FOR MAKING SEPARATE ADDITION. THE LD.AR INVI TED OUT ATTENTION TO PAGE NO. 5 OF 21 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR THE CIT(A) ORDER, WHEREIN, THE DETAILS WERE FURNISHED WITH REGARD TO EVALUATION OF THE COMPANY AND PURCHASE CONSIDERATION AGREED TO BE PAID BY BSA INTERNATIONAL WHICH WAS CALCULATED BY DELOITTE TOUCHE TOHMANTSU INDIA PRIV ATE LTD WHICH READS AS UNDER : 22 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR 8.1. FROM THE ABOVE WORKING, IT SHOWS THAT BARCLAYS FEE WAS ALREADY RECOVERED BY BSA INTERNATIONAL AND THE NET CONSIDERATION WAS PAID TO SHAREHOLDERS WHICH ESTABLISHES THAT THE AMOUNT OF SUCCESSION FEE PAID TO BARCLAYS FROM THE PROFITS AND RESERVES OF THE SHAREHOLDERS. FURTHER, THE FEE PAID TO BARCLAYS WAS EXPENSES IN RELATION TO TRANSFER OF SHARES WHICH 23 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR REQUIRED TO BE ALLOWED AS DEDUCTION FOR COMPUTING THE CAPITAL GAINS AND CANNOT BE BROUGHT TO TAX UNDER THE HEAD INCO ME FROM OTHER SOURCES. FOR A QUERY FROM THE BENCH, THE LD.DR DID NOT SHOW ANY MATERIAL TO SUBSTANTIATE THAT THE SUCCESS FEE PAID TO THE BARCLAYS WAS NOT IN RELATION TO TRANSFER OF SHARES. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD.CIT(A) AND DISMISS T HE APPEAL OF THE REVENUE. I .T.A.NO.12/VIZ/2019, A.Y.2014 - 15 9. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL FILED HIS RETURN OF INCOME ON 27 - 09 - 2014 FOR THE ASST. YEAR 2014 - I5 ADMITTING TOTAL INCOME OF RS. 210,99,86,140/ - FROM SALARY, ADVISORY FEES, HOUSE PROPERTY, CAPITAL GAINS AND INCOME FROM OTHER SOURCES. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND APPROPRIATE NOTICES WERE ISSUED BY THE AO AND DULY SERVED UPON THE ASSESSEE. DURING THE COURSE OF PROCEEDINGS THE AO NOTICED THAT THE INCOME OF THE ASSESSEE CONSISTS OF LONG TERM CAPITAL GAINS OF RS. 204,17,20,233/ - ON SALE OF SHARES OF M/S TIRUMALA MILK PRODUCTS PVT. LTD.(TMPPL). THE AO CONSIDERING THE PAYMENT MADE BY THE COMPANY TMPPL TO M/S. BARCLAYS BANK PLC (BBP) TOWARDS SUCCESS FEE REDUCED THE CAPITAL GAINS ADMITTED BY THE ASSESSEE TO THE EXTENT OF RS.3,70,24,915/ - AND THE SAME WAS TREATED AS OTHER SOURCE OF INCOME. IN 24 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR EFFECT THERE WAS NO CHANGE IN THE INCOME ADMITTED BY THE ASSESSEE AND INCOME ASSESSED BY THE AO. THE SUM OF RS. 3,70,24,915/ - WAS CONSIDERED AS OTHER SOURCE OF INCOME FROM OTHER SOURCE S INSTEAD SEPARATELY WHICH HAS THE EFFECT OF INCREASING THE TAX RATE . 9.1. ON IDENTICAL FACTS IN THE CASE OF DANDA BRAHMANANDAM VIDE I.T.A 11/VIZ/2019 IN THIS ORDER WE HAVE HELD THAT NO BENEFIT WAS DERIVED BY THE ASSESSEE ON TRANSFER OF SHARES AND UPHELD THE ORDER OF THE LD.CIT(A). ACCORDINGLY, WE HOLD THAT THE PAYMENT OF SUCCESS FEE IS THE OBLIGATION OF THE COMPANY SINCE THE AGREEMENT WAS ENTERED INTO BY THE ASSESSE E COMPANY AND THE BARCLAYS, HENCE WE HOLD THAT NO PERSONAL BENEFIT DERIVED BY THE ASSESSEE AND WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) AND THE SAME IS UPHELD. 10 . IN THE RESULT, APPEALS OF THE REVENUE IN I.T.A. NO.11/VIZ/201 9 AND 12/VIZ/2019 ARE DISMISSED. 25 I.T.A. NO S.11 & 12/VIZ/2019, A.Y.2014 - 15 SRI DANDA BRAHMANDAM, CHENNAI AND SRI BATTINI NAGESWARA RAO, GUNTUR ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JUL 2019. S D/ - S D/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 19 .0 7 .2019 L.RAMA, SPS / COPY OF THE ORDER FORWARDED TO: - 1. / THE ASSESSEE S (I) SRI DANDA BRAHMANANDAM, 13AJ BLOCK, 5 TH STREET , SANTHI COLONY, ANNANAGAR, CHENNAI (II) SRI BATTINI NAGESWARA RAO, D.NO.11 - 15 - 8, RAMIREDDY PET, NARSARAOPET GUNTUR 2. / THE REVENUE - ASST.COMMISSIONER OF INCOME TAX , CIRCLE - 2(1) , GUNTUR 3. THE PR. COMMISSIONER OF INCOME TAX - 1 , GUNTUR 4. THE COMMISSIONER OF INCOME TAX (APPEALS) - 1, GUNTUR 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM