Gulf Oil Corporation Limited, Hyderabad, Hyderabad V. ACIT, Circle-2(2), Hyderabad, Hyderabad

ITA 217/HYD/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91566 (ITAT-HYDERABAD)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-04-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 05-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G APARNA RAO
• Assessee Lawyers: D V ANJANEYULU
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Transfer pricing; Opportunity of being heard; Permanent establishment; Cost of acquisition; Bad and doubtful debts; Valuation report
• Section: 143(3); 50C; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 217/HYD/2015 ASSESSMENT YEAR: 2010-11 GULF OIL CORPORATION LTD., HYDERABAD PAN AABCG8433B VS. ASST. COMMISSIONER OF INCOME-TAX OFFICER, CIRCLE 2(2), HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI Y. RATNAKAR & SHRI D.V. ANJANEYULU REVENUE BY : SMT. G. APARNA RAO DATE OF HEARING 20-04-2015 DATE OF PRONOUNCEMENT 30-04-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY ASSESSEE IS DIRECTED AGAINST THE ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTIO N 92CA(4) AND 144C(13) OF THE ACT FOR THE AY 2010-11. 2. ASSESSEE HAS RAISED IN ALL 33 GROUNDS. GROUND NO S. 1, 28,29,30,32 AND 33 BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SPECIFIC ADJUDICATION, HENCE, THESE GROUNDS ARE DIS MISSED. GROUND NO. 31 RELATES TO LEVY OF INTEREST U/S 234A AND 234 B OF THE ACT. LEVY OF INTEREST U/S 234A AND 234B BEING MANDATORY AND C ONSEQUENTIAL ON FINAL DETERMINATION OF INCOME, CANNOT BE ADJUDICATE D AT THIS STAGE, HENCE, THIS GROUND IS ALSO DISMISSED. 2 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. 3. IN GROUND NO.2, ASSESSEE HAS CHALLENGED DISALLOW ANCE OF AN AMOUNT OF RS. 39,01,332 MADE ON ACCOUNT OF PAYMENT OF ROYALTY ON EXPORT SALES. 4. BRIEFLY THE FACTS RELATING TO THIS ISSUE ARE, AS SESSEE AN INDIAN COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE O F INDUSTRIAL EXPLOSIVES, LUBRICANTS AND EXECUTING CONTRACTS. FOR THE AY UNDER CONSIDERATION, ASSESSEE FILED ITS RETURN OF INCOME ON 03/11/2011 DECLARING INCOME OF RS. 19,83,91,287. DURING ASSESS MENT PROCEEDING, AO NOTICING THAT ASSESSEE HAS INTERNATI ONAL TRANSACTIONS MADE A REFERENCE TO THE TRANSFER PRICING OFFICER (T PO) FOR DETERMINING ARMS LENGTH PRICE (ALP) TO THE INTERNA TIONAL TRANSACTIONS. TPO IN COURSE OF PROCEEDING BEFORE HI M, NOTICED THAT ASSESSEE HAS CLAIMED AN AMOUNT OF RS. 4,98,90,819 T OWARDS PAYMENT OF ROYALTY TO M/S GULF OIL INTERNATIONAL (MAURITIUS ), INC., AE OF ASSESSEE ON THE BASIS OF TRADE MARK, LICENCE AND TE CHNICAL AND MARKETING SERVICES AGREEMENT ENTERED WITH M/S GULF OIL INTERNATIONAL (MAURITIUS) ON 01/08/2008. HE NOTICED THAT PAYMENT OF ROYALTY AS PER THE AGREEMENT IS IN CONNECTION WITH USE OF PROJECT FORMULATION PROPRIETARY OF GULF OIL INTERNATIONAL (MAURITIUS) I NC AND RELEVANT TRADE MARKS AND FOR TECHNICAL INFORMATION, COMPOUNDING TE STING, PACKAGING AND APPLICATION OF PRODUCTS AND TO VARIOUS LICENSEE TO USE THE TRADE MARK AND DESIGN/INDICIA AND PRODUCTS. ACCORDING TO THE AGREEMENT, ASSESSEE IS REQUIRED TO PAY ROYALTY @ 5% ON INTERNA L SALES AND 8% ON EXTERNAL SALES WHICH AFTER AS PER THE AGREEMENT STA ND REVISED TO 5.88% ON DOMESTIC SALES AND 9.41% ON EXPORT SALES. WHEN CALLED UPON TO EXPLAIN, ASSESSEE JUSTIFIED THE PAYMENT OF ROYALTY BY MAKING ELABORATE SUBMISSIONS. AO, HOWEVER, DID NOT FIND M ERIT IN THE SUBMISSIONS OF ASSESSEE. HE OBSERVED THAT THE VERY SAME ISSUE RELATING TO PAYMENT OF ROYALTY BY ASSESSEE TO AE WA S EXAMINED IN DETAIL BY DISPUTE RESOLUTION PANEL (DRP) IN AY 2008 -09 AND AFTER GOING THROUGH ALL RELEVANT ASPECTS, LD. DRP HELD TH AT ROYALTY @ 1% IS 3 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. TO BE ALLOWED ON THE INTERNATIONAL SALES/EXPORT SAL ES ON ACCOUNT OF DIFFERENTIAL PRICING. THUS, TPO FOLLOWING THE DECIS ION OF LD. DRP IN AY 2008-09, ALLOWED DEDUCTION TOWARDS ROYALTY PAYMENT AT 1% AND ACCORDINGLY DETERMINED ALP OF THE ROYALTY PAYMENT AT RS. 25,81,949 AGAINST ROYALTY PAYMENT OF RS. 64,83,281 CLAIMED BY ASSESSEE ON EXPORT SALES TO AE. THUS, HE DISALLOWED AN AMOUNT O F RS. 39,01,332 AND TREATED IT AS ADJUSTMENT U/S 92CA OF THE ACT. A S A CONSEQUENCE OF THE ORDER PASSED BY TPO, AO MADE ADDITION ACCORD INGLY OF THE SAID AMOUNT IN THE DRAFT ASSESSMENT ORDER. ASSESSEE OBJE CTED TO SUCH ADDITION BEFORE LD. DRP. LD. DRP ON GOING THROUGH T HE SUBMISSIONS OF ASSESSEE BEFORE IT FOUND THAT ASSESSEE HAD ACCEPTED THE DISALLOWANCE OF ROYALTY IN EXCESS OF 1% AND ACCORDI NGLY UPHELD THE ADDITION MADE IN THE DRAFT ASSESSMENT ORDER. 5. LD. AR SUBMITTED BEFORE US, MERELY BECAUSE ASSES SEE ACCEPTED THE DISALLOWANCE IN ONE YEAR IT DOES NOT DEBAR IT F ROM DISPUTING THE SAME IN A SUBSEQUENT AY. HE SUBMITTED IF AN AGREEME NT, WHICH PROVIDING FOR ROYALTY PAYMENT IS APPROVED BY GOVT. OF INDIA AND RBI, IT IS TO BE ACCEPTED THAT THE RATE APPROVED IS AT ALP AND SO LONG AS PAYMENT IS MADE WITHIN THE RATE OF ROYALTY APPROVED THERE CANNOT BE ANY DISALLOWANCE. HE FURTHER SUBMITTED, THE ACTUAL ROYALTY PAID BEING MUCH LESS THAN THE ALP FOR PAYMENT OF ROYALTY AS SU BMITTED IN THE WORKINGS, NO DISALLOWANCE IS CALLED FOR. 6. LD. DR, ON THE OTHER HAND, SUBMITTED BEFORE US, AS ASSESSEE IN PRECEDING AY HAS ACCEPTED THE DISALLOWANCE OF ROYAL TY PAYMENT IN EXCESS OF 1%, HE CANNOT DISPUTE THE DISALLOWANCE I N THE CURRENT AY. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF PARTIES AN D PERUSED THE MATERIALS ON RECORD. UNDISPUTEDLY, ASSESSEE IN THE PRECEDING AYS I.E. AYS 2007-08 AND 2008-09 HAS ACCEPTED THE DRPS DECI SION IN UPHOLDING THE DISALLOWANCE OF ROYALTY ON EXPORT SAL ES IN EXCESS OF 1%. 4 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. IN THE IMPUGNED AY ALSO, LD. DRP HAS EXPRESSED SIMI LAR OPINION. IN FACT IN AY 2006-07 WHEN IDENTICAL ISSUE RELATING TO DISALLOWANCE OF ROYALTY PAYMENT IN EXCESS OF 1% WAS AGITATED IN APP EAL BEFORE ITAT. THE COORDINATE BENCH IN ITA NO. 1450/HYD/2010 DATED 22/01/2010, HELD AS UNDER: 16.1. COMING TO THE EXPORT SALES, THE LEARNED COUN SEL RELIED ON THE VARIOUS FACTORS FOR ALLOWING THE ENTIRE CLAIM. HOWE VER, CONSIDERING THE FACT THAT SAME ISSUE WAS ALSO EXAMINED BY THE D RP IN A.YS. 2007-2008 AND 2008-2009 WHICH THE ASSESSEE/APPELLAN T SEEMS TO HAVE ACCEPTED, WE ARE OF THE OPINION THAT THE ROYAL TY ON EXPORT SALES CAN BE RESTRICTED TO 1% AS WAS DONE IN LATER YEARS AND ACCORDINGLY, THE ROYALTY IS RESTRICTED TO AN AMOUNT OF RS.18,05, 788/- AS PER THE WORKING FURNISHED BY ASSESSEE AT PARA 24 IN PAGE 7 OF THE PAPER BOOK VOLUME-2. THEREFORE, OUT OF THE AMOUNT OF RS.6 2,29,972/- ASSESSING OFFICER IS DIRECTED TO ALLOW ROYALTY AT R S.18,05,788/- AND BALANCE AMOUNT OF RS.44,24,184/- STANDS DISALLOWED. THUS, WHEN THERE IS NO MATERIAL DIFFERENCE IN FACTS AND WHEN ASSESSEE HAS ACCEPTED DISALLOWANCE OF ROYALTY PAYME NT IN EXCESS OF 1% IN THE PRECEDING AYS WHICH HAS ALSO BEEN CONFIRM ED BY ITAT IN ASSESSEES OWN CASE IN AY 2006-07, WE ARE OF THE VI EW THAT THE DISALLOWANCE OF ROYALTY PAYMENT IN EXCESS OF 1% DES ERVES TO BE UPHELD. THIS GROUND IS, THEREFORE, DISMISSED. 8. THE NEXT ISSUE AS RAISED IN GROUND NO. 3 TO 7 RE LATES TO DISALLOWANCE OF AN AMOUNT OF RS. 34,01,324 U/S 40(A )(I). 9. BRIEFLY THE FACTS RELATING TO THIS ISSUE ARE, IN COURSE OF ASSESSMENT PROCEEDING, AO ON VERIFYING THE DETAILS FURNISHED IN FORM NO. 15CA, NOTICED THAT DURING THE YEAR ASSESSEE HAS PAID AN AMOUNT OF RS. 47,06,975 TO FOREIGN CONCERNS WITHOUT DEDUCT ING TAX AT SOURCE U/S 195 OF THE ACT. THUS, APPLYING THE PROVISIONS O F SECTION 40(A)(I), HE DISALLOWED SUCH PAYMENTS AND ADDED BACK TO INCOM E OF ASSESSEE. BEING AGGRIEVED OF SUCH DISALLOWANCE, ASSESSEE RAIS ED OBJECTIONS BEFORE LD. DRP. 5 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. 10. BEFORE LD. DRP, IT WAS SUBMITTED BY ASSESSEE TH AT THE AMOUNT IN QUESTION WAS PAID ON BEHALF OF ANOTHER COMPANY, VIZ., GULF OIL INTERNATIONAL LUBRICANTS PVT. LTD. AND THE SAID AMO UNT WAS DEBITED TO THE SAID COMPANY. ASSESSEE FURTHER SUBMITTED THAT T HE AMOUNT WAS ALSO NOT CLAIMED AS DEDUCTION. IN SUPPORT OF SUCH C ONTENTION, ASSESSEE ALSO FURNISHED A STATEMENT SHOWING THE DAT ES OF PAYMENT, NAMES OF PAYEES, AMOUNT PAID AND THE PURPOSE FOR WH ICH THE AMOUNTS WERE PAID. LD. DRP AFTER CONSIDERING THE SU BMISSIONS OF ASSESSEE DIRECTED AO TO VERIFY ASSESSEES CLAIM AS TO WHETHER THE AMOUNT WAS ACTUALLY PAID ON BEHALF OF GULF OIL INTE RNATIONAL LUBRICANTS PVT. LTD. AND ALLOW ASSESSEES CLAIM ACC ORDINGLY. AO, HOWEVER, WHILE COMPLETING THE ASSESSMENT IN PURSUAN CE TO DIRECTIONS OF LD. DRP, ON VERIFICATION OF THE INFORMATIONS SUB MITTED BY ASSESSEE, NOTICED THAT OUT OF THE AMOUNT OF RS. 47,06,975 ASS ESSEE HAS ACTUALLY RAISED DEBIT NOTE ON M/S GULF OIL INTERNATIONAL LUB RICANTS PVT. LTD. ONLY TO THE EXTENT OF RS. 12,45,051. AS FAR AS THE BALANCE AMOUNT OF RS. 34,61,924 IS CONCERNED, AO OBSERVED THAT ASSESS EE DID NOT PRODUCE ANY EVIDENCE TO PROVE THAT THE PAYMENTS WER E MADE TO FOREIGN CONCERNS ON BEHALF OF M/S GULF OIL INTERNAT IONAL LUBRICANTS PVT. LTD. THUS, AO HELD THAT AS THE PAYMENT OF RS. 34,61,924 PERTAINS TO EXPENDITURE INCURRED BY ASSESSEE AND WHILE REMIT TING THE SAME SINCE TAX WAS NOT DEDUCTED AT SOURCE, THE AMOUNT I S LIABLE TO BE DISALLOWED U/S 40(A)(I). ACCORDINGLY, AO DISALLOWED THE AMOUNT OF RS. 34,61,924. 11. LD. AR SUBMITTED BEFORE US, OUT OF THE AMOUNT O F RS. 34,61,924 ADDED BY AO, AN AMOUNT OF RS. 32,20,992 WAS REMITTE D TO SOYUZ ENERGY SUPPLY LTD., A NON-RESIDENT COMPANY TOWARDS COMMISSION AND CONSULTATION CHARGES FOR IMPORT BOOKING OF BASE OIL . HE SUBMITTED, THE AMOUNT IN QUESTION IS ACTUALLY COST OF RAW MATERIAL , THOUGH, SHOWN SEPARATELY AS EXPENDITURE. IT WAS SUBMITTED, SINCE SOYUZ ENERGY SUPPLY LTD., A NON RESIDENT COMPANY IS NOT LIABLE T O TAX IN INDIA, THERE 6 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. IS NO NECESSITY TO DEDUCT TAX U/S 195. LD. AR SUBMI TTED, THOUGH ASSESSEE HAS SUBMITTED ALL THESE FACTS IN A NOTE SU BMITTED BEFORE AO ON 18/02/2015, BUT, AO, COMPLETELY IGNORED THE SUBM ISSIONS OF ASSESSEE AND ADDED BACK THE AMOUNT. LD. AR SUBMITTE D, AS FAR AS TWO OTHER SUMS OF RS. 2,02,444 AND RS. 38,442 ARE C ONCERNED, ASSESSEE HAS NOT MADE ANY SUCH PAYMENT, THEREFORE, DEDUCTION OF TAX U/S 195 DOES NOT ARISE. 12. LD. DR, HOWEVER, JUSTIFIED THE ADDITION MADE BY AO. 13. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIALS ON RECORD. AS CAN BE SEEN, WHILE OBJE CTING TO THE ADDITION MADE BY AO IN THE DRAFT ASSESSMENT ORDER, THE SPECIFIC CONTENTION OF ASSESSEE BEFORE LD. DRP IS PAYMENT DO ES NOT RELATE TO EXPENDITURE INCURRED BY ASSESSEE ON ITS OWN BEHALF, BUT, ACTUALLY IT RELATES TO EXPENDITURE INCURRED ON BEHALF OF GULF O IL INTERNATIONAL LUBRICANTS PVT. LTD. ASSESSEE FURTHER CLAIMED THAT THE AMOUNT WAS NEVER CLAIMED AS EXPENDITURE BY ASSESSEE. CONSIDERI NG SUCH SUBMISSIONS OF ASSESSEE, LD. DRP DIRECTED AO TO VER IFY AND ALLOW ASSESSEES CLAIM IF IT IS FOUND THAT THE PAYMENTS W ERE MADE ON BEHALF OF GULF OIL INTERNATIONAL LUBRICANTS PVT. LTD. THUS , IT IS VERY MUCH CLEAR THAT BEFORE LD. DRP ASSESSEE NEVER TOOK THE P LEA THAT THE AMOUNT OF RS. 32,20,992 PAID TO SOYUZ ENERGY SUPPL Y LTD. WAS TOWARDS PURCHASE OF RAW MATERIAL BY ASSESSEE. FURT HER, THOUGH LD. AR HAS SUBMITTED BEFORE US THAT AO HAS COMPLETELY I GNORED THE NOTE SUBMITTED BY ASSESSEE BEFORE HIM ON 18/02/15, BUT, ON PERUSAL OF THE IMPUGNED ASSESSMENT ORDER, IT IS SEEN THAT AO IN FA CT HAS TAKEN NOT E OF THE SUBMISSIONS MADE BY ASSESSEE ON 18/02/2015. HOWEVER, SINCE THE LD. DRP HAS DIRECTED AO TO ALLOW ASSESSEES CLA IM IF THE PAYMENT WAS MADE ON BEHALF OF GULF OIL INTERNATIONAL LUBRIC ANTS PVT. LTD., AO HAS DISALLOWED ASSESSEES CLAIM SINCE PAYMENT MADE TO SOYUZ ENERGY SUPPLY LTD. WAS NOT ON BEHALF OF GULF OIL IN TERNATIONAL PVT. 7 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. LTD.. AS IT APPEARS, FOR THE FIRST TIME, IN COURSE OF FINAL ASSESSMENT PROCEEDING, ASSESSEE HAS COME UP WITH THE PLEA THAT THE PAYMENTS RELATE TO PURCHASE OF RAW MATERIAL MADE BY ASSESSEE . BE THAT AS IT MAY, CONSIDERING THE SUBMISSIONS OF ASSESSEE THAT P AYMENTS MADE BY ASSESSEE TO M/S SOYUZ ENERGY SUPPLY LTD., WAS TO WARDS PURCHASE OF RAW MATERIAL AND NOT TOWARDS ANY SERVICES RENDER ED BY THE FOREIGN COMPANY AND FURTHER SINCE ACCORDING TO ASSESSEE, FO REIGN COMPANY NEITHER HAS ANY PERMANENT ESTABLISHMENT IN INDIA NO R TAXABLE INCOME IN INDIA, THE ISSUE WHETHER TAX IS REQUIRED TO BE D EDUCTED U/S 195 ON THE PAYMENTS MADE TO M/S SOYUZ ENERGY SUPPLY LTD. N EEDS EXAMINATION. AS AO HAS NOT EXAMINED THE AFORESAID A SPECTS, WE ARE INCLINED TO REMIT THE ISSUE BACK TO HIS FILE FOR CO NSIDERING AFRESH. WHILE DOING SO, AO ALSO SHOULD VERIFY ASSESSEES CL AIM THAT OTHER TWO PAYMENTS OF RS. 2,02,444 AND RS. 38,442 WERE NOT MA DE BY ASSESSEE TO ANY NON-RESIDENT COMPANY. AO MUST AFFORD REASONA BLE OPPORTUNITY OF BEING HEARD TO ASSESSEE IN THE MATTER. THESE GRO UNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 14. THE NEXT ISSUES AS RAISED IN GROUND NOS. 8 TO 1 0(A) IS IN RELATION TO ADDITION OF AN AMOUNT OF RS. 10,01,931 AS UNDISCLOSED RECEIPTS. 15. BRIEFLY THE FACTS ARE, AO ON VERIFYING THE INFO RMATION AS PER FORM NO. 26AS NOTICED THAT ASSESSEE HAS NOT DISCLOS ED TDS FOR AN AMOUNT OF RS. 2,45,237, WHICH PERTAINED TO TRANSACT IONS WORTH OF RS. 45,08,097. AO ALLEGING THAT ASSESSEE COULD NOT EXPL AIN ANYTHING ON THIS ISSUE , ADDED BACK THE AMOUNT OF RS. 45,08,097 AS INCOME OF ASSESSEE IN THE DRAFT ASSESSMENT ORDER. BEING AGGRI EVED OF SUCH ADDITION, ASSESSEE OBJECTED THE SAME BEFORE LD. DRP . 16. BEFORE LD. DRP, IT WAS SUBMITTED BY ASSESSEE TH AT IN REALITY THERE ARE NO SUCH UNDISCLOSED RECEIPTS AS ALLEGED B Y AO AND IN 8 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. SUPPORT OF SUCH CLAIM, ASSESSEE SUBMITTED A STATEME NT RECONCILING THE DIFFERENCE. LD. DRP AFTER VERIFYING THE DETAILS SUBMITTED BY ASSESSEE OBSERVED THAT WHILE AO HAS MADE ADDITION O N THE BASIS OF FORM NO. 26AS, WHICH SHOW THE DETAILS OF TDS CREDIT OF ASSESSEE AND CORRESPONDING INCOME, BUT, STATEMENT FURNISHED BY A SSESSEE SHOWS THE DETAILS OF TDS CREDIT AND CORRESPONDING INCOME WITHOUT DISCLOSING THE FACT WHETHER SUCH INCOME WAS REFLECTED IN THE P &L A/C, AND SUPPORTED BY ENTRIES MADE IN THE BOOKS OF ACCOUNT. THUS, IN ABSENCE OF DETAILS, LD. DRP DIRECTED AO TO VERIFY THE ADDIT ION MADE AS PER FORM NO. 26AS TO THE EXTENT THEY ARE EXPLAINED BY A SSESSEE. WHILE IMPLEMENTING THE DIRECTIONS OF LD. DRP IN FINAL ASS ESSMENT ORDER, AO OBSERVED THAT ON PERUSAL OF THE LEDGER FURNISHED BY ASSESSEE, AN AMOUNT OF RS. 16,01,931 PERTAINING TO TRANSACTIONS WITH THREE DIFFERENT PARTIES WAS NOT ACCOUNTED AS REVENUE IN T HE BOOKS OF ACCOUNT OF ASSESSEE. WHEN THIS FACT WAS POINTED OUT , ASSESSEE SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAD NO TRANSACTIONS WITH THESE PARTIES, HOWEVER, THE CONCE RNED PARTIES MADE TDS AND CREDITED THE SAME TO THE GOVT. ACCOUNT QUOT ING ASSESSEES PAN. AO NOT BEING SATISFIED WITH THE EXPLANATION SU BMITTED BY ASSESSEE, ADDED BACK THE AMOUNT OF RS. 16,01,931. 17. LD. AR SUBMITTED BEFORE US, THE AMOUNT OF RS. 1 6,01,931 PERTAINED TO AMOUNTS ALLEGEDLY RECEIVED FROM THE FO LLOWING THREE PARTIES: 1. TRANSSTROY (INDIA) LTD. RS. 6,83,831 2. ISGEC HEAVY ENGG. LTD. RS. 9,13,150 3. GO AIRLINES INDIA LTD. RS. 4,950 LD. AR SUBMITTED, ASSESSEE HAS NO TRANSACTIONS WITH TRANSSTROY (INDIA) LTD. DURING THE YEAR AND THE SAID COMPANY H AS ERRONEOUSLY SHOWN ASSESSEES NAME AND PAN IN ITS TDS RETURN. AS FAR AS THE AMOUNT OF RS. 9,13,150 FROM ISGEC HEAVY ENGG. LTD. IS CONCERNED, IT 9 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. WAS SUBMITTED, IN AY UNDER CONSIDERATION, ASSESSEE HAS SHOWN INCOME FROM THE AFORESAID COMPANY BY MENTIONING ITS NAME AS INDIAN SUGAR GENERAL CO. LTD. WHEREAS IN FORM 26AS, THE NA ME IS SHOWN AS ISGEC HEAVY ENGG. LTD., IN ABBREVIATED FORM, WHICH MIGHT HAVE CREATED CONFUSION IN THE MIND OF AO. AS FAR AS THE BALANCE AMOUNT OF RS. 4,950 IS CONCERNED, LD. AR SUBMITTED, ASSESSEE HAS NOT RECEIVED ANY SUCH INCOME FROM THE SAID CONCERN. 18. LD. DR, ON THE OTHER HAND, SUBMITTED, WHEN FORM 26AS CLEARLY REFLECTS THE PAYMENTS IN ASSESSEES NAME, ASSESSEE CANNOT DENY OF RECEIVING SUCH PAYMENTS. 19. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE RELEVANT MATERIAL ON RECORD AS WELL AS THE ORDE RS OF REVENUE AUTHORITIES. AS CAN BE SEEN, THE CONTENTION OF ASSE SSEE IS IT HAS NOT RECEIVED ANY PAYMENT FROM TRANSSTROY (INDIA) LTD. A ND GO AIRLINES INDIA LTD. DURING THE YEAR UNDER CONSIDERATION. AS FAR AS THE ISGEC HEAVY ENGG. LTD. IS CONCERNED, IT IS THE CLAIM OF A SSESSEE THAT THE PAYMENTS RECEIVED HAVE ALREADY BEEN INCLUDED IN THE INCOME SHOWN BY ASSESSEE IN ITS BOOKS OF ACCOUNT AND DUE TO CHAN GE IN MENTIONING THE NAME IN FORM 26AS, AO HAS MADE ADDITION. HOWEVE R, IT IS A FACT ON RECORD THAT APART FROM CLAIMING THAT ASSESSEE HA S NOT RECEIVED THE PAYMENTS FROM TRANSSTROY (INDIA) LTD. AND GO AIR, A SSESSEE HAS NOT PRODUCED ANY OTHER EVIDENCE LIKE CONFIRMATION FROM CONCERNED PARTIES TO SUBSTANTIATE ITS CLAIM THAT IT HAD NO TRANSACTIO N WITH THESE COMPANIES AND ASSESSEES NAME HAS BEEN WRONGLY MENT IONED IN FORM 26AS. EVEN AS FAR AS THE RECEIPTS FROM ISGEC HEAVY ENGG. LTD. IS CONCERNED, ASSESSEE COULD HAVE OBTAINED CONFIRMATIO N FROM THE SAID PARTY OR AT LEAST ACCOUNT COPIES TO PROVE THAT THE AMOUNT REFLECTED IN FORM 26AS HAS ALREADY BEEN INCLUDED AS INCOME IN IT S ACCOUNTS. THEREFORE, IN ABSENCE OF ANY DOCUMENTARY EVIDENCE T O SUBSTANTIATE ITS CLAIM THAT ASSESSEE HAS NOT RECEIVED ANY PAYMEN TS FROM 10 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. TRANSSTROY (INDIA) LTD. AND GO AIR LTD AND HAS ALRE ADY REFLECTED THE INCOME SHOWN IN THE NAME OF ISGEC HEAVY ENGG. LTD. IT IS DIFFICULT TO ACCEPT ASSESSEES CLAIM ON MERE FACE VALUE. HOWEVER , IN COURSE OF HEARING LD. AR REQUESTED FOR AN OPPORTUNITY TO PROD UCE CONFIRMATION LETTERS FROM CONCERNED PARTIES. IN THE AFORESAID FA CTS AND CIRCUMSTANCES, WE ARE INCLINED TO GIVE ONE MORE OPP ORTUNITY TO ASSESSEE TO PRODUCE DOCUMENTARY EVIDENCE BY WAY OF CONFIRMATIONS OR ANY OTHER EVIDENCE TO PROVE ITS CLAIM THAT IT HA S NOT RECEIVED ANY AMOUNT DURING THE YEAR FROM TRANSSTROY (INDIA) LTD. AND GO AIRLINES INDIA LTD. AND AS FAR AS ISGEC HEAVY ENGG. LTD. IS CONCERNED, THE INCOME HAS ALREADY BEEN SHOWN BY ASSESSEE. ACCORDIN GLY, THIS ISSUE IS REMITTED TO AO TO DECIDE THE SAME AFRESH AFTER A FFORDING AN OPPORTUNITY OF BEING HEARD TO ASSESSEE. THE GROUNDS RAISED ARE ALLOWED FOR STATISTICAL PURPOSES. 20. THE NEXT ISSUE AS RAISED IN GROUND NOS. 11 TO 1 3 PERTAINED TO DISALLOWANCE OF BAD DEBTS WRITTEN OFF OF RS. 5,30,5 3,903. 21. BRIEFLY, THE FACTS ARE, IN COURSE OF ASSESSMENT PROCEEDING, AO WHILE EXAMINING THE ACCOUNTS OF ASSESSEE, FOUND THA T ASSESSEE HAS WRITTEN OFF AN AMOUNT OF RS. 7,43,14,587 AS BAD DEB TS. HOWEVER, HE OBSERVED THAT DETAILS OF BAD DEBTS ARE AVAILABLE ON LY TO THE EXTENT OF RS. 2,12,60,684. ACCORDINGLY, HE HELD THAT THE BALA NCE AMOUNT OF RS. 5,30,53,903 HAS TO BE ADDED BACK TO INCOME OF ASSES SEE. HE FURTHER OBSERVED THAT IN CASE ADVANCES GIVEN TO SUBSIDIARIE S LIKE IDL SOFTWARE CHEMICALS LTD ARE WRITTEN OFF, THEN, IT WO ULD CLEARLY AMOUNT TO VIOLATION OF HIGH COURT ORDER GRANTING ARRANGEMENT. BEING AGGRIEVED OF DISALLOWANCE OF BAD DEBTS, ASSESSEE RAISED OBJEC TIONS BEFORE LD. DRP. 22. IN COURSE OF PROCEEDING BEFORE LD. DRP, IT WAS SUBMITTED BY ASSESSEE THAT ALL THE DETAILS RELATING TO BAD DEBT WRITTEN OFF WERE FULLY 11 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. AVAILABLE IN THE BOOKS. FURTHER, IT WAS SUBMITTED B Y ASSESSEE THAT THE AMOUNT OF RS. 5,30,53,903 REPRESENT THE ENTIRE AMOU NT OF BAD DEBT CLAIMED UNDER THE EXPLOSIVES DIVISION. IT WAS SUBMI TTED, WHILE AO ALLOWED BAD DEBTS CLAIM UNDER LUBRICANTS DIVISION, HE COMPLETELY IGNORED THE BAD DEBTS RELATING TO EXPLOSIVES DIVISI ON. ASSESSEE ALSO SUBMITTED, THE AMOUNT OF RS. 5,30,53,903 CLAIMED AS BAD DEBT REPRESENTS SALES OF PAST YEARS, WHICH WERE ACCOUNTE D FOR AS INCOME IN THE PRECEDING YEARS. LD. DRP AFTER CONSIDERING T HE SUBMISSIONS OF ASSESSEE, HOWEVER, REJECTED SUCH CLAIM BY OBSERVING THAT ASSESSEE HAVING FAILED TO DISCHARGE PRIMARY RESPONSIBILITY O F SUBSTANTIATING ITS CLAIM, THE CLAIM CANNOT BE ALLOWED. IN COMPLIANCE T O THE DIRECTION OF LD. DRP, AO WHILE COMPLETING FINAL ASSESSMENT ADDED BACK THE AMOUNT OF RS. 5,30,53,903 TO THE INCOME OF ASSESSEE . 23. LD. AR MORE OR LESS REITERATING THE SUBMISSIONS MADE BEFORE THE DEPARTMENTAL AUTHORITIES STATED THAT AO WHILE A LLOWING BAD DEBTS RELATING TO LUBRICATION DIVISION HAS COMPLETELY OVE RLOOKED THE BAD DEBTS RELATING TO EXPLOSIVES DIVISION. HE SUBMITTED , SINCE BAD DEBTS RELATING TO EXPLOSIVES DIVISION, WHICH REPRESENTS S ALES WERE OFFERED AS INCOME IN THE PRECEDING AY AND SINCE THE AMOUNT WAS ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNT, AO WAS NOT CO RRECT IN DISALLOWING THE SAME. FURTHER, LD. AR SUBMITTED, ALL INFORMATIO N RELATING TO ENTRIES MADE IN THE BOOKS OF ACCOUNT WITH REFERENCE TO THE CLAIM OF BAD DEBTS RELATING TO EXPLOSIVES DIVISION, THOUGH WAS SUBMITT ED IN THE FORM OF CD, BUT, AO WITHOUT PROPERLY VERIFYING THE SAME, HA S DISALLOWED THE SAME. 24. THE LD. DR, ON THE OTHER HAND, SUBMITTED BEFORE US, ASSESSEE APART FROM SAYING THAT THE AMOUNT IS ACTUALLY WRITT EN OFF IN THE BOOKS, MUST ALSO PROVE THAT THE AMOUNT IN QUESTION IS NOT RECOVERABLE. 12 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. 25. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIALS ON RECORD. AS CAN BE SEEN FROM THE OR DERS OF REVENUE AUTHORITIES, A PART OF THE BAD DEBT CLAIMED BY ASSE SSEE WAS DISALLOWED FOR THE REASON THAT ENTRIES RELATING TO SUCH BAD DEBTS WERE NOT AVAILABLE IN THE BOOK OF ACCOUNT. HOWEVER, IT I S THE CONTENTION OF ASSESSEE BEFORE US THAT ALL THE ENTRIES RELATING TO BAD DEBTS WERE NOT ONLY AVAILABLE BUT WERE ALSO PROVIDED BEFORE AO AND LD. DRP. IN THIS CONTEXT, WE HAVE TO OBSERVE THAT AS PER THE PROVISI ON CONTAINED U/S 36(1)(VII) OF THE ACT, AS IT STOOD DURING THE RELE VANT AY, THE ONLY REQUIREMENT FOR ALLOWING CLAIM OF BAD DEBT IS THERE MUST BE A DEBT WHICH HAS BECOME BAD AND IT IS ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNT. SECOND CONDITION IS, ASSESSEE MUST HAVE OF FERED INCOME RELATING TO SUCH DEBT IN THE PRECEDING AYS. ASSESSE E NEED NOT PROVE THAT DEBTS ARE NO LONGER RECOVERABLE. IN VIEW OF TH E SETTLED PRINCIPLE OF LAW, WE DIRECT AO TO VERIFY THE ISSUE AGAIN AND IF IT IS FOUND THAT BAD DEBT IS ACTUALLY WRITTEN OFF IN THE BOOKS MAINT AINED BY ASSESSEE AND IF IT WAS SHOWN EARLIER AS INCOME, THEN, THE DE DUCTION CLAIMED HAS TO BE ALLOWED AS PER THE PROVISIONS OF SECTION 36(1)(VII). AO MUST ALLOW ADEQUATE OPPORTUNITY TO ASSESSEE TO REPRESENT ITS CASE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 26. THE NEXT ISSUE AS RAISED IN GROUND NOS. 14 TO 1 8 IS IN RELATION TO ADDITION OF RS. 3,69,60,000 AS CAPITAL GAIN BY A PPLYING THE PROVISIONS CONTAINED U/S 50C OF THE ACT. 27. BRIEFLY THE FACTS RELATING TO THIS ISSUE ARE, I N COURSE OF ASSESSMENT PROCEEDING, AO NOTICED THAT ASSESSEE DUR ING THE RELEVANT PY HAS SOLD LAND ADMEASURING 5.24 ACRES IN SURVEY N O. 629 (PART) AND 1011/4 (PART), KUKATPALLY FOR A SALE CONSIDERAT ION OF RS. 4.18 CRORE PER ACRE. HOWEVER, ON VERIFYING THE REGISTERE D SALE DEED, AO NOTICED THAT FOR THE PURPOSE OF STAMP DUTY, SRO HAS VALUED THE PROPERTY AT RS. 4.84 CRORE PER ACRE. WHEN AO CALLED UPON ASSESSEE 13 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. TO EXPLAIN WHY THE STAMP DUTY VALUATION SHALL NOT B E TAKEN AS DEEMED SALE CONSIDERATION AS PER 50C OF THE ACT, ASSESSEE , IN REPLY, SUBMITTED THE VALUATION CERTIFICATE ISSUED BY SRO P URPORTEDLY IN THE NAME OF ONE KIRAN STATING THEREIN THAT THE MARKET R ATE OF THE LAND IS RS. 8,500 PER SQ.YD. IN THE SAME SURVEY NO. ON VERI FYING THE SAID CERTIFICATE, AO OBSERVED THAT THE NAME AND ADDRESS OF THE PERSON IN WHOSE NAME CERTIFICATE WAS ISSUED BY SRO IS NOT AVA ILABLE. FURTHER, THE DATE OF ISSUE OF CERTIFICATE WAS MENTIONED AS 3 1/04/2013. HE, THEREFORE, DOUBTED THE AUTHENTICITY OF THE VALUATIO N CERTIFICATE OBTAINED BY ASSESSEE. HE OBSERVED THAT AS THE CERT IFICATE IS NOT ADDRESSED TO ASSESSEE, THE VALUE MENTIONED THEREIN WILL NOT APPLY TO ASSESSEES CASE. ACCORDINGLY, APPLYING THE PROVISIO NS OF SECTION 50C(1) OF THE ACT, DETERMINED THE SALE CONSIDERATIO N AT RS. 27,10,40,000, WHICH RESULTED IN EXCESS CAPITAL GAIN OF RS. 3,69,60,000. BEING AGGRIEVED OF SUCH ADDITION, ASSE SSEE RAISED OBJECTIONS BEFORE THE LD.DRP. LD. DRP ALSO SUSTAINE D THE ADDITION BY AGREEING WITH THE REASONING OF AO. 28. LD. AR MORE OR LESS REITERATING WHAT WAS STATE D BEFORE THE DEPARTMENTAL AUTHORITIES SUBMITTED, BOTH AO AND LD. DRP HAVE NOT CONSIDERED THE FACTS AND MATERIALS PLACED BY ASSESS EE ON RECORD. IT WAS SUBMITTED, WHEN AO PROPOSED TO ADOPT THE VALUAT ION MADE BY SRO FOR STAMP DUTY PURPOSE, ASSESSEE DEPUTED ONE OF ITS EMPLOYEES MR. KIRAN BOKIL TO THE SUB-REGISTRAR OFFICE FOR ISS UANCE OF VALUATION CERTIFICATE SHOWING THE VALUATION OF THE LAND AS ON 09/04/2009. THE SUB-REGISTRAR ISSUED A CERTIFICATE SHOWING THE MARK ET RATE AT RS. 8500 PER SQ.YD OF LAND IN THE SAME SURVEY NO. THEREFORE, SALE CONSIDERATION OF LAND SHOWN BY ASSESSEE AT RS. 4.18 CRORE PER ACR E IS MORE THAN THE VALUE AS PER THE RECORDS OF SUB-REGISTRAR. IT W AS SUBMITTED, THE REASONING ON WHICH AO REJECTED THE VALUATION CERTIF ICATE IS TOTALLY IRRELEVANT. HE FURTHER SUBMITTED, BEFORE THE LD. DR P ASSESSEE HAS SUBMITTED REVISED VALUATION CERTIFICATE FROM SRO WH ICH WAS NOT AT ALL 14 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. CONSIDERED BY LD. DRP. LD. AR SUBMITTED, THE TRANSA CTION BEING A BONAFIDE ONE, THE PROVISIONS OF SECTION 50C WOULD N OT APPLY. 29. LD. DR ON THE OTHER HAND SUBMITTED, SINCE THE R EGISTERED SALE DEED CLEARLY INDICATED THAT ASSESSEE HAS UNDERSTATE D THE SALE CONSIDERATION, PROVISIONS OF SECTION 50C ARE APPLI CABLE, HENCE, NO FAULT CAN BE FOUND WITH AO IN APPLYING THE SAME. 30. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IALS ON RECORD. UNDISPUTEDLY, IN THE REGISTERED SALE DEED, THE SALE CONSIDERATION RECEIVED BY ASSESSEE HAS BEEN SHOWN AS RS. 4.18 CRO RE PER ACRE WHEREAS THE SRO HAS VALUED THE PROPERTY AT RS. 4.84 CRORES PER ACRE FOR STAMP DUTY PURPOSES. SINCE THE PROPERTY WAS SOL D DURING FY 2009- 10, PROVISIONS OF SECTION 50C OF THE ACT IS APPLICA BLE TO SUCH TRANSACTION. AS PER SECTION 50C(1) OF THE ACT, IF T HE CONSIDERATION SHOWN TO HAVE BEEN RECEIVED BY AN ASSESSEE ON A CAP ITAL ASSET BEING LAND OR BUILDING IS LESS THAN THE VALUE ADOPTED OR ASSESSED BY ANY AUTHORITY OF A STATE GOVT. FOR THE PURPOSE OF PAYME NT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THEN, VALUATION SO ADOPTE D BY THE CONCERNED AUTHORITY SHALL FOR THE PURPOSE OF COMPUTATION OF C APITAL GAIN U/S 48 BE DEEMED TO BE THE FULL VALUE RECEIVED OR OCCURRIN G AS A RESULT OF SUCH TRANSFER. THUS, THE LANGUAGE OF SECTION 50C(1) OF THE ACT IS CLEAR ENOUGH TO INDICATE THAT IT IS A DEEMING PROVISION P ROVIDING FOR ADOPTION OF THE VALUATION MADE BY THE REGISTERED AU THORITY FOR STAMP DUTY PURPOSE AS SALE CONSIDERATION DEEMED TO HAVE B EEN RECEIVED BY ASSESSEE. HOWEVER, SUB-SECTION (2) OF SECTION 50C P ROVIDES THAT WHERE ASSESSEE IN COURSE OF PROCEEDING BEFORE AO OB JECTS TO THE VALUE ADOPTED OR ASSESSED BY STAMP VALUATION AUTHOR ITY AND IF SUCH VALUATION MADE BY THE STAMP VALUATION AUTHORITY HAS NOT BEEN DISPUTED BY ASSESSEE BEFORE ANY OTHER APPROPRIATE A UTHORITY BY WAY OF APPEAL OR REVISION, AO IS REQUIRED TO REFER THE VALUATION OF CAPITAL ASSET TO A VALUATION OFFICER AND ON THE BASIS OF TH E VALUATION MADE BY 15 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. THE VALUATION OFFICER, AO MAY PROCEED TO COMPUTE TH E CAPITAL GAIN AS PROVIDED UNDER SUB-SECTION (3) OF SECTION 50C. IN T HE PRESENT CASE, THE FACTS AND MATERIALS ON RECORD CLEARLY REVEAL TH AT IN COURSE OF THE ASSESSMENT PROCEEDING, ASSESSEE HAS OBJECTED TO ADO PTION OF VALUATION MADE BY THE STAMP DUTY VALUATION AUTHORIT Y AND HAS PRODUCED A VALUATION CERTIFICATE TO SUBSTANTIATE IT S CLAIM THAT THE VALUE OF THE PROPERTY IS MUCH LESS THAN THE VALUE A DOPTED BY THE STAMP DUTY VALUATION AUTHORITY FOR THE PURPOSE OF S TAMP DUTY. HOWEVER, AO REJECTING SUCH VALUATION CERTIFICATE BY POINTING OUT CERTAIN TECHNICAL DEFECTS HAS PROCEEDED TO COMPUTE CAPITAL GAIN BY ADOPTING THE VALUATION MADE BY STAMP DUTY VALUATION AUTHORITY FOR STAMP DUTY PURPOSES WITHOUT REFERRING THE VALUATION TO THE VALUATION OFFICER AS PROVIDED UNDER SUB-SECTION (2) OF SECTIO N 50C. IN OUR VIEW SUCH ACTION OF AO BEING CONTRARY TO THE STATUTORY P ROVISIONS CANNOT BE APPRECIATED. LD. DRP HAS ALSO COMPLETELY OVERLOOKED THIS ASPECT. IN THE AFORESAID VIEW OF THE MATTER, SINCE THE AO HAS NOT COMPLIED TO THE STATUTORY MANDATE AS PROVIDED IN SUB-SECTION (2) OF SECTION 50C, WE ARE INCLINED TO REMIT THE MATTER BACK TO THE FILE O F AO TO CONSIDER THE OBJECTIONS OF ASSESSEE IN THE MATTER AND DECIDE THE ISSUE AFTER COMPLYING TO THE PROVISIONS OF SECTION 50C(2) OF TH E ACT. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 31. THE NEXT ISSUE AS RAISED IN GROUND NO. 19 TO 21 IS IN RESPECT OF ADDITION OF AN AMOUNT OF RS. 19,73,25,000 BEING REP AYMENT OF LOAN BY SUBSIDIARIES. 32. BRIEFLY THE FACTS RELATING TO THIS ISSUE ARE, D URING THE ASSESSMENT PROCEEDING AO ON EXAMINING THE P&L A/C O F ASSESSEE, NOTICED THAT DURING THE YEAR ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 19,73,25,000 FROM ITS SUBSIDIARIES AGAINST ADVANCES ADJUSTED TO REVALUATION RESERVE WHICH HAS BEEN CREDITED TO THE P&L A/C. HOWEVER, WHILE COMPUTING ITS TAXABLE INCOME, ASSESSEE HAS DE DUCTED THIS 16 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. AMOUNT FROM THE INCOME. AO OBSERVED THAT ASSESSEE D ID NOT EXPLAIN WHEN THE AMOUNTS ARE ADVANCED TO THE SUBSIDIARIES. HE FURTHER NOTICED THAT HUGE AMOUNTS OUTSTANDING IN THE NAME O F SUBSIDIARIES WERE ALSO WRITTEN OFF TO THE REVALUATION RESERVE AS PROVISION FOR DOUBTFUL ADVANCES, THE DETAILS OF WHICH ARE AS UNDE R: 1. GULF COROSSERIE INDIA LTD. RS. 5.29 CRORES 2. IDL BUILDWARE RS. 440.89 CRORES 3. IDL SPECIALITY CHEMICALS LTD. RS. 1137.09 CRORE S AND 4. OTHER ADVANCES RS. 174.76 CRORES AO OBSERVED THAT AN AMOUNT OF RS. 19,73,25,000 WHIC H WAS ALSO SHOWN AS INCOME IN P&L A/C, BUT, ONLY FOR THE PURPO SE OF TAXATION THE SAME IS REDUCED FROM THE INCOME. AO OBSERVED THAT W HEN AN AMOUNT IS RECEIVED ON CESSATION OF LIABILITIES, THE SAME W OULD BE INCOME IN THE HANDS OF ASSESSEE AND ACCORDINGLY, HE ADDED BAC K THE AMOUNT OF RS. 19,73,25,000 TO THE INCOME OF ASSESSEE. BEING A GGRIEVED OF SUCH ADDITION, ASSESSEE RAISED OBJECTIONS BEFORE THE LD. DRP. 33. BEFORE THE LD. DRP, IT WAS SUBMITTED BY ASSESSE E, THE AMOUNT OF RS. 19,73,25,000 REPRESENTS REVERSAL OF PROVISIO N MADE EARLIER TO THE REVALUATION RESERVE. REVALUATION RESERVE EARLIE R CREATED WAS NEVER CLAIMED AND ALLOWED AS DEDUCTION. THEREFORE, WHEN ASSESSEE RECEIVED THE REPAYMENTS OF LOAN FROM THE SUBSIDIARI ES, IT CANNOT BE TREATED AS INCOME OF ASSESSEE. LD. DRP, HOWEVER, D ID NOT FIND MERIT IN THE SUBMISSIONS OF ASSESSEE. LD. DRP OBSERVED TH AT ASSESSEE FAILED TO EXPLAIN HOW THE AMOUNT OF RS. 19,73,25,00 0 CREDITED TO THE P&L A/C AS INCOME DULY AUDITED BY THE TAX AUDITOR C ANNOT BE CONSIDERED AS INCOME IN THE COMPUTATION OF TOTAL IN COME. ACCORDINGLY, LD. DRP SUSTAINED THE ADDITION MADE BY AO. AS A CONSEQUENCE, WHILE COMPLETING THE FINAL ASSESSMENT ALSO, AO MADE THE ADDITION. 17 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. 34. NARRATING THE FACTS, LD. AR SUBMITTED BEFORE US , ASSESSEE EARLIER HAD ADVANCED AN AMOUNT OF RS. 30,90,87,613 TO IDL SPECIALITIES AND CHEMICALS LTD. IN FY 2008-09 AS RE CEIPT OF THE AMOUNT BECAME DOUBTFUL, A SUM OF RS. 31,03,96,799 W AS SHOWN IN THE ACCOUNTS OF ASSESSEE AS DOUBTFUL ADVANCE AND WA S DEBITED TO THE REVALUATION RESERVE ACCOUNT. THE AMOUNT WAS NEVER C LAIMED AS DEDUCTION NOR WAS DEBITED TO THE P&L A/C. IT WAS SU BMITTED, SUBSEQUENTLY, ASSESSEE RECEIVED A SUM OF RS. 19,66, 88,000 FROM IDL SPECIALITIES CHEMICALS LTD. IN FY 2009-10. THEREFOR E, TO THAT EXTENT INITIAL PROVISION MADE IN THE ACCOUNTS STOOD REVERS ED AND THE AMOUNT RECEIVED WAS CREDITED TO P&L ACCOUNT. SIMILARLY, AM OUNTS TOTALING TO 4,47,25,578 WERE ADVANCED TO ANOTHER SUBSIDIARY, NA MELY, IDL BUILDWARE LTD. DURING FY 2005-06 TO 2008-09. THESE AMOUNTS REPRESENT EXPENSES PAID BY ASSESSEE ON BEHALF OF ID L BUILDWARE SINCE THE AMOUNTS WERE NOT RECOVERABLE, ASSESSEE MA DE A PROVISION IN ITS ACCOUNTS IN AY 2009-10 AND ADJUSTED THE SAME AGAINST THE REVALUATION RESERVE ACCOUNT IN THE BALANCE SHEET. IT WAS SUBMITTED, THE SAID AMOUNT WAS NEVER CLAIMED AS DEDUCTION BY A SSESSEE IN ANY OF THE PY. OUT OF THE AFORESAID ADVANCES DURING FY 2009-10, A SUM OF RS. 6,36,75,000 WAS RECEIVED BY ASSESSEE AND WAS CR EDITED TO P&L A/C. LD. AR SUBMITTED, THESE TWO AMOUNTS ARE REPAY MENT OF LOANS BY SUBSIDIARIES AND DO NOT REPRESENT INCOME OF ASSESS EE. FURTHER, SINCE ASSESSEE IN THE PRECEDING AYS NEVER CLAIMED THESE A MOUNTS AS DEDUCTION WHILE COMPUTING INCOME, THEY HAVE TO BE D EDUCTED FROM THE COMPUTATION OF TAXABLE INCOME SINCE THE AMOUNTS WER E CREDITED TO THE P&L A/C. LD. AR SUBMITTED, THE REASONING ON WHICH A O AND LD. DRP SUSTAINED THE ADDITION ARE NOT AT ALL TENABLE. IT W AS SUBMITTED, SINCE THE DOUBTFUL ADVANCES WERE NEVER CLAIMED AS DEDUCTI ON, THE SAME CANNOT BE TREATED AS INCOME ON RECEIPT FROM THE SUB SIDIARIES BY APPLYING THE PROVISIONS OF SECTION 41(1) OF THE ACT . IT WAS SUBMITTED, THOUGH, ASSESSEE NOT ONLY BEFORE AO BUT ALSO BEFORE LD. DRP HAS FILED ALL THE FACTS AND MATERIALS, BUT, IGNORING SU CH FACTS AND 18 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. EVIDENCES, AO AS WELL AS LD. DRP HAVE MADE ADDITION . LD. AR SUBMITTED, THOUGH, IT MAY BE A FACT THAT THE AMOUNT S IN QUESTION SHOULD NOT HAVE BEEN CREDITED TO P&L A/C AND SHOUL D HAVE BEEN SHOWN DIRECTLY IN THE BALANCE SHEET, BUT, SINCE EAR LIER WHEN THE AMOUNTS WRITTEN OFF AS NOT RECOVERABLE AND THERE W AS NO DEBIT MADE IN THE P&L A/C, BUT, WHEN THEY WERE CREDITED TO THE P&L A/C ON RECEIPT, IT HAS TO BE REDUCED FROM THE TAXABLE INCO ME. LD. AR SUBMITTED, ENTRIES MADE IN THE BOOKS OF ACCOUNT ARE NOT CONCLUSIVE TO DETERMINE WHETHER PAYMENT RECEIVED IS IN THE NATUR E OF INCOME OR NOT. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON A DECISION OF THE HONBLE SUPREME COURT IN CASE OF KEDARANATH JUTE MA NUFACTURING CO. VS. CIT 82 ITR 363 AND OF BOMBAY HIGH COURT IN CIT VS. GOPAL PUROHIT, [2011] 336 ITR 287 (BOM.). 35. LD. DR, ON THE OTHER HAND, SUBMITTED BEFORE US, WHEN AN AMOUNT IS CREDITED TO THE P&L A/C AS INCOME, THERE IS NO REASON WHY ASSESSEE SHOULD REDUCE IT FROM INCOME FOR THE PURPO SE OF TAXATION. 36. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIALS ON RECORD. THERE IS NO DISPUTE TO THE FACT THAT AN AMOUNT OF RS. 19,73,25,000 HAS BEEN CREDITED TO THE P&L A/C AS INCOME DURING THE YEAR. IN THE NOTE TO THE P&L A/C, AUDITORS HAVE STATED THAT AMOUNTS RECEIVED FROM SUBSIDIARIES AGAI NST ADVANCES MADE AND ADJUSTED TO REVALUATION RESERVE IN PURSUAN CE TO SCHEME OF ARRANGEMENTS BY THE HONBLE HIGH COURT OF AP IN 200 8-09 SHOWN AS INCOME UNDER THE HEADING EXCEPTIONAL ITEM. THERE IS NO CERTIFICATION BY THE AUDITORS WHETHER THE AMOUNTS WERE EARLIER CL AIMED AS DEDUCTION OR NOT. UNDER THE NORMAL CIRCUMSTANCES, R EPAYMENT OF LOAN CANNOT BE AN INCOME. HOWEVER, IN THE PRESENT CASE, AS APPARENT FROM RECORD, IT NEEDS TO BE VERIFIED WHETHER THE AMOUNT IN QUESTION WAS EARLIER CLAIMED AS DEDUCTION BY ASSESSEE OR NOT. IT IS ALSO REQUIRED TO BE EXAMINED WHETHER THESE SUMS ARE COVERED IN THE S CHEME OF 19 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. ARRANGEMENT APPROVED BY HONBLE HIGH COURT. SINCE T HESE ASPECTS HAVE NOT BEEN EXAMINED BY AO OR BY LD. DRP IN DETAI L, WE ARE INCLINED TO REMIT THE MATTER BACK TO THE FILE OF AO FOR VERIFICATION AND DECIDING THE SAME IN ACCORDANCE WITH LAW AFTER DUE OPPORTUNITY OF BEING HEARD TO ASSESSEE IN THE MATTER. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 37. THE NEXT ISSUE AS RAISED IN GROUND NOS. 22 TO 2 7 RELATES TO DISALLOWANCE OF ASSESSEES CLAIM OF CAPITAL LOSS OF RS. 61,64,14,000. 38. BRIEFLY THE FACTS RELATING TO THIS ISSUE ARE, W HILE EXAMINING THE ACCOUNTS OF ASSESSEE, AO NOTICED THAT ASSESSEE HAS CLAIMED LONG TERM CAPITAL LOSS FROM SALE OF SHARES OF IDL SPECIA LITY CHEMICALS LTD. ON VERIFYING THE FACTS ON RECORD, HE OBSERVED THAT AS PART OF THE SCHEME OF ARRANGEMENT SANCTIONED BY HONBLE AP HIGH COURT, ASSESSEE TRANSFERRED ONE OF ITS DIVISION SPECIALTY CHEMICAL DIVISION TO IDL SPECIALTY CHEMICALS LTD. FOR RS. 42,29,46,00 0 IN AY 2009-10. HE OBSERVED THAT ASSESSEE BEFORE THE HONBLE HIGH C OURT SUBMITTED THAT IT WANTS TO RUN VARIOUS SEGMENTS OF BUSINESS W ITH FOCUS AND THAT IS WHY SPECIALTY CHEMICALS DIVISION IS SOLD. AS PER THE SCHEME IDL SPECIALTY CHEMICALS LTD. WAS TO RUN API UNIT WITH F OCUS. FOR THAT PURPOSE ONLY AN UNIT WITH HIGH NETWORTH WAS SOLD TO A COMPANY WHICH IS IN LOSSES. IN RETURN, ASSESSEE GOT 97,60,000 SHA RES OF THE SAID COMPANY. HOWEVER, THE SAID UNIT WAS SOLD BY IDL SPE CIALTY CHEMICALS LTD. WITHIN A FEW MONTHS AT A LOSS. AO WONDERED HOW AN UNIT WITH POSITIVE NETWORTH SUDDENLY LOSES ITS VALUE. AO OBSE RVED THAT FOR THE PURPOSE OF AVOIDING CAPITAL GAIN ARISING FROM SALE OF LAND, ASSESSEE HAS ADOPTED LOWER VALUATION FOR THE UNIT FOR THE PU RPOSE OF BOOKING LONG TERM CAPITAL LOSS TO SET IT OFF AGAINST CAPITA L GAIN FROM THE SALE OF LAND. AO OBSERVED, SHARES OF IDL SPECIALTY CHEMICA LS LTD. WERE SOLD IN A SHORT PERIOD FOR A PALTRY CONSIDERATION OF RS. 2.10 CRORES THEREBY INCURRING CAPITAL LOSS. AO WAS OF THE VIEW THAT WHA T PROMPTED THE SALE 20 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. OF SHARES FOR A PALTRY SUM OF RS. 2.10 CRORES WITHI N A SHORT PERIOD OF ACQUISITION CANNOT BE UNDERSTOOD. AO OBSERVED THAT M/S HINDUJA VENTURES, A CONCERN TO WHICH SHARES WERE SOLD AS WE LL AS ASSESSEE AND IDL SPECIALTY CHEMICALS LTD. BELONG TO THE SAME HINDUJA GROUP AND IT IS A COLLUSIVE TRANSACTION BETWEEN AE AND AS SESSEE. AO OBSERVED THAT A REASONABLE MAN COULD NOT HAVE PARTE D WITH UNDERTAKING WORTH OF RS. 63,74,14,000 IN EXCHANGE O F SHARES WHICH ARE NOT EVEN WORTH THE VALUE OF A PAPER. THUS, AO O PINING THAT THE TRANSACTIONS RELATING TO SALE OF SHARES IS A COLLUS IVE ONE, LONG TERM CAPITAL LOSS CLAIMED BY ASSESSEE ON SALE OF SHARES HAS TO BE DISALLOWED. AGAINST THE DISALLOWANCE OF CAPITAL LOS S, ASSESSEE RAISED OBJECTIONS BEFORE LD. DRP. LD. DRP ALSO APPROVED TH E VIEW OF THE AO BY REJECTING OBJECTIONS OF ASSESSEE. 39. LD. AR EXPLAINING THE FACTS SUBMITTED BEFORE US , ASSESSEE HAD A DIVISION CALLED IDL SPECIALTY CHEMICALS DIVISION, WHICH WAS IN EXISTENCE IN FY 2004-05. HE SUBMITTED, THE NETWORTH OF ASSETS AS PER THE DIVISION AS ON 01/04/08 IS RS. 78,63,74,140.00 AND THE COST OF ACQUISITION OF ASSETS AS ON 01/04/08 WAS RS. 54,61, 17,596. LD. AR SUBMITTED, THE ENTIRE DIVISION WAS TRANSFERRED UND ER THE SCHEME OF TRANSFER TO ANOTHER DIVISION I.E. IDL SPECIALTY CHE MICALS LTD. FROM, 01/04/08 AND THE SCHEME OF MERGER/DEMERGER WAS ALSO APPROVED BY HONBLE HIGH COURT. CONSEQUENT TO THE TRANSFER OF E NTIRE ASSETS OF THE UNDERTAKING TO THE NEW DIVISION AT BOOK VALUE, ASSE SSEE WAS GIVEN RS. 97,60,000 SHARES AT VALUE OF RS. 65.31 PER SHAR E ( RS. 10 AS FACE VALUE + 55.31 AS PREMIUM PER SHARE). THE VALUE OF T HE SHARE GIVEN WAS EQUAL TO THE BOOK VALUE OF DIVISION AT RS. 63,7 4,14,000. THE COST OF ASSET FOR THE PURPOSE OF INCOME TAX, POST DEPREC IATION WAS RS. 54,61,17,596. LD. AR SUBMITTED, FOR THE PURPOSE OF COMPUTING LONG TERM CAPITAL GAIN, ASSESSEE GOT VALUATION REPORT OF NETWORTH OF THE UNDERTAKING AND THE VALUATION AUTHORITY ASSESSED IT AT RS. 42,29,40,000 IN PLACE OF BOOK VALUE OF RS. 63,74,14 ,000. DURING THE 21 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. ASSESSMENT PROCEEDING RELEVANT TO AY 2009-10, ASSES SEE CLAIMED THAT FOR THE PURPOSE OF COMPUTING CAPITAL GAIN SALE CONSIDERATION SHOULD BE TAKEN AT RS. 42,29,46,000 AND SINCE THE C OST OF ACQUISITION OF ASSETS TRANSFERRED AS PER THE IT ACT WAS RS. 54, 61,17,596, THERE IS A CAPITAL LOSS. HOWEVER, AO REJECTED THE SUBMISSION S OF ASSESSEE AND HELD THAT ACTUAL VALUE OF 97,60,000 SHARES AL LOWED TO ASSESSEE IN THE SCHEME OF ARRANGEMENT BY TAKING THE ENTIRE N ETWORTH AT THE BOOK VALUE AS PER THE BOOKS OF ASSESSEE AT RS. 63,7 4,14,000. THEREFORE, CAPITAL GAIN ON THE BASIS OF VALUATION SHOWN IN THE VALUERS REPORT BEING IRRELEVANT CANNOT BE TAKEN FO R THE PURPOSE OF COMPUTING CAPITAL GAIN. AO ADOPTING THE ACTUAL VALU E OF SHARES AT RS. 63,74,14,000 ( COST AS PER THE BOOK VALUE), COMPUTE D CAPITAL GAIN AT RS. 9,12,96,404, WHICH WAS ALSO CONFIRMED BY LD. DR P IN AY 2009-10. LD. AR SUBMITTED, ENTIRE SHARES OF 97,60,000 WAS SO LD BY ASSESSEE DURING FY 2009-10 TO M/S HINDUJA VENTURES LTD. FOR A TOTAL CONSIDERATION OF RS. 2.10 CRORES. SINCE THE COST OF ACQUISITION OF SHARES OF 97,60,000 WAS RS. 63,74,14,000, WHICH WAS ALSO ADOPTED BY AO WHILE COMPUTING CAPITAL GAIN IN AY 2009-10, L ONG TERM CAPITAL LOSS OF RS. 61,64,14,000 IS ALLOWABLE. LD. AR SUBMI TTED, THE OBSERVATIONS MADE BY AO THAT TRANSFER OF SHARES IS A COLLUSIVE TRANSACTION DESIGNED TO SET OFF CAPITAL LOSS AGAINS T LONG TERM CAPITAL GAIN ON SALE OF LAND IS ERRONEOUS AND IMAGINARY AND HAS NO NEXUS WITH THE ACTUAL FACTS. IT WAS SUBMITTED, NEITHER A T THE STAGE OF ASSESSMENT OR SUBSEQUENTLY ANY ENQUIRY WAS MADE NO R DETAILS WERE CALLED FOR OR ANY EXPLANATION WAS SOUGHT ON THIS AS PECT. THOUGH, BEFORE LD. DRP ASSESSEE SUBMITTED THE FACTUAL DETAI LS, BUT LD. DRP SIMPLY GLOSSED OVER THE ISSUE BY MERELY OBSERVING A SSESSEE HAS MISREPRESENTED THE FACTS. LD. AR SUBMITTED, REASONE S GIVEN FOR DISALLOWING THE CAPITAL LOSS IS TOTALLY INCORRECT. LD. AR REFERRING TO THE P&L A/C OF IDL SPECIALTY CHEMICALS LTD. SUBMITTED B EFORE US, LOSS OF THE UNIT FOR THE PERIOD 01/04/08 TO 31/03/10 AMOUNT ED TO RS. 62,13,37,338. DUE TO CONTINUING LOSS NETWORTH OF TH E COMPANY GOT 22 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. TOTALLY WIPED OUT. SINCE LOSSES WERE ACCUMULATED YE AR AFTER YEAR, IT SERVED NO PURPOSE TO RUN THE COMPANY AND SUFFER FUR THER LOSSES. FOR THIS REASON ALONE, IDL SPECIALTY CHEMICALS LTD. THO UGHT IT FIT TO SELL ITS ENTIRE ASSETS TO AN UNRELATED COMPANY VIZ. BIOCON L TD AT A LOSS. LD. AR SUBMITTED, AT THE TIME OF SALE, NETWORTH OF IDL SPECIALTY CHEMICALS LTD. WAS ABOUT RS. 1.97 CRORES. THEREFORE , WHEN M/S HINDUJA VENTURES LTD. CAME FORWARD TO BUY 97,67,000 SHARES FOR A PRICE OF RS. 2.10 CRORES, ASSESSEE SOLD THE SHARES AS THE VALUE OF SHARES HAVE BECOME VERY VERY LESS. LD. AR SUBMITTED , SINCE THE VALUE AT WHICH THE SHARES WERE TRANSFERRED TO M/S HINDUJA VENTURES IS MORE OR LESS AT PAR WITH THE NETWORTH OF THE COM PANY, TRANSACTION CANNOT BE CONSIDERED AS COLLUSIVE ONE. LD. AR SUBMI TTED, THE FACT THAT IDL SPECIALTY CHEMICALS LTD WAS RUNNING AT A LOSS I S PROVED FROM THE FACTS THAT ASSESSEE SOLD THE ASSETS AT RS. 22 CRORE S TO M/S BIOCON LTD AND FROM THESE SALE PROCEEDS IDL SPECIALTY CHEMICAL S LTD. DISCHARGED ITS LIABILITY. LD. AR SUBMITTED, THOUGH, IT MAY BE A FACT THAT AS A RESULT OF SALE OF SHARES, THE CAPITAL LOSS SUS TAINED WAS SET OFF AGAINST THE CAPITAL GAIN ON SALE OF LAND, BUT, FOR THAT REASON ITSELF IT CANNOT BE SAID THAT THE TRANSACTION IS COLLUSIVE. L D. AR SUBMITTED, IF THE SHARES OF A COMPANY HAVING NETWORTH OF RS. 1.92 CORES WERE SOLD AT RS. 2.10 CRORE , IT CANNOT BE SAID TO BE A COLLU SIVE TRANSACTION. LD. AR SUBMITTED, LD. DRP HAS NOT AT ALL APPLIED ITS MI ND TO THE SUBMISSIONS MADE BY ASSESSEE. IT WAS SUBMITTED, IF ASSESSEE ARRANGES ITS AFFAIRS IN A MANNER PERMISSIBLE WITHI N THE LEGAL FRAMEWORK, WHICH RESULTS IN LESSENING OF ITS TAX LI ABILITY, THEN, IT CANNOT BE TERMED AS A COLLUSIVE TRANSACTION. IN THI S CONTEXT, HE RELIED UPON A DECISION OF HONBLE SUPREME COURT IN CASE OF UNION OF INDIA & ANOR VS. AZADI BACHAO ANDOLAN & ANR, 263 ITR 706 (S C). 40. LD. DR, ON THE OTHER HAND, RELIED UPON THE OBSE RVATIONS OF AO AND. LD. DRP. 23 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. 41. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IALS ON RECORD. AS FAR AS THE FACTUAL ASPECT IS CONCERNED, THERE IS NO DISPUTE TO THE FACT THAT THE BOOK VALUE OF ASSETS OF ASSESSEE AT T HE TIME OF DEMERGER WAS RS. 63,74,14,000 AS THE SAME WAS ADOPTED BY AO WHILE COMPUTING CAPITAL GAIN FOR AY 2009-10. FROM THE ANN UAL REPORTS OF THE IDL SPECIALTY CHEMICALS DIVISION AS WELL AS IDL SPE CIALTY CHEMICALS LTD., WHICH WAS SUBMITTED IN THE PAPER BOOK. IT IS SEEN THAT ACCUMULATED LOSS OF IDL SPECIALTY CHEMICALS LTD. ST OOD AT RS. 62,13,37,338, AS A RESULT THE NETWORTH OF THE COMPA NY WAS REDUCED TO RS. 1.92 CRORES. THEREFORE, IN THE AFORESAID CIRCUM STANCES, IF ASSESSEE TOOK A PRUDENT BUSINESS DECISION TO SELL S HARES OF THE COMPANY, HAVING LOW NETWORTH FOR A CONSIDERATION O F RS. 2.10 CRORES, THE TRANSACTION CANNOT BE TERMED AS COLLUSIVE MEREL Y ON PRESUMPTIONS AND SURMISES WITHOUT BRINGING MATERIALS ON RECORD T O PROVE SUCH FACT. FURTHER, THE SALE OF THE ASSETS OF SPECIALTY DIVISI ON TO ANOTHER COMPANY I.E. BIOCON AT LOSS ALSO INDICATES THAT THE COMPANY WAS NOT IN A GOOD FINANCIAL POSITION. IN THE AFORESAID FACT S AND CIRCUMSTANCES WITHOUT MAKING ANY ENQUIRY OR BRINGING POSITIVE MAT ERIAL ON RECORD TO SHOW THAT SHARES OF IDL SPECIALTY CHEMICALS LTD. WE RE OF A MUCH HIGHER VALUE AND COULD HAVE FETCHED MUCH MORE PRICE THAN WHAT WAS SHOWN BY ASSESSEE, AO CANNOT TERM THE TRANSACTION A S A COLLUSIVE ONE ONLY BECAUSE THE CONCERN TO WHICH THE SHARES WE RE SOLD BELONGS TO HINDUJA GROUP. IF IT IS A FACT ON RECORD THAT TH E NETWORTH OF THE COMPANY IS REDUCED TO 1.97 CRORES AND IT IS A PERS ISTENT LOSS MAKING COMPANY. IT IS REASONABLE TO BELIEVE THAT ASSESSEE WOULD HAVE FOUND IT DIFFICULT TO DISPOSE OFF THE SHARES HELD BY IT W HICH ARE NOT WORTH MUCH. IN THIS SITUATION, IF A COMPANY COMES FORWARD TO PURCHASE THE SHARES BY OFFERING A PRICE MORE THAN OR AT PAR WITH NETWORTH OF THE COMPANY, THEN, THE SALE OF SHARES BY ASSESSEE AT TH E PRICE OFFERED BY THE PURCHASER CANNOT BE QUESTIONED UNLESS THERE ARE STRONG EVIDENCES ON RECORD TO SHOW THAT ASSESSEE HAS ENTER ED INTO A COLOURABLE TRANSACTION OR COLLUSIVE ARRANGEMENT WHI LE DISPOSING OF 24 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. SHARES TO A GROUP COMPANY AT A SUBSTANTIALLY LESSER PRICE. IT IS THE CONTENTION OF ASSESSEE BEFORE US, AT THE STAGE OF A SSESSMENT, AO NEITHER MADE ANY ENQUIRY NOR SOUGHT ANY EXPLANATION FROM ASSESSEE WITH REGARD TO THE SHARE TRANSACTION. THOUGH, BEFOR E LD. DRP ASSESSEE SUBMITTED THE FACTS RELATING TO SHARE TRAN SACTION, HOWEVER, ON GOING THROUGH THE OBSERVATIONS OF LD. DRP, WE FI ND THAT THE LD. DRP HAS ONLY CURSORILY REFERRED TO THE ISSUE AND FI NISHED ITS JOB BY MERELY OBSERVING THAT ASSESSEE HAS MISREPRESENTED I TS FACTS, VALUATION REPORTS, VALUATION OF ITS ASSETS, VALUATI ON OF SHARES WITH THE INTENTION OF CLAIMING LONG TERM CAPITAL LOSS. IN OU R VIEW, LD. DRP HAS NOT CONSIDERED THE ISSUE IN PROPER PERSPECTIVE. ON OVERALL CONSIDERATION OF FACTS AND MATERIALS ON RECORD, WE ARE OF THE VIEW THAT THE ENTIRE ISSUE RELATING TO SALE OF SHARES BY ASSE SSEE TO M/S HINDUJA VENTURES LTD. REQUIRES FRESH EXAMINATION BY AO. ACC ORDINGLY, WE REMIT THE ISSUE BACK TO AO WITH A DIRECTION TO DECI DE THE SAME AFTER EXAMINING ALL FACTS AND MATERIALS BROUGHT ON RECORD BY ASSESSEE. AO MUST AFFORD REASONABLE OPPORTUNITY OF BEING HEARD T O ASSESSEE IN THE MATTER AND DECIDE THE ISSUE AFTER CONSIDERING ALL S UBMISSIONS MADE BY ASSESSEE ON THE ISSUE. AO ALSO SHOULD KEEP IN VI EW THE DECISIONS, WHICH ASSESSEE MAY RELY UPON IN SUPPORT OF ITS CLAI M. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 42. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 30 TH APRIL, 2015. SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 30 TH APRIL, 2015 KV 25 ITA NO. 217/HYD/2015 GULF OIL CORPORATION LTD., HYD. COPY TO:- 1) GULF OIL CORPORATION LTD., KUKATPALLY, P.B. NO. 1, SANATNAGAR , HYDERABAD. 2) ACIT, CIRCLE 2(2), HYDERABAD. 3 DRP, HYDERABAD 4)CIT, INTERNATIONAL TAXATION, IT TOWERS, 10-02-3, AC GUARDS, HYDERABAD 500 004. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.