DCIT, CHENNAI V. Maya Appliances Pvt. Ltd., CHENNAI

ITA 2677/CHNY/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4320 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 16-03-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 24-10-2014
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATHA PEERYA
• Assessee Lawyers: VIJAYARAGHAVAN
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Depreciation; Wholly owned subsidiary
• Section: 50C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI , ! ' ! # . $ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.2677/MDS./2014 / ASSESSMENT YEAR : 2011-12 THE DCIT, COMPANY CIRCLE IV(1), CHENNAI. VS. M/S.MAYA APPLIANCES PVT LTD., 10/5,ROYAL ENCLAVE, BESANT AVENUE, ADYAR, CHENNAI 600 020. [PAN AAACM 6280 D ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : MR.PATHLAVATHA PEERYA, CIT DR. /RESPONDENT BY : MR.VIJAYARAGHAVAN, ADVOCATE / DATE OF HEARING : 16 - 03 - 2017 / DATE OF PRONOUNCEMENT : 02 - 06 - 2017 , / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, CHENN AI DATED 21.08.2014 PERTAINING TO ASSESSMENT YEAR 2011-12. ITA NO.2677/14 :- 2 -: 2. THE GRIEVANCE OF THE REVENUE IN THIS APPEAL IS WITH REGARD TO DELETION OF ADDITION MADE UNDER THE HEAD CAPITAL GA INS ON SALE OF LAND. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A MANUFACTURING COMPANY INVOLVED IN MANUFACTURE OF MI XTURE, INDUCTION STOVE, RICE COOKERS ETC., UNDER BRAND NAME PREETHI . THE SHARE HOLDING PATTERN OF THE ASSESSEE COMPANY IS AS INDIC ATED BELOW:- MR.T.T.VARADARAJAN 60% MRS.MAYA VARADARAJAN 20% MS.DEEPA VARADARAJAN 10% MR.SIDDAARTH VARADARAJAN 10% THE COMPANY IS HOLDING COMPANY OF ITS 100% SUBSIDIA RY VIZ., M/S.GENERAL WOOD INDUSTRIES (P) LTD.(GWI). THE SHAR E HOLDING PATTER OF M/S.GWI IS AS UNDER:- MR.T.T.VARADARAJAN 50% MRS.MAYA VARADARAJAN 50% THE SHARE CAPITAL OF THE ABOVE SUBSIDIARY COMPANY W AS AS FOLLOWS:- 24,000 SHARES OF RS.100 EACH - ` 24,00,000/- BOTH THE ABOVE DIRECTORS HELD 12,000/- SHARES EACH. 3.1 THE ABOVE SUBSIDIARY COMPANY IS A DORMANT COMPA NY AND HOLDS LAND IN THURAIPAKKAM ON WHICH THE FACTORY BUI LDING OWNED BY THE HOLDING COMPANY VIZ., M/S.MAYA APPLIANCES (P) L TD. (MAL) IS ITA NO.2677/14 :- 3 -: SITUATED. THE ASSESSEE COMPANY TOOK THE LAND ON LEA SE FOR AN ANNUAL RENT AND CONSTRUCTED A BUILDING ON THE SAID LEASE H OLD LAND AND TREATED IT AS AN ASSET IN ITS BOOKS, CLAIMING DEPRECIATION ON THE SAME ACCORDINGLY. M/S.MAYA APPLIANCES (P) LTD. WAS HOLDI NG 100% SHARES OF ITS SUBSIDIARY M/S.GENERAL WOOD INDUSTRIES (P) LTD. TILL FEBRUARY 2011. ON 28.2.2011, THE ASSESSEE COMPANY, M/S.MAYA APPLIA NCES (P) LTD. SOLD THE SHARES OF M/S.GENERAL WOOD INDUSTRIES (P) LTD. AT ITS PREVAILING BOOK VALUE TO THE FOLLOWING PERSONS: (I) MR.T.T.VARADARAJAN 12,000 SHARES @ RS.100 EACH - ` 12,00,000/- (II) MRS. MAYA VARADARAJAN 12,000 SHARES @ RS. 100 EACH- ` 12,00,000/- THUS THE OWNERSHIP OF THE COMPANY IS NOW JOINTLY HE LD BY THE ABOVE TWO PERSONS AT 50% SHARES EACH. 3.2 THE ASSESSING OFFICER RELYING ON THE PROVISIO NS OF SEC 2(47)(VI) AND SEC.269UA(D)(II) OF THE ACT CONCLUDED THAT WHIL E TRANSFERRING THE SHARES, THE TRANSFER OF UNDERLYING IMMOVABLE PROPER TY HAS BEEN EFFECTED SINCE THE IMMOVABLE PROPERTY UNDER REFEREN CE IS THE ONLY ONE HELD BY THE COMPANY AND THERE ARE NO OTHER ASSETS A T THE TIME OF TRANSFER OF SHARES. HAVING HELD THAT THAT THERE HAS BEEN A TRANSFER, THE ASSESSING OFFICER APPLIED THE PROVISIONS OF SEC 45 OF THE ACT FOR CHARGEABILITY TO TAX ON CAPITAL GAINS FOR THE TRANS FER OF THE UNDERLYING ITA NO.2677/14 :- 4 -: IMMOVEABLE PROPERTY WHILE TRANSFERRING THE SHARES. AFTER HOLDING THAT CAPITAL GAINS TAX ARISES IN THE HANDS OF THE ASSESS EE ON THE TRANSFER OF IMMOVABLE PROPERTY, THE ASSESSING OFFICER APPLIED T HE SPECIAL PROVISIONS FOR ARRIVING AT THE FULL VALUE OF CONSID ERATION U/S.50C OF THE ACT. THE SUBMISSION OF THE ASSESSEE DURING THE ASSE SSMENT PROCEEDINGS WAS THAT THE IMMOVABLE PROPERTY WAS NOT TRANSFERRED AND IS STILL WITH M/S.GWI AND THERE WAS ONLY A CHANGE I N THE SHARE HOLDING. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBMISS IONS OF ASSESSEE CONCLUDED THAT THE TRANSFER OF THE UNDERLYING IMMOV ABLE PROPERTY HAS BEEN EFFECTED IN THE GUISE OF TRANSFER OF SHARES AN D IS ONLY AN ARRANGEMENT THAT IS MADE BY THE ASSESSEE COMPANY, L EADING TO EVASION OF TAX. AGGRIEVED WITH THE ORDER OF LD. AS SESSING OFFICER, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). 3.3 ON APPEAL, LD.CIT(A) OBSERVED THAT THE ASSESSE E COMPANY HAS A WHOLLY OWNED SUBSIDIARY CALLED M/S.GENERAL WOOD IND USTRIES (P) LTD., IN WHICH ASSESSEE HAS 100% SHARE HOLDING. THE ASSES SEE COMPANY TRANSFERRED THE ENTIRE SHARE HOLDING OF ABOUT 24,00 0 SHARES OF MR.T.T.VARADARAJAN AND MRS.MAYA VARADARAJAN EQUALLY IN THE RATIO OF 60% & 20% RESPECTIVELY. IT IS ALSO NOT IN DISPUTE THAT THE SUBSIDIARY COMPANY WAS A DORMANT COMPANY OWNING LAND LEASED TO THE ASSESSEE COMPANY IN WHICH ASSESSEE COMPANY HAD CONSTRUCTED A FACTORY ITA NO.2677/14 :- 5 -: BUILDING. THE ISSUE THAT ARISES FOR CONSIDERATION I S WHETHER BY TRANSFER OF SHARES OF THE SUBSIDIARY COMPANY PROVISIONS OF S ECTION 2(47)(VI) R.W.S.269 UA AND SEC 50C OF THE ACT WOULD BE ATTRAC TED. ACCORDING TO THE ASSESSING OFFICER, ASSESSEE IN THE GUISE OF TRA NSFER OF SHARES OF THE COMPANY HAD INDIRECTLY TRANSFERRED THE IMMOVABLE PR OPERTY TO EVADE CAPITAL GAINS TAX. THEREFORE WHAT HAS TO BE SEEN IN THE PRESENT CASE IS WHETHER THE TRANSFEREES POSSESS OR ENJOY THE PROPER TIES BY MERELY OWNING THE SHARES OF THE COMPANY. 3.4 IT WAS SUBMITTED BY AUTHORISED REPRESENTATIVE OF ASSESSEE BEFORE THE LD.CIT(A) THAT IN THE CASE OF COMPANIES HOLDING IMMOVABLE PROPERTY, THE SHARE HOLDERS DO NOT HAVE ANY RIGHT O VER ANY OF THE ASSETS OF THE COMPANY AND HENCE, THOUGH THE SHARES ARE TRANSFERRED, RIGHTS OF THE ASSETS OF THE COMPANY ARE NOT TRANSFE RRED. ADMITTEDLY IN THE PRESENT CASE THERE IS NO TRANSFER OF IMMOVABLE PROPERTY AND THE SAME CONTINUES TO BE THE ASSET OF THE M/S.GWI. THE ASSESSING OFFICER WITHOUT CONSIDERING THE ABOVE LEGAL ASPECT HAS GONE ON THE PRESUMPTION THAT SEC 2(47)(VI) WILL APPLY EVEN TO T RANSFER OF SHARES WITHOUT ANY DIRECT RIGHT OF OWNING OR ENJOYING OF T HE PROPERTY OF THE COMPANY. NORMALLY THE TRANSFER OF SHARES OF A COMPA NY DOES NOT ENABLE THE PURCHASER OF SHARES TO ENJOY THE IMMOVAB LE PROPERTY. THE SHARE HOLDERS GET A RIGHT OVER THE PROPERTY OF THE COMPANY ONLY ON ITS ITA NO.2677/14 :- 6 -: LIQUIDATION. IT WAS OBSERVED BY THE LD.CIT(A) THAT SECTION 2(47)(VI) OF THE ACT READS AS UNDER: (VI) ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEMBER OF, OR CQUIRING SHARES IN, A CO-OPERATIVE SOCIETY, COMPANY OR OTHER ASSOCIATION OF PERSON OR BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER) WHIC H HAS THE EFFECT OF TRANSFERRING, OR ENABLING THE ENJOYMENT O F, ANY IMMOVABLE PROPERTY 3.5 FURTHER THE AR RELIED ON CBDT CIRCULAR NO.495 DT 22 SEPTEMBER 1987, REPORTED IN 168 ITR (ST) 87 EXPLAINING THE PR OVISIONS OF FINANCE ACT 1987 RELATING TO DIRECT TAXES WHEREIN IT WAS ME NTIONED THAT SUB- CLAUSE (VI) WAS INTRODUCED TO PREVENT THE AVOIDANCE OF CAPITAL GAINS LIABILITY BY RECOURSE TO TRANSFER OF RIGHTS ACCRUIN G TO A PURCHASER BY WAY OF BECOMING A MEMBER OF OR ACQUIRING SHARES IN A CO-OPERATIVE SOCIETY, COMPANY OR ASSOCIATION OF PERSONS OR BY WA Y OF ANY AGREEMENT OR ANY ARRANGEMENT WHEREBY SUCH PERSON AC QUIRERS ANY RIGHT IN ANY IMMOVABLE PROPERTY. SUCH ARRANGEMENTS CONFER THE PRIVILEGES OF OWNERSHIP WITHOUT TRANSFER OF TITLE W HICH ARE NOT REQUIRED TO BE REGISTERED UNDER THE REGISTRATION ACT, 1908. THE LD.CIT(A) PLACED RELIANCE ON THE ABOVE CIRCULAR AND THE RELEV ANT PORTION OF CIRCULAR READS AS UNDER: 11.1 THE EXISTING DEFINITION OF THE WORD TRANSFER IN S. 2(47) DOES NOT INCLUDE TRANSFER OF CERTAIN RIGHTS ACCRUIN G TO A PURCHASER, BY WAY OF BECOMING A MEMBER OF OR ACQUIR ING SHARES ITA NO.2677/14 :- 7 -: IN A CO-OPERATIVE SOCIETY, COMPANY, OR ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT OR ANY ARRANGEMENT WHEREBY SUCH PERSON ACQUIRES ANY RIGHT IN ANY BUILDING WHICH IS EITHER BEING CONSTRUCTED OR WHICH IS TO BE CONSTRUCTED. TRANSACT IONS OF THE NATURE REFERRED TO ABOVE ARE NOT REQUIRED TO BE REG ISTERED UNDER THE REGISTRATION ACT, 1908. SUCH ARRANGEMENTS CONFE R THE PRIVILEGES OF OWNERSHIP WITHOUT TRANSFER OF TITLE I N THE BUILDING AND ARE A COMMON MODE OF ACQUIRING FLATS PARTICULAR LY IN MULTI- STORE YED CONSTRUCTIONS IN BIG CITIES. THE DEFINITI ON ALSO DOES NOT COVER CASES WHERE POSSESSION IS ALLOWED TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT, OF THE NATURE RE FERRED TO IN S. 53A OF THE TRANSFER OF PROPERTY ACT, 1882. NEW SUBC IS. (V) & (VI) HAVE BEEN INSERTED IN S. 2(47) TO PREVENT AVOIDANCE OF CAPITAL GAINS LIABILITY BY RECOURSE TO TRANSFER OF RIGHTS I N THE MANNER REFERRED TO ABOVE, 11.2 THE NEWLY INSERTED SUB-CLAUSE(VI) OF SECTION2( 47) HAS BROUGHT INTO THE AMBIT OF TRANSFER, THE PRACTICE OF ENJOYMENT OF PROPERTY RIGHTS THROUGH WHAT IS COMMONLY KNOWN AS P OWER OF ATTORNEY ARRANGEMENTS. THE PRACTICE IN SUCH CASES I S ADOPTED NORMALLY WHERE TRANSFER OF OWNERSHIP IS LEGALLY NOT PERMITTED. A PERSON HOLDING THE POWER OF ATTORNEY IS AUTHORIZED THE POWERS OF OWNER, INCLUDING THAT OF MAKING CONSTRUCTION, THE L EGAL OWNERSHIP IN SUCH CASES CONTINUES TO BE WITH THE TR ANSFEROR. 3.6 FROM THE ABOVE CIRCULAR, HE DREW INFERENCE THA T THIS PROVISION WAS INTRODUCED TO PREVENT THE AVOIDANCE OF CAPITAL GAINS TAX LIABILITY. THIS SECTION WILL APPLY ONLY TO CASES WHERE THE ACQ UISITION OF SHARES IN A COMPANY HAS THE EFFECT OF TRANSFERRING, OR ENABLI NG THE ENJOYMENT OF, ANY IMMOVABLE PROPERTY. ADMITTEDLY IN THE PRESE NT CASE THERE IS NO ITA NO.2677/14 :- 8 -: TRANSFER OF IMMOVABLE PROPERTY AND THE SAME CONTINU ES TO BE THE ASSET OF THE M/S.GWI. ACCORDING TO LD.CIT(A), THE PROVISI ONS OF SEC 2(47)(VI) ARE NOT ATTRACTED TO THE FACTS OF THE PRESENT CASE. 3.7 ACCORDING TO LD.CIT(A), CHAPTER XX-C DEALS WI TH PURCHASE OF IMMOVABLE PROPERTY BY CENTRAL GOVERNMENT IN CERTAIN CASES. UNDER SEC 269 UA(2)(D) IMMOVABLE PROPERTY MEANS (I) AN Y LAND OR ANY BUILDING OR PART OF A BUILDING, AND INCLUDES, WHERE ANY LAND OR ANY BUILDING OR PART OF A BUILDING IS TO BE TRANSFERRED TOGETHER WITH ANY MACHINERY, PLANT, FURNITURE, FITTINGS OR OTHER THIN GS, SUCH MACHINERY, PLANT, FURNITURE, FITTINGS OR OTHER THINGS ALSO. EXPLANATION : FOR THE PURPOSES OF THIS SUB-CLAUSE, LAND, BUILDING, PART OF A BUILDING, MACHINERY, PLANT, FURNITURE, FITTINGS AND OTHER THINGS INCLUDE ANY RIGHTS THEREIN; (II) ANY RIGHTS IN OR WITH RESPECT TO ANY LAND OR A NY BUILDING OR A PART OF A BUILDING (WHETHER OR NOT INCLUDING ANY MACHINERY, P LANT, FURNITURE, FITTINGS OR OTHER THINGS THEREIN) WHICH HAS BEEN CONSTRUCTED OR WHICH IS TO BE CONSTRUCTED, ACCRUING OR ARISING FROM ANY TRANSACTI ON (WHETHER BY WAY OF BECOMING A MEMBER OF, OR ACQUIRING SHARES IN, A CO- OPERATIVE SOCIETY, COMPANY OR OTHER ASSOCIATION OF PERSONS OR BY WAY O F ANY AGREEMENT OR ANY ARRANGEMENT OF WHATEVER NATURE), NOT BEING A TRANSA CTION BY WAY OF A SALE, EXCHANGE OR LEASE OF SUCH LAND, BUILDING OR PART OF A BUILDING; ITA NO.2677/14 :- 9 -: 3.8 THE CIT(A) EXAMINED THE PROVISIONS OF THE SEC 269UA WHICH IS A SPECIFIC SECTION TO COVER CASES WHERE THE MAIN PURP OSE OF ANY ARRANGEMENT IS ENJOYMENT OF THE IMMOVABLE PROPERTY, UNLIKE IN THE PRESENT CASE WHERE THERE WAS A TRANSFER OF SHARES, AND THE POSSESSION AND ENJOYMENT OF THE PROPERTY STILL VESTS WITH GENE RAL WOOD INDUSTRIES WHICH OWNS THE PROPERTY. THE TRANSFEREES DO NOT POS SES OR ENJOY THE PROPERTIES BY MERELY OWNING THE SHARES. 3.9 ACCORDING TO LD.CIT(A), SEC 50C OF THE ACT PROV IDES THAT WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET, BEING LAND OR BUILDING OR BOTH, IS LESS THAN THE VALUE ADOPTED [OR ASSESSED OR ASSESSABLE] BY AN Y AUTHORITY OF A STATE GOVERNMENT (HEREAFTER IN THIS SECTION REFERRE D TO AS THE STAMP VALUATION AUTHORITY) FOR THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER, THE VALUE SO ADOPTED [OR ASSESSED OR ASSESSABLE] SHALL, FOR THE PURPOSES OF SECTION 48, BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUIN G AS A RESULT OF SUCH TRANSFER. IT IS SETTLED ISSUE THAT PROVISIONS OF SE CTION 50C ARE DEEMED PROVISIONS AND, THEREFORE, SAME HAVE TO BE INTERPRE TED STRICTLY IN ACCORDANCE WITH SPIRIT OF PROVISIONS. ITA NO.2677/14 :- 10 - : 3.10 ACCORDING TO LD.CIT(A), SEC 50C APPLIES ONLY TO A TRANSFER OF CAPITAL ASSETS BEING LAND AND BUILDING AND NOT APPL ICABLE TO THE FACTS OF THE PRESENT CASE WHERE THERE IS ONLY TRANSFER OF SH ARES AND THE OWNERSHIP OF PROPERTY VESTS WITH M/S.GWI. 4. HE HAS ALSO TAKEN SUPPORT OF THE DECISION OF TH E HONBLE KARNATAKA HIGH COURT IN THE CASE OF BHORUKA ENGINEE RING INDS. LTD. VS. DOT 356 ITR 25 (KAR). THE FACTS IN THAT CASE WAS AS SESSEE AND OTHER PROMOTER SHAREHOLDERS WERE HOLDING 98.73K SHARES I N X, WHEREAS PUBLIC SHAREHOLDERS WERE HOLDING REMAINING SHARES. IN THE AY 2006-07 ASSESSEE SOLD ITS SHAREHOLDINGS IN X TO EXTENT OF 45,350 SHARES FOR NET CONSIDERATION OF ` 20,29,08,626/- AFTER PAYING SECURITY TRANSACTION TAX, SERVICE TAX, ETC. ASSESSEE CLAIMED GAIN ON SAL E OF SHARES AS EXEMPT FROM TAXATION U/S. 10 (38). AC HELD THAT IMP UGNED TRANSACTION WAS COLOURABLE DEVISE AND VIRTUALLY IMMOVABLE PROPE RTY HAD BEEN TRANSFERRED FOR CONSIDERATION AND ASSESSEE WAS LIAB LE TO TAX ON SHORT TERM CAPITAL GAIN ON SALE OF IMMOVABLE PROPERTY AS DETERMINED. CIT(A) AS WELL AS ITAT CONFIRMED ACTION OF AC. THE HONBLE HIGH COURT HELD THAT, ASSESSEE WAS HOLDING SHARES IN X FROM 01.10 .1984 AND THEREFORE, IT WAS LONG TERM CAPITAL ASSET AND ALL T HREE CONDITIONS STIPULATED U/S. 10(38) WERE FULFILLED. THEREFORE, A SSESSEE WAS ENTITLED TO BENEFIT FLOWING THERE FROM I.E., INCOME FROM SUC H TRANSFER COULD NOT ITA NO.2677/14 :- 11 - : BE INCLUDED IN TOTAL INCOME OF ASSESSEE FOR THE PRE VIOUS YEAR. ASSESSEE BY RESORTING TO SUCH TAX PLANNING, HAD TAKEN ADVANT AGE OF BENEFIT OF LAW OR LOOP HOLES IN LAW, WHICH HAD ENDURED TO HIS BENEFIT. THUS, IMPUGNED TRANSACTION WAS REAL, VALUABLE CONSIDERATI ON WAS PAID, ALL LEGAL FORMALITIES WERE COMPLIED WITH AND WHAT WAS T RANSFERRED WAS SHARES AND NOT IMMOVABLE PROPERTY. THUS, FINDING OF AO THAT IT WAS TRANSFER OF IMMOVABLE PROPERTY WAS CONTRARY TO LAW AND CONTRARY TO MATERIAL ON RECORD. AUTHORITIES BELOW COMMITTED VER Y SAME MISTAKE WHICH WAS ILLEGAL, CONTRARY TO SETTLED LEGAL POSITI ON. ACCORDINGLY, IMPUGNED ORDER PASSED BY ALL THREE AUTHORITIES WAS SET-ASIDE. 4.1 ACCORDING TO LD.CIT(A),THE RATIO OF THE ABOVE D ECISION SQUARELY APPLIES TO THE FACTS OF THE PRESENT CASE WHERE ASSE SSEE HAS TRANSFERRED ONLY THE SHARES AND THE POSSESSION AND ENJOYMENT OF PROPERTY STILL VESTS WITH M/S.GWI WHICH OWNS THE ASSET. THEREFORE THE FINDING OF AO THAT IT WAS TRANSFER OF IMMOVABLE PROPERTY WAS CONT RARY TO LAW AND THE MATERIAL ON RECORD. 4.2 HE HAS ALSO RELIED ON THE DECISION OF TRIBUNAL IN THE CASE OF ASIF ABDUL KADER FAZIANI VS. ACIT 36 CCH 234, ASSESSEE T RANSFERRED THE ENTIRE SHARES IN M/S. KAMALA MENSION PVT. LTD. TO T HE PURCHASERS OF THE SHARES. ACCORDING TO AO, THE AGREEMENT ENTERED INTO BY THE ASSESSEE ITA NO.2677/14 :- 12 - : IN THE GARB OF SHARE TRANSFER AGREEMENT WAS TO TRAN SFER OWNERSHIP OF THE TWO FLATS OWNED BY THE SAID COMPANY TO THE PURC HASERS OF THE SHARES. HE, THEREFORE, HELD THAT IT WAS A CASE OF T RANSFER OF IMMOVABLE PROPERTY AND THE PROVISIONS OF SECTION 50C WERE APP LICABLE HE ADOPTED THE STAMP DUTY VALUATION OF ` 4,12,16,500/- FOR THE PURPOSE OF COMPUTATION OF LONG TERM CAPITAL GAIN ARISING FROM THE TRANSFER OF THE PROPERTY WHICH WAS ALLEGEDLY EFFECTED IN THE GARB O F SHARE TRANSFER AGREEMENT AS AGAINST THE AGREEMENT VALUE OF `3,46,7 1,609/- SHOWN BY THE ASSESSEE FOR TRANSFER OF SHARES. ON APPEAL C IT(A) CONFIRMED. THE TRIBUNAL HELD THAT THE PROVISIONS OF SECTION 50 C ARE DEEMED PROVISIONS AND, THEREFORE, THE SAME HAVE TO BE INTE RPRETED STRICTLY IN ACCORDANCE WITH THE SPIRIT OF THE PROVISIONS, I.E E XPRESSION TRANSFER SHOULD BE A DIRECT TRANSFER AS DEFINED U/S 2(47) WH ICH DOES NOT INCLUDE TRANSFER OF SHARES & THE TRANSFER OF SHARES WAS NEV ER A PART OF THE ASSESSMENT OF THE STAMP DUTY AUTHORITIES OF THE STA TE GOVERNMENT. 4.3 ACCORDING TO LD.CIT(A), IN THE PRESENT CASE AL SO WHAT HAD BEEN TRANSFERRED IS ONLY SHARES OF GWI AND THE OWNERSHIP AND POSSESSION AND ENJOYMENT OF ASSET IS WITH GWI AND THERE IS NO DIRECT TRANSFER OF LAND, BUILDING OR BOTH. IN THE PRESENT CASE ASSESSE E HAS OFFERED INCOME FROM CAPITAL GAINS ON SALE OF SHARES. AS THE RE IS NO TRANSFER OF LAND OR BUILDING OR BOTH IN THE PRESENT CASE, HELD THAT PROVISIONS OF SEC ITA NO.2677/14 :- 13 - : 50C ARE ALSO NOT APPLICABLE TO THE FACTS OF THIS CA SE. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE MAIN CONTENTION OF THE LD .A.R IS THAT THE PROVISIONS OF THE SECTION 50C DOES NOT ATTRACT TO T HE TRANSACTIONS, WHICH ARE NOT REGISTERED WITH THE STAMP DUTY VALUA TION AUTHORITY AND THERE WAS NO DIRECT TRANSFER OF LAND AND BUILDING O R BOTH. IN THE PRESENT CASE, THE ASSESSEE COMPANY, SOLD THE SHARES OF M/S.GENERAL WOOD INDUSTRIES (P) LTD., AT ITS PREVAILING BOOK VA LUE TO THE FOLLOWING PERSONS:- MR.T.T.VARADARAJAN 50% -12,000 SHARES AT ` 100 - ` 12 LAKHS MRS.MAYA VARADARAJAN 50% -12,000 SHARES AT ` 100 - ` 12 LAKHS THUS, THE OWNERSHIP OF THE COMPANY VIZ. M/S.GENERAL WOOD INDUSTRIES (P) LTD., NOW OWNED BY THE ABOVE TWO PERSONS JOINT LY. ACCORDING TO LD. ASSESSING OFFICER, THE ASSESSEE SOLD THE ACTUAL LAND AND BUILDING IN THE GUISE OF SALE OF SHARES TO THE ABOVE PERSONS AN D THE PROVISIONS OF THE SECTION 50C OF THE ACT IS APPLICABLE, THOUGH TH E PROPERTIES ARE NOT REGISTERED WITH THE STAMP VALUATION AUTHORITY. IN THE INSTANT CASE, WHAT WAS TRANSFERRED BY THE ASSESSEE, EVEN THE SHAR ES IN M/S.GENERAL WOOD INDUSTRIES (P) LTD., AND NOT THE LAND AND BUIL DING OR BOTH. THE ASSETS TRANSFERRED BEING THE SHARES, WHICH WAS NEVE R PART OF ITA NO.2677/14 :- 14 - : ASSESSMENT OF STAMP DUTY AUTHORITY OF THE STATE GOV ERNMENT. IN SUCH CIRCUMSTANCES THAT CANNOT BE NO QUESTION OF INVOKIN G THE PROVISIONS OF THE SECTION 50C OF THE ACT AS THERE IS NO DIRECT TR ANSFER AS ENUMERATED IN SEC.50C OF THE ACT R.W.S 2(47) OF THE ACT. BEIN G SO, LD.CIT(A) HAD TAKEN A CORRECT VIEW OF THE FACTS OF THE CASE BY PL ACING RELIANCE ON THE JUDGEMENT OF KARNATAKA HIGH COURT IN THE CASE OF BH ORUKA ENGINEERING INDS. LTD. VS. DOT 356 ITR 25 (KAR) AND ALSO THE JU DGEMENT OF TRIBUNAL IN THE CASE OF ASIF ABDUL KADER FAZIANI VS . ACIT 36 CCH 234. ACCORDINGLY, WE ARE INCLINED TO UPHOLD THE ORDER OF LD.CIT(A). HENCE, THE GROUND RAISED BY THE REVENUE STANDS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED ON 02 ND JUNE, 2017, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 02 ND JUNE, 2017. K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF