The ACIT, Circle-5, Ahmedabad V. Pripan Investment Pvt. Ltd., Ahmedabad

ITA 271/AHD/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5458 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-07-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 03-02-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MUKESH M PATEL
• Keywords: Capital asset; Cost of acquisition; Fair market value; Deemed dividend; Reason to believe

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI MUKUL SHRAWAT, JUDICIAL MEMBER AND SHRI N.S.SAINI, ACCOUNTANT MEMBER DATE OF HEARING :8-7-2010 DRAFTED ON: 8-7-2010 ITA NO.271 /AHD/2006 ASSESSMENT YEAR : 199-00 ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE-5, C.U.SHAH BUILDING, ASHRAMROAD,AHMEDABAD. VS. PRIPAN INVESTMENT PVT.LTD., ZYUD TOWER, OPP. ISKON TEMPLE, AHMEDABAD. PAN/GIR NO. : AAACP 9017 B (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI B.S.GAHLOT,CIT(LEARNED DEPARTMENTAL REPRESENTATIVE) RESPONDENT BY: SHRI MUKESH M. PATEL. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XI ,AHM EDABAD DATED 10-11-2005. 2. THE SOLE GROUND OF APPEAL TAKEN BY THE REVENUE I N THIS APPEAL IS AS UNDER:- THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS )-XI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.22,58,49,837/- ON ACCOUNT OF LONG TE RM CAPITAL GAIN. - 2 - 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DECIDED THE ABOVE ISSUE BY OBSERVING AS UNDER :- 4. WITH REGARD TO COMPUTATION OF CAPITAL GAINS ON ACCOUNT OF TRANSFER OF SHARES. IT IS SUBMITTED BY THE LEARN ED AUTHORISED REPRESENTATIVE OF THE ASSESSEE THAT THE APPELLANT H AD SHARES OF CADILA COMPANY TOTALLING TO 35,96,501/- WHICH HAVE BEEN ACQUIRED BY THE APPELLANT COMPANY IN THE PAST IN TH E NAME OF CADILA LABORATORIES LTD., CADILA CHEMICALS LTD., CA DILA VETERINARY PVT. LTD., AND CADILA EXPORTS LTD. SUBSE QUENTLY THESE GROUP OF COMPANIES GOT MERGED AND ULTIMATELY THE SHARES WERE ISSUED IN THE NAME OF CADILA HEALTHCARE LTD. I T IS ALSO STATED BY THE A.R. THAT NUMBER OF SHARES WERE INCRE ASED IN THE DUE COURSE SINCE THE CADILA HEALTH CARE HAD ISSUED BONUS SHARES THE RATIO OF 2:1 ON SEVERAL OCCASIONS AND UL TIMATELY THE SHARES HOLDINGS OF THE APPELLANT COMPANY ARE AT 53, 94,751 EVEN THOUGH THE SHARES PURCHASED ORIGINALLY WERE ONLY 3 5,96,501 AT THE COST OF RS.20,11,429/-. THE APPELLANT HAD AVERA GED THE SAID COST OF THE ACQUISITION TOWARDS THE SHARES PURCHASE D AND BONUS SHARES ISSUED. 4.1. IT IS FURTHER SUBMITTED THAT FOR THE PREVIOUS YEAR UNDER CONSIDERATION THE APPELLANT HAD TRANSFERRED 53,94,6 51 SHARES TO ZYDUS FAMILY TRUST WHEREIN THE SHARE HOLDINGS OF TH E APPELLANT COMPANY ARE ALSO MEMBERS OF THE ZYDUS FAMILYTRUST A ND RETAINED HUNDRED SHARES WITH THE APPELLANT. THE APP ELLANT COMPANY HAD WORKED OUT THE COST OF THE SHARES WHICH WERE TRANSFERRED BY TAKING THE AVERAGE OF COST OF THE SH ARES ACQUIRED AND BONUS SHARES RECEIVED WHICH COMES TO RS.0.37. T HE COST OF THE ACQUISITION OF THE SHARES WERE AVERAGED TOWARD THE ORIGINAL SHARES AND BONUS SHARES. THE APPELLANT HAD TRANSFER RED THE SHARES TO ZYDUS FAMILY TRUST AT ABOVE ARRIVED AVERA GE COST. 4.2. THE ASSESSING OFFICER, HOWEVER IS OF THE VIEW THAT THE APPELLANT HAD TRANSFERRED THE SHARES TO ZYDUS FAMIL Y TRUST FOR UNDER CONSIDERATION WHEREAS THE MARKET VALUE OF THE SHARES WHICH IS WORKED OUT BY TAKING THE SHARES CAPITAL AN D RESERVES AFTER REDUCING THE MISCELLANEOUS EXPENSES WAS AT RS .42.24. 4.3. IT IS ALSO SUBMITTED BY THE AUTHORISED REPRES ENTATIVE THAT THE ASSESSING OFFICER HAS WRONGLY COMPUTED THE MARKET VALUE OF THE SHARES AT RS.42.24 AGAINST THE ACTUAL CONSIDERATION - 3 - RECEIVED BY THE APPELLANT. THE APPELLANT HAD RECEIV ED THE VALUE OF THE SHARES TRANSFERRED AT RS.0.37 TOTALLING TORS .20,11,392/- WHEREAS THE A.O. HAS COMPUTED THE VALUE OF THE SHAR ES TRANSFERRED AT RS.42.24 EACH AND THEREBY HE HAS COM PUTED CAPITAL GAINS AT RS.22,58,49,837/- WHICH IS NOT JUS TIFIED. 4.4. IT IS CONTENDED BY THE A.R. THAT THE ASSESSIN G OFFICER DID NOT APPRECIATE THE FACTS THAT THE APPELLANT HAD REC EIVED ACTUAL CONSIDERATION AT RS.20,11,392/- FROM THE ZYDUS FAMI LY TRUST WHICH IS THE ACTUAL COST OF THE SHARES TRANSFERRED BY THE APPELLANT. 4.5. IT IS FURTHER CONTENDED BY THE A.R. THAT THE ASSESSING OFFICER IS UNDER THE MISTAKEN IMPRESSION THAT THE A PPELLANT HAD RECEIVED MORE CONSIDERATION THAN WHAT IS ADMITTED W ITHOUT SUBSTANTIATING ANY EVIDENCE. IT IS CONTENDED BY THE A.R. THAT THE APPELLANT DID NOT RECEIVE ANY EXTRA CONSIDERATI ON EITHER IN KIND OR CASH TOWARDS THE TRANSFER OF THE SHARE. THE REFORE, THE ASSESSING OFFICERS ALLEGATION THAT THE APPELLANT C OMPANY HAD RECEIVED EXTRA CONSIDERATION IN ADDITION TO WHAT HA S BEEN RECEIVED AS ADMITTED BY THE APPELLANT COMPANY IS NO T CORRECT. 4.6. THE A.RS ARGUMENTS HAVE BEEN TAKEN INTO CONS IDERATION AND TO FIND OUT WHETHER THE APPELLANT HAD RECEIVED ANY EXTRA CONSIDERATION TOWARDS THE TRANSFER OF SHARES THE A. O. WAS ASKED TO GIVE A REPORT WITH REGARD TO ADDITIONAL CONSIDER ATION ALLEGEDLY SAID TO HAVE BEEN RECEIVED BY THE APPELLA NT. 4.7. THE ASSESSING OFFICER VIDE HER LETTER NO. ACIT/CIR.5/REMAND REPORT/2005-06 DATED 22-08-2005 H AS SUBMITTED HER REMAND REPORT WHICH IS REPRODUCED HER EUNDER - 2. THE ASSESSEE VIDE HIS LETTER DT.20-4-2005 HAS M ADE CERTAIN REPRESENTATIONS BEFORE HON'BLEBLE COMMISS IONER OF INCOME TAX(APPEALS) ,AHMEDABAD AND RAISED CERTAIN I SSUES. MY REPORT ON THESE ISSUES ARE AS UNDER - 3. THE NET WORTH PER SHARE ISSUED AND PAID UP AS ON 31-3-98 IS TAKEN AS THE FAIR MARKET VALUE OF CADILA HEALTHC ARE LTD. WHILE CALCULATING THE NET WORTH PER SHARE, THE FICT ITIOUS ASSETS HAVE BEEN DEDUCTED FROM THE RESEVES AND SURPLUS. TH E VALUE OF INTANGIBLE ASSETS SUCH AS BRANDS, TRADE MARKS, G OODWILL, - 4 - PATENTS OF CADILA HEALTHCARE LTD., TOO HAVE NOT BE EN TAKEN INTO CONSIDERATION. AS PER THE ASSESSEE, CADILA HEALTHCARE LTD., HAS P AID THE DIVIDEND OF RS.89,91,252.50 IN A YEAR (FINANCIAL YE AR 98-99) AT THE RATE OF RS./2.5 PER SHARE FOR A FACE VALUE OF R S.10/- (WHEREAS THE RATE OF DIVIDEND OF THE SHARES OF CADI LA HERALTHCARE LTD., AS PER ITS BALANCE SHEET FOR THE THREE PRECEDING YEARS HAVE BEEN 40% FOR FINANCIAL YEAR 97 -98 AND 10% FOR FINANCIAL YEAR 96-97). THE EARNING PER SHARE OF CADILA HEALTHCARE LTD., I S RS.14 AS ON 31-3-98 (RS.4.81 AS ON 31.3.98, RS.4.81 AS ON 31.3.97 AND 11.39 AS ON 31.3.98) THE PUBLIC ISSUE PRICE IN FEB.,2000 OF THESE SHARE S WAS RS.250 FOR THE SHARES OF FACE VALUE OF RS.5/-. CONSIDERING THE ABOVE MENTIONED FACTS, THE A.O. HA S TAKEN A CONSERVATIVE APPROACH (NET WORTH OF A COMPA NY FROM THE BALANCE SHEET BASED ON HISTORICAL COST) WHILE C ALCULATING THE FAIR MARKET VALUE OF THE CADILA SHARES. THE FAI R MARKET VALUE WOULD HAVE BEEN HIGHER IF EARNINGS APPROACH, DIVIDEND APPROACH, OR THE IPO RATE WOULD HAD BEEN CONSIDERED FOR THE VALUATION OF THE CADILA SHARES. THE ASSESSEE HAS EVADED TAX ON TWO COUNTS. I) BY CONCEALING THE CAPITAL GAINS ARISING ON THE SALE OF SHARES OF CADILA HEALTHCARE LTD. TOP ZYDUS FAMILY TRUST. II) BY NOT PAYING THE DIVIDEND DISTRIBUTION TAX ON THE DEEMED DIVIDEND PAID BY THE ASSESSEE UNDER SECTION 2(22)(E). SECTION 2 (22)(E) OF THE I.T.ACT,1961 STATES DIVID END INCLUDES ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTER ESTED, OF ANY SUM (WHETHER AS REPRESENTING A PART OF THE A SSETS OF THE COMPANY OR OTHERWISE) (MADE AFTER THE 31 ST DAY OF MAY,1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDE R, BEING A PERSON WHO IS THE BENEFICIAL OWNER OF THE S HARES, (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVID END - 5 - WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN P ROFITS) HOLDING NOT LESS THAN 10% OF THE VOTING POWER, OR T O ANY CONCERN, IN WHICH SUCH SHAREHOLDER IS A MEMBER OF A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFERRED TO AS THE SAID C ONCERN) OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FO R THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSE S ACCUMULATED PROFITS. ASSESSEE IS A PRIVATE LIMITED COMPANY IN WHICH THE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. SHAREHOLDING OF THE BENEFICIARIES OF ZYDUS FAMILY T RUST IS MORE THAN 10% IN THE ASSESSEE COMPANY (SHAREHOLD ING PATTERN ENCLOSED AS ANNEXURE-1). THE SHAREHOLDERS HAVE SUBSTANTIAL INTEREST IN THE Z YDUS FAMILY TRUST AS ITS BENEFICIARIES (LIST OF BENEFICI ARIES OF ZYDUS FAMILY TRUST ENCLOSED AS ANNEXURE-2). THE PAYMENT HAS BEEN MADE FOR THE BENEFIT OF THE SHAREHOLDERS. A BENEFIT CONNOTES ANYTHING THAT IS ADVANTAGEOUS TO, OR FOR THE GOOD OF, A PERSON. WHIL E LOAN OR ADVANCE IS A DIRECT PAYMENT TO THE SHAREHOLDER, THE LATTER MAY ALSO BE BENEFITED BY PA YMENT FLOWING FROM THE COMPANY TO A THIRD PERSON AND THE SHAREHOLDER GETTING THE ADVANTAGE FLOWING FROM THE THIRD PERSON BECAUSE OF SUCH PAYMENT TO SUCH THIRD PERSON BY THE COMPANY. THUS IN ORDER THAT THE PROVISIONS MAY BE SUCCESSFULLY INVOLVED, A CORRELATION MUST BE FOUND TO EXIST BETWEEN THE PAYMENT BY THE COMPANY TO THE THI RD PERSON ON THE ONE HAND AND AN ADVANTAGE OR BENEFIT FLOWING FROM THE THIRD PERSON TO THE SHAREHOLDER WH ICH MAY TAKE ANY SHAPE INCLUDING A LOAN BY THE THIRD PE RSON TO THE SHAREHOLDER (NANDLAL KANORIA VS. CIT (1998) 122 ITR-405 (CAL.). PAYMENT HAS BEEN MADE FROM THE ACCUMULATED PROFIT O F THE ASSESSEE COMPANY REFLECTED IN ITS RESERVES AND SURPLUS AND CONCEALMENT OF PROFITS ARISING ON THE S ALE OF CADILA HERALTHCARE LTD., SHARES TO ZYDUS FAMILY TRU ST. - 6 - 4. THE MODUS OPERANDI OF THE ASSESSEE WAS (I) SALE OF CADILA HEALTHCARE LTD. SHARES TO ZYDUS FAMILY TRUST WITH AN INTENTION TO EARN PROFIT AND TO TRANSFER THE PROFIT TO ITS SHAREHOLDERS AS DIVIDEND. (II) THE CONSIDERATION FOR SALE OF SHARES HAS BEEN RECEIVED PARTLY IN CASH AND THE BALANCE PAYMENT HAS BEEN ADJUSTED AS DEEMED DIVIDEND TO ITS SHAREHOLDERS U/S. 2(22)(E).THE ASSESSEE HAS SUBMITTED THAT IT HAS NOT ENTERED INTO ANY SALE DEE D OR RAISED ANY SALES BILL SINCE THE ZYDUS FAMILY TRUST IS A GROUP TRUST. THE SALES PRICE OF SHARES WAS TAKEN AS THE COST OF ACQUISITION I.E. 37 PAISE PER SHARE. THE ASSESSEE IS A PROFIT ORIENTED COMPANY AND HAS A CORPORATE ENTITY SEPARATE AND DISTINCT FROM THAT OF THE ZYDUS FAMILY TRUST. THE ASSESSEE HAS NOT PRODUCED ANY SAL ES BILL TO SUBSTANTIATE ITS CLAIM THAT THE SHARES HAVE ACTUALL Y BEEN SOLD AT A VALUE OF 37 PAISE, A PRICE WHICH WAS NEGLIGIBLE C OMPARED TO ITS WORTH. IN THE ABSENCE OF SUCH BILLS THE A.O. HA S ADOPTED A CONSERVATIVE APPROACH TAKING THE NET WORTH PER SHAR E AS SITS TRANSACTION PRICE. NO METHOD OF VALUATION CAN VALUE A SHARE PAYING THE DIVIDEND @ 40% PER SHARE AND EARNING PER SHARE OF 14 AT RS.0.37. THE BENEFITS HAS IN FACT FLOWED TO THE CONCERNED PE RSONS, WHO ARE INTERRELATED. THE MAIN BENEFICIARIES OF THE ZYDUS FAMILY TRUST ALSO HAVE SUBSTANTIAL INTEREST IN THE ASSESSEE COMPANY AND ONE OF THE BENEFITICAY IS THE MANAGING DIRECTOR OF CADILA HEALTH CARE LTD., WHOSE SHARES HAVE BEEN TRANSFERRED BY THE ASSESSEE COMPANY TO THE TRUSTEES OF THE ZYDU S FAMILY TRUST. THEREFORE, IN A WAY ALL THE THREE CONCERNS, THE SELLER (PRIPAN INVESTMENT, ASSESSEE), THE BUYER (ZYDUS FAM ILY TRUST) AND THE COMPANY WHOSE SHARES HAVE BEEN SOLD (CADILA HEALTH CARE LTD.) HAVE COMMON PERSONS AT THE HELM OF AFFAI RS AND THESE PERSONS ARE IN KNOWLEDGE OF SENSITIVE INFORMA TION INCLUDING INSIDE INFORMATION. THEREFORE. AS DIRECTE D, THE SCRUTINIZING OF BANK ACCOUNTS WILL NOT LEAD TO ANY SIGNIFICANT INFORMATION. - 7 - THEREFORE, IT APPEARS THAT THE ASSESSEE IS TRYING T O MISDLEAD THE APPELLATE AUTHORITY BY TWISTING THE FA CTS. BY ADOPTING THE MODUS OPERANDI DISCUSSED ABOVE, THE AS SESSEE COMPANY HAD NOT ONLY MADE AN ATTEMPT TO TRANSFER TH E BENEFITS TO ITS SHAREHOLDERS ALMOST WITHOUT ANY CONSIDERATIO N, BUT HAS ALSO MADE AN ATTEMPT TO EVADE THE TAX PAYABLE ON IT . THE EXERCISE ADOPTED BY THE ASSESSEE IS NOTHING BUT AN ATTEMPT TO DEFEAT THE PROVISIONS OF THE ACT AND THEREFORE, IS DIRECTLY HIT BY THE MCDOWELL CASE. THE ASSESSMENT ORDER ITSELF IS A SPEAKING ORDER. TH E INTENTION OF THE ASSESSEE IS TO EVADE THE TAX WHICH IS OBVIOUS FROM THE RECORDS. 4.8. THE COPY OF THE REMAND REPORT RECEIVED FROM TH E ASSESSING OFFICER WAS GIVEN TO THE APPELLANT FOR IT S COUNTER COMMENTS. CONSEQUENT UPON THE REMAND REPORT OF THE ASSESSING OFFICER. THE A.R. OF THE APPELLANT FILED WRITTEN SUBMISSION WHICH IS REPRODUCED HEREUNDER FOR CONVEN IENCE SAKE. (1) AT THE OUTSET, THE APPELLANT WISHES TO POINT O UT THAT THE LEARNED A.O. HAS NOT MET WITH THE TWO MOST IMPORTAN T AND RELEVANT LEGAL CONTENTIONS RAISED BY THE APPELLANT UNDER ITS GROUNDS OF APPEAL NO.(3) AND (4) RAISED BEFORE YOUR HONOUR AS UNDER : (3) THAT THE LEARNED A.O. FAILED TO APPRECIATE THE MERITS OF THE ELABORATE SUBMISSIONS BOTH ON FACTS A ND IN LAW, MADE BY THE APPELLANT UNDER ITS REPLY DT. 22 ND MARCH,2005 (COPY ENCLOSED) IN RESPECT TO THE SHOW CAUSE NOTICE DATED 15 TH MARCH,2005 ISSUED BY THE A.O. THAT THE LD. A.O. FURTHER ERRED IN LAW AND ON FACTS IN BLATANTLY FLOUTING THE RATIO OF THE HON'BLE SUPREME COURT AS LAID IN ITS FOLLOWING JUDGEMENTS DIRECTLY COVER IN FAVOUR OF THE APPELLANT COMPANY. (I) CIT VS. GEORGE HENDERSON & CO. LTD., - 66 ITR 622 (SC) - 8 - (II) CIT VS. SHIVAKAMI CO. PVT. LTD. 159 ITR-71 (SC) (4) THAT THE ACTION OF THE LD. A.O. IN NOTIONALLY COMPUTING THE CAPITAL GAINS AS INCOME OF THE APPELL ANT, IN THE MANNER AS DONE BY HIM IS ALTOGETHER UNJUSTIF IED AND UNCALLED FOR AND NOT AUTHORIZED BY ANY PROVISIO NS UNDER THE INCOME TAX ACT. THE SAME, THEREFORE, OUGH T TO BE HELD AS BAD IN LAW AND BE DIRECTED TO BE QUASHED IN APPEAL BEFORE YOUR HONOUR. (2) THE APPELLANT WISHES TO RESPECTFULLY SUBMIT THA T WHEN THE CONTROVERSY RAISED BY THE A.O.IN THE APPELLANT S CASE IS SQUARELY COVERED IN FAVOUR OF THE APPELLANT BY THE BELOW REFERRED RATIO OF THE TWO JUDICIAL PRONOUNCEMENTS O F THE HON'BLE SUPREME COURT AND THE LEARNED A.O. HAS NOT BEEN ABLE TO POINT OUT AS TO HOW THE SAID BINDING RATIO IS NO T APPLICABLE ON THE FACTS OF THE APPELLANTS CASE, THERE IS NO B ASIS OR JUSTIFICATION ON HER PART TO PLEAD FOR CONFIRMING T HE ADDITION IN RESPECT OF LONG TERM CAPITAL GAINS AS MADE UNDER TH E ASSESSMENT ORDER. (A) CIT VS. GEORGE HENDERSON & CO. LTD. 66 ITR 62 2(SC). FULL VALUE OF THE CONSIDERATION CANNOT BE CONSTRU ED AS HAVING REFERENCE TO THE MARKET VALUE OF THE ASSET TRANSFERRED, BUT WHAT THE TRANSFEROR RECEIVES IN LI EU OF THE ASSET HE PARTS WITH, VIZ. MONEY OR MONEYS WORTH. I N THE CASE OF A SALE, THE FULL VALUE OF THE CONSIDERATION IS FULL SALE PRICE ACTUALLY PAID. (B) CIT VS.SHIVAKAMI CO. PVT. LTD. 159 ITR 71 (SC) CAPITAL GAINS TAX WAS INTENDED TO TAX THE GAINS OF AN ASSESSEE, NOT WHAT AN ASSESSEE MIGHT HAVE GAINED. W HAT IS NOT GAINED CANNOT BE COMPUTED AS GAINED. ALL LAW S, FISCAL OR OTHERWISE MUST BE BOTH REASONABLY AND JUS TLY INTERPRETED WHENEVER POSSIBLE. CAPITAL GAINS TAX IS NOT A TAX ON WHAT MIGHT HAVE BEEN RECEIVED OR COULD HAVE BEEN TAXED. UNLESS THERE IS AN EVIDENCE THAT MORE T HAT - 9 - WHAT WAS STATED WAS RECEIVED, NO HIGHER PRICE CAN B E TAKEN TO BE THE BASIS FOR COMPUTATION OF CAPITAL GA INS. (3)(A) UNDER PAR-3 OF THE REMAND REPORT, THE LD. A. O. HAS ATTEMPTED TO JUSTIFY THE CONSERVATIVE APPROACH WHIL E CALCULATING THE FAIR MARKET VALUE OF THE SHARES OF CADILA. THE APPELLANT WISHES TO POINT OUT THAT PURSUANT TO THE DELETION OF THE PROVISIONS OF SECTION 52(2) OF THE INCOME-TAX ACT, THERE IS NO LEGAL PROVISION UNDER T HE INCOME-TAX ACT WHICH EMPOWERS AN A.O. TO SUBSTITUTE THE FULL VALUE OF THE CONSIDERATION RECEIVED UNDE R TRANSFER BY ANY FAIR MARKET VALUE AS CALCULATED B Y THE A.O. (B) UNDER PARA-3 OF THE REMAND REPORT THE LD. A. O HAS FURTHER OBSERVED THAT THE APPELLANT HAS EVADED TAX ON TWO COUNTS : I) BY CONCEALING THE CAPITAL GAINS RAISING ON THE SALE OF SHARES OF CADILA HEALTHCARE LTD. TO ZYDUS FAMILY TRUST. II) BY NOT PAYING THE DIVIDEND DISTRIBUTION TAX ON THE DEEMED DIVIDEND PAID BY THE ASSESSEE UNDER SECTION 2(22)(E). THE APPELLANT WISHES TO EMPHATICALLY SUBMIT THAT BO TH THE ABOVE CHARGES ARE TOTALLY BASELESS ON FACTS AND UNT ENABLE IN LAW. FIRSTLY, THERE IS NO QUESTION OF THE APPELLANT HAVI NG CONCEALED ANY CAPITAL GAINS ARISING ON SALE OF CADILA SHARES. CONCEALMENT POSTULATES THAT AN ASSESSEE HAS NOT SHOWN SOMETHING THAT IS RECEIVED. NOWHERE IN THE ASSESSMENT ORDER ALSO, HAS THE A.O. BEEN ABLE TO SHOW THAT THE APPELLANT HAS RECEIVED A NY CONSIDERATION WHICH IS HIGHER THAN WHAT WAS DECLARE D. ALL THAT THE A.O. DID WAS TO COMPUTE NOTIONAL CAPITAL GAINS ON THE BASIS OF THE PRICE OF SHARES OF CADILA AS ESTIMATED BY HI M TO BE THE MARKET VALUE. AS POINTED OUT HEREINABOVE, THERE IS NO PROVISION UNDER THE INCOME TAX ACT WHICH AUTHORIZES THE A.O. TO TAX ANY SUCH NOTIONAL GAINS. SECONDLY, THE ARGUMENT OF THE LD. A.O. THAT THE APP ELLANT HAS EVADED THE PAYMENT OF DIVIDEND DISTRIBUTION TAX ON THE - 10 - DEEMED DIVIDEND PAID BY IT UNDER SECTION 2 (22) (E ) ALSO DEFIES ALL LOGIC AND IMAGINATION. THE ASSESSMENT OR DER FINALIZED BY THE A.O. TAXING THE NOTIONAL CAPITAL GAINS AS RE FERRED TO HEREINABOVE, ALSO NOWHERE TALKS ABOUT ANY DEEMED DI VIDEND UNDER SECTION 2(22)(E). THE RELIANCE PLACED BY THE A.O. ON THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF NANDLAL KANORIA VS. CIT 122 ITR-405 (CAL.) IS ALTOGETHER MI SPLACED AND IRRELEVANT. (C) UNDER PARA-4 OF THE REMAND REPORT THE LD.A.O. HAS G AIN ALLEGED EVASION OF TAX AND OBSERVED THAT THE APPELL ANTS CASE IS HIT BY THE MCDOWELL CASE. IN THIS REGARD TH E APPELLANT WISHES TO INVITE YOUR HONOURS KIND ATTEN TION TO THE FOLLOWING EXPLANATION AS PLACED ON RECORD IN RE SPONSE TO THE SHOW CAUSE NOTICE SERVED BY THE A.O.: I) DURING THE YEAR UNDER ASSESSMENT, THE ASSESSEE COMPANY HAS DISPOSED OF ITS MAJORITY SHAREHOLDING I N CADILA HEALTHCARE LTD., AHMEDABAD AT COST OF ITS INVESTMEN T I.E.RS.20,11,392/- TO ZYDUS FAMILYTRUST, AHMEDABAD AND AS SUCH, NO PROFIT OR LOSS ON THE SAME HAS BEEN REFLEC TED IN ITS PROFIT & LOSS ACCOUNT. THE REASON FOR DOING THE SAM E WAS TO RESTRUCTURE SHAREHOLDING OF THE CADILA GROUP IN ITS PRINCIPAL COMPANY VIZ. CADILA HEALTHCARE LTD., WHICH WAS A CL OSELY HELD PRIVATE LIMITED COMPANY AT THAT TIME. SINCE THERE W AS NO INTENTION TO MAKE PROFIT EITHER BY THE ASSESSEE COM PANY OR BY ZUYDUS FAMILY TRUST AND THE ABOVE ARRANGEMENT WAS M ERELY DONE FOR RESTRUCTURING OF THE GROUP HOLDING, IT MAY BE NOTED THAT ZYDUS FAMILY TRUST HAS NOT SOLD UNTIL DATE, A SINGLE SHARE OUT OF ITS TOTAL HOLDING IN CADILA HEALTHCARE LTD. II) IT WILL BE APPRECIATED FROM THE ABOVE FACTS THA T THERE WAS NO INTENTION OF THE ASSESSEE COMPANY TO EVADE TAX, FOR THE SIMPLE REASON THAT NONE OF THE PARTIES INVOLVED HAS MADE ANY PROFIT OR GAIN OUT OF THE ABOVE TRANSACTION, AS NON E OF THE SAID SHARES UNTIL DATE HAS BEEN SOLD BY THE TRANSFEREE I .E. ZYDUS FAMILY TRUST. WHEN THERE HAS BEEN NO INCOME OR GAIN , AT ANY POINT OF TIME, NO QUESTION OF EVASION OF TAX CAN BE AT ALL CONTEMPLATED. III) WE WISH TO STRONGLY RELY ON THE FOLLOWING RATIO OF THE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SAKARLAL BALABHAI 69 - 11 - ITR 186 (GUJ.), WHICH WAS ALSO AFFIRMED BY THE HON' BLE SUPREME COURT IN THE CASE OF CIT VS. VADILAL LALLUB HAI 86 ITR 2 (SC) AS UNDER : TAX AVOIDANCE POSTULATES THAT THE ASSESSEE IS IN R ECEIPT OF AN AMOUNT WHICH IS REALLY AND IN TRUTH HIS INCOM E LIABLE TO TAX BUT ON WHICH HE AVOIDS PAYMENT OF TAX BY SOME ARTIFICE OR DEVICE APPARENTLY SHOWING THE INCO ME AS ACCRUING TO ANOTHER PERSON, AT THE SAME TIME MAK ING IT AVAILABLE FOR USE AND ENJOYMENT BY THE ASSESSEE HIMSELF. THE LD. A.O. HAS CONVENIENTLY IGNORED TO APPRECIATE THE CORRECT FACTS AS POINTED OUT HEREINABOVE AND ALLEGE D MOTIVES AGAINST THE APPELLANT IN A MOST UNFAIR AND UNJUST M ANNER. (4) THE APPELLANT, THEREFORE, PRAYS BEFORE YOUR HON OUR THAT THE RELIEFS AS CLAIMED UNDER THE APPEAL MAY KINDLY BE ALLOWED, KEEPING IN VIEW THE MERITS OF THE APPELLAN TS CASE AND THE SUPPORTING RATIO OF BINDING JUDICIAL PRONOUNCEMENTS. 4.9. IN VIEW OF THE ABOVE SUBMISSIONS IT IS ARGUED BY THE A.R. THAT THE ASSESSING OFFICER IS NOT JUSTIFIED TO ASSUME THAT THE APPELLANT HAD RECEIVED HIGHER CONSIDERATION OR MIGHT HAVE RECEIVED HIGHER CONSIDERATION AND SHOULD NOT HAVE T REATED THE APPELLANT AT DEFAULT OR SHOULD NOT HAVE RECEIVED CA PITAL GAINS TAX ON THE ALLEGED EXTRA CONSIDERATION SAID TO HAVE BEEN RECEIVED. 4.10. FURTHER, THE ASSESSING OFFICER HAS NO EVIDENC E TO ASSUME THAT THE APPELLANT HAD RECEIVED ANY CONSIDER ATION OTHER THAN WHAT IS ACTUALLY RECEIVED. THE A.O. COULD NOT HAVE PRESUMED THAT THE APPELLANT HAD RECEIVED HIGHER CON SIDERATION OTHER THAN WHAT IS DISCLOSED BY IT. THE A.O. CAN NO T LEVY CAPITAL GAIN TAX ON ALLEGED CONSIDERATION WHICH HAD NOT BEE N RECEIVED BY THE APPELLANT. 4.11. THE A.R. CONTENDED THAT THE ACTUAL CONSIDERAT ION RECEIVED BY THE APPELLANT IS THE ACTUAL COST OF THE SHARES WHICH HAVE BEEN INVESTED AT THE TIME OF ACQUIRING THE SHA RES AND THE ACTUAL COST FOR SHARES IS WORKED OUT ON THE BASIS O F AVERAGE OF - 12 - TOTAL NUMBER OF SHARES WHICH INCLUDES THE BONUS SHA RES RECEIVED. ACCORDING TO THE A.R. THE FULL VALUE OF T HE CONSIDERATION RECEIVED BY THE APPELLANT TOWARDS THE TRANSFER OF SHARES IS ACTUAL COST OF ACQUISITION OF THE SHARES. THEREFORE, THE A.O. SHOULD HAVE ACCEPTED THE SAME COST AND HE SHOU LD NOT HAVE WORKED OUT MARKET VALUE OF THE SHARES AND THER EBY HE SHOULD NOT HAVE COMPUTED THE CAPITAL GAINS TAX. IN SUPPORT OF THIS ARGUMENT, THE A. R. HAS RELIED UPON THE DECISI ON OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. GEORGE HENDERS ON & CO. LTD., (1967) 66 ITR-622.THE HEAD NOTE OF THE SAID D ECISION IS AS UNDER :- THE EXPRESSION FULL VALUE OF THE CONSIDERATION FO R WHICH THE SALE, EXCHANGE OR TRANSFER OF THE CAPITAL ASSET IS MADE, APPEARING IN SECTION 12B(2) OF THE INDIAN INCOME TAX ACT,1922, DOES NOT MEAN THE MARKET VALUE OF THE ASSET TRANSFERRED, BUT THE PRICE BARGAINED F OR BY THE PARTIES TO THE SALE, ETC. THE CONSIDERATION FOR THE TRANSFER OF A CAPITAL ASSET IS WHAT THE TRANSFEROR RECEIVES IN LIEU OF THE ASSET HE PARTS WITH, VIZ., MONEY OR MONEYS WORTH, AND THEREFORE THE VERY ASSET TRANSFERRED OR PARTED WITH CANNOT BE THE CONSIDERATION FOR THE TRANSFER. THE EXPRESSION FULL CONSIDERATION IN THE MAIN PART OF SECTION 12B (2) CANNOT BE CONSTRUED AS HAVING A REFERENCE TO THE MARKET VALUE OF THE ASSET TRANSFER RED BUT THE EXPRESSION ONLY MEANS THE FULL VALUE OF THE THI NG RECEIVED BY THE TRANSFEROR IN EXCHANGE FOR THE CAPI TAL ASSET TRANSFERRED BY HIM. THE MAIN PART OF SECTION 12B(2) PROVIDES THAT THE AMOUNT OF CAPITAL GAIN SHA LL BE COMPUTED AFTER MAKING CERTAIN DEDUCTIONS FROM THE FULL VALUE OF THE CONSIDERATION FOR WHICH THE SALE, EXCH ANGE OR TRANSFER OF THE CAPITAL ASSET IS MADE. IN THE CASE OF A SALE, THE FULL VALUE OF THE CONSIDERATION IS THE FU LL SALE PRICE ACTUALLY PAID. THE LEGISLATURE HAD TO USE THE WORDS FULL VALUE OF THE CONSIDERATION BECAUSE IT WAS DE ALING NOT MERELY WITH THE SALE BUT WITH OTHER TYPES OF TR ANSFERS, SUCH AS EXCHANGE, WHERE THE CONSIDERATION WOULD BE OTHER THAN MONEY. THE EXPRESSION FULL VALUE MEANS THE WHOLE PRICE WITHOUT ANY DEDUCTION WHATSOEVER AND IT CANNOT REFER TO THE ADEQUACY OR INADEQUACY OF THE P RICE BARGAINED FOR. NOR HAS IT ANY NECESSARY REFERENCE T O THE - 13 - MARKET VALUE OF THE CAPITAL ASSET WHICH IS THE SUBJ ECT- MATTER OF THE TRANSFER. 4.12. FURTHER, THE A.R. HAS ALSO RELIED UPON THE DE CISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SHIVAK AMI CO. PVT. LTD. (1986) 159 ITR 71. THE HEAD NOTE OF THE S AID DECISION IS AS UNDER :- THE RESPONDENT COMPANY HELD CERTAIN SHARES WHICH WERE NOT QUOTED ON THE STOCK EXCHANGE. IT SOLD THE SHARE TO TWO OTHER COMPANIES WHICH WERE DIRECTLY OR INDIR ECTLY CONNECTED WITH IT AT PRICES CONSIDERABLE THAN THEIR BREAK- UP VALUE. THE TRIBUNAL FOUND THAT THE CONSIDERATION WAS NOT UNDERSTATED AND THAT THE REAL AND MAIN OBJECT O F THE RESPONDENT IN SELLING THE SHARES WAS TO SAFEGUARD T HE SHARES FROM BEING TAKEN OVER BY THE GOVERNMENT IN SETTLEMENT OF TAX DUES. THE QUESTION WAS WHETHER TH E PROVISIONS OF THE FIRST PROVISO TO SECTION 12B(2) O F THE INDIAN INCOME-TAX ACT,1922, COULD BE INVOKED AND TH E BREAK-UP VALUE SUBSTITUTED IN THE PLACE OF THE DECL ARED PRICE AND THE RESPONDENT ASSESSED TO TAX ON CAPITAL GAINS ON THAT BASIS - HELD THAT SINCE THE TRIBUNAL HAD FOUND THAT THE CONSIDERATION WAS NOT UNDERSTATED AND THERE WAS NO EVIDENCE DIRECT OR INFERENTIAL TO SHOW THAT THE CONSIDERATION ACTUALLY RECEIVED BY THE RESPONDENT W AS MORE THAN WHAT WAS DISCLOSED OR DECLARED BY THE RESPONDENT, THE PROVISO TO SECTION 12 B(2) COULD NO T BE INVOKED. K.P. VARGHESE VS. ITO (1981) 131 ITR -597 (SC) RELI ED ON. BY THE COURT: (1) THOUGH THE LEGISLATION IN QUESTIO N IS TO REMEDY A SOCIAL EVIL AND SHOULD BE READ BROADLY AND SHOULD BE SO READ THAT THE OBJECT IS FULFILLED, YET THE ONUS OF ESTABLISHING A CONDITION OF TAXABILITY MUST BE F ULFILLED BY THE REVENUE. (II)UNLESS THERE IS EVIDENCE THAT MORE THAN WHAT WA S STATED WAS RECEIVED, NO HIGHER PRICE CAN BETAKEN TO BE THE BASIS FOR COMPUTATION OF CAPITAL GAINS. - 14 - (III) CAPITAL GAIN TAX WAS INTENDED TO TAX THE GAINS OF AN ASSESSEE, NOT WHAT AN ASSESSEE MIGHT HAVE GAINED . WHAT IS NOT GAINED CANNOT BE COMPUTED AS GAINED. AL L LAWS, FISCAL OR OTHERWISE, MUST BE BOTH REASONABLY AND JUSTLY INTERPRETED WHENEVER POSSIBLE. CAPITAL GAINS TAX IS NOT A TAX ON WHAT MIGHT HAVE BEEN RECEIVED OR COULD HAVE BEEN TAXED. IT IS WELL SETTLED THAT WHEN A CONCLUSION OF A FACT -FINDING BODY IS BASED ON AN INFERENCE FROM PRIMARY FACTS, T HEN THE FINDINGS OF FACT ARE NOT AMENABLE TO CHALLENGE BUT THE INFERENCES DRAWN FROM THE PRIMARY FACTS ARE OPEN TO CHALLENGE AS A CONCLUSION OF LAW. IT IS ALSO OPEN T O CHALLENGE ON THE GROUND THAT THE CONCLUSION OF FACT DRAWN BY THE TRIBUNAL WAS NOT SUPPORTED BY LEGAL EVIDENCE OR THAT ALL IMPUGNED CONCLUSION DRAWN FROM THE FACTS WAS NOT RATIONALLY POSSIBLE. IN SUCH A CASE, IT IS NECESSARY TO EXAMINE THE CORRECTNESS OF THE CONCLUS ION. CIT VS. RAJASTHAN MINES LTD. (1970) 78 ITR-45 (SC) FOLLOWED DECISION OF THE MADRAS HIGH COURT IN SIVAK AMI CO. PVT. LTD. VS. CIT (1973) 88 ITR 311 AFFIRMED ON DIFFERENT GROUNDS. 4.13. IN THE LIGHT OF THE ABOVE WRITTEN SUBMISSION AND ALSO CASE LAWS RELIED UPON BY THE A.R. IT IS FURTHER ARG UED THAT THERE IS NO SCOPE FOR THE ASSESSING OFFICER TO PRESUME TH AT THE APPELLANT HAD RECEIVED ADDITIONAL BENEFIT BY TRANSF ERRING THE SHARES EITHER IN KIND OR CASH. FURTHER, THE ASSESSI NG OFFICER HAS NOT ESTABLISHED ANY GROUND/EVIDENCE TO SHOW THAT TH E APPELLANT HAD RECEIVED ANY ADDITIONAL BENEFIT BY TRANSFERRING THE SHARES. 4.14. IT IS FURTHER ARGUED THAT THE APPELLANT HAS T RANSFERRED THE SHARES AT COST PRICE WHICH BECOMES COST OF ACQUISIT ION IN THE HANDS OF THE ZYDUS FAMILY TRUST AND IN CASE THERE I S A SALE OF SHARES IN THE HANDS OF THE ZYDUS FAMILY TRUST, NATU RALLY THE CAPITAL GAIN SHOULD BE WORKED OUT IN THE HANDS OF T HE SAID TRUST IN ACCORDANCE TO LAW. HOWEVER, TILL NOW THE SHARES TRANSFERRED TO ZYDUS FAMILY TRUST HAVE NOT BEEN SOLD IN THE MAR KET EVEN THOUGH RIGHT NOW MARKET VALUE OF SHARES QUOTED AT B SE IS MUCH MORE THAN WHAT IS WORKED OUT BY THE ASSESSING OFFICER. THEREFORE, THERE IS NO REASON TO BELIEVE THAT THE A PPELLANT WOULD HAVE TRANSFERRED THE SHARES TO THE ABOVE TRUS T AT A HIGHER PRICE. THEREFORE, IT IS ARGUED BY THE A.R. THAT THE CAPITAL GAINS - 15 - TAX WAS INTENDED TO TAX THE GAINS OF AN ASSESSEE, N OT WHAT AN ASSESSEE MIGHT HAVE GAINED. WHAT IS NOT GAINED CANN OT BE COMPUTED AS GAINED. ALL LAWS, FISCAL OR OTHERWISE M UST BE BOTH REASONABLY AND JUSTLY INTERPRETED WHENEVER POSSIBLE . CAPITAL GAINS TAX IS NOT A TAX ON WHAT WHICH HAVE BEEN RECE IVED OR COULD HAVE BEEN TAXED. 4.15. THEREFORE, IT IS CONTENDED BY THE A.R. THAT THE APPELLANT HAD DISCLOSED WHAT IS ACTUALLY RECEIVED IN TRANSFER RING THE SHARES AND THE A.O. HAS NOT PRODUCED ANY EVIDENCE T O SAY THAT THE APPELLANT HAD RECEIVED ANY ADDITIONAL; CONSIDER ATION. THEREFORE, THE CAPITAL GAINS COMPUTED BY THE A.O. I S NOT ON RIGHT GROUND. 4.16. THE A.R. ALSO CONTENDED THAT THE INTENTION OF THE APPELLANT TO TRANSFER THE SHARES TO ZYDUS FAMILY TR UST AT THE COST PRICE IS ONLY TO CONSOLIDATE THE SHARE HOLDING S OF THE FAMILY MEMBERS IN ONE ENTITY I.E. ZYDUS FAMILY TRUS T. THEREFORE, THE INTENTION OF THE APPELLANT TRANSFERR ING THE SHARES AT THE COST OF ACQUISITION CAN NOT BE ATTRIBUTED AS MALAFIDE ACT. 4.17. IN VIEW OF THE ABOVE FACTS AND RELYING UPON T HE VARIOUS DECISIONS, REFERRED TO ABOVE, IT IS SUBMITTED BY TH E A.R. THAT THE ACTION OF THE ASSESSING OFFICER IS UNDER AND UNJUS T AND PLEADED THAT THE ADDITION MADE BY THE A.O. TO BE DELETED. 5. THE SUBMISSIONS MADE BY THE A.R. AND THE CASE LA WS RELIED UPON BY HIM HAVE BEEN EXAMINED. THE OBSERVAT IONS MADE BY THE ASSESSING OFFICER IN ASSESSMENT ORDER A ND REMAND REPORT AND ARGUMENTS PUT FORTH BY THE ASSESSING OFF ICER AT THE TIME OF HEARING ARE PERUSED. IT IS SEEN THAT THE AP PELLANT COMPANY WAS IN POSSESSION OF 53,94,751 SHARES IN TO TAL. ORIGINALLY THE SHARES WERE PERTAINING TO CADILA GRO UP OF COMPANIES. LATER STAGER ALL THESE COMPANIES CAME UN DER THE FLAGSHIP OF CADILA HEALTHCARE LTD., AND THE APPELLA NT CAME INTO POSSESSION OF THE ABOVE STATED SHARES ALONG WITH BO NUS SHARES ISSUED FROM TIME TO TIME. THE ACTUAL COST INVOLVED IN ACQUIRING THE SHARES OF 35,96,501 WAS RS.20,11,429/- PRIOR TO THE ALLOTMENT OF BONUS SHARES. AFTER THE ISSUE OF BONUS SHARES THE NUMBER OF SHARES WERE INCREASED TO 53,94,751. THE A PPELLANT HOWEVER APPORTIONED THE SAME COST TOWARDS THE SHARE S ACQUIRED AND BONUS SHARES RECEIVED FROM TIME TO TIME. THE AP PELLANT - 16 - TRANSFERRED 53,94,651 SHARE TO ZYDUS FAMILY TRUST W HEREIN THE MEMBERS OF THE TRUST ARE ALSO THE SHARE HOLDERS OF THE APPELLANT COMPANY. THE APPELLANT RETAINED ONLY 100 SHARES WIT H IT. THE INTENTION OF TRANSFERRING THE SHARES TO ZYDUS FAMIL Y TRUST IS STATED TO CONSOLIDATE THE SHARE AT ONE ENTITY. 5.1. THE SHARES HAVE BEEN TRANSFERRED AT THE COST O F ACQUISITION AND THE COST WORKED OUT FOR EACH SHARE IS AT RS.0.37.THE ASSESSING OFFICER, HOWEVER, HAD WORKED OUT MARKET COST AT RS.42.24. 5.2. IT IS FURTHER SEEN THAT THERE IS NO EVIDENCE T O SUBSTANTIATE THAT THE APPELLANT HAD TRANSFERRED THE SHARES AT RS .42.24 WHICH IS STATED TO HAVE BEEN CONSERVATIVE MARKET PRICE WH ICH IS WORKED OUT BY THE ASSESSING OFFICER EVEN THOUGH THE COST OF THE ACQUISITION IS NOT IN DISPUTE BY THE ASSESSING OFFICER. 5.3. IT IS ALSO SEEN THAT THE APPELLANT HAS TRANSFE RRED THE SHARES AT COST OF ACQUISITION OF SHARES AND THERE I S NO EVIDENCE WHATSOEVER IS FORTHCOMING THAT THE APPELLANT HAD RE CEIVED ANY FURTHER CONSIDERATION ADDITION TO WHAT IS ADMITTED. THE DECISIONS OF THE HON'BLE SUPREME COURT AS CITED ABO VE ARE IN SUPPORT OF A.RS ARGUMENTS. 5.4. THEREFORE, IN THE LIGHT OF A.RS ARGUMENTS AND CASE LAWS RELIED UPON BY HIM, I AM INCLINED TO AGREE WITH THE AUTHORISED REPRESENTATIVES ARGUMENT. HENCE, HAVING CONSIDERED THE FACTS OF THE CASE I AM OF THE OPINION THAT THERE IS NO JU STIFICATION FOR MAKING ADDITION OF LONG TERM CAPITAL GAINS. THE ADD ITION MADE BY THE ASSESSING OFFICER AMOUNTING TO RS.22,58 ,49,837/- IS THEREFORE, DELETED. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE C ASE ARE THAT THE ASSESSEE COMPANY HAS TRANSFERRED 53,94,751 SHARES O F CADILA HEALTHCARE LTD., TO M/S. ZYDUS FAMILY TRUST AT BOOK VALUE WHICH WAS RS.20,11,429/- ON 1-9-1998. THE LEARNED ASSESSING O FFICER OBSERVED THAT THE TRANSFEREE TRUST AND THE ASSESSEE COMPANY BELONGS TO THE SAME - 17 - GROUP I.E. ZYDUS FAMILY TRUST GROUP. ACCORDING TO T HE LEARNED ASSESSING OFFICER THE FAIR MARKET VALUE OF THE SHAR ES TRANSFERRED BY THE ASSESSEE COMPANY ON THE DATE OF TRANSFER WAS RS .22,78,61,228.HE THEREFORE, OPINED THAT TRANSFER AT RS. 20,11,429/- MADE BY THE ASSESSEE COMPANY WAS AN ATTEMPT TO EVADE TAX. HE THEREFORE, CALCULATED THE CAPITAL GAIN IN THE HANDS OF THE ASSESSEE COMPANY B Y TAKING THE FULL VALUE OF CONSIDERATION OF SUCH SHARES AT RS.22,78,6 1,228/- IN PLACE OF RS.20,11,429/- DECLARED BY THE ASSESSEE COMPANY. T HUS, HE ASSESSED CAPITAL GAIN AT RS.22,57,28,303/- IN PLACE OF NIL S HOWN BY THE ASSESSEE. 4. ON APPEAL, THE CIT(A) DELETED THE ABOVE ADDITION OF CAPITAL GAIN. 5. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE RELIED UPON THE ORDER OF THE LEARNED ASSESSING OFFICER 6. WE FIND THAT NO MATERIAL COULD BE BROUGHT ON REC ORD BY THE REVENUE TO SHOW THAT THE ASSESSEE COMPANY ACTUALLY RECEIVED CONSIDERATION OF ANY AMOUNT MORE THAN THE AMOUNT D ECLARED BY IT IN ITS RETURN OF INCOME IN RESPECT OF TRANSFER OF SHAR ES IN QUESTION. IN ABSENCE OF ANY SUCH MATERIAL BROUGHT ON RECORD IN O UR CONSIDERED OPINION, THE LEARNED ASSESSING OFFICER WAS NOT JUST IFIED IN DEEMING THE ALLEGED MARKET VALUE OF THE SHARES AS FULL VALU E OF THE CONSIDERATION RECEIVED BY THE ASSESSEE FOR TRANSFER OF SHARES ONLY ON THE BASIS OF ASSUMPTIONS AND PRESUMPTIONS. THE DEC ISION OF THE HON'BLE HIGH COURT IN THE CASE OF C.I.T. VS. SMT. N ILOFFER I.SINGH (2009) 221 CTR (DEL) 277 AND THE DECISION OF THE MU MBAI BENCH OF - 18 - THE TRIBUNAL IN THE CASE OF RUPEE FINANCE & MANAGEM ENT (P) LTD. VS. A.C.I.T..7(2) MUMBAI (2008) 22 SOT 174 (MUM.) CITED BY THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE A RE AUTHORITIES FOR THE PROPOSITION THAT FULL VALUE OF CONSIDERATION FO R THE PURPOSES OF SECTION 48 READ WITH SECTION 45 OF THE I.T. ACT IS THE ACTUAL CONSIDERATION RECEIVED BY THE TRANSFEREE AND NOT AN Y OTHER AMOUNT SUCH AS MARKET VALUE OF THE ASSET WHICH OUGHT TO HA VE BEEN RECEIVED. THE CAPITAL GAIN IS CHARGEABLE IN RESPECT OF REAL C APITAL GAIN AND NOT IN RESPECT OF ANY NOTIONAL CAPITAL GAIN WHICH THE ASSE SSEE COULD HAVE EARNED BUT HAS NOT ACTUALLY EARNED. IN VIEW OF THE ABOVE WE DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT (A). THEREFO RE, IT IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSE D. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 30TH DAY OF JULY, 2010. SD/- SD/- (MUKUL SHRAWAT ) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; ON THIS 30TH DAY OF JULY, 2010 PATKI - 19 - COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)- 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 8-7-2010 2. DRAFT PLACED BEFORE AUTHORITY 8-7-2010 3. DRAFT PROPOSED & PLACED JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED --------------- ----- -------------- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S ---------------- -- ------------------ 6. KEPT FOR PRONOUNCEMENT ON ---------------- --- ----------------- 7. FILE SENT TO THE BENCH CLERK ---------------- -------------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------