Income Tax Officer-Ward-4(4), Kolkata, Kolkata V. M/s Khaitan Consultants Ltd., Kolkata

ITA 2796/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4536 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 16-12-2013
• Court: TRIBUNAL
• Department Lawyers: K K TRIPATHI
• Assessee Lawyers: A K; R N BAJORIA SR
• Keywords: Depreciation; Share purchase agreement; Cost of acquisition; Capital expenditure
• Section: 32

Judgement Text

1 ITA NO.2796/KOL/2013-M/S. KHAITAN CONSULTANTS LTD. A.Y.2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B KOL KATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI M.B ALAGANESH, AM ] ITA NO.2796/KOL/2013 ASSESSMENT YEAR : 2010-11 I.T.O., WARD-4(4), , -VERSUS- M/S. KHAITAN CONSUL TANTS LTD. KOLKATA KOLKATA (PAN:AABCK 3870 A) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI K.K.TRIPATHI, JCIT, SR. DR FOR THE RESPONDENT: SHRI R.N.BAJORIA, SR.COUNSEL & SHRI A.K.GUPTA, FCA DATE OF HEARING : 10.06..2016. DATE OF PRONOUNCEMENT : 08.07.2016 ORDER PER N.V.VASUDEVAN, JM: THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 12.08.2013 OF CIT(A) IV, KOLKATA, RELATING TO AY 2010-11. 2. GR.NO.1 & 2 RAISED BY THE REVENUE READS AS FOLL OWS: 1. THE LD. CIT( APPEAL) IS NOT JUSTIFIED IN HOLDIN G THAT THE TOTAL CONSIDERATION FOR SALE OF SHARES WAS RS. 10,40,705/- ONLY, IGNORING THE FA CT THAT THE ASSESSEE HAD AGREEMENT FOR SALE OF SHARES OF KCCL FOR RS. 15,37,35,633/- C OMPRISING SALE CONSIDERATION OF ASSESSEE OF RS. 4,97,25,928/-. 2. THE LD. CIT(APPEAL ) HAS ERRED IN LAW AS WELL AS ON FACTS IN APPLYING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. HOOGHL Y MILLS CO. LTD. ( 287 ITR 333) IGNORING THE FACT THAT BOTH THE CASES ARE TOTALLY D IFFERENT. IN THE CASE OF HOOGHLY MILLS THE SALE CONSIDERATION WAS RS.2 CRORES ONLY AND THE VENDEE HAD TO BEAR THE STATUTORY LIABILITY OF GRATUITY OF EMPLOYEES. HOWEVER IN THIS CASE AS PER AGREEMENT SALE CONSIDERATION ITSELF INCLUDED REPAYMENT OF LOAN. 3. THE FACTS AND CIRCUMSTANCES GIVING RAISE TO GR. NO.1 & 2 RAISED BY THE REVENUE ARE AS FOLLOWS: (1) THERE WAS A COMPANY BY NAME M/S.AVINASH ORGANIC S PRIVATE LIMITED. IT ACQUIRED ON 9.7.1997 PROPERTY BEING 4 TH AND 5 TH FLOOR MEASURING 1921 SQ.FT. EACH OF PREMISES KNOWN AS MEHER CHAMBERS, SITUATED AT R.K.MARG, BALLARD 2 ITA NO.2796/KOL/2013-M/S. KHAITAN CONSULTANTS LTD. A.Y.2010-11 ESTATE, MUMBAI-400 001 TOGETHER WITH PROPORTIONATE UNDIVIDED RIGHT, TITLE AND INTEREST IN THE LAND OVER WHICH THE ABOVE PREMISES WERE CONSTRUCTED. (2) ON AND FROM 31.10.2001 THE NAME OF M/S.AVINASH ORGANICS PRIVATE LIMITED WAS CHANGED TO M/S.KHAITAN & CO. CONSULTING PRIVATE LIMITED. ON AND FROM 12.4.2002, M/S.KHAITAN & CO., CONSULTING P RIVATE LIMITED WAS CHANGED TO M/S.KHAITAN & CO., CONSULTING LTD. (3) ON 23.12.2009, M/S.KHAITAN & CO., CONSULTING LT D., ACQUIRED BY A REGISTERED DOCUMENT THE 3 RD FLOOR MEASURING 1921 SQ.FT. OF THE PREMISES KNOWN AS MEHER CHAMBERS, SITUATED AT R.K.MARG, BALLARD ES TATE, MUMBAI-400 001 TOGETHER WITH PROPORTIONATE UNDIVIDED RIGHT, TITLE AND INTEREST IN THE LAND OVER WHICH THE ABOVE PREMISES WERE CONSTRUCTED. (4) THE 3 RD , 4 TH AND 5 TH FLOOR OF KNOWN AS MEHER CHAMBERS, SITUATED AT R.K.MARG, BALLARD ESTATE, MUMBAI-400 001 TOGETHER W ITH PROPORTIONATE UNDIVIDED RIGHT, TITLE AND INTEREST IN THE LAND OVE R WHICH THE ABOVE PREMISES WERE CONSTRUCTED, OWNED BY M/S.KHAITAN AND CO. CONS ULTING LTD., WILL HEREAFTER BE REFERRED TO AS THE PROPERTY. (5) THE SHARE CAPITAL OF M/S.KHAITAN & CO. CONSULT ING LTD., WERE HELD BY THE FOLLOWING PERSONS: ISSUED AND PAID UP EQUITY SHARES OF RS.10(RUPEES TE N) EACH : SR.NO. NAME NUMBER OF SHARES HELD IN THE COMPANY DISTINCTIVE NOS. %(APPROX.) 1. MR.RAM KISHORE CHOUDHURY/KHAITAN CONSULTANTS LIMITED. 1 230671-230671 0.0004 2. MR.SUDIP MULLICK/ KHAITAN CONSULTANTS LIMITED. 1 230672-230672 0.0004 3. ME.,PADAM KHAITAN/ KHAITAN CONSULTANTS LIMITED. 1 230673-230673 0.0004 4. MR.HAIGREVE KHAITAN/ KHAITAN CONSULTANTS LIMITED. 50 230421-230470 0.021 5. MR.AJOY GUPTA/ KHAITAN CONSULTANTS LIMITED. 10 1-10 0.004 6. MR.RABINDRANATH JHUNJHUNWALA/ 10 11-20 0.004 3 ITA NO.2796/KOL/2013-M/S. KHAITAN CONSULTANTS LTD. A.Y.2010-11 KHAITAN CONSULTANTS LIMITED. 7. KHAITAN CONSULTANTS LIMITED. 230600 21-230420 230471-230670 99.97 TOTAL 230673 100.00 (6) AS CAN BE SEEN FROM THE ABOVE CHART THE ASSESS EE HELD 99.97% OF M/S.KHAITAIN &CO.CONSULTING LTD., WAS ITS HOLDING C OMPANY. THE ASSESSEE HAD GIVEN A LOAN OF RS.4,97,25,928 TO M/S.KHAITAN & CO.CONSULTING LTD. (7) MR.GULABSI RATANSI KHIMJI AND MS.DEVYANI GULAB SI BHATIA (HEREINAFTER REFERRED TO AS PURCHASERS) WANTED TO PURCHASE THE PROPERTY. THE SALE COULD HAVE BEEN CONCLUDED BY A DEED OF CONVEYANCE OF THE PROPERTY BY M/S.KHAITAN & CO. CONSULTING LTD., OR ALTERNATIVELY, THE PURC HASERS COULD ACQUIRE 2,30,600 EQUITY SHARES OF M/S.KHAITAN & CO.CONSULTING LTD., WHICH CONSTITUTES ABOUT 99.97% OF THE SHARE CAPITAL OF M/S.KHAITAN & CO.CON SULTING LTD., HELD BY THE ASSESSEE, THEREBY GAINING CONTROL AND POSSESSION OF THE PROPERTY WITHOUT A REGISTERED DEED OF CONVEYANCE. THE PARTIES CHOSE T HE SECOND OPTION OF ACQUIRING SHARES OF M/S.KHAITAN & CO.CONSULTING LTD . (8) A SHARE PURCHASE AGREEMENT DATED 29.1.2010 WAS ENTERED INTO BETWEEN THE ASSESSEE, PURCHASERS AND M/S.KHAITAN &CO.CONSULTING LTD., WHEREBY IT WAS AGREED THAT THE ASSESSEE WOULD SELL HIS SHAREHOLDIN G IN M/S.KHAITAN & CO.CONSULTING LTD., TO THE PURCHASERS FOR A LUMP SU M CONSIDERATION OF RS.15,37,35,633. CLAUSE 2, 2.1 & 2.2 OF THE AGREEM ENT DATED 29.1.2010 IS VERY VITAL FOR A DECISION OF THE DISPUTE IN THE PRESENT CASE AND IT READS AS FOLLOWS: 2. SALE AND PURCHASE OF SALE SHARES 2.1 THE SELLER SHALL SELL AND TRANSFER TO THE PURCH ASERS AND THE PURCHASERS SHALL PURCHASE AND ACQUIRE FROM THE SELL ER AS A SPOT DELIVERY CONTRACT ALL THE SALE SHARES FOR A LUMP SUM CONSIDE RATION OF RS 15,37,35,633/- (RUPEES FIFTEEN CRORES THIRTY SEVEN LAKHS THIRTY FIVE THOUSAND SIX HUNDRED AND THIRTY THREE ONLY) (HEREIN AFTER REFERRED TO AS 'SALE CONSIDERATION'), FREE FROM ALL ENCUMBRANCE AN D CHARGES, LIEN OR DEMAND WHATSOEVER -BUT WITH THE BENEFIT OF ALL RIGH TS, TITLE AND INTEREST ATTACHED THERETO. 2.2 ON THE EFFECTIVE DATE, THE PURCHASERS SHALL PAY THE SALE CONSIDERATION TO THE SELLER IN THE FOLLOWING MANNER : 2.2.1 A SUM OF RS 1,60,00,000 (RUPEES ONE CRORE SIX TY LACS) HAS ALREADY BEEN PAID BY THE PURCHASERS TO THE SELLER ON OR BEF ORE THE EXECUTION HEREOF, AS EARNEST MONEY TOWARDS THE PURCHASE OF TH E SALE SHARES IN THE COMPANY VIDE PAY ORDER NO. 516321 DATED 3 SEPTEMBER 2009 DRAWN ON THE BANK OF BARODA, NARIMAN POINT BRANCH, MUMBAI IN FAVOUR OF THE 4 ITA NO.2796/KOL/2013-M/S. KHAITAN CONSULTANTS LTD. A.Y.2010-11 COMPANY (THE RECEIPT WHEREOF THE SELLER DOES HEREBY ADMIT AND ACKNOWLEDGE); 2.2.2 A SUM OF RS 1,00,00,000 (RUPEES ONE CRORE) ( ESCROW AMOUNT') SHALL BE PAID BY THE PURCHASERS TO AND PLACED IN ES CROW WITH THE ESCROW AGENT, WHICH SHALL BE ADMINISTERED AS PER THE PROVI SIONS OF CLAUSE 3 HEREOF; 2.2.3 A SUM OF RS.4,S7,25,928 (RUPEES FOUR CRORES N INETY SEVEN LAKHS TWENTY FIVE THOUSAND NINE HUNDRED TWENTY EIGHT) TO THE SELLER TOWARDS REPAYMENT OF LOANS MADE BY THE SELLER TO THE COMPAN Y AND SUCH AMOUNT SHALL BE TREATED AS A LOAN REPAYMENT BY THE COMPANY ; AND 2.2.4 BALANCE AMOUNT OF THE SALE CONSIDERATION, BEI NG A SUM OF RS. 7,80,09,705 (RUPEES SEVEN CRORES EIGHTY LAKHS NINE THOUSAND SEVEN HUNDRED AND FIVE) SHALL BE PAID BY THE PURCHASERS T O THE SELLER SIMULTANEOUSLY ON EXECUTION HEREOF THROUGH A PAY OR DER OR A BANKER'S CHEQUE MADE IN FAVOUR OF THE SELLER. 4. THE ASSESSEE DECLARED LONG TERM CAPITAL GAIN (L TCG) ON SALE OF SHARES OF M/S.KHAITAN & CO.CONSULTING LTD., BY ADOPTING THE F ULL VALUE OF CONSIDERATION RECEIVED ON TRANSFER AS RS.10,40,09,705. ACCORDING TO THE ASSESSEE THOUGH THE SALE CONSIDERATION FOR SALE OF SHARES WAS RS.15,37,35,63 3 AS PER THE AGREEMENT DATED 29.1.2010, THE REAL SALE CONSIDERATION FOR SALE OF SHARES WAS ONLY RS.10,40,09,705 BECAUSE A SUM OF RS.4,97,25,928 OUT OF THE SALE CON SIDERATION OF RS.15,37,35,633 MENTIONED IN CLAUSE-2 OF THE SAID AGREEMENT, WAS A LOAN PAYABLE BY M/S.KHAITAN & CO.CONSULTING LTD., TO THE ASSESSEE AND THAT WAS DI SCHARGED BY THE PURCHASERS FOR AND ON BEHALF OF M/S.KHAITAN & CO.CONSULTING LTD., AND DID NOT THEREFORE CONSTITUTE PART OF THE SALE CONSIDERATION OF THE SALE OF SHARES. T HE ASSESSEE POINTED OUT THAT IN ITS BOOKS THE LOAN RECEIVABLE OF RS.4,97,25,928 WAS SHO WN AS REALIZED AND THE PURCHASERS IN THEIR BOOKS OF ACCOUNTS RECOGNISED M/S.KHAITAN & CO.CONSULTING LTD., AS THEIR CREDITOR TO THE EXTENT OF RS.4,97,25,928. THE ASSE SSEE ALSO POINTED OUT THAT M/S.KHAITAN & CO.CONSULTING LTD., (WHOSE NAME WAS S UBSEQUENTLY CHANGED BY THE PURCHASERS AS TEST CONSULTANTS LTD., AFTER THEIR AC QUISITION OF THE VIRTUALLY THE ENTIRE SHAREHOLDING) RECOGNISED MR.GULABSI RATANSI KHIMJI AS THEIR CREDITORE IN THEIR BOOKS OF ACCOUNTS. THUS THE DEBT DUE TO THE ASSESSEE FRO M M/S.KHAITAN & CO.CONSULTING 5 ITA NO.2796/KOL/2013-M/S. KHAITAN CONSULTANTS LTD. A.Y.2010-11 LTD., STOOD DISCHARGED AND THAT WAS NOT PART OF THE SALE CONSIDERATION OF SALE OF SHARES BUT WAS A REALIZATION OF THEIR OUTSTANDING FROM M/S .KHAITAN &CO.CONSULTING LTD. THE ASSESSEE SUBMITTED THAT THE AGREEMENT DATED 29.1.20 10 WAS A COMPOSITE AGREEMENT BY WHICH THE ASSESSEE WANTED TO SELL SHARES AND ALS O SECURE REPAYMENT OF THE LOAN DUE BY IT FROM M/S.KHAITAN & CO.CONSULTING LTD. THEREFO RE THE SALE CONSIDERATION MENTIONED IN THE AGREEMENT WAS A COMPOSITE SALE CON SIDERATION. ONLY A SUM OF RS.10,40,09,705 WAS RELATABLE TO SALE OF SHARES AN D THE REMAINING SUM WAS NOTHING BUT REALIZATION OF LOANS DUE TO IT WHICH CANNOT BE REGARDED AS FULL VALUE OF CONSIDERATION RECEIVED ON TRANSFER OF SHARES. THE ASSESSEE THUS CLAIMED THAT ITS COMPUTATION OF LTCG WAS CORRECT. THE ASSESSEE PLAC ED RELIANCE ON THE DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF VOLTAS LTD. VS . ACIT (2010) 4 ITR (TRIB.)(MUMBAI). IN THE AFORESAID DECISION THE FAC TS WERE THAT VOLTAS LIMITED (VL) ALONG WITH VOLTAS INTERNATIONAL LTD. (VIL) HAD PROM OTED A COMPANY NAMED PREMIUM GRANITE LTD. (PGL). INVESTMENTS WERE MADE BY VL AN D VIL IN THE SAID COMPANY, PGL FROM TIME TO TIME. THEY HAD ALSO ADVANCED LOAN S TO THE SAID COMPANY, PGL ON VARIOUS OCCASIONS. DUE TO CONTINUED LOSS SUFFERED BY PGL, VL AND VIL DECIDED TO SELL ALL THE SHARES OF PGL FOR RE.1/- ONLY TO ZASS EXPORTS (PVT.)LTD. (ZES). IT WAS FURTHER AGREED THAT THE PURCHASER WOULD INFUSE LOAN INTO PGL WHICH WOULD BE USED TO REPAY LOAN GIVEN BY IT TO VL AND VIL AND ONE OF THE BANKERS, STATE BANK OF INDIA TOTALLING TO RS.5,40,00,000. THE AO TREATED THE SA LE PRICE AT RS.5,40,00,000 I.E., THE CONSIDERATION AS WELL AS THE REPAYMENT OF LOAN. TH E TRIBUNAL AFTER DISCUSSING THE ISSUE IN DETAIL HELD THAT THE AMOUNT OF RS.5.4 CRORES INF USED BY ZES IN PGL TO REPAY THE LOANS CANNOT BE ADDED TO THE CONSIDERATION AND AS S UCH THE LOSS CLAIMED BY VL WAS TO BE ALLOWED. 5. THE AO HOWEVER DID NOT AGREE WITH THE AFORESAID SUBMISSIONS OF THE ASSESSEE AND HE HELD AS FOLLOWS: 1.11 THE REPLY BY THE ASSESSEE AND THE CASE LAW RE LIED UPON IS CONSIDERED. THE SUBMISSION OF THE ASSESSEE CANNOT BE ACCEPTED AS CL AUSE NO. 2.1 VERY CLEARLY DEFINES THE SALES CONSIDERATION AND LEAVES NO AMBIGUITY IN THE MATTER. 6 ITA NO.2796/KOL/2013-M/S. KHAITAN CONSULTANTS LTD. A.Y.2010-11 L.12 THE REFERENCE TO CLAUSE NO. 2.2 AND IN PARTICU LAR TO CLAUSE NO. 2.2.3 IS OF NO HELP TO THE ASSESSEE AS THE SAID CLAUSE STATES THE MANNER O F DISCHARGE OF SALE CONSIDERATION ONE OF THEM BEING THROUGH REPAYMENT OF LOAN MADE BY THE SELLER TO THE COMPANY. ON THE CONTRARY THE SAID CLAUSE STATES THAT ... AND SUCH AMOUNT SHALL BE TREATED AS A LOAN REPAYMENT BY THE COMPANY'. (EMPHASIS ADDED) THE ASSESSEE CLAIMS STATES THAT IT HAS RECEIVED ONL Y RS. 10,40,09,705.00 AND NOT RS. 15,37,35,633.00 FROM THE PURCHASER OF THE SHARES. H OWEVER, RECEIVING PAYMENT IN PART OR NON RECEIPT OF PAYMENT OF ENTIRE SALE PRICE CANN OT BE FACTOR OF DETERMINING THE SALES PRICE OF THE SHARES SOLD. 1.13 ALTHOUGH NUMEROUS OPPORTUNITIES WERE PROVIDED TO THE ASSESSEE, THEY FAILED TO EXPLAIN WHY THE SALE CONSIDERATION AS PER CLAUSE NO . 2.1, WHICH SPECIFICALLY PROVIDES THAT ....FOR A LUMP SUM CONSIDERATION OF RS. 15,37,35,6 33.00 (RUPEES FIFTEEN CRORES THIRTY.SEVEN LAKHS THIRTY FIVE THOUSAND SIX HUNDRED AND THIRTY THREE ONLY) HEREINAFTER REFERRED TO AS 'SALE CONSIDERATION') ... ' (EMPHASI S ADDED) . BE NOT TREATED AS THE SALE 'PRICE OF SHARES NEITHER COULD THEY EXPLAIN WHY THE SAID CLAUSE SHOULD NOT BE GIVEN EFFECT TO. THE ASSESSEE IN ALL HI RESPONSES REMAINED SILEN T ON THE SAID POINTS. 1.14. THE ASSESSEE HAS ALSO RELIED ON DECISION OF T HE HONBLE ITAT VOLTAS LTD. VS. ASST.COMMISSIONER OF INCOME TAX ( 2010) 4 ITR (TRIB .) 721 (MUMBAI). THE FACTS OF THE CASE ARE TOTALLY DISTINCT FROM THE MATTER IN HAND. IN VOLTAS LTD. (SUPRA) THE ISSUE IN HAND DEALT WITH THE GENUINENESS OF INV ESTMENT IN SHARES ON RIGHTS BASIS AND THERE WAS SPECIFIC CLAUSE FOR REPAYMENT OF LOAN DUE AS PART OF ONE TIME SETTLEMENT. THERE WAS PRE-REQUISITE TO SEEK APPROVAL OF FINANCIAL INS TITUTION FOR TRANSFER OF SHARES AND FOR SEEKING SUCH APPROVAL, LOAN REPAYMENT WAS MADE. SUC H LOAN AMOUNT WAS TREATED BY THE AO AS SALE CONSIDERATION ALTHOUGH THERE WAS NO SUCH CLAUSE IN THE AGREEMENT AND THE AND THE SALE CONSIDERATION WAS FIXED AT RS. I/- ALT HOUGH THE PURCHASE PRICE WAS VERY HIGH. IN THE INSTANT CASE IT IS SPECIFICALLY MENTIONED IN THE SALE AGREEMENT THAT LUMP SUM SALE CONSIDERATION OF SHARE IS RS.15,37,3S,633/- 1.15. IN VIEW OF THE ABOVE, THE CONTENTION OF THE A SSESSEE IS REJECTED AND I RECOMPUTE THE CAPITAL GAINS WITH SALE CONSIDERATION AT RS. 15,37, 3S,633.00. HENCE AN AMOUNT OF R.4,97,2S,928/- IS ADDED BACK BEING DIFFERENCE OF R S.15,37,3S,633/- (-) RS.10,40,09,705/- 6. ON APPEAL BY THE ASSESSEE, THE CIT(A) AGREED WI TH THE STAND TAKEN BY THE ASSESSEE AND HELD THAT THE FULL VALUE OF CONSIDERATION RECEI VED ON TRANSFER SHOULD BE ADOPTED ONLY AT RS.10,40,09,705. THE FOLLOWING WERE THE REL EVANT OBSERVATIONS OF THE CIT(A): 2.4. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AND ALSO APPL ICABLE LEGAL POSITION. IN THE LIGHT OF THE AFORESAID BASIC FACTS THE ISSUE IS TO BE CONSID ERED. THE AGREEMENT PROVIDES FOR A TOTAL CONSIDERATION WHICH IS A LUMP SUM AMOUNT OF RS. 15, 37,35,633/-. IF OUT OF SUCH LUMP SUM THE AMOUNT OF RS. 4,97,25,928 IS DEDUCTED, THEN THE BALANCE REMAINS IS RS.10,40,09,705/-. THE SUM OF RS. 4,97,25,928 HAS N OT BEEN RECEIVED BY THE APPELLANT DIRECTLY FROM THE KEEL ALTHOUGH THE OUTSTANDING LOA N OF THE APPELLANT TO THE SAID SUBSIDIARY STOOD SQUARED OFF. THE MANNER IN WHICH S UCH LOAN STOOD DISCHARGED WAS BY KEEL CREDITING THE SAID SUM OF RS. 4,97,25,928 TO T HE ACCOUNT OF THE BUYER GULABJI RATANJI KHIMJI AND DEBITING THE SAME TO THE APPELLA NT'S LOAN ACCOUNT IN VIEW OF THE 7 ITA NO.2796/KOL/2013-M/S. KHAITAN CONSULTANTS LTD. A.Y.2010-11 AFORESAID PAYMENT MADE TO THE APPELLANT BY THE BUYE R BY THE SAID DRAFT FOR THE SAID SUM. FOR DISCHARGE OF SUCH LOAN NO OTHER PAYMENT AND/OR AMOUNT WAS RECEIVED BY THE APPELLANT OR PAID BY KEEL. SUCH DISCHARGE OF THE LO AN IS RECORDED BY KEEL BY CREDITING THE LOAN AMOUNT TO THE ACCOUNT OF THE BUYERS NAMELY GULABJI RATANJI KHIMJI. THE SAID MR GULABJI RATANJI KHIMJI BECAME THE CREDITOR OF KE EL IN PLACE AND IN STEAD OF THE APPELLANT. 2.5 ACCORDINGLY THE CONSIDERATION FOR SALE OF THE S AID SHARES COULD NOT BE ANYTHING OVER AND ABOVE RS. 10,40,09,705/- (RS. 15,37,35,633 RS .15,97,25,928). THERE IS NO EVIDENCE OF ANY MANNER WHATSOEVER TO INDICATE THAT ANYTHING OVER AND ABOVE THE SAID LUMP SUM AMOUNT OF RS. 15,37,35,633 HAS BEEN RECEIV ED BY THE APPELLANT. KCCL HAS NOT PAID ANY SUM TO THE APPELLANT SAVE AND EXCEPT B Y CREDITING THE ACCOUNT OF THE BUYER GULABJI RATANJI KHIMJI AND DEBITING THE APPELLANT'S LOAN ACCOUNT. THE USE OF THE EXPRESSION 'LUMP SUM' IN CLAUSE 2.L.OF THE AGREEMEN T CLEARLY INDICATE THAT TWO SEPARATE ITEMS HAVE BEEN CLUBBED TOGETHER. THE EXPRESSION 'C ONSIDERATION' CANNOT BE DESCRIBED FOR THE SHARES ONLY. WHEN THE ENTIRE SHAREHOLDING O F KCCL WAS BEING TRANSFERRED BY THE APPELLANT IT ALSO SECURED AS A PART OF THE TERM OF THE SALE THAT THE LOAN RECEIVABLE BY IT FROM THE SAID SUBSIDIARY KCCL IS ALSO REPAID. HAVI NG PARTED WITH THE ENTIRE SHAREHOLDING OF THE SUBSIDIARY THE APPELLANT COULD NOT HAVE LEFT ITS LOAN OUTSTANDING. THE TRANSACTION NATURALLY REQUIRED THAT NOT ONLY THE PR ICE OF THE SHARES SHOULD BE PAID BUT THE LOAN RECEIVABLE FROM THE SUBSIDIARY SHOULD ALSO BE REPAID. 2.6. MERELY BECAUSE THE TWO TRANSACTIONS ARE ROLL ED IN ONE LUMP SUM CONSIDERATION IN A TRANSACTION OF OUTRIGHT TRANSFER OF AN UNDERTAKING, NO DIFFERENT ADVERSE CONCLUSION CAN BE DRAWN AS THE AO HAS SOUGHT TO DO. IT IS WELL ESTABL ISHED THAT THE AGREEMENT HAS TO BE READ IN ITS ENTIRETY AND CANNOT BE DISSECTED AND AP PLIED PIECE- MEAL. IN THIS BEHALF RELIANCE CAN BE PLACED ON THE DECISION OF THE HON'B LE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. HOOGHLY MILLS CO. LT D. REPORTED IN 287 ITR 333 WHEREIN AT PAGE 335 IT WAS HELD AS FOLLOWS:- 'THUS IN THE SAME AGREEMENT OF SALE OF THE UNDERTAK ING IT WAS NOT ONLY MENTIONED THAT THE VENDEE WILL PAY TO THE VENDOR TH E SUM OF RS.2 CRORES AS A CONSIDERATION BUT IN ADDITION TO THIS IT WILL ALSO TAKE OVER THE ACCRUED AND FUTURE GRATUITY LIABILITY OF THE EMPLOYEES. IT IS W ELL-SETTLED THAT AN AGREEMENT HAS TO BE READ AS A WHOLE. HENCE THE CONSIDERATION FOR THE SALE WAS NOT ONLY RS.2 CRORES BUT IN ADDITION THE GRATUITY LIABILITY OF THE VENDOR AS WELL. THE MUMBAI TRIBUNAL DECISION IN THE CASE OF VOLTAS (SUPRA) ALSO SUPPORTS THE VIEW TAKEN ABOVE. 2.7 IN THE CIRCUMSTANCES, THE FINDING OF THE A.A. T HAT THE SAID SUM OF RS. 15,37,35,633 REPRESENTED THE CONSIDERATION ONLY FOR THE SALE OF SHARES OF KCCL CANNOT BE SUPPORTED. IF THERE WOULD HAVE BEEN ANY EVIDENCE TO SHOW THAT EITHER THE SAID LOAN TO KCCL OF RS. 4,97,25,928 REMAINED OUTSTANDING AND/OR WAS DISCHAR GED OTHERWISE BY ANY SEPARATE PAYMENT THERE COULD HAVE BEEN SOME BASIS FOR SUCH A VIEW. IN THE CIRCUMSTANCES, THE TREATMENT OF ENTIRE SUM OF RS. 15,37,35,633 AS THE SALE CONSIDERATION FOR THE SHARES CANNOT BE SUSTAINED. FROM THE SAID SUM THE AMOUNT T OWARDS PAYMENT OF LOAN ADVANCED TO THE SUBSIDIARY HAS TO BE EXCLUDED. 8 ITA NO.2796/KOL/2013-M/S. KHAITAN CONSULTANTS LTD. A.Y.2010-11 7. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVEN UE HAS RAISED GR.NO.1 & 2 BEFORE THE TRIBUNAL. THE LEARNED DR SUBMITTED THAT THE CI T(A) HAS WRONGLY RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F HOOGHLY MILLS CO. LTD., (SUPRA). ACCORDING TO HIM THE FACTS OF THE CASE BEFORE THE H ONBLE SUPREME COURT WAS THAT THERE WAS A TAKE-OVER OF BUSINESS AS A GOING CONCER N BY PAYING A CONSIDERATION OF RS.2 CRORES BESIDES TAKING OVER ACCRUED FUTURE GRATUITY LIABILITY PAYABLE TO EMPLOYEES. REFERRING TO THE AGREEMENT ENTERED INTO BETWEEN THE PARTIES, THE SUPREME COURT HELD THAT THE AGREEMENT HAD TO BE READ AS A WHOLE AND, H ENCE, THE CONSIDERATION FOR THE SALE WAS NOT ONLY RS. 2 CRORES BUT ALSO INCLUDED THE GRA TUITY LIABILITY OF THE VENDOR AS WELL. IT WAS HIS FURTHER SUBMISSION THAT THE CIT(A) WRONG LY PLACED RELIANCE ON THE DECISION OF THE ITAT MUMBAI IN THE CASE OF VOLTAS LTD. (SUPR A). ACCORDING TO HIM IN THE AFORESAID DECISION THERE WAS A SPECIFIC CLAUSE IN T HE AGREEMENT BETWEEN PARTIES WHEREBY REPAYMENT OF LOAN DUE WAS PART OF ONE TIME SETTLEMENT. ACCORDING TO HIM IN THE CASE OF THE ASSESSEE THE AGREEMENT SPECIFICALLY MENTIONS SALE CONSIDERATION FOR SALE OF SHARES AS RS.15,37,35,633 AND THIS FACT HAS BEEN OVERLOOKED BY THE CIT(A). THE ACTUAL RECEIPT OF CONSIDERATION BY THE ASSESSEE , ACCORDING TO HIM IS IRRELEVANT. HE THEREFORE SUBMITTED THAT THE AOS ORDER HAS TO BE R ESTORED. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED SUBMISSIONS MADE BEFORE AO/ CIT(A) AND RELIED ON THE ORDER OF THE CIT(A). 8. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. THE FACTS OF THE PRESENT CASE AS GIVEN IN PARA-3 OF THIS ORDER A RE NOT DISPUTED BY THE PARTIES BEFORE US. SINCE THE MAIN CHALLENGE OF THE REVENUE IN T HIS APPEAL IS THAT THE RATIO IN THE CASE OF HOOGHLY MILLS CASE (SUPRA) HAD BEEN WRONGLY APPL IED, IT IS NECESSARY FOR US TO SEE THE FACTS OF THE CASE IN HOOGHLY MILLS CASE (SUPRA) . THE ASSESSEE IN THE CASE OF HOOGHLY MILLS CO. LTD.(SUPRA) HAD BY AN AGREEMENT W ITH THE VENDOR, PURCHASED AN UNDERTAKING FOR RS. 2 CRORES. IN ADDITION TO THE SA ID AMOUNT THE ASSESSEE ALSO TOOK UP THE ACCRUED AND FUTURE GRATUITY LIABILITY OF THE VE NDOR WHICH AMOUNTED TO RS. 3.5 CRORES. BY THE VIRTUE OF THE SAID AGREEMENT, THE AM OUNT WAS APPORTIONED AMONG THE HEADS OF THREE LARGER HEADS OF LAND, BUILDINGS AND PLANT AND MACHINERY. THE ASSESSEE 9 ITA NO.2796/KOL/2013-M/S. KHAITAN CONSULTANTS LTD. A.Y.2010-11 CLAIMED THAT SINCE THIS AMOUNT OF RS. 3.5 CRORES TO WARDS GRATUITY WAS CAPITAL EXPENDITURE IT WAS ENTITLED TO DEPRECIATION ON THE SUM UNDER SECTION 32 OF THE INCOME- TAX ACT. THE COMMISSIONER OF APPEAL, TRIBUNAL HEL D THAT ACCRUED GRATUITY WAS A PART OF CONSIDERATION AND ALLOWED ITS DISTRIBUTION TO TH E COST OF ACQUISITION FOR DIFFERENT ASSETS AND DEPRECIATION ON REWORKED AMOUNT WHICH WA S UPHELD BY THE HIGH COURT OF CALCUTTA. ON FURTHER APPEAL BY THE REVENUE, THE HON BLE SUPREME COURT HELD THAT CLAIM FOR DEPRECIATION WAS NOT TO BE ALLOWED. REFER RING TO THE AGREEMENT ENTERED INTO BETWEEN THE PARTIES, THE SUPREME COURT HELD THAT TH E AGREEMENT HAD TO BE READ AS A WHOLE AND, HENCE, THE CONSIDERATION FOR THE SALE WA S NOT ONLY RS. 2 CRORES BUT ALSO INCLUDED THE GRATUITY LIABILITY OF THE VENDOR AS WE LL. HOWEVER, ON THE ISSUE OF CLAIMS OF DEPRECIATION, THE SUPREME COURT RULED IN FAVOUR OF THE REVENUE. REFERRING TO THE AGREEMENT OF SALE ENTERED INTO BETWEEN THE PARTIES, THE SUPREME COURT OBSERVED THAT THE AGREEMENT ITSELF SEPARATELY MENTIONED THE PRICE OF THE LAND, BUILDING AND THE MACHINERY. THE HONBLE SUPREME COURT THEREFORE REJE CTED RE-APPORTIONMENT BY THE ASSESSEE IN COMBINATION WITH ACCRUED GRATUITY LIABI LITY. THE SUPREME COURT HELD THAT 'THE GRATUITY LIABILITY DOES NOT FALL UNDER ANY OF THOSE CATEGORIES SPECIFIED IN SECTION 32, NO DEPRECIATION CAN BE CLAIMED IN RESPECT OF TH E GRATUITY LIABILITY EVEN IF IT IS REGARDED AS CAPITAL EXPENDITURE. THE RATIO THAT FL OWS FROM THE DECISION OF THE HONBLE SUPREME COURT, IN OUR HUMBLE VIEW, IS THAT THE APPO RTIONMENT OF SALE CONSIDERATION AS PER THE AGREEMENT BETWEEN THE PARTIES WILL BE OF PA RAMOUNT IMPORTANCE TO DECIDE CLAIMS OF PARTIES UNDER THE INCOME TAX ACT, 1961 (A CT). 9. IF THAT BE THE RATIO THEN, IN OUR VIEW, A READI NG OF CLAUSES 2.1 & 2.2 OF THE AGREEMENT DATED 29.1.2010 BETWEEN THE PARTIES, CLEA RLY SHOWS THAT THE LIABILITY OF M/S.KHAITAN & CO.CONSULTING LTD., WAS NOT PART OF T HE CONSIDERATION OF SALE OF SHARES. IT WAS AN ALREADY EXISTING LIABILITY IN THE BOOKS O F THE ASSESSEE WHICH WAS DISCHARGED BY THE PURCHASERS. THE PURCHASERS TOOK OVER THAT L IABILITY AND M/S.KHAITAN & CO.CONSULTING LTD., ACKNOWLEDGED THE PURCHASERS AS THEIR CREDITOR IN SO FAR AS THE SUM OF RS.4,97,25,928/- IS CONCERNED. ON THE FACTS OF THE PRESENT CASE, WE ARE OF THE VIEW THAT THE SUM OF RS.4,97,25,928 CANNOT BE ATTRI BUTED TO CONSIDERATION FOR SALE OF 10 ITA NO.2796/KOL/2013-M/S. KHAITAN CONSULTANTS LTD. A.Y.2010-11 SHARES AND THE ASSESSEE WAS JUSTIFIED IN ITS CLAIM THAT THE SAID SUM DID NOT FORM PART OF THE FULL VALUE OF CONSIDERATION RECEIVED ON TRANSFE R OF SHARES AND ITS COMPUTATION OF LTCG WAS CORRECT. WE DO NOT FIND ANY GROUNDS TO IN TERFERE WITH THE DECISION OF THE CIT(A). CONSEQUENTLY, GR.NO.1 AND 2 RAISED BY THE REVENUE IS DISMISSED. 10. GR.NO.3 RAISED BY THE REVENUE READS AS FOLLOWS : 3. THE LD. CIT (APPEAL) IS NOT JUSTIFIED IN HOLDIN G THE BROKERAGE AS EXPENDITURE . OF THE COMPANY FOR SALE OF SHARES, IGNORING THE FACT T HAT THE BROKERAGE WAS ACTUALLY RAISED FOR SALE OF PREMISES WHICH IS IN THE NAME OF SUBSID IARY COMPANY. 11. THE FACTS IN SO FAR AS GR.NO.3 RAISED BY THE R EVENUE IS CONCERNED ARE THAT THE ASSESSEE WHILE COMPUTING LTCG ON SALE OF SHARES OF M/S.KHAITAN & CO.CONSULTING LTD., THE ASSESSEE HAD CLAIMED AS A DEDUCTION TOWAR DS EXPENDITURE IN CONNECTION WITH TRANSFER A SUM OF RS.12,13,300/- BEING BROKERAGE PA ID TO MR.MANISH B.THAKKAR. ON PERUSAL OF THE BILL DATED 3.2.2010 RAISED BY THE BR OKER BASED ON WHICH THE ASSESSEE MADE THE AFORESAID PAYMENT OF COMMISSION, THE AO NO TICED THAT THE BILL CONTAINED THE FOLLOWING SERVICE RENDERED FOR WHICH BROKERAGE WAS PAID BY THE ASSESSEE: ' BEING YOUR PREMISE AT MEHER CHAMBERS.3 RD & 5 TH FLOOR, R.KMARG, BELLARD ESTATE, SOLD TO OUR CLIENT MR. GULABSI RATANSI KHIM JI & MRS. DEVYANI GULABSI BHATIA. OUR REMUNERATION CHARGES ARE LUMP SUM'. 12. THE AO WAS OF THE VIEW THAT THE BROKERAGE IN Q UESTION WAS PAID IN CONNECTION WITH SERVICES RENDERED FOR SALE OF PROPERTY AND NOT FOR SALE OF SHARES. THE ASSESSEE SUBMITTED BEFORE AO THE BROKERAGE BILL BY MISTAKE M ENTIONED THAT IT IS FOR SALE OF PREMISES BUT IN FACT IT WAS WITH REFERENCE TO THE T RANSACTION OF SALE OF SHARES BY THE ASSESSEE. 13. THE AO HOWEVER REFUSED TO BELIEVE THE PLEA OF THE ASSESSEE THAT THERE WAS A MISTAKE IN THE BILL SINCE PAYMENT OF BROKERAGE WAS MADE ON THE BASIS OF THE SAID BILL. IN CASE THERE WAS MISTAKE WHICH IS EASILY IDENTIFIA BLE IT WOULD HAVE SOUGHT RECTIFICATION THEREOF OR OBTAIN REVISED BILL. EVEN DURING THE COURSE OF HEARING, THE ASSESSEE DID NOT PRODUCE REVISED/RECTIFIED BILL ALT HOUGH SUFFICIENT TIME AND OPPORTUNITY 11 ITA NO.2796/KOL/2013-M/S. KHAITAN CONSULTANTS LTD. A.Y.2010-11 WAS GRANTED TO THE ASSESSEE. THE CLAIM THAT THE MIS TAKE EXISTS AT THE STAGE OF ASSESSMENT AND THAT TOO WHEN POINTED OUT BY THE REV ENUE IS ONLY AN AFTER- THOUGHT AND NO BENEFIT COULD BE GRANTED TO THE ASSESSEE FOR THE SAME. THE AO THEREFORE REFUSED TO ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON AC COUNT OF BROKERAGE OF RS. 1213300/- WHILE COMPUTING LTCG. 14. ON APPEAL BY THE ASSESSEE, THE CIT(A) DIRECTED THE AO TO ALLOW THE DEDUCTION CLAIMED BY THE ASSESSEE, OBSERVING AS FOLLOWS: 4. I HAVE CONSIDERED THE SUBMISSIONS MADE AND MATE RIAL ON RECORD. BRIEF FACTS OF THE ISSUE ARE THAT KCCL OWNED OFFICE SPACE SITUATED AT 3 RD , 4 TH AND 5 TH FLOORS AT MEHER CHAMBERS, BALLARD STATE, MUMBAI. THE APPELLANT WAS THE HOLDING COMPANY, HOLDING THE ENTIRE SHARES OF KCCL. THE FACT THAT THE TRANSFER O F THE ENTIRE SHAREHOLDING OF KCCL LED TO THE TRANSFER OF THE OFFICE SPACE AT 3 RD , 4 TH AND 5 TH FLOORS OF MEHER CHAMBERS CANNOT BE DISPUTED. THE BROKER HAS ALSO CONFIRMED THE RECEIPT OF BROKERAGE FOR THE SERVICES RENDERED FOR THE SAID TRANSACTION. THE A.O. HAS NOT DISPUTED THE FACTUM OF THE PAYMENT AND/OR GENUINENESS OF THE SERVICES BEING RENDERED B Y THE BROKER. CONSEQUENTLY DISALLOWANCE OF THE AMOUNT OF BROKERAGE OF RS.12,13 ,300/- CANNOT BE SUSTAINED AND HAS TO BE ALLOWED IN COMPUTING THE CAPITAL GAIN. 15. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVEN UE HAS RAISED GR.NO.3 BEFORE THE TRIBUNAL. WE HAVE HEARD THE SUBMISSIONS OF THE LEA RNED DR WHO SUBMITTED THAT THE BILL SHOWED PAYMENT FOR BROKERAGE FOR SALE OF PROPE RTY AND NOT FOR SALE OF SHARES AND THE CAPITAL GAIN IN QUESTION IS NOT ARISING ON SALE OF PROPERTY BUT ON SALE OF PROPERTY. 16. WE HAVE CONSIDERED HIS SUBMISSION AND ARE OF T HE VIEW THAT THE OBJECTION OF THE REVENUE IS WITHOUT ANY MERIT. AS WE HAVE ALREADY S EEN THE SALE OF THE PROPERTY WAS SOUGHT TO BE ACHIEVED BY SALE OF SHARES OF M/S.KHAI TAN & CO.CONSULTING LTD., WHICH WAS HELD BY THE ASSESSEE TO THE EXTENT OF 99.97%. THE BILL ISSUED BY THE BROKER CONTAINED A DESCRIPTION THAT IT WAS SALE OF THE PRO PERTY. IN OUR VIEW THIS DESCRIPTION IN THE BILL ISSUED BY THE BROKER TO WHOM COMMISSION WA S PAID IS INSIGNIFICANT. THE FACT REMAINS AND IT IS NOT DISPUTED THAT MR.MANISH B.THA KKAR, ACTED AS AN INTERMEDIARY IN THE TRANSACTION AND WAS PAID BROKERAGE. CAPITAL GA IN DECLARED BY THE ASSESSEE ARISES OUT OF THE SAME TRANSACTION. IN SUCH CIRCUMSTANCES , THE CLAIM OF THE ASSESSEE FOR DEDUCTION COULD NOT HAVE BEEN REFUSED BY THE AO. T HE CIT(A) IN OUR VIEW HAS RIGHTLY 12 ITA NO.2796/KOL/2013-M/S. KHAITAN CONSULTANTS LTD. A.Y.2010-11 ALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE. WE DO NOT FIND ANY GROUNDS TO INTERFERE WITH THE ORDER OF THE CIT(A). CONSEQUENT LY, GR.NO.3 RAISED BY THE REVENUE IS ALSO DISMISSED. 17. IN THE RESULT, APPEAL BY THE REVENUE IS DISMIS SED. O RDER PRONOUNCED IN THE COURT ON 08.07.2016. SD/- SD/- [M.BALAGANESH ] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 08.07.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.M/S. KHAITAN CONSULTANTS LTD., 1B, 2 ND FLOOR, EMERALD HOUSE, OLD POST OFFICE STREET, KOLKATA-700001. 2. I.T.O., WARD-4(4), KOLKATA. 3. CIT(A)-IV, KOLKATA 4. CIT-II, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, ASST. REGISTRAR, ITAT, KOLKATA BENCHES