Siel Ltd., V. ACIT, Circle-8(1),

ITA 3467/DEL/2004

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9579 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 15-09-2009
• Assessment Year: 2000-2001
• Appeal Filed On: 04-08-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: STEPHEN GEORGE
• Keywords: Capital asset; Business expenditure; Share purchase agreement; Cost of acquisition; Avoidance of tax; Valuation report; Capital Gains
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI I.P.BANSAL, JM AND SHRI R.C.SHARMA, AM ITA NO.3467/DEL/2004 ASSESSMENT YEAR : 2000-01 M/S SIEL LIMITED, 5 TH FLOOR, KIRTI MAHAL, 19, RAJENDRA PLACE, NEW DELHI 110 008. PAN NO.AAACS4902Q. VS. ASSTT.COMMISSIONER OF INCOME TAX, CIRCLE-8(1), NEW DELHI. (APPELLANT) (RESPONDENT) ITA NO.3444/DEL/2004 ASSESSMENT YEAR : 2000-01 ASSTT.COMMISSIONER OF INCOME TAX, CIRCLE-8(1), NEW DELHI. VS. M/S SIEL LIMITED, 5 TH FLOOR, KIRTI MAHAL, 19, RAJENDRA PLACE, NEW DELHI 110 008. PAN NO.AAACS4902Q. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI TARANDEEP SINGH, CA. REVENUE BY : SHRI STEPHEN GEORGE, CIT-DR. ORDER PER R.C.SHARMA, AM : THESE ARE CROSS-APPEALS FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 31.5.2004, WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE, OUT OF INTEREST PAID, THE FOLLOWING INTEREST CALCULATED @ 15% P.A. ON THE INVESTMENT MADE IN SHARES AND ADVANCE TO M/S JAY ENGINEERING WORKS LIMITED RS.4,31,55,000 ON ADVANCES TO SUBSIDIARY COMPANIES RS.4,56,66,440 RS.8,88,21,440 ITA NOS.3467 & 3444/D/2004 2 1.1 THAT THE CIT(A) IN DEALING WITH THE GROUNDS REL ATING TO THE DISALLOWANCE OF AFORESAID INTEREST ERRED, ON FACT A ND IN LAW, IN TOTALLY IGNORING AND NOT ABIDING THE DIRECTION OF THE HONB LE C BENCH, INCOME TAX APPELLATE TRIBUNAL, NEW DELHI, CONTAINED IN THE ORDER IN ITA ANO.3367/DEL/2002 DATED 28.10.2003 IN ASSESS EES OWN CASE FOR THE ASSESSMENT YEAR 1998-99, WHICH DIRECTIONS W ERE EQUALLY APPLICABLE IN AS MUCH AS THE FACTS OF THE ASSESSMEN T YEAR UNDER CONSIDERATION WERE AKIN TO THE FACTS OF THE ASSESSM ENT YEAR 1998-99. 1.2 THAT THE CIT(A) ERRED IN NOT ACCEPTING THE ASSE SSEES CONTENTION, TAKEN WITHOUT PREJUDICE AND IN THE ALTE RNATIVE, THAT THE ADOPTION OF RATE OF INTEREST OF 15% P.A. WAS HIGH A ND EXCESSIVE. 1.3 THAT THE CIT(A) ERRED IN RELYING ON THE DECISIO N OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. MOTOR & GEN ERAL FINANCE LTD. IN UPHOLDING THE ADDITION/DISALLOWANCE, EVEN T HROUGH THE SAID DECISION HAS BEEN REVERSED BY THE APEX COURT REPORT ED AS MOTOR & GENERAL FINANCE LTD. VS. CIT 267 ITR 381 (S.C.). 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF RS.3, 46,000/- ON ACCOUNT OF PROVISION FOR EMPLOYEES LEAVE ENCASHMEN T. 2.1 THAT THE CIT(A) FAILED TO APPRECIATE THAT THE I NCREASED LIABILITY ON ACCOUNT OF EMPLOYEES LEAVE ENCASHMENT IS BASED ON ACTUARIAL VALUATION, A COPY OF WHICH WAS SUBMITTED DURING ASSESSMENT AS WELL AS APPELLATE PROCEEDINGS. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSI NG OFFICER IN HOLDING THAT THE SALE PRICE OF 1,27,00,000 SHARES O F SIEL TIZIT LTD. SOLD BY THE ASSESSEE, BE ADOPTED AT RS.10/- PER SHA RE, FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN, AS AGAINST THE SALE ACTUALLY MADE AT US$ 6,00,000 EQUIVALENT TO RS.25,74,000/-. 3.1 THAT THE CIT(A) OUGHT TO HAVE HELD THAT IN ABSE NCE OF ANY EVIDENCE WITH THE DEPARTMENT, INDICATING RECEIPT OF CONSIDERATION HIGHER THAN THAT STATED BY THE ASSESSEE, THE ASSESS EES CLAIM COULD NOT BE DISALLOWED ON SURMISES AND CONJECTURES. 4. THAT THE ORDER PASSED BY THE CIT(A) IS BAD IN LA W AND VOID AB-INITIO. 2. THE REVENUES GROUND OF APPEAL READS AS UNDER:- ITA NOS.3467 & 3444/D/2004 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW T HE BENEFIT OF INDEXATION WHILE WORKING OUT THE CAPITAL LOSS BECAU SE ONCE THE CIT(A) HAS ACCEPTED THAT THE TRANSACTION OF SALE OF SHARES OF SIEL TIZIT LTD. WAS ENTERED INTO BY THE ASSESSEE WITH TH E SOLE INTENTION OF BOOKING CAPITAL LOSS, THERE CANNOT BE ALLOWED A SUB STANTIAL BENEFIT ON ACCOUNT OF INDEXATION. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FIRST GRIEVANCE OF THE ASSESSEE RELATES TO DISALLOWANCE OF INTEREST EX PENDITURE. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO OBSERVED THAT THE ASSES SEE COMPANY HAD GIVEN LOANS AND ADVANCES TO SUBSIDIARY COMPANIES AMOUNTING TO R S.3831.97 LAKHS. THESE ADVANCES WERE TREATED BY THE AO AS DEPLOYMENT OF BO RROWED CAPITAL ON WHICH INTEREST WAS BEING PAID BY THE ASSESSEE COMPANY. T HE AO FOUND THAT OUT OF TOTAL ADVANCES GIVEN ONLY AMOUNT OF RS.1.12 CRORES HAS BE EN RECEIVED AS INTEREST FROM SUBSIDIARY COMPANY. FOR THE BALANCE AMOUNT OF ADVA NCE, THE AO TREATED THAT THESE DO NOT REPRESENT BUSINESS EXPEDIENCY THEREFOR E INTEREST ATTRIBUTABLE TO SUCH ADVANCE IS NOT ALLOWABLE AS BUSINESS EXPENDITURE. THE AO FOUND THAT AVERAGE INTEREST PAYABLE ON BORROWED CAPITAL WAS 15%, THERE FORE BY APPLYING THE SAME RATE OF INTEREST ON THE ADVANCE GIVEN FREE OF INTEREST, THE AO COMPUTED THE AMOUNT OF INTEREST TO BE DISALLOWED. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO. 4. AT THE OUTSET, LEARNED AR PLACED ON RECORD THE O RDER OF ITAT DATED 28.10.2003 IN ASSESSEES OWN CASE FOR AY 1998-99 WH EREIN SIMILAR ISSUE WAS DEALT BY THE TRIBUNAL. 5. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE COORDINATE BENCH WHEREIN IT WAS OBSERVED THAT NO DISALLOWANCE SHOULD BE MADE ON THE LOANS WHICH HAD BEEN ADVANCED IN EARLIER YEAR AND ON WHICH NO DISALLOWAN CE WAS MADE IN THE EARLIER YEAR ON SUCH ADVANCE ON ACCOUNT OF INTEREST FREE AD VANCES. SIMILAR ISSUE HAS ALSO ITA NOS.3467 & 3444/D/2004 4 TRAVELED BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1999-2000, WHEREIN VIDE ORDER DATED 20.4.2005 THE MATTER WAS RESTORED BACK TO THE FILE OF THE AO FOR DECIDING THE SAME AS PER THE DIRECTIONS GIVEN BY TH E TRIBUNAL IN AY 1998-99. FOLLOWING WAS THE OBSERVATION OF THE TRIBUNAL IN IT S ORDER DATED 28.10.2003 FOR THE AY 1998-99:- (IX) NO DISALLOWANCE SHOULD BE MADE WHEN MONEY HAD BEEN ADVANCED IN EARLIER YEAR AND NO ADDITION WAS MADE I N THE EARLIER YEARS ON SUCH ADVANCES ON ACCOUNT OF INTEREST FREE ADVANCES IN EARLIER YEARS. AS HELD IN THE CASE OF SRIDEVI ENTE RPRISES (SUPRA), IF NO ADDITION HAS BEEN MADE IN EARLIER YEARS, THEN THE O PENING BALANCE SHOULD NOT BE CONSIDERED IN THE YEAR IN QUESTION AN D THE INQUIRY IS TO BE LIMITED ONLY TO THE INCREASE IN THE YEAR IN QUES TION. THIS APPROACH WILL ALSO BE IN CONSONANCE WITH THE RULE OF CONSIST ENCY AND DEFINITENESS BECAUSE TO REVENUE CANNOT BE ALLOWED T O RE-EXAMINE THE NATURE OF ACCOUNTS MAINTAINED BY THE ASSESSEE A ND CONCLUDED ASSESSMENTS SHOULD NOT BE IGNORED WITHOUT ACTUALLY REOPENING THE ASSESSMENT. (XI) THE ENTIRE INTEREST FREE FUNDS INCLUDE OWNERS OWN CAPITAL ACCUMULATED PROFITS AND OTHER INTEREST FREE CREDITS AND LOANS. IF TOTAL INTEREST FREE ADVANCES INCLUDING DEBIT BALANCES OF PARTNERS DO NOT EXCEED THE TOTAL INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE, NO INTEREST IS DISALLOWABLE ON ACCOUNT OF UTILIZATION OF FUNDS FOR NON- BUSINESS PURPOSES AND IF IT EXCEEDS, THE PROPORTION ATE DISALLOWANCE CAN BE MADE. THIS VIEW IS SUPPORTED BY THE DECISIO N OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. TINGRI T EA CO.LTD. (SUPRA) AND ALSO BY THE DECISION OF TRIBUNAL AHMEDA BAD A BENCH IN THE CASE OF TORRENT FINANCIERS VS. ACIT (SUPRA). (B) THEN AT PGS 76 AND 77 CONCLUSIONS ARE AS UNDER: - FOR THE PARITY OF REASONS AND AS THE APPELLANT DID NOT GET EFFECTIVE OPPORTUNITY TO SUPPORT HIS CLAIM, THE MATTER OF ALL THE THREE DISALLOWANCES IS REMANDED BACK TO THE ASSESSING OFF ICER FOR TAKING A DECISION AFRESH WITH A DIRECTION TO FIND OUT WHETHE R THE BORROWED MONEYS OR PART OF IT HAVE BEEN UTILIZED FOR NON-BUS INESS PURPOSES AND WHAT IS THE QUANTUM THEREOF THAT IS ATTRIBUTABL E TO THE INVESTMENT IN SHARES OR ADVANCES MADE INTEREST FREE. HE SHALL ALSO PASS A SPEAKING ORDER AS TO HOW THE EXPLANATION OF THE APP ELLANT THAT SUCH INVESTMENT OR ADVANCES WERE MADE OUT TO INTEREST FR EE FUNDS ITA NOS.3467 & 3444/D/2004 5 AVAILABLE WITH THEM CANNOT BE ACCEPTED. HE SHALL H AVE REGARD TO THE RATIO LAID BY THE TRIBUNAL IN MEENAKSHI SYNTHETICS (P) LTD. SUPRA. HE SHALL HOWEVER, GIVE EFFECTIVE AND REASONABLE OPP ORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE RAISING ANY PRESUMPTIO N OR DRAWING ANY ADVERSE INFERENCE. THE ASSESSING OFFICER SHALL ALS O CONSIDER THE BOARDS CIRCULAR NO.11/2001 DATED 23.7.2001 IN RESP ECT OF INVESTMENT IN SHARES ETC. BEFORE ATTRACTING PROVISIONS OF SECT ION 14A OF THE I.T.ACT INSERTED BY THE FINANCE ACT 2002 W.E.F. 11. 5.2001 AND APPLICATION OF SUB SECTION 5 OF SECTION 115(O) OF T HE ACT BEFORE QUANTIFYING ANY DISALLOWANCE ON ACCOUNT OF INTEREST IF ANY. THE ASSESSEE SHALL COOPERATE. 6. IT WAS ALSO CONTENDED BY LEARNED AR THAT INVESTM ENT INTO EQUITY AND PREFERENTIAL SHARES CAPITAL OF JEW WAS MADE IN AY 1 998-99, NO FRESH INVESTMENT WAS MADE IN AY 1999-2000 AND 2000-01. ACCORDINGLY, AS PER LEARNED AR, ON THE LOANS AND ADVANCES GIVEN LAST IN AY 1999-2000 AND N O FRESH FUND WAS INTRODUCED IN AY 2000-01, SHOULD BE MADE IN TERMS OF DECISION OF COORDINATE BENCH IN ASSESSEES OWN CASE. 7. WITH REGARD TO LOAN TO M/S SFSLI, THERE WAS A FR ESH INTRODUCTION OF LOAN TO THE EXTENT OF RS.23 LAKHS DURING THIS YEAR. THE OP ENING BALANCE OF RS.1662.56 LAKHS WAS FOR EARLIER YEARS. IT WAS ALSO THE CONTE NTION OF THE LEARNED AR THAT AS REGARDS M/S SIEL TIZIT LTD. THERE WAS NO FRESH LOAN GIVEN DURING AY 2000-01 AND THAT OPENING BALANCE REMAINS TO BE THE SAME. 8. WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE TH ROUGH THE DECISIONS OF COORDINATE BENCH ON THE VERY SAME ISSUE AS DISCUSSE D ABOVE. RESPECTFULLY FOLLOWING THE SAME, WE RESTORE THIS GROUND RELATING TO DISALLOWANCE OF INTEREST, BACK TO THE FILE OF THE AO FOR DECIDING THE SAME IN TERMS OF OBSERVATION OF THE COORDINATE BENCH DISCUSSED HEREINABOVE. WE DIRECT ACCORDINGLY. 9. NEXT GRIEVANCE RELATES TO DISALLOWANCE OF PROVIS ION FOR EMPLOYEES LEAVE ENCASHMENT AMOUNTING TO RS.3,46,000/-. WE HAVE CON SIDERED THE RIVAL CONTENTIONS ITA NOS.3467 & 3444/D/2004 6 AND FOUND THAT PROVISION OF RS.49.25 LAKHS MADE BY THE ASSESSEE AS ON 31.3.2000 AS AGAINST PROVISION OF RS.45.79 LACS AS ON 31.3.19 99, AND SAME WAS SUPPORTED BY ACTUARIAL VALUATION REPORT. IN VIEW OF THE DECISIO N OF HON'BLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS 245 ITR 428, NO D ISALLOWANCE CAN BE MADE FOR LEAVE ENCASHMENT PAID ON THE BASIS OF ACTUAL VALUAT ION. AS THE ACTUARIAL VALUATION REPORT WAS FILED BEFORE THE AO AND THE CIT(A) HAD A LSO NOT CONSIDERED THE SAME, IN THE INTEREST OF JUSTICE, WE RESTORE THIS GROUND ALSO BACK TO AO FOR DECIDING AFRESH AFTER CONSIDERING THE ACTUARIAL VALUATION RE PORT IN THE LIGHT OF DECISION IN CASE OF SUPREME COURT DISCUSSED ABOVE. WE DIRECT A CCORDINGLY. 10. NEXT GRIEVANCE OF THE ASSESSEE RELATES TO CIT(A )S ACTION IN UPHOLDING THE AOS CONCLUSION THAT SALE PRICE OF RS.1,27,00,000/- SHARES OF SIEL TIZIT LTD. (IN SHORT STL) SHOWN BY THE ASSESSEE BE ADOPTED AT RS.1 0/- PER SHARE FOR THE PURPOSE OF COMPUTING CAPITAL GAIN. FACTS IN BRIEF ARE THAT THE ASSESSEE HAD CLAIMED RS.10.12 CRORES AS CAPITAL LOSS AND THE DIFFERENCE BETWEEN THE LOSS AND THE PROVISION OF DIMINUTION OF ASSETS AMOUNTING TO RS.0 .48 LAKHS IN THE P&L A/C. IN THE COMPUTATION OF INCOME LOSS ON SALE OF LONG TER M INVESTMENTS FOR SEPARATE CONSIDERATION UNDER THE HEAD CAPITAL GAINS WAS ADD ED TO THE PROFITS AT RS.10,15,47,952/-. AT THE SAME TIME PROVISION FOR DIMINUTION IN THE VALUE OF LONG TERM INVESTMENT OFFERED TO TAX IN EARLIER YEAR WAS REDUCED FROM THE PROFIT/LOSS AS PER THE P&L A/C AT RS.10,15,00,000/- . THROUGH NOTE 7 ATTACHED WITH THE COMPUTATION IT WAS MADE CLEAR THAT DURING THE Y EAR UNDER CONSIDERATION 127 LAKH SHARES WERE ACTUALLY SOLD AT A LOSS OF RS.1012 .60 LAKHS AND THAT THIS LOSS HAS BEEN ADDED BACK IN THE REGULAR COMPUTATION OF INCOM E, FOR SEPARATE CONSIDERATION UNDER THE HEAD CAPITAL GAINS. FURTHER FROM THE C OMPUTATION OF CAPITAL GAINS IT WAS SEEN THAT THE LOSS WAS INCURRED ON THE SALE OF 1,27,00,000/- WHICH WERE ACQUIRED AT RS.12,70,00,000/- IN THE YEAR 1996-97 A ND WERE SOLD AT RS.2,57,40,000/- IN THE F.Y. 1999-00. THE LOSS FOR THE PURPOSES OF CAPITAL GAINS ON THIS ACCOUNT COMES TO RS.13,62,37,049/- AFTER ALLOW ING INDEXING OF THE COST OF ACQUISITION OF RS.16,19,77,049/-. ITA NOS.3467 & 3444/D/2004 7 11. THE AO ALSO OBSERVED THAT NOTE 13 OF SCHEDULE 1 2 CONTAINING NOTES TO ACCOUNTS THAT THE COMPANY IS A JOINT VENTURE PARTN ER OF SIEL TIZIT LTD. WITH PLANSEE TIZIT (AUSTRIA) (IN SHORT PLANSEE) IN WHICH IT HAD A HOLDING OF 50% OF THE PAID UP EQUITY CAPITAL REPRESENTED BY 1,50,00,000 E QUITY SHARES OF RS.10 EACH AGGREGATING TO RS.1500 LAKHS. IN THE PREVIOUS YEAR S, THE COMPANY RENOUNCED ITS ENTITLEMENT TO SUBSCRIBE 30,00,000 EQUITY SHARES OF RS.10 EACH OF STL ON RIGHTS BASIS IN FAVOUR OF PLANSEE THEREBY REDUCING ITS HOL DING TO 41.7%. AS PER AGREEMENT DATED MARCH 31, 1999 ENTERED INTO BY THE ASSESSEE COMPANY WITH PLANSEE WHICH WAS EFFECTED DURING THE YEAR ON RECEI PT OF NECESSARY GOVERNMENT APPROVALS, THE COMPANY HAS RENOUNCED ITS ENTITLEMEN T TO SUBSCRIBE 41,66,667 EQUITY SHARES OF RS.10 EACH OF STL ON RIGHTS BASIS IN FAVOUR OF PLANSEE AND TRANSFERRED 1,27,00,000 EQUITY SHARES OF STL HELD B Y IT FOR A CONSIDERATION OF US$ 6,00,000. THIS AGREEMENT HAS FURTHER REDUCED THE COMPANYS H OLDING IN STL TO 5%. HOWEVER, AS PER THE SAID AGREEMENT, THE COMPANY HAS THE OPTION TO BUY-BACK SUCH NUMBERS OF SHARES WITHIN A PERIOD OF 36 MONTHS FROM THE DATE OF ACQUISITION OF SUCH SHARES BY PLANSEE AT A PRICE TO BE MUTUALLY AG REED BETWEEN IT AND PLANSEE WHICH WILL ENABLE THE COMPANY TO REACH IT AND PLANS EE WHICH WILL ENABLE THE COMPANY TO REACH ITS HOLDING UPTO 50% IN THE JOINT VENTURE. 12. QUESTIONS WITH RESPECT TO THE TWO TRANSACTIONS TAKEN CUMULATIVELY WERE POSED TO THE ASSESSEE. IN RESPONSE TO THE QUERY WH Y CAPITAL GAINS ARE NOT ATTRACTED IN REGARD TO RENUNCIATION OF RIGHTS THE ASSESSEE VI DE LETTER DATED 24 TH JAN, 2003 REPLIED THAT : (A) SIEL TIZIT WAS A JOINT VENTURE BETWEEN SIEL LTD . AND PLANSEE TIZIT OF AUSTRIA AND RIGHT FROM ITS INCEPTION IT REQUIRED IN FUSION OF FUNDS. ITA NOS.3467 & 3444/D/2004 8 (B) SIEL TIZIT OFFERED FOR SUBSCRIPTION TO SIEL LIM ITED 30 LAKH EQUITY SHARES OF RS.10 EACH ON RIGHTS BASIS FOR CASH AT PAR FOR F UNDING ITS REQUIREMENT. (C) THE OFFER WAS CONSIDERED BUT NOT TAKEN UP AND T HE SAME WAS RENOUNCED IN FAVOUR OF PLANSEE TIZIT BY RESERVING THE RIGHT T O BUY BACK WITHIN EIGHTEEN MONTHS AT MUTUALLY AGREED PRICES. (D) SIEL LTD. DID NOT RECEIVE ANY PREMIUM FROM M/S PLANSEE FOR RENOUNCING THE RIGHT IN THEIR FAVOUR. (E) IN F.Y. 1999-00 SIEL LTD. SOLD 1,27,00,000 SHAR ES AT A TOTAL CONSIDERATION OF RS.2,57,40,000/-. (F) THE TRANSACTION WAS APPROVED BY THE RBI. ITS A DIFFERENT MATTER THAT THE RBIS APPROVAL IS IN RESPECT OF REMITTANCE OF T HE AMOUNT. IN THE MATTER OF RENUNCIATION OF RIGHTS THE ASSESSE E VIDE LETTER DATED 26 TH FEB, 2003 REPLIED THE MAIN FEATURES. 13. AFTER CONSIDERING ASSESSEES REPLY, THE AO CONC LUDED THAT THE PRICE OF THE SHARES SOLD AT RS.2.2 PER SHARE BY WHICH THE ASSESS EE HAS INCURRED BOOK LOSSES OF RS.10.12 CRORES AND ACTUAL LOSS OF RS.13.62 CRORES IS NOT ACCEPTABLE BECAUSE OF THE FOLLOWING REASONS. (1) THERE WAS A CLOSE CONNECTION BETWEEN THE TWO JO INT VENTURE PARTNERS WHO SHARED BETWEEN THEMSELVES THE CONTROL OVER SHAR ES OF STL IN A RATIO. (2) DIFFERENT RATES WHEN THE RIGHTS WERE RENOUNCE D AT CASH AT PART THE SALES SHOULD HAVE BEEN MADE ALSO AT PAR. IF THE TWO PART IES CAN AGREE FOR THE BUYBACK AT MUTUALLY AGREED PRICES THEN THE PRICES A T WHICH THE SHARES WERE SOLD ALSO SEEM TO BE MUTUALLY AGREED UPON. IT IS ALSO A FACT THROUGH SELF CONCESSION BY THE ASSESSEE THAT RIGHTS WERE RENOUNCED WITHOUT ANY PRICE OR PAYMENT OF PREMIUM. IT IS MOR E THAN CLEAR THAT THIS ARRANGEMENT FINDS ECHO IN THE LOW PRICES BEING PAID FOR BY PLANSEE ON THE PURCHASE OF 1,27,00,000 SHARES FROM SIEL LTD. THE PREMIUM THE ITA NOS.3467 & 3444/D/2004 9 PRICES WHICH PLANSEE WOULD HAVE BEEN LIABLE TO PAY HAS BEEN BUILT INTO THE LOW COSTS IT HAS INCURRED ON THE PURCHASE OF SH ARES FROM ITS JV PARTNER. (3) THE DATES OF AGREEMENT I.E. 31.3.99 AND DATE OF VALUATION I.E. SIGNED ON 22 ND APRIL, 99 AND THE RBI APPROVAL RECEIVED VIDE LETTE R DATED 29 TH APRIL, 1999 PROVE THAT THIS WAS PART OF AN ARRANGEMENT. I T WAS ALREADY AGREED IN THE AGREEMENT WHICH WAS PLACED AS EVIDENCE (AS D ISCUSSED ABOVE) THAT PLANSEE WOULD BUY 127 LAKH SHARES HELD BY SIEL FOR US$ 6,00,000/-. THE VALUATION IS DATED APRIL, 1999. IT MORE THAN P ROVES THAT THE VALUATION WAS AN AFTERTHOUGHT AND ONLY A PLOY TO GE T RBIS APPROVAL FOR REMITTING THE AMOUNT OTHERWISE IT WAS NOT POSSIBLE FOR THE TWO JV PARTNERS TO ARRIVE AT THE VALUE OF $ US 6,00,000 BE FORE THE VALUATION. (4) IT IS FOR REASONS BEST KNOWN TO THE JV PARTNERS THAT WHERE THE NEED FOR GETTING THE VALUATION DONE WAS WHEN THE RATE WAS AL READY AVAILABLE. RIGHTS RENUNCIATION AND THE SALE OF SHARES WHICH HA VE BEEN DONE BY SIEL LTD. IN FAVOUR OF PLANSEE TIZIT HAS TAKEN PLACE IN SUCH SPAN OF TIME WHERE THE RATES COULD NOT HAVE VARIED MUCH. RIGHTS RENOUNCED AT RS.10 AT CASH AT PAR WAS THE IDEAL RATE WHICH WOULD HAVE FORMED THE BASIS OF SALE OF SHARES TO PLANSEE TIZIT. (5) THE FACT OF THE MATTER IS THAT THE ASSESSEE HAD RETAINED WITH HIM THE OPTION TO BUY BACK SHARES BUT THIS TIME AT PRICES M UTUALLY AGREED. IT IS ALSO CORROBORATED THAT IN THE VALUATION THAT THE SH ARES WERE HELD ONLY BY THE TWO JV PARTNERS AND THAT IT WAS NOT GUIDED BY M ARKET FORCES. (6) IT HAS BEEN DONE ON THE PRETEXT THAT SIEL TIZIT WAS IN NEED OF FUNDS. THE RATIONALE BEHIND INFUSING ADDITIONAL FUNDS AT LOW P RICES DEFIES LOGIC. IF THE COMPANYS FUND CRUNCH WAS TO BE MET BY THIS SAL E IT SHOULD HAVE BEEN DONE AT HIGHER PRICES OR AT LEAST AT PAR ON WH ICH THE RIGHTS HAVE BEEN RENOUNCED. (7) NO PREMIUM WAS RECEIVED FROM PLANSEE TIZIT. IT S LIKELY THE PREMIUM WAS BUILT INTO THE LOW PRICES WHICH WERE RECEIVED B Y SIEL LTD. ITA NOS.3467 & 3444/D/2004 10 (8) THROUGH THIS ARRANGEMENT THE ASSESSEE HAS BEEN ABLE TO PASS OFF CAPITAL LOSSES WITHOUT PARTING WITH ITS FUNDS. THE OPTION RETAINED FOR BUY BACK POINT TO A SCHEME WHICH WOULD BE EFFECTUATED LATER. 14. GOING BY THE ABOVE IT IS ESTABLISHED THAT THE A SSESSEE HAS USED THE MUTUALITY INVOLVED IN THE DEALINGS BETWEEN THE TWO JV PARTNER S TO SELL SHARES AT PRICES DELIBERATELY MADE LOWER THAN COMPARABLE PRICES AT W HICH THE RIGHTS RENUNCIATION WAS OFFERED. THE SALE SHOULD HAVE BEEN MADE AT RS. 10 PER SHARE AT WHICH THE RIGHTS WERE RENOUNCED. IF THIS WAS THE CASE THE AS SESSEE WOULD NOT HAVE INCURRED ANY LOSS ON THE SALE OF SHARES OF SIEL TIZIT LIMITE D TO PLANSEE TIZIT. IT HAS BEEN LAID BY THE HONOURABLE SUPREME COURT IN THE CASE OF MCDOWELL AND CO.LTD. VS. COMMERCIAL TAX OFFICER, 154 ITR 148 (1985), THAT IT IS FOR THE COURT TO EXPOSE THE REAL NATURE OF THE DEVICE ADAPTED BY THE TAX PAYER, WHETHER IT IS LEGITIMATE AVOIDANCE OF TAX OR EVASION OF TAX UNDER CLOUD OF A VOIDANCE. IT HAS BEEN FURTHER HELD THAT TAX PLANNING MAY BE LEGITIMATE PROVIDED I T IS WITHIN THE FRAMEWORK OF LAW. COLOURABLE DEVICES CANNOT BE PART OF TAX PLAN NING AND IT IS WRONG TO ENCOURAGE OR ENTERTAIN THE BELIEF THAT IT IS WRONG TO ENCOURAGE OR ENTERTAIN THE BELIEF THAT IT IS HONOURABLE TO AVOID THE PAYMENT O F TAX BY RESORTING TO DUBIOUS METHODS. IT IS THE OBLIGATION OF EVERY CITIZEN TO PAY THE TAXES HONESTLY WITHOUT RESORTING TO SUBTERFUGES. 15. GOING BY THE ABOVE THE PRICES AT WHICH 1,27,00, 000 SHARES OF SIEL TIZIT LTD. HAVE BEEN SOLD TO PLANSEE TIZIT AT $ US 6,00,000/- AT A PER SHARE RATE OF RS.2.2 IS NOT ACCEPTABLE. THE RATES APPLICABLE SHOULD BE CAS H AT PAR AT WHICH THE RIGHTS ENTITLEMENT HAVE BEEN RENOUNCED IN FAVOUR OF PLANSE E TIZIT. GOING BY THIS THE LOSSES BOOKED BY THE ASSESSEE ON THIS SALE IS NOT A CCEPTED. THE BOOK LOSSES BOOKED IN THE PROFIT AND LOSS ACCOUNT AMOUNTING TO RS.10.1 2 CRORES AND THE ACTUAL CAPITAL LOSSES OF RS.13.62 CRORES ARE DISALLOWED. ON THE S AME PRINCIPLES THE PROVISION OF DIMINUTION OF RESERVES TO THE EXTENT OF RS.10.15 CR ORES REMAINS UNUTILIZED. ITA NOS.3467 & 3444/D/2004 11 16. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACT ION OF THE AO, HOWEVER HE HAS DIRECTED THE AO TO GIVE BENEFIT OF INDEXATIO N WHILE WORKING OUT THE CAPITAL LOSS. AGGRIEVED BY THIS ORDER OF CIT(A), BOTH ASSE SSEE AND REVENUE ARE IN APPEAL BEFORE US. 17. IT WAS CONTENDED BY LEARNED AR THAT IN TERMS OF AN AGREEMENT WITH PLANSEE ENTERED ON 31.3.1999, WHEREIN IT WAS AGREED THAT PL ANSEE WOULD BUY 1,27,00,000 EQUITY SHARES OF STL FROM THE ASSESSEE FOR A CONSID ERATION OF US$ 6,00,000 FOR WHICH NECESSARY APPROVAL WAS RECEIVED FROM FIPB AND RBI, THE SHARES WERE SOLD TO PLANSEE AND THE SAME WERE VALUED BY M/S S.S.KOTH ARI & ASSOCIATES AT RS.2.02 PER SHARE, ACCORDINGLY THERE IS NO MERIT IN THE ACT ION OF THE LOWER AUTHORITIES FOR TREATING TRANSACTION OF SALE OF SHARE AT RS.2.02 PE R SHARE AS BOGUS AND THEREBY DISALLOWING THE GENUINE LOSS CLAIMED BY THE ASSESSE E. BY REFERRING TO THE DECISION OF K.P.VERGHESE 131 ITR 596 RENDERED BY HON'BLE S UPREME COURT, HE DRAWN OUR ATTENTION TO THE FOLLOWING OBSERVATION CONTAINED ON PAGE 616 OF THE REPORT:- WHAT IN FACT NEVER ACCRUED OR WAS NEVER RECEIVED C ANNOT BE COMPUTED AS CAPITAL GAINS U/S 48. IN CIT V. SMT.NA DINI NOPANY 230 ITR 679(CAL), THE ASSESSEE TRANSFERRED CERTAIN SHAR ES IN FAVOUR OF ANOTHER COMPANY ON A VALUE, WHICH WAS LESS THAN THE MARKET VALUE. IT WAS HELD THAT THE GENUINENESS OF THE TRANSACTION OF SALE AND PURCHASE WAS NOT DOUBTED, THAT IT WAS NOT A CASE OF ANY UNDERSTATEMENT OR MISSTATEMENT OF VALUE OF THE SHAR ES SOLD AND THERE WAS NO EVIDENCE DIRECT OR INFERENTIAL NOR WAS THERE ANY FINDING BY THE INCOME TAX AUTHORITY THAT THE ASSESSEE RECEIVED THE DIFFERENCE BETWEEN THE VALUE ON WHICH THE SHARES WERE TRANSFER RED AND THE MARKET VALUE. THE VALUE DISCLOSED WAS ACCEPTED. 18. IN TERMS OF THE RATIO LAID DOWN IN THE ABOVE DE CISION, LEARNED AR CONTENDED THAT THERE CANNOT BE TAX ON ANY NOTIONAL CAPITAL GA IN. HE FURTHER CONTENDED THAT THERE IS ANOTHER ASPECT OF THE MATTER OF COMPUTATIO N OF CAPITAL GAINS WHICH REVOLVES AROUND THE EXPRESSIONS FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF CAPITAL ASS ET APPEARING IN SECTION 48. WAY ITA NOS.3467 & 3444/D/2004 12 BACK IN CIT VS. GEORGE HENDERSON & CO.LTD. 66 ITR 6 22 (SC), IT WAS HELD THAT THE EXPRESSION FULL VALUE OF THE CONSIDERATION CA NNOT BE CONSTRUED AS HAVING REFERENCE TO THE MARKET VALUE OF THE ASSET TRANSFER RED BUT REFERS TO THE PRICE BARGAINED FOR BY THE PARTIES. THE COURT WENT ON TO HOLD THAT IT CAN HAVE NO REFERENCE TO THE ADEQUACY OR INADEQUACY OF THE PRIC E BARGAINED FOR. THE RATIO EMERGING FROM THE JUDGEMENT IS THAT THE FULL VALUE OF CONSIDERATION HAS NO REFERENCE TO THE MARKET VALUE, THAT IT HAS REFERENC E TO A PRICE BARGAINED BY THE PARTIES AND THE QUESTION OF ANY ADEQUACY OR INADEQU ACY OF THE PRICE BARGAINED FOR IS NOT PERMISSIBLE TO BE LOOKED INTO. THE JUDGEMEN T WAS APPLIED SUBSEQUENTLY IN THE CASE OF CIT V. GILLANDERS ARBUTHNOT & CO. 87 IT R 407 (SC). 19. LEARNED AR VEHEMENTLY ARGUED THAT AO WAS NOT JU STIFIED IN REJECTING THE PRICE BARGAIN FOR TWO PARTIES PARTICULARLY WHEN NOT HING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE PRICE ACTUALLY CHARGED WAS NOT THE ONE BARGAINED FOR. AS PER LEARNED AR, GENUINENESS OF THE TRANSACTION CANNOT B E DOUBTED IN VIEW OF THE APPROVAL GIVEN BY THE RBI FOR SALE OF 1,27,00,000 E QUITY SHARES, VIDE ITS LETTER DATED 6.6.1999, WHEREIN FOLLOWING WAS THE CONTENT O F THE RBI LETTER:- 2. WE ADVISE THAT WE HAVE NO OBJECTION TO SIEL LTD ., NEW DELHI (SL), THE RESIDENT SHAREHOLDERS SIEL TIZIT LTD., NE W DELHI (STL) TRANSFERRING 1,27,00,000 SHARES OF RS.10 EACH OF ST L IN FAVOUR OF TIZIT AKTIENGESELLSCHAFT, AUSTRIA (PLANSEE) FOR AN AGGREGATE CONSIDERATION OF US$ 600,000. 3. THIS PERMISSION MAY ALSO BE TREATED AS RESERVE B ANKS PERMISSION U/S 29(1)(B) OF FERA 1973 TO PLANSEE FOR ACQUIRING THE ABOVE SHARES STL FROM SL, THE ABOVE RESIDENT SHAREH OLDER OF STL. 4. THIS PERMISSION MAY ALSO BE TREATED AS OUR PERMI SSION TO STL UNDER SECTION 19(4) FOR EFFECTING CONSEQUENTIAL CHA NGES IN ITS REGISTER AND UNDER SECTION 19(1)(A) OF THE FERA 197 3 FOR THE EXPORT OF RELEVANT SHARE CERTIFICATES TO PLANSEE. 20. IN TERMS OF THE ABOVE LETTER OF THE RBI, LEARNE D AR CONTENDED THAT RBI NOT ONLY GAVE APPROVAL FOR THE TRANSFER OF THESE SHARES TO NON RESIDENT COMPANY BUT THE ITA NOS.3467 & 3444/D/2004 13 APPROVAL WAS ALSO GIVEN FOR THE QUANTIFICATION OF T HE CONSIDERATION FOR THE TRANSACTION AND THE CONSIDERATION TO BE REMITTED TH ROUGH NORMAL BANKING CHANNELS. AS PER LEARNED AR, ONE REASON GIVEN BY THE AO FOR D ISBELIEVING THE TRANSACTION IS CLOSE CONNECTION BETWEEN TWO J.V. PARTNERS. THIS OBSERVATION IS MISCONCEIVED BECAUSE THIS TRANSACTION HAD ITS APPROVAL FROM THE RESERVE BANK OF INDIA AND FIPB. IN ANY CASE WHERE THERE ARE ONLY TWO J.V. PA RTNERS A CONNECTION IS BOUND TO EXIST; NOTHING TURNS ON THIS OBSERVATION. HE FURTH ER CONTENDED THAT THE AO HAS NOT PROPERLY APPRECIATED THE FACT THAT THE TRUE TRANSAC TION I.E. TRANSACTION OF SALE OF THESE SHARES AT A PRICE BELOW PAR VIS--VIS THE TRA NSACTION OF RIGHT SHARES ISSUE AT PAR. AS PER LEARNED AR, THESE TWO TRANSACTIONS ARE TOTALLY DISTINCT FROM EACH OTHER AND ONE DOES NOT LIMIT SCOPE OF THE OTHER. AS PER LEARNED AR, WHILE THE ISSUE OF RIGHT SHARE INVOLVES INCREASE OF THE CAPITAL OF THE COMPANY, THE SALE OF THE EXISTING SHARES BY A SHAREHOLDER TO ANOTHER, ON THE OTHER HA ND, DOES NOT AFFECT THE SHARE CAPITAL. THE LATTER TRANSACTION IS BARGAINED BY TW O PERSONS UNDER WHICH SHARES ARE SOLD BY ONE SHAREHOLDER TO ANOTHER. IT IS NOT RELE VANT TO JUDGE THE PRICE BARGAINED FOR THE SALE OF EXISTING SHARES BY THE ISSUE PRICE OF A RIGHT SHARE. 21. LEARNED AR FURTHER CONTENDED THAT SECTION 79 OF THE COMPANIES ACT 1956 PROVIDES THAT THE COMPANY SHALL NOT ISSUE SHARES AT DISCOUNT EXCEPT AS PROVIDED BY THIS SAID SECTION. SUB-SECTION (2) PROVIDES THE EX CEPTIONS WHERE COMPANY CAN ISSUE SHARES AT DISCOUNT. OUR ATTENTION WAS DRAWN TO PAGES 738 TO 743 OF THE COMMENTARY ON COMPANY LAW BY A.RAMAIYA (AT PAGES 51 TO 56). IT HAS BEEN CLARIFIED IN THE COMMENTARY (AT PAGE 740) THAT THE FACT THAT MARKET QUOTATION IS BELOW PAR WOULD NOT JUSTIFY ISSUING SHARES AT DISCO UNT. SUB-SECTION (2) LIMIT ON THE DISCOUNT ON WHICH SHARES CAN BE ISSUED. THE RI GHT SHARES ISSUED AT PAR AT RS.10/- PER SHARE CANNOT HAVE ANY RATIONALE WITH TH E PRICE BARGAINED IN RESPECT OF SALE OF EXISTING SHARES BY THE ASSESSEE TO PLANSEE. ACCORDINGLY, THERE IS NO MERIT IN THE OBSERVATIONS OF THE ASSESSING OFFICER. ITA NOS.3467 & 3444/D/2004 14 22. ON THE OTHER HAND, LEARNED DR CONTENDED THAT TH ERE WAS A CLOSE CONNECTION WITH THE TWO JOINT VENTURE PARTNERS WHO SHARE BETWE EN THEMSELVES THE CONTROL OVER SHARES OF STL IN A RATIO. HE CONTENDED THAT WHEN T HE RIGHT ISSUE WAS RENOUNCED AT PAR, THE SALE PRICE OF THE PRESENT SHARE SHOULD HAV E BEEN MADE ALSO AT PAR. LEARNED DR DRAWN OUR ATTENTION TO THE RESPECTIVE DATE OF TH E AGREEMENT WHICH WAS SIGNED BY 22.4.1999 PROVIDING FOR PURCHASE OF 1,27,00,000 SHARES BY PLANSEE HELD BY THE ASSESSEE, FOR A CONSIDERATION OF 6,00,000 US$ VIS- -VIS VALUATION REPORT DATED APRIL, 1999. AS PER LEARNED DR, THIS VALUATION WAS AFTER THOUGHT AND ONLY PLOY TO GET RBIS APPROVAL FOR REMITTING THE AMOUNT, OTHERW ISE IT WAS NOT POSSIBLE FOR THE TWO JOINT VENTURE PARTNERS TO ARRIVE AT A VALUE OF 6,00,000 US$, BEFORE THE DATE OF VALUATION. HE FURTHER PLACED RELIANCE ON THE FINDI NGS RECORDED BY THE LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS ADVANCING RE ASONS FOR DISALLOWING THE CLAIM OF LOSS ON SALE OF SHARES. 23. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREF ULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT IN ITS COMPUTATION OF INCOME THE ASSESSEE HAS CLAIMED A LOSS OF RS.10.12 CRORES AS A CAPITAL LOSS. THROUGH NOTE 7 ATTACHED WITH THE COMPUTATION OF INC OME IT WAS MADE CLEAR THAT DURING THE YEAR UNDER CONSIDERATION, 1,27,00,000 SH ARES WERE ACTUALLY SOLD AT LOSS OF RS.10.12 CRORES, WHICH HAS BEEN ADDED BACK IN TH E REGULAR COMPUTATION OF INCOME FOR SEPARATE CONSIDERATION. ON THE PLEA THA T ASSESSEE HAS RENOUNCED RIGHT SHARE AT PAR IN FAVOUR OF PLANSEE, THE AO WAS OF TH E VIEW THAT TO CLAIM BOGUS LOSS THE ASSESSEE HAD SOLD ITS SHARE AT RS.2.02 PER SHAR E IN PLACE OF FACE VALUE OF RS.10. IN SUPPORT OF THE SALE CONSIDERATION OF RS.2.02 PER SHARE THE ASSESSEE HAD SUBMITTED AGREEMENT ENTERED INTO WITH STL, RBI APPR OVAL DULY MENTIONING THE PRICE AT WHICH SHARES ARE TRANSFERRED AS WELL AS VA LUATION REPORT. NO DEFECT WAS POINTED OUT BY THE AO EITHER IN THE AGREEMENT NOR I N THE VALUATION REPORT WHEREIN VALUE OF THE SHARE ON THE DATE OF TRANSACTION WAS D ETERMINED AT RS.2.02. NO MATERIAL WAS REFERRED BY THE AO TO REACH TO THE CON CLUSION AS TO WHY HE HAS NOT ACCEPTED THE VALUE AT WHICH THE SHARES WERE SOLD NO R ANY MATERIAL WAS BROUGHT ON ITA NOS.3467 & 3444/D/2004 15 RECORD TO INDICATE THAT ASSESSEE WAS IN RECEIPT OF SALE CONSIDERATION OVER AND ABOVE WHAT WAS STATED IN THE AGREEMENT. MERELY BECAUSE A SSESSEE HAS RENOUNCED THE RIGHT SHARES AT PAR WILL NOT MEAN THAT ASSESSEE HAS EARNED ANY INCOME OR PREMIUM ON SUCH RENOUNCEMENT. WHILE COMPUTING CAPITAL GAIN UNDER THE PROVISIONS OF SECTION 45 READ WITH SECTION 48 EXPRESSION FULL VA LUE OF CONSIDERATION RECEIVED OR ACCRUED AS A RESULT OF TRANSFER OF CAPITAL ASSET IS TO BE SEEN AND NOT THE VALUE ARRIVED AT BY THE AO. IN VIEW OF THE FACT THAT NO MATERIAL WAS FOUND INDICATING ANYTHING PAID OVER AND ABOVE THE SALE PRICE OF SHAR E AGREED IN THE AGREEMENT, KEEPING IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CELEBRATED JUDGMENT OF K.P.VERGHESE (SUPRA) WHEREIN IT WAS HEL D THAT ONUS LIES ON THE DEPARTMENT TO PROVE THAT SOME CONSIDERATION OVER AN D ABOVE THE CONSIDERATION STATED IN THE SALE DEED HAVE BEEN INVESTED, NO ADDI TION CAN BE MADE ON PRESUMPTIONS AND SUSPICIONS. IN THE LATEST CASE OF CIT VS. SHAKUNTALA DEVI (ITA NO.345/2007), HON'BLE DELHI HIGH COURT HELD IT MAY BE RELEVANT TO NOTE THAT A DIVISION BENCH OF THE COURT COMPRISING DR.ARIJIT PR ASAYATH AND JUSTICE D.K.JAIN, AS THEIR LORDSHIPS THEN WERE RETREATED THAT THERE MUST BE A FINDING OF THE REVENUE THAT THE ASSESSEE HAD RECEIVED AMOUNTS OVER AND ABOVE TH E CONSIDERATION STATED IN THE SALE DEED, FOLLOWING THE RATIO OF K.P.VERGHESE (SUP RA). K.P.VERGHESE (SUPRA) HAS ALSO BEEN FOLLOWED AND APPLIED BY THE SUPREME COURT IN CIT VS. GODAVARI CORPORATION LIMITED 200 ITR 567. THE DECISION IN C IT VS. MANOJ JAIN 287 ITR 285 IS ALSO TO THE SAME EFFECT. IN CIT VS. SHIVAKA MI COMPANY (P) LTD. 151 ITR 79(SC), THEIR LORDSHIPS HAVE ONCE AGAIN RETREATED T HAT ONUS WHETHER THE ASSESSEE HAD RECEIVED MORE CONSIDERATION THAN WHAT WAS STATE D IN THE DOCUMENTS OF TRANSFER, RESTED ON THE REVENUE AND IN THE ABSENCE OF THAT BURDEN HAVING BEEN BEING DISCHARGED, IT WOULD BE LEGALLY IMPERMISSIBLE TO MAKE ANY INFERENCES AGAINST THE ASSESSEE. THE EXPRESSION FULL VALUE OF CONSIDERATION CANNOT BE CONSTRUED AS HAVING REFERENCE TO THE MARKET VALUE O F THE ASSET TRANSFERRED BUT REFERS TO THE PRICE BARGAINED BY THE PARTIES. THIS PROPOSITION HAS BEEN LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF GEORGE HENDERSON & CO. (SUPRA). FURTHERMORE, THE LETTER ISSUED BY THE RBI CLEARLY M ENTIONS TRANSFER OF SHARE BY THE ITA NOS.3467 & 3444/D/2004 16 ASSESSEE COMPANY AS PER THE PRICE AGREED UPON BY TH E PARTIES CONCERNED. WHEN NOTHING WAS BROUGHT ON RECORD BY THE AO TO SHOW THA T PRICE ACTUALLY CHARGED WAS NOT THE BARGAINED FOR, THERE WAS NO REASON TO TAKE THE SALE PRICE OF THE SHARES AT RS.10 IN PLACE OF RS.2.02 AS BARGAINED BY THE PARTI ES CONCERNED. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE LOWER AU THORITIES FOR SUBSTITUTING THE PRICE BARGAINED BY THEM AND RECOMPUTING THE CAPITAL GAINS. 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED IN PART WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2009. SD/- SD/- (I.P.BANSAL) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30.09.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR