Cura Finstock Pvt.Ltd., Baroda V. The ACIT.,Circle-1(1), Baroda

ITA 3474/AHD/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50663 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 29-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Fair market value
• Section: 45(2); 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, B BENCH . . , , ! . ' . #$ , % ' ITA NO.3474/AHD/2010 [ASSTT. YEAR : 2004-2005] CURA FINSTOCK PVT. LTD. CRATIVE CASTLE, 70 SAMPATRAO COLONY PRODUCTIVITY ROAD, ALKAPURI BARODA. /VS. ACIT, CIR.1(1) BARODA. ( &' / APPELLANT) ( (#&' / RESPONDENT) )* + , ' / ASSESSEE BY : SHRI JAIMIN GANDHI % + , ' / REVENUE BY : SHRI SAMIR TEKRIWAL -. + */ / DATE OF HEARING : 2 ND SEPTEMBER, 2011 012 + */ / DATE OF PRONOUNCEMENT : 9 TH SEPTEMBER, 2011 '3 / O R D E R G.D. AGARWAL, VICE-PRESIDENT : THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I , BARODA DATED 6.10.2010 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER P ASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. THE ONLY GROUND RAISED IN THIS APPEAL BY THE ASS ESSEE READS AS UNDER: 1. THE LD.CIT(A) HAS GROSSLY CONFIRMING THE ACTION OF AO IN REDUCING THE BUSINESS LOSS CLAIMED BY THE APPELLANT ON SALE OF SHARES ITA NO.3474/AHD/2010 -2- BY TAKING THE SHARE VALUE AT RS.1.52 PER SHARE INST EAD RS.0.79 AT WHICH THE APPELLANT ENTERED INTO THE TRANSACTION. 3. THE FACTS OF THE CASE ARE THAT DURING THE YEAR U NDER CONSIDERATION, THE ASSESSEE SOLD 332942 SHARES OF MARKET CREATORS LTD. AT THE RATE OF RE.0.79/- PER SHARE ON 10-2-2004. THE AO NOTICED THAT THE PRICE OF THE SHARES AS PER BSE ON 9-2-2004 WAS RS.1.52 PER SHARE. HE THEREFORE RE-WO RKED THE LOSS CLAIMED BY THE ASSESSEE ON THE SALE OF SHARES AND REDUCED THE LOSS DISCLOSED BY THE ASSESSEE BY RS.2,43,048/-. THE SAME IS SUSTAINED BY THE CIT (A), HENCE THIS APPEAL BY THE ASSESSEE. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. WE FIND THAT THE IDENTICAL ISSUE IS CONSIDERED BY THE ITAT B BENCH, AHMEDABAD IN THE CASE OF ALLURE INVESTMENTS & FINAN CE PVT. LTD. VS. ACIT, 341/AHD/2010 DATED 5-8-2011 WHEREIN THE SHARES OF T HE SAME COMPANY I.E. MARKET CREATORS WERE SOLD BY THE ASSESSEE ON THE SA ME DATE I.E. 10-2-2004 AT THE RATE OF RE.0.26PER SHARE. THE AO RE-WORKED THE LOSS APPLYING THE SALE RATE OF RS.1.52 PER SHARE AS PER THE QUOTATION OF BSE ON 9-2-2004. HOWEVER, THE ITAT ACCEPTED THE ASSESSEES CONTENTION WITH THE FO LLOWING FINDINGS: 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERU SED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE A UTHORITIES BELOW AS WELL AS THE JUDGMENTS CITED BY BOTH THE SIDES. WE F IND THAT AS PER SECTION 48, CAPITAL GAIN HAS TO BE WORKED OUT AFTER REDUCIN G THE COST OF ACQUISITION OF CAPITAL ASSET ALONG WITH COST OF IMP ROVEMENT THERETO AND THE EXPENSES INCURRED ON TRANSFER OF A CAPITAL ASSE T FROM FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T HE TRANSFER OF THE CAPITAL ASSET. THERE IS NO REFERENCE TO THE MARKET VALUE OF THE CAPITAL ASSET TRANSFERRED IN SECTION 48 OR IN ANY OTHER SEC TION EXCEPT SECTION 50C, WHICH IS APPLICABLE ONLY IN CASE OF SALE OF LA NDED PROPERTY. IN THE CASE OF JUDGMENT OF HONBLE GUJARAT HIGH COURT REND ERED IN THE CASE OF CIT VS. SHRI GIRISH DAMJIBHAI PATEL (SUPRA), HONBL E GUJARAT HIGH COURT HAS ALSO REFERRED TO THE SAME PROVISIONS OF S ECTION 48 AND ON THE BASIS OF SAME SECTION 48 OF THE ACT, IT WAS HELD TH AT SINCE SECTION 48 OF THE ACT DOES NOT HAVE ANY REFERENCE TO THE MARKET V ALUE BUT ONLY TO THE CONSIDERATION REFERRED TO IN THE SALE DEED, THERE I S NO ERROR IN THE ULTIMATE CONCLUSION ARRIVED AT BY THE CIT(A) AS WEL L AS BY THE TRIBUNAL ITA NO.3474/AHD/2010 -3- IN THAT CASE. HENCE, RATIO OF THIS DECISION OF HON BLE GUJARAT HIGH COURT IS THIS THAT FOR THE PURPOSE OF WORKING OUT C APITAL GAIN, THE SALE CONSIDERATION RECEIVED BY THE ASSESSEE OR ACCRUED S ALE CONSIDERATION HAS TO BE ADOPTED BECAUSE THERE IS NO REFERENCE IN SECTION 48 TO THE MARKET VALUE OF THE ASSET FOR THE PURPOSE OF COMPUT ING THE CAPITAL GAIN.. REGARDING THIS CONTENTION THAT THE ASSET IN THE PRE SENT CASE IS QUOTED SHARES AND NOT LANDED PROPERTY AS IN THE CASE OF DE CISION OF BOMBAY HIGH COURT OR SHARES OF PRIVATE LTD. CO., AS IN THE CASE OF ITAT ORDER CITED SUPRA, WE ARE OF THE CONSIDERED OPINION THAT IT DOES NOT HAVE ANY IMPACT ON THE RATIO OF THE JUDGMENT AND THE LEGAL P OSITION. LEGAL POSITION REMAINS THE SAME IRRESPECTIVE OF THE TYPE OF CAPITAL ASSET AND HENCE, WE DO NOT FIND ANY MERIT IN THIS CONTENTION OF THE LD. D.R. OF THE REVENUE THAT THIS JUDGMENT OF HONBLE GUJARAT HIGH COURT IS NOT APPLICABLE IN THIS CASE BECAUSE ASSETS IN THAT WAS LANDED PROPERTY WHEREAS IN PRESENT CASE, IT IS QUOTED SHARE. AS PER THE RATIO LAID DOWN BY HONBLE GUJARAT HIGH COURT, CAPITAL GAIN HAS TO BE COMPUTED ON THE BASIS OF CONSIDERATION ACCRUING OR RECEIVED FOR TRA NSFER OF CAPITAL ASSET AND FOR THAT PURPOSE, NO REFERENCE IS REQUIRED TO B E MADE TO THE MARKET VALUE OF THE ASSET IN QUESTION BECAUSE THERE IS NO PROVISION IN SECTION 48 OF THE ACT. IN THAT JUDGMENT, REFERENCE HAS BEEN MA DE TO SECTION 45(2) ALSO WHERE IT IS SPECIFIED THAT MARKET VALUE OF THE ASSET IN QUESTION HAS TO BE CONSIDERED WHERE THERE IS CONVERSION BY THE O WNER OF THE CAPITAL ASSET INTO STOCK IN TRADE BUT IT WAS HELD THAT PROV ISION OF SECTION 45(2) ARE NOT APPLICABLE IN THE CASE OF SALE OF CAPITAL A SSET AND THE SAME IS APPLICABLE WHERE THERE IS CONVERSION OF CAPITAL ASS ET INTO STOCK IN TRADE. IT WAS NOTED BY HONBLE GUJARAT HIGH COURT IN PARAG RAPH 19 THAT COUNSEL FOR THE REVENUE WAS UNABLE TO POINT OUT ANY OTHER PROVISION IN WHICH IN A SITUATION LIKE THE PRESENT CASE, THE ASS ESSING OFFICER COULD HAVE MADE A REFERENCE TO A VALUER FOR ASCERTAINING THE FAIR MARKET VALUE OF THE ASSETS IN QUESTION AS ON THE DATE OF ITS TRA NSFER IN THE PRESENT CASE ALSO, NO PROVISION IN THE INCOME TAX ACT HAS BEEN B ROUGHT TO OUR NOTICE AS PER WHICH, MARKET VALUE CAN BE CONSIDERED FOR TH E PURPOSE OF COMPUTATION OF CAPITAL GAIN. REGARDING THE RELIANCE PLACED BY LD. D.R. OF THE REVENUE ON THE JUDGMENT OF HONBLE APEX COUR T RENDERED IN THE CASE OF MCDOWELL & CO. LTD. VS. C.T.O. (SUPRA), WE FIND THAT IN THAT CASE, THE ISSUE INVOLVED WAS REGARDING LEGAL TAX PL ANNING OR TAX AVOIDANCE. IN THE PRESENT CASE, WE FIND THAT EVEN A FTER ADDITION MADE BY THE A.O. OF RS.4,19,504/-, THE LOSS ASSESSED BY THE A.O. IS OF RS.28,23,396/-. THE FACTS OF THE PRESENT CASE DOES NOT INDICATE THAT THERE WAS ANY CASE OF WILFUL TAX AVOIDANCE OR TAX EVASION . HENCE, IN OUR CONSIDERED OPINION, THE JUDGMENT OF HONBLE APEX CO URT RENDERED IN THE CASE OF MCDOWELL & CO. LTD. VS. C.T.O. (SUPRA) HAS NO RELEVANCE IN THE PRESENT CASE BECAUSE WE FIND THAT IN THE PRESENT CA SE, THE REASONS ARE ALSO GIVEN FOR ADOPTING LOWER PRICE OF RS.0.26 PER SHARE AS AGAINST THE QUOTATION AT BOMBAY STOCK EXCHANGE OF RS. 1.52 PER SHARE. IT IS ITA NO.3474/AHD/2010 -4- SUBMITTED THAT THE ASSESSEE COMPANY HAS SOLD THE SH ARES IN PHYSICAL FORM TO THE RELATED PARTY WHEREAS THE SHARES TRADED AT BOMBAY STOCK EXCHANGE WERE DEMAT SHARES AND IF THE ASSESSEE WANT S TO SALE THE SHARES AT A STOCK EXCHANGE, IT HAS GOT THE SHARES DEMATERI ALIZED WHICH WILL REQUIRE TIME AND WILL ALSO HAVE ITS COST AND MOREOV ER, THE QUANTITY OF SHARES TRADED IN THE STOCK EXCHANGE IN VARIOUS MONT HS OF THE FINANCIAL YEAR AT VARIOUS DATES IN THE MONTH OF MARCH,2004 OR IN FEBRUARY,2004 WAS 100 SHARES ON SOME DATES, 200 SHARES ON SOME DA TES, 300 SHARES ON SOME DATES AND 1100 SHARES ON ONE DATE ONLY WHEREAS THE QUANTITY OF SHARES SOLD BY THE ASSESSEE IS 3,32,940 SHARES. IT WAS SUBMITTED THAT IT CANNOT BE SAID THAT THE PRICE CHARGED BY THE ASSESS EE WAS UNREASONABLY LOW IN THE FACTS OF THE PRESENT CASE. 8. CONSIDERING THE FACTS OF THE PRESENT CASE IN ITS ENTIRETY AS DISCUSSED ABOVE AND BY RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. GIRISH D AMJIBHAI PATEL (SUPRA), WE ARE OF THE CONSIDERED OPINION THAT FOR THE COMPUTATION OF CAPITAL GAIN IN THE PRESENT CASE, THE A.O. SHALL WO RK OUT THE CAPITAL GAIN/CAPITAL LOSS ON THE BASIS OF CONSIDERATION REC EIVED BY THE ASSESSEE AND NOT ON THE BASIS OF ALLEGED MARKET VALUE OF THE SHARES SOLD BY THE ASSESSEE. WE DIRECT THE A.O. ACCORDINGLY. ADMITTEDLY, THE FACTS OF THE ASSESSEES CASE ARE ID ENTICAL BECAUSE THE ASSESSEE HAS SOLD THE SHARES OF THE SAME COMPANY ON THE SAME DATE AND IN FACT AT A BETTER PRICE THAN THE ALLURE INVESTMENTS AND FINANCE PVT. LTD. THE ASSESSEE SOLD THE SHARES AT RE.0.79 PER SHARE WHILE ALLURE INVESTMENT S & FINANCE PVT. LTD. HAD SOLD THE SHARES AT RE.0.26 WHICH WAS HELD TO BE REA SONABLE BY THE ITAT. IN VIEW OF THE ABOVE, WE RESPECTFULLY FOLLOWING THE AB OVE DECISION OF THE ITAT DIRECT THE AO TO ACCEPT THE LOSS AS DISCLOSED BY TH E ASSESSEE. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( . .. .' '' ' . .. .#$ #$ #$ #$ /D.K. TYAGI) % % % % /JUDICIAL MEMBER ( . .. . . .. . G.D. AGARWAL) /VICE-PRESIDENT