ITO 6(1)(3), MUMBAI V. BLUE NILES HOLDINGS LTD, MUMBAI

ITA 4098/MUM/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8175 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 22-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREMANAND
• Keywords: Sale consideration of property below Jantri Value; Cost of acquisition; Fair market value
• Section: 143(3); 50C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA , A M & SHRI AMIT SHUKLA , J M ITA NO. 4 0 98 / MUM/20 1 3 ( ASSESSMENT YEAR : 200 9 - 10 ) ITO - 6(1)(3), MUMBAI VS. M/S BLUE NILES HOLDINGS LTD., 463, CEAT MAHAL, DR. A.B. ROAD, WORLI, MUMBAI - 40 030 PAN/GIR NO. : A A A C B 1881 B ( APPELL ANT ) .. ( RESPONDENT ) /REVENUE BY : SHRI PREMANAND /ASSESSEE BY : SHRI RONAK DOSHI DATE OF HEARING : 10 TH SEPT. 201 4 DATE OF PRONOUNCEMENT : 19 TH SEPT , 2 01 4 O R D E R PER R.C.SHARMA ( A .M.) : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER CIT(A ) , DATED 22 - 2 - 2013 FOR ASSESSMENT YEAR 200 9 - 10 , IN THE MATTER OF ORDER PASSED U/S. 143(3) OF THE I.T. ACT. 2. RIVAL CONTENTIONS HAVE BEEN H EARD AND RECORD PERUSED. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD CONVERTED ALL THE SECURITIES HELD BY IT AS STOCK - IN - TRADE, INTO INVESTMENTS. THE ASSESSEE SOLD 5,52,632 UNLISTED EQUITY SHARES OF OFFSHORE INDIA LIMITED (OIL) AT A TOTAL SALE CONSIDER ATION OF RS. 27,63,155/ - . THIS ENTIRE LOT OF SHARES HAD A COST OF ACQUISITION OF ONLY RS.2/ - . THUS, SHORT TERM CAPITAL GAIN WAS COMPUTED BY THE ASSESSEE AS UNDER: ITA NO. 4 0 98 /1 3 2 COMPANY NAME NO. OF SHARES COST OF ACQUISITION SALE CONSIDERATION SHORT TERM CAPITAL GAINS RS. OFFSHORE INDIA LTD. (OIL) 5,52,632 2 27,63,155 27,63,153 HOWEVER, T HE AO DID NOT AGREE WITH THE ABOVE COMPUTATION OF SHORT - TERM CAPITAL GAIN AS CLAIMED BY THE APPELLANT. THE AO COMPUTED CAPITAL GAIN BY TAKING NOTIONAL SALE CONSIDERATION OF SHARE AT RS.21.54 PER SHARE TERMING IT AS THE FAIR MARKET VALUE OF THE SHARES. THE SAID FAIR MARKET VALUE WAS AR RIVED AT BY US ING THE FORMULA AS IS PRESCRIBED UNDER RULE 11 UA OF THE RULES WHICH APPLIES TO TRANSACTIONS. THUS, THE AO COMPUTED NOTIONAL CAPITAL GA IN ON SALE OF THESE 5,52,632 SHARES IN THE FOLLOWING MANNER: COMPANY NAME NO. OF SHARES COST OF ACQUISITION PRICE RECEIVED OF FMV, WHICHEVER IS HIGHER RS. SHORT TERM CAPITAL GAINS RS. OIL 5,52,632 2 1,19,03,693 1,19,03,691 ACCORDINGLY AN ADDITION OF R S. 91,40,540/ - WAS MADE UNDER THE HEAD SHORT TERM CAPITAL GAINS. 3 . BY THE IMPUGNED ORDER, THE CIT(A) DELETED ADDITION SO MADE BY THE AO WHILE COMPUTING THE SHORT TERM CAPITAL GAIN AFTER HAVING THE FOLLOWING OBSERVATIONS : - 4.7 I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF THE APPELLANT AND AGREE WITH THE SAME. THERE IS NO PROVISION IN THE ACT WHICH ALLOWS THE AO TO SUBSTITUTE FAIR MARKET VALUE OF SHARES IN PLACE OF ACTUAL CONSIDERATION RECEIVED ON SALE OF SHARES BY THE APPELLANT. VARIOUS DECISIONS CITED BY T HE APPELLANT IN THIS REGARD, SUPPORT THIS VIEW. THERE IS NO CONCEPT OF ANY NOTIONAL CAPITAL GAIN EXCEPT FOR THE ONLY PROVISION OF SECTION 50C OF THE ACT, WHICH IS APPLICABLE TO IMMOVABLE PROPERTY. HENCE, IN MY VIEW, THE AO WAS NOT JUSTIFIED IN TAKING THE F AIR MARKET VALUE OF THE SHARES SOLD IN PLACE OF ACTUAL SALE CONSIDERATION RECEIVED BY THE APPELLANT FOR THE PURPOSE OF ITA NO. 4 0 98 /1 3 3 COMPUTATION OF CAPITAL GAIN. THE CASE LAWS CITED BY THE APPELLANT ALSO SUPPORT THIS VIEW. THE ADDITION MADE BY THE AO IS HEREBY DELETED. 4 . WE HAVE CONSIDERED RIVAL CONTENTIONS, GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT ASSESSEE HAD RECEIVED RS.27,63, 155/ AS A SALE CONSIDERATION TOWARDS TRANSFER OF 5,52,632 SHARES OF OIL. THE CONSIDERATION SO RECEIV ED WAS REDUCED BY THE COST OF ACQUISITION OF THE SHARES AND THE RESULTING SHORT - TERM CAPITAL GAIN OF RS.27,63,153/ - WAS OFFERED TO TAX. HOWEVER, AO HAS TAKEN FAIR - MARKET VALUE OF SHARES IN PLACE OF ACTUAL PRICE RECEIVED BY ASSESSEE FOR DETERMINING THE CAPI TAL GAINS. IT IS A SETTLED LAW THAT CAPITAL GAINS ON SALE OF SHARES CANNOT BE COMPUTED BY TAKING FAIR MARKET VALUE OF SHARES BY IGNORING THE ACTUAL SALE CONSIDERATION RECEIVED BY THE ASSESSEE UNLESS THERE IS ANY COGENT REASON. THE AO HAS NOT DISCUSSED ANY REASON FOR IGNORING ACTUAL SALE CONSIDERATION RECEIVED BY ASSESSEE. IT IS ALSO NOT THE CASE OF AO THAT TRANSACTION OF SALE HAS BEEN EFFECTED WITH ANY RELATIVE OR ASSOCIATE CONCERN. H ENCE, THE ACTUAL SALE CONSIDERATION SHOULD BE CONSIDERED AS FULL VALUE OF CO NSIDERATION FOR COMPUTING THE CAPITAL GAINS. THE EXPRESSION 'FULL VALUE OF CONSIDERATION' CANNOT BE CONSTRUED AS THE FAIR MARKET VALUE AND IT REPRESENTS THE SALE PRICE ACTUALLY PAID BY THE BUYER OF AN ASSET TO THE SELLER. AS NOTHING WAS BROUGHT ON RECORD BY THE AO TO IGNORE THE ACTUAL SELLING PRICE RECEIVED BY THE ASSESSEE , T HERE IS N O JUSTIFICATION FOR ADDITION MADE BY THE AO. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE ADDITION SO MADE AFTER RECORDING THE FINDING AT PARA 4.7 OF HIS APPELLATE ORDER, WHICH HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT. ITA NO. 4 0 98 /1 3 4 5 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 /09/ 201 4 . /09/ 2014 SD/ - SD/ - ( ) ( AMIT SHUKLA ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER M UMBAI ; DATED 19 /09 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CI T 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//