THE DCIT 5(1), MUMBAI V. M/S. ATLAS EQUIFIN P. LTD, MUMBAI

ITA 4879/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1703 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-01-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 31-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMANT LAL
• Assessee Lawyers: RA JEEV WAGLAY
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A : MUMBAI BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI B. RAMAKOT AIAH,(AM) ITA NO.4879/MUM/2008 ASSESSMENT YEAR : 2001-02 DY. COMMISSIONER OF INCOME TAX -5(1) ROOM NO.568/525 AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. ..( APPELLANT ) VS. M/S. ATLAS EQUIFIN PVT. LTD. 14, NEW SURYA KIRAN BUILDING PANGULLY, AUGUST KRANTI MARG MUMBAI-400 036. ..( RESPONDENT ) P.A. NO. (AACCA 7723 P) APPELLANT BY : SHRI HEMANT LAL RESPONDENT BY : SHRI RA JEEV WAGLAY O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 1.5.2008 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2001-02. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS AS AN INVESTMENT COMPANY. THE R ETURN WAS FILED DECLARING AN INCOME OF RS.1,33,29,97,218/-. HOWEV ER, THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.1,33,64,94,110/ - VIDE ITA NO.4879/M/08 A.Y:01-02 2 ORDER DATED 17.3.2004 PASSED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). ON APPEAL THE LD. CIT(A) HAD DIRECTED TH E ASSESSING OFFICER TO TREAT THE PROFIT AND LOSS OF SHARES AS LONG TERM CAPI TAL GAIN. HOWEVER, WHILE GIVING APPEAL EFFECT, THE ASSESSING OFFICE R ALLOWED EXPENDITURE INCURRED FOR ADVISING AND ARRANGEMENT FO R DIS-INVESTMENT OF SHARES TO THE TUNE OF RS.7,94,25,675/- AS DEDUCTION. SUBSEQUENTLY ON EXAMINATION OF RECORDS IT WAS FOUND THAT THE SAID DE DUCTION ALLOWED BY THE ASSESSING OFFICER APPEARS TO BE NOT CORRECT. ACCORDI NGLY ACTION U/S.263 OF THE ACT WAS INITIATED. THE LD. CIT AFTER HE ARING THE ASSESSEE WAS OF THE VIEW THAT THE ORDER PASSED BY THE ASSESSING OFFICER IN ALLOWING THE EXPENDITURE INCURRED FOR ADVISING AND A RRANGEMENT FOR DIS-INVESTMENT OF SHARES AMOUNTING TO RS.7,94,25,675/- AS DEDUCTION WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE AND ACCORDINGLY HE SET ASIDE THE SAID ORDER TO THE FILE OF T HE ASSESSING OFFICER TO PASS FRESH ORDER AFTER HEARING THE ASSESSEE. P URSUANT TO THE ORDER OF THE LD. CIT, THE ASSESSING OFFICER CALLED FOR CE RTAIN DETAILS AND THE ASSESSEE WAS ALSO ASKED AS TO WHY THE ENTIRE EXPENSES O N ACCOUNT OF TRANSFER OF 10,00,000 SHARES OF SET INDIA LTD. HAVE BEEN CLAIMED EVEN THOUGH ONLY 209153 SHARES HAVE BEEN SOLD AND WHY NOT THE EXPENDITURE IF ANY ALLOWABLE FOR SUCH SERVICES WAS TO BE ALLOWED ON PROPORTIONATE BASIS FOR SELLING OF 209153 SHARES. IN RE PLY, IT WAS ITA NO.4879/M/08 A.Y:01-02 3 SUBMITTED BY THE ASSESSEE THAT (EXTRACTED FROM PAGE-4 O F ASSESSMENT ORDER ): YOU HAVE MENTIONED THAT OUR CLIENT COMPANY APPOINTED SSKI TO SALE 10,00,000 SHARES OF SET. WE ARE NOT AWARE FROM WHERE DID YOU GOT THIS IDEA. OUT CL IENT COMPANY WAS HOLDING IN ALL 10,00,000 SHARES IN SET WHICH IS A JOINT VENTURE BETWEEN THEM AND SONY PICT URE ENTERTAINMENT AND THEY WANTED TO SALE ONLY SOME PAR T OF IT. AFTER SELLING 209153 SHARES IN A.Y. UNDER REFER ENCE, THE REMAINING SHARES ARE HELD BY OUR CLIENT COMPANY TILL TODAY. IT IS ALSO CLEAR FROM LETTER OF SSKI THAT T HEY WILL BE PAID SUCCESS FEES AT THE RATE OF 5.47% OF TOTAL VAL UE OF SHARES PLACED WITH FII. THE FEE PAID BY OUR CLIENT COMPANY IS 5.47% OF THE AMOUNTS RECEIVED AS AND BY WAY OF SALE CONSIDERATION. THE QUESTION, THEREFORE, OF DISALLOWING ANY PROPORTIONATE EXPENDITURE DOES NOT ARISE. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT ONLY P ROPORTIONAL EXPENSES ON SALE OF 209153 SHARES ARE ALLOWABLE AS DEDUCTI ON. ACCORDINGLY PROPORTIONAL EXPENSES ON SALE OF 209153 SHARE S WORKED OUT TO RS.1,66,12,118/- WAS ALLOWED AND BALANCE OF RS.6 ,28,13,556/- WAS CONSIDERED TO BE ALLOCABLE FOR REMAINING UNSOLD SHARE S AND HENCE ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE AND ACCORDIN GLY COMPLETED THE ASSESSMENT AT AN INCOME OF RS.1,39,58,10,770 /- VIDE ORDER DATED 27.12.2007 PASSED U/S.143(3) R.W.S. 263 OF THE ACT. 3. ON APPEAL THE LD. CIT(A), WHILE OBSERVING THAT TH ERE IS NO JUSTIFICATION IN MAKING ANY DISALLOWANCE OUT OF THE FEE S PAID @ RS.5.47% OF THE TOTAL SALE CONSIDERATION WITH RESPECT TO 209153 SHARES ONLY THAT HAVE BEEN SOLD DURING THE YEAR AND THE SUSP ICION OF THE ITA NO.4879/M/08 A.Y:01-02 4 ASSESSING OFFICER THAT THIS FEES MIGHT HAVE BEEN FOR THE TRANSFER OF TOTAL SHARES OF RS.10.00 LACS IS UNFOUNDED, DELETED TH E ADDITION MADE BY THE ASSESSING OFFICER. 4. BEING AGGRIEVED BY THE ORDER OF THE CIT(A) THE R EVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUNDS OF APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE LD. CIT(A) HAS ERRED IN NO T ALLOWING PROPORTIONATE EXPENSES TOWARDS ENTIRE FEES PAID TO SSKI FOR TRANSFER OF 209153 SHARES RATHER THAN CONSIDERING THE ENTIRE EXPENSES OF RS.7,94,25,675/- FOR TRANSFER OF 10 LAKH SHARES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE LD. CIT(A) HAS ERRED IN NO T APPRECIATING THE FACT THAT DOCUMENTS SUBMITTED BY S SKI DID NOT SPEAK AS TO WHETHER THE CONSIDERATION HAVE BEEN RECEIVED FOR 10 LAKH SHARES OR FOR 209153 SHARES. 5. AT THE TIME OF HEARING THE LD. DR SUBMITS THAT FOR THE REASONS AS DISCUSSED IN ASSESSMENT ORDER, THE LD. CIT(A) WAS NOT JUS TIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. HE THEREFORE, SUBMITS THAT THE ADDITION MADE BY THE ASSESSING OFFICER BE RESTORED. 6. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE WH ILE RELYING ON THE ORDER OF THE LD. CIT(A) FURTHER SUBMITS THAT I N TERMS OF LETTER DATED 10.7.2000 APPEARING AT PAGE-4 OF THE ASSESSEE'S PA PER BOOK WHEREIN IT WAS STATED BY SSKI CORPORATE FINANCE LTD. THAT THEY WILL CHARGE A SUCCESS FEE @ 5.47% OF THE TOTAL VALUE OF SHARES PLACED WITH THE FOREIGN INSTITUTIONAL INVESTORS, THE ASSESSEE HAS PAID AN AMOUNT OF ITA NO.4879/M/08 A.Y:01-02 5 RS.7,94,25,625/- INCLUDING SERVICE TAX BEING 5.47% OF T OTAL SALE CONSIDERATION RECEIVED RS.1,40,97,29,405/- AND IN SUPPOR T THE COPIES OF DEBIT NOTES DATED 27.6.2000 AND 15.9.2000 ARE ALSO PLACED ON RECORD APPEARING AT PAGE-5 AND 6 OF ASSESSEE'S PAPER BOO K. HE FURTHER SUBMITS THAT THE CONSIDERATION OF RS.1,40,97,29 ,405/- WAS RECEIVED FOR 209153 SHARES ONLY AND HENCE, THERE WAS NO QUESTION OF PROPORTIONAL DISALLOWANCE BY ASSUMING THAT THE SUCCESS FEE WAS FOR RS.10.00 LAC SHARES. HE FURTHER SUBMITS THAT THE BALANCE SH EET FOR THE YEAR ENDED 31.3.2001 CLEARLY REFLECTS BALANCE OF RS.7,90 ,847/- SHARES OF SET INDIA PVT. LTD. WHICH PROVES BEYOND DOUBT THAT ONLY 209153 SHARES OF SET INDIA PVT. LTD. WERE SOLD AND IN SUPPORT THE REFERENCE WAS ALSO MADE TO THE COPY OF BALANCE SHEET APPEARING AT PAGE-7 TO 10 OF ASSESSEE'S PAPER BOOK. HE, THEREFORE, SUBMITS THAT THE ADDITION MADE BY THE ASSESSING OFFICER WAS RIGHTLY DELETED BY THE LD. CIT(A) AND THEREFORE, HIS ORDER BE UPHELD. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS RECEIVED CONSIDERATION OF RS.1,40,97,29,405/- ON SALE OF 209153 SHARES ONLY OF S ET INDIA PVT. LTD. WE FURTHER FIND THAT IT HAS BEEN CONFIRMED BY S SKI CORPORATE FINANCE LTD. THAT A SUCCESS FEE @5.47% OF THE TOTAL VALUE OF SHARES PLACED WITH FOREIGN INSTITUTIONAL INVESTORS WOULD BE P AYABLE TO THEM ITA NO.4879/M/08 A.Y:01-02 6 WHICH IS ALSO SUPPORTED BY DEBIT NOTES ISSUED BY THEM. IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVEN UE TO SHOW THAT THE SAID SUCCESS FEE OF 5.47% WAS PAYABLE BY THE ASSESSEE ON ALL THE 10 LAC SHARES HELD BY THE ASSESSEE COMPANY WHETHER SOLD OR N OT AND KEEPING IN VIEW THAT IN THE BALANCE SHEET THE ASSESSEE HA S SHOWN 790847 AS BALANCE SHARES OF SET INDIA PVT. LTD. , WE A RE OF THE VIEW THAT ADDITION MADE BY THE ASSESSING OFFICER OF RS.6,28,1 3,556/- ON PRESUMPTION BASIS IS NOT SUSTAINABLE IN LAW AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDING OF THE LD. CIT(A) IN DELETING THE SAME. THE GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJ ECTED. 8. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.6.2010. SD/- SD/- (B. RAMAKOTAIAH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 11.6.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.