ACIT, New Delhi V. Sh. Ajay Guliya, Ghaziabad

ITA 5331/DEL/2011

• Counselvise Citation: 533120114 RSA 2011
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 31-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 29-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NAMITA PANDEY
• Keywords: Capital asset; Depreciation; Share purchase agreement; Advance ruling

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI. BEFORE SHRI R.P. TOLANI AND SHRI K.G. BANSAL I.T.A. NO.5331(DEL)/2011 ASSESSMENT YEAR: 2006-07 ASSTT. COMMISSIONER OF INCOME SHR I AJAY GULIYA, TAX, CIRCLE 47(1), NEW DELHI. VS. FL AT NO.811, RATTAN JYOTI APARTMENT, SECTOR-4, VAISHALI, GHAZIABAD. (APPLICANT) (RESPONDENT) APPELLANT BY : MS. NAMITA PANDEY, SR. D.R. RESPONDENT BY : SH RI GAGAN KUMAR, C.A. DATE OF HEARIN G: 31.01.2012 DATE OF PRONOUN CEMENT: 17 .02.2012. ORDER PER K.G. BANSAL : A.M THE ONLY GROUND TAKEN BY THE REVENUE IN THIS CA SE IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) ERRED IN DELETING THE ADDITION OF RS. 26.25 LAK H MADE BY THE AO ON ACCOUNT OF LONG-TERM CAPITAL GAIN (LTCG), BY IGNOR ING THE PROVISION CONTAINED IN SECTION 45(1). IT IS MENTIONED THAT ANY PROFIT OR GAIN ARISING FROM TRANSFER OF A CAPITAL ASSET EFFECTED IN T HE PREVIOUS YEAR SHALL BE CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAINS, AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRAN SFER TAKES PLACE. ITA NO. 5331(DEL)/2011 2 2. THE FACTS OF THE CASE ARE THAT THE RETURN DEC LARING TOTAL INCOME OF RS. 64,50,782/- WAS FILED ON 26.10.2007. THE ASSESSM ENT PROCEEDINGS WERE INITIATED BY ISSUING NOTICE U/S 143(2) ON 29.09 .2008. IT WAS FOUND THAT THE ASSESSEE SOLD 1500 SHARES OF ORION DIALOG PRI VATE LIMITED (ORION DIALOG FOR SHORT) TO ESSAR INVESTMENTS LTD. FOR CONSIDERATION OF RS. 5,750/- PER SHARE. THUS, THE TOTAL SALE CONSIDERAT ION AMOUNTS TO RS. 86.25 LAKH. HOWEVER, THE SALE CONSIDERATION TAKEN INTO ACCOUNT FOR COMPUTING LTCG HAS BEEN SHOWN AT RS. 60.00 LAKH ONLY @ R S. 4,000/- PER SHARE. IN THIS CONNECTION, IT HAS BEEN NOTICED THAT THE AGREEMENT FOR SALE OF SHARES HAS BEEN ENTERED INTO ON 15.02.2006. TH E DELIVERY OF SHARES HAS ALSO BEEN GIVEN ON THIS DATE. THE AGREEMENT HA S BEEN SIGNED BY ONE OF THE DIRECTORS OF ORION DAILOG, MS. ISHITA SWARUP , ON BEHALF OF ALL THE SHAREHOLDERS. THESE FACTS SHOW THAT THE AGREEME NT HAS BEEN MADE IN THIS YEAR AND DELIVERY HAS ALSO BEEN GIVEN IN THIS YEAR. THEREFORE, THE ASSESSEE HAS BEEN REQUESTED TO STATE AS TO WHY THE SALE CONSIDERATION SHOULD NOT BE TAKEN AT RS. 86.25 LAKH. IT HAS BEEN SUBMITTED THAT AS PER AGREEMENT, ONLY A SUM OF RS. 60.00 LAKH HAS BEEN RECEIVABLE IN THIS YEAR. THE BALANCE AMOUNT IS RECEIVABLE IN THREE SUCCE EDING YEARS SUBJECT TO FULFILLMENT OF CERTAIN TARGETS BY ORION DAILOG. THEREFORE, ONLY A SUM OF RS. 60.00 LAKH ACCRUES AS CONSIDERATION IN THIS Y EAR AND THIS IS ALSO THE ITA NO. 5331(DEL)/2011 3 AMOUNT RECEIVED IN THIS YEAR. HENCE ONLY THIS AMO UNT IS TAXABLE IN THIS YEAR. THE AO HAS NOT ACCEPTED THIS POSITION. HE REFERRED TO THE PROVISION CONTAINED IN SECTION 45(1). ON THE BAS IS OF THE LANGUAGE OF THE STATUTORY PROVISION, IT IS MENTIONED THAT THE ONLY RELEVANT DATE FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN IS 15.0 2.2006. THEREFORE, THE WHOLE OF THE AMOUNT OF RS. 86.25 LAKH HAS BEEN TA KEN AS SALE CONSIDERATION FOR THE PURPOSE OF COMPUTING THE CAP ITAL GAIN. 3. THE MATTER WAS AGITATED BEFORE THE CIT(APPEAL S)-XXX, NEW DELHI. HE REFERRED TO THE PROVISION CONTAINED IN SECTI ON 48, BEING THE MACHINERY SECTION UNDER WHICH CAPITAL GAIN IS COMPUTED. THE STARTING POINT IS THE DETERMINATION OF THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER OF THE CAPITAL ASSET. IT IS MENTIONED THAT THE PAYMENT OF CONSIDERATION IS TO BE MADE IN TRANCHES SUBJECT T O FULFILLMENT OF CERTAIN CONDITIONS. THEREFORE, WHILE INITIAL CONSIDERATIO N HAS ACCRUED AND IT HAS BEEN RECEIVED, THE ADDITIONAL CONSIDERATION HAS NEITHER ACCRUED NOR IT HAS BEEN RECEIVED. THEREFORE, ONLY THE AMOUNT ACCRUI NG OR RECEIVED, WHICH IS RS. 60.00 LAKH, IS LIABLE TO BE TAXED IN THIS YEA R. HE HAS ALSO MENTIONED THAT THE TAX RATE IN THIS YEAR AND SUCCEEDING THREE YEARS LEVIED ON CAPITAL ITA NO. 5331(DEL)/2011 4 GAINS IS SAME. THEREFORE, NO LOSS OCCURS TO THE R EVENUE EVEN IF THE CAPITAL GAIN IS TAXED AS SHOWN BY THE ASSESSEE. 4. BEFORE US, THE LD. SENIOR DR REFERS TO THE AG REEMENT ON PAGES 30 AND 31. THIS IS SCHEDULE-3 OF THE AGREEMENT REG ARDING PAYMENT OF CONSIDERATION. THE INITIAL CONSIDERATION HAS BEEN FIXED AT RS. 1,72,50,000/- IN RESPECT OF ALL THE SHARES SOLD UNDER THE SHA RE-PURCHASE AGREEMENT. THE BALANCE MINIMUM CONSIDERATION OF RS. 6,27,50,000/- IS PAYABLE AS UNDER:- (I) RS. 2,09,16,666.66 ON 31.03.2006, (II) RS. 2,09,16,666.66 ON A DATE NOT LATER THAN 30 D AYS FROM 31.03.2007, AND (III) RS. 2,09,16,666.66 ON A DATE NOT LATER THAN 30 D AYS FROM 31.03.2008. 4.1 THE SCHEDULE ALSO CONTEMPLATES ADDITIONAL P URCHASE CONSIDERATION SUBJECT TO FULFILLMENT OF CERTAIN CONDITIONS AS OV ERLEAF:- ITA NO. 5331(DEL)/2011 5 (I) RS. 1,16,66,666 (FIRST TRANCHE) ON 15.03.2006, PROVIDED THAT THE COMPANY ACHIEVES PROJECTED REVENUE TARGET OF RS . 20.00 CRORE FOR FINANCIAL YEAR ENDING 31.03.3006, (II) RS. 1,16,66,666 (SECOND TRANCHE) ON A DATE NOT LA TER THAN 30 DAYS FROM 31.03.2007 SUBJECT TO THE CONDITIONS THAT TH E COMPANY RUNS A PILOT FOR ANY OUTSOURCED PROCESS FOR HUTCH, ESS AR SPACETEL PVT. LTD., BPL MOBILE COMMUNICATIONS LTD. OR BPL, MOB ILE CELLULAR LIMITED, IF IT IS GIVEN AN OPPORTUNITY TO DO SO, AND IT MAINTAINS THE CURRENT OPERATING COST STRUCTURE, WHICH WOUL D INCLUDE DIRECT COSTS BORNE BY THE COMPANY IN RELATION TO PAYROLL PAYMENTS, COSTS FOR RUNNING THE FACILITIES OF THE COMPANY, OPERAT ING OVERHEADS, SUBJECT TO INFLATIONARY ADJUSTMENTS AND ANY UNFOR ESEEN EVENTS; AND IT ACHIEVES PROJECTED REVENUE TARGET OF RS. 20.00 CRORE FOR THE FINANCIAL YEAR ENDED ON 31.03.2007 OR AS MODIFIED BY MUTUAL DISCUSSION, AND (III) RS. 1,16,66,666/- (THIRD TRANCHE) ON A DATE NOT L ATER THAN 30 DAYS FROM 31.03.2008 SUBJECT TO THE CONDITIONS THAT THE COMPANY OPERATIONALISES ANY ADDITIONAL CAPACITY ADDED TO SERVICE NEW OR ITA NO. 5331(DEL)/2011 6 EXISTING SERVICE CONTRACTS AND IT ACHIEVES PROJEC TED REVENUE TARGET OF RS. 20.00 CRORE FOR THE FINANCIAL YEAR ENDED O N 31.03.2008 OR AS MODIFIED BY MUTUAL DISCUSSION. 4.2 SHE FURTHER REFERS TO THE FINDINGS OF THE AO AN D THE LD. CIT(APPEALS), PARTICULARLY IN RESPECT OF THE PROVISIONS CONTAI NED IN SECTIONS 45 AND 48. IT IS ARGUED THAT THE CASE IS COVERED U/S 45(1) UNDER WHICH PROFITS OR GAINS ARISING FROM TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL BE CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAI NS, AND SHALL BE DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH TRA NSFER TAKES PLACE. THE PROVISION CLEARLY SHOWS THAT ALL THE PROFITS OR G AINS ARE CHARGEABLE IN THE YEAR IN WHICH THE TRANSFER IS EFFECTED, THEREFORE, EVEN IF A PART OF THE CONSIDERATION IS RECEIVED IN SUBSEQUENT YEAR, THE SAME IS DEEMED TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TAKES PLACE. 5. IN REPLY, THE LD. COUNSEL FOR THE ASSESSEE REF ERS TO THE FINDING OF THE LD. CIT(APPEALS) THAT ONLY INITIAL PURCHASE CO NSIDERATION AND THE MINIMUM PURCHASE CONSIDERATION WHICH HAS ACCRUED AND HAS BEEN RECEIVED IN THIS YEAR IS LIABLE TO BE TAXED. TH IS IS THE AMOUNT WHICH IS THE STARTING POINT FOR COMPUTATION OF CAPITAL GAINS U/S 48. A SUM IS SAID TO ACCRUE AS INCOME TO THE ASSESSEE ONLY WHEN A LE GAL RIGHT TO RECEIVE THE ITA NO. 5331(DEL)/2011 7 AMOUNT HAS COME INTO EXISTENCE. THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE IN RE ANURAG JAIN, (2005) 277 ITR 1 (AAR) AND ANURAG JAIN VS. AUTHORITY FOR ADVANCE RULING & ANOTHER, (2009) 308 ITR 302 (MAD.). ACCORDINGLY, IT IS URGED THAT THE ORDER OF THE LD. CIT(APPEALS) MAY BE UPHELD. 6. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE FACTS OF THE CASE IN SO FAR AS T HE ASSESSEE IS CONCERNED ARE THAT HE TRANSFERRED 1500 SHARES OF ORION DIALOG T O ESSAR INVESTMENTS LTD. THE OVERALL CONSIDERATION WAS RS. 86.25 LAKH. H OWEVER, IN THIS YEAR A SUM OF RS. 60.00 LAKH ONLY WAS RECEIVED. THE BA LANCE WAS TO BE RECEIVED IN THREE SUCCEEDING YEARS SUBJECT TO FULFILLMENT OF CERTAIN CONDITIONS BY ORION DIALOG. IN THE COURSE OF HEARING, IT HAS B EEN ASCERTAINED THAT THE WHOLE OF THE COST HAS BEEN CLAIMED BY THE ASSESSEE WHILE COMPUTING CAPITAL GAINS BY TAKING THE SALE CONSIDERATION AT RS. 60.00 LAKH. THE QUESTION IS- WHETHER, THE WHOLE OF THE SALE PROCEEDS OF RS. 8 6.25 LAKH OR ONLY A SUM OF RS. 60.00 LAKH IS LIABLE TO BE CONSIDERED FOR THE PURPOSE OF LEVY OF CAPITAL GAINS? ITA NO. 5331(DEL)/2011 8 6.1 WE MAY AT THE FIRST INSTANCE EXAMINE THE S TATUTORY PROVISIONS CONTAINED IN SECTIONS 45 AND 48 IN SO FAR AS T HEY CONCERN US. SECTION 45(1) PROVIDES THAT THE PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHA LL BE CHARGEABLE TO INCOME- TAX UNDER THE HEAD CAPITAL GAINS, AND SHALL BE DEEMED TO BE THE INCOME OF THE YEAR IN WHICH TRANSFER TAKES PLACE. THERE IS NO DOUBT THAT THE TRANSFER OF SHARES HAS TAKEN PLACE IN THIS YEAR. THE AGREEMENT HAS BEEN SIGNED IN THIS YEAR AND THE SHARES HAVE BEEN DEL IVERED IN THIS YEAR. ON PRIMA FACIE READING OF THIS PROVISION, WHICH IS IN THE NATURE OF CHARGING SECTION, IT WILL BE CLEAR THAT THE CAPITAL GAINS A RE CHARGEABLE IN THE YEAR OF TRANSFER AS THEY ARE DEEMED TO BE THE INCOME OF T HE PREVIOUS YEAR IN WHICH THE TRANSFER TAKES PLACE. SECTION 48 REGARDI NG MODE OF COMPUTATION IS THE MACHINERY PROVISION AND THE COMPUTATION UNDER IT STARTS WITH ASCERTAINMENT OF THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER. THIS PROVISION DOES NO T SPEAK OF THE YEAR OF ACCRUAL OR RECEIPT. THIS PROVISION HAS TO BE RE AD IN CONJUNCTION WITH SECTION 45 WITH CLEAR UNDERSTANDING THAT IT CANNOT OVER-RIDE SECTION 45 IMPLICITLY. THE REASON FOR LACK OF THE YEAR IN L ATTER PROVISION IS THAT ALL SUMS ACCRUING OR RECEIVED IN CONNECTION WITH TRANS FER ARE LIABLE TO BE ITA NO. 5331(DEL)/2011 9 TAXED IN THE YEAR IN WHICH TRANSFER TAKES PLACE. WITH THESE PRELIMINARY REMARKS, WE MAY EXAMINE THE CASES RELIED UPON BY THE LD. COUNSEL. 6.2 IN THE CASE OF CIT VS. ASHOKBHAI CHIMANBHAI ( 1965) 56 ITR 42 (S.C.), THE QUESTION BEFORE THE COURT WAS-WHETHER , ON THE FACTS AND IN THE CIRCUMSTANCES OF THIS CASE, THE FIVE ANNAS SHARE OF THE INCOME OF AMRIT CHEMICALS OR ANY PART THEREOF FOR THE YEAR 01.01 .1955 TO 31.12.1955, ACCRUES TO THE ASSESSEE AND WHETHER IT COULD BE CHARGED IN HIS HAND? AT PAGE 45 OF THE REPORT, IT IS MENTIONED THAT UNDER THE INCOME TAX ACT, INCOME IS TAXABLE WHEN IT ACCRUES, ARISES OR IS RECEIVED, OR WHEN IT IS BY FICTION DEEMED TO ACCRUE, ARISE OR IS DEEMED TO BE RECEIVED. RECEIPT IS NOT THE ONLY TEST OF CHARGEABILITY TO TAX; IF INC OME ACCRUES OR ARISES IT MAY BECOME LIABLE TO TAX. FOR THE PURPOSE OF THIS CA SE IT IS UNNECESSARY TO DILATE UPON THE DISTINCTION BETWEEN THE INCOME ACCRUING AND ARISING. BUT THERE IS NO DOUBT THAT THESE TWO WORDS ARE USED TO CONTRA-DISTINGUISH THE WORD RECEIVED. INCOME IS SAID TO BE RECEI VED WHEN IT REACHES THE ASSESSEE: WHEN THE RIGHT TO RECEIVE THE INCOME BE COMES VESTED IN THE ASSESSEE, IT IS SAID TO ACCRUE OR ARISE. ITA NO. 5331(DEL)/2011 10 6.3 IN THE CASE OF CIT VS. BHARAT PETROLEUM CORP ORATION LTD. (1993) 202 ITR 492, THE MAIN QUESTION BEFORE THE COURT WAS-WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE T RIBUNAL WAS CORRECT IN LAW IN HOLDING THAT THE SUM OF RS. 44,47,482/- REPRES ENTING ADDITIONAL CLAIM UNDER COPE SCHEME (REALIZED BY THE ASSESSEE DURI NG THE RELEVANT PREVIOUS YEAR BY WAY OF ADJUSTMENT AND NEVER REFUNDED TO THE GOVERNMENT) DID NOT ACCRUE TO THE ASSESSEE DUR ING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 1975-76? AT PAGE NO. 500 OF THE REPORT, IT IS MENTIONED THAT THE CLAIM MADE BY THE ASSESSEE FOR THE ADDITIONAL SUM OF RS. 44,47,482/- IS A MERE CLAIM AND THE SAID C LAIM APPARENTLY WAS NOT IN ACCORDANCE WITH THE CLEAR DIRECTIVE OF THE MINIST RY OF PETROLEUM, HENCE, THE SAID AMOUNT CANNOT BE SAID TO HAVE RIPENED INTO AN INCOME ACCRUING TO THE ASSESSEE DURING THE RELEVANT YEAR. THE AS SESSEE MAINTAINS ITS ACCOUNT ON MERCANTILE BASIS. THE SAID SUM CANNO T BE TREATED AS ASSESSEES INCOME BECAUSE DURING THE RELEVANT Y EAR THE ASSESSEE HAD NOT ACQUIRED ANY LEGAL RIGHT TO RECEIVE THE SAME. THE AMOUNT CAN ACCRUE OR ARISE TO THE ASSESSEE IF IT ACQUIRES A LEGAL RIGHT TO RECEIVE THE AMOUNT OR CONVERSELY SAID AMOUNT HAS BECOME LEGALLY DUE TO THE ASSESSEE FROM THE DEBTOR. MERE RAISING OF A CLAIM OR BILL DOES NO T CREATE ANY LEGAL ENFORCEABLE RIGHT TO RECEIVE THE SAME. ITA NO. 5331(DEL)/2011 11 6.4 THE LD. COUNSEL DREW OUR ATTENTION TOWARDS T HE HEAD NOTES IN THE CASE OF ANURAG JAIN (SUPRA). THE AUTHORITY RULED THAT (I) THE CONTINGENT PAYMENTS WERE IN SUBSTANCE AND REALITY PAYMENT S FOR ENSURING PERFORMANCE UNDER THE EMPLOYMENT AGREEMENT TO A CHIEVE THE DESIRED OBJECT IN EXCEEDING THRESHOLD EARNINGS BEFORE INTEREST, TAX AND DEPRECIATION ALLOWANCE, AND HAD NO REAL NEXUS WIT H THE CONSIDERATION FOR SALE OF SHARES; (II) THE ENTIRE CAPITAL GAIN HAD TO BE ASSESSED IN ASSESSMENT YEAR 2004-05 AS THE SUM OF US$ 2.30 MILLION WAS RECEIVED ON 01.07.2003; AND (II) THE CONTINGENT PAYMENT HAD NEXUS WITH PERFORMANCE OF THE ASSESSEE FOR ACHIEVING DEFINED TARGET AND HAD CONNECTION WITH NOT CARRYING ON ANY ACTIVITY IN RELATION TO ANY BUSIN ESS. THE CONSEQUENCE OF FAILURE WAS TERMINATION OF THE AGREEMENT COUPLED WITH NOT MAKING FURTHER CONTINGENT PAYMENTS AS WELL AS REFUNDS OF SUCH PAYMENTS IF ALREADY RECEIVED. THESE CONTINGENT PAYMENTS DID NOT FA LL U/S 25(VA). 6.5 THIS DECISION WAS A MATTER OF WRIT PETITION BEFORE HONBLE MADRAS HIGH COURT. THE QUESTIONS BEFORE THE HONBLE COURT WERE AS UNDER:- '(I) WHETHER THE GAINS ARISING FROM THE TRANSFER OF 15,000 EQUITY SHARES IN M/S VISION HEALTH SOURCE INDIA (P) LTD. C OVERED BY THE SHARE PURCHASE AGREEMENT DATED 15TH APRIL, 2003 REA D WITH EXHIBITS A AND B NAMELY WHICH ARE SHARE PURCHASE AGREEMENT A ND ASSOCIATED ITA NO. 5331(DEL)/2011 12 EMPLOYMENT AGREEMENT RESPECTIVELY IS CHARGEABLE TO CAPITAL GAIN TAXES OR NOT EITHER WHOLLY OR IN PART ? (II) IF THE AFORESAID GAINS ARISING FROM THE ABOVE TRANSFER IS LIABLE TO BE CHARGED TO CAPITAL GAIN TAX EITHER WHOLLY OR IN PART, IN WHICH YEAR OF ASSESSMENT DOES THE LIABILITY TO PAY CAPITAL GAI N TAXES ARISE FOR THE FOLLOWING AMOUNT RECEIVED/RECEIVABLE AS CONSIDERATI ON FOR THE TRANSFER OF SHARES AFORESAID, WHICH, IN AGGREGATE A MOUNTS TO 93 LAKH US DOLLARS (9.3 MILLION U.S. DOLLARS) TERMED AS PUR CHASE PRICE AS PER CLAUSE 1 OF THE SHARE PURCHASE AGREEMENT DATED 15TH APRIL, 2003? (I) INITIAL LUMP SUM PAYMENT EQUAL TO 23 LAKH US DOLLARS (2.3 MILLION US DOLLARS) (REFERRED IN THE SHARE PURCHASE AGREEMENT AS THE CLOSING PAYMENT) RECEIVED ON JULY 1, 2003 IN THE PR EVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2004-05. (II) CONTINGENT PAYMENT AS PER CLAUSE (1) OF TH E SHARE PURCHASE AGREEMENT DATED APRIL 15, 2003 (EXHIBIT A) RECEIVA BLE FOR EACH OF THE THREE YEARS IN THE FOLLOWING TERMS: HAVING REGARD TO THE FACT THAT THESE AMOUNTS, CON TINGENT ON THE EXISTENCE OF THE EBITDA, NAMELY EARNINGS BEFORE INT EREST-TAX DEPRECIATION ALLOWANCE, CAN BE DETERMINED ONLY WHEN THE EBITDA AS PER CLAUSE (1) OF THE SAID SHARE PURCHASE AGREEM ENT DATED APRIL 15, 2003 RELATING TO THE THREE CONTINGENT PAYMENTS AS DEFINED IN CLAUSE (1) THEREIN IS COMPUTED. BY WHOM PAID AND YEAR IN WHICH WHERE DEFINED NATURE OF PAYMENT TO BE PAID PAYER AND PROVIDER FOR YEAR ENDED EXHIBIT A FIRST YEAR CONTINGENT 31.3.2004 PAYMENT PAYER AND PROVIDER FOR YEAR ENDED EXHIBIT A SECOND YEAR CONTINGENT 31.3.2005 PAYMENT PAYER AND PROVIDER FOR YEAR ENDED EXHIBIT A THIRD YEAR CONTINGENT 31.3.2006 PAYMENT (III) IF THE GAINS ARISING FROM TRANSFER OF SHARES AFORESAID ARE NOT TO BE CHARGED AS CAPITAL GAINS, EITHER WHOLLY OR IN PA RT, UNDER WHAT HEAD OF INCOME THE CONTINGENT PAYMENTS MADE TO/RECE IVED BY THE ITA NO. 5331(DEL)/2011 13 APPLICANT TOWARDS THE TRANSFER OF SHARES COVERED BY THE AFORESAID SHARE PURCHASE AGREEMENT DATED APRIL 15, 2003, READ WITH EXHIBIT ATTACHED THERETO ARE TAXABLE AND IN WHICH OF ASSESS MENT ? 6.6 THE HONBLE COURT DISMISSED THE WRIT PETITION BY MENTIONING THAT THE TWO DOCUMENTS, NAMELY, ASSOCIATED EMPLOYMENT AGREEMENT AND SHARE PURCHASE AGREEMENT CANNOT BE SAID TO BE TOTALLY DIFFERENT AS ONE DOCUMENT IS INTER-LINKED WITH THE OTHER. THIS BEC OMES CLEAR FROM QUESTION NO. 3. THEREFORE, THE AAR WAS COMPETENT TO TAKE INTO CONSIDERATION THE SHARE PURCHASE AGREEMENT AND OTHER EXHIBITS CONN ECTED THERETO. SINCE THE ASSOCIATED EMPLOYMENT AGREEMENT IS EXHIBIT B, WHIC H FORMS PART OF THE AGREEMENT, THEREFORE, IT CANNOT BE SAID THAT THE A UTHORITY HAS ACTED BEYOND ITS POWER WHILE DECIDING THE REFERENCE. 6.7 WE MAY NOW CONSIDER THE FACTS OF THE CASE IN THE LIGHT OF THESE DECISIONS. IN THE CASE OF ASHOKBHAI CHIMANBAHI (SUPRA), THE HONBLE COURT HAS DISTINGUISHED BETWEEN THE WORD RECEIV ED AND THE WORDS ACCRUING AND ARISING. BUT IT IS ALSO MENTION ED THAT UNDER THE INCOME- TAX ACT, INCOME IS TAXABLE WHEN IT ACCRUES, ARI SES OR IS RECEIVED, OR WHEN IT IS BY FICTION DEEMED TO ACCRUE, ARISE OR IS DEEMED TO BE RECEIVED. SECTION 45 CONTAINS A FICTION THAT PROFITS AND GAINS ARISING FROM TRANSFER OF A CAPITAL ASSET SHALL BE DEEMED TO BE THE INCOME OF A PREVIOUS YEAR IN ITA NO. 5331(DEL)/2011 14 WHICH THE TRANSFER TAKES PLACE. THEREFORE, THE WOR DS RECEIVED OR ACCRUING IN SECTION 48 SHALL HAVE TO BE READ IN CONJUNCTION WITH THE PROVISION CONTAINED IN SECTION 45(1). THIS MEANS THAT FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING IN ANY YEAR AS A RESULT OF TRANSFER OF THE CAPITAL ASSET SHALL BE TAXED IN THE YEAR IN WHICH TRANSFER TAKES PLACE IRRESPECTIVE OF THE YEAR OF ACCRUAL OR RECEIPT. 6.8 IN THE CASE OF BHARAT PETROLEUM CORPORATION LT D. (SUPRA), IT HAS BEEN HELD THAT AN INCOME ACCRUES WHEN THE ASSESSEE GETS A LEGAL RIGHT TO ENFORCE THE AMOUNT AGAINST THE DEBTOR. IN THIS SEN SE, INCOME MIGHT HAVE ACCRUED IN DIFFERENT YEARS BUT BY DINT OF FICTI ON CONTAINED IN SECTION 45(1), INCOME ACCRUING IN DIFFERENT YEARS OR RECE IVED IN DIFFERENT YEARS IS CHARGEABLE IN THE YEAR IN WHICH TRANSFER TAKES P LACE. 6.9 THE DECISION IN THE CASE OF ANURAG JAIN (SUP RA) HAS BEEN RENDERED UNDER TOTALLY DIFFERENT SET OF FACTS. IN THIS CASE , THE PAYMENT FOR CONSIDERATION OF SHARES WAS INTER-LINKED WITH THE PERFORMANCE OF THE ASSESSEE AND NOT THE COMPANY WHOSE SHARES WERE TRA NSFERRED. THE QUESTION WAS REGARDING TAXATION OF THE CAPITAL GAINS AND CONTINGENT PAYMENTS UNDER THE HEAD SALARY. THE INSTANT CASE IS ONE OF TR ANSFER OF SHARES SIMPLICITER. ITA NO. 5331(DEL)/2011 15 THE PAYMENT OF ADDITIONAL CONSIDERATION DOES DEPE ND UPON PERFORMANCE OF THE ASSESSEE. THERE IS NO PROVISION REGARDIN G CANCELLATION OF THE AGREEMENT IN CASE OF FAILURE TO ACHIEVE TARGETS. THEREFORE, THE FACTS OF THE CASE DISTINGUISHABLE. 6.10 IN VIEW OF THE DEEMING FICTION CONTAINED IN SECTION 45(1), IT IS HELD THAT THE WHOLE OF CONSIDERATION ACCRUING OR A RISING OR RECEIVED IN DIFFERENT YEARS IS CHARGEABLE UNDER THE HEAD C APITAL GAINS IN THE YEAR IN WHICH THE TRANSFER OF SHARES HAS TAKEN PLACE. IT MAY BE MENTIONED HERE THAT THE EXCEPTION TO SUB-SECTION (1) ARE PROVIDE D IN OTHER SUB-SECTIONS. THE CASE OF THE ASSESSEE DOES NOT FALL IN ANY OF THE EXCEPTIONS. UNDOUBTEDLY AND ADMITTEDLY THE SHARES HAVE BEEN TRANSFERRED IN THIS YEAR. THEREFORE, WE AGREE WITH THE AO THAT THE WHOLE CO NSIDERATION OF RS. 86.25 LAKH IS CHARGEABLE TO TAX AS CAPITAL GAINS IN THIS YEAR. THE ASSESSEE HAS ALSO CLAIMED THE WHOLE COST. THEREFORE, THE ORDER OF T HE LD. CIT(APPEALS) IS SET ASIDE AND THAT OF THE AO IS RESTORED. 7. IN THE RESULT, THE APPEAL IS ALLOWED. SD/- SD/- (R.P. TOLANI) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA ITA NO. 5331(DEL)/2011 16 COPY OF THE ORDER FORWARDED TO:- SHRI AJAY GULIA, VAISHALI, GHAZIABAD. ACIT, CIRCLE 47(1), NEW DELHI. CIT(A) CIT, THE D.R., ITAT, NEW DELHI. ASSISTANT REGISTRAR.