ACIT, New Delhi V. Shri Bhaskar Jyoti Bagchi, New Delhi

ITA 5597/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0445 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 09-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Assessee Lawyers: KN GUPTA; JITAN JINDAL
• Keywords: Capital asset; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.5597 /DEL/2010 ASSESSMENT YEAR : 2005-06 ACIT, BHASKAR JYOTI BAGCHI, CIRCLE-46 (1), AC-101, DEFENCE OOFFICERS NEW DELHI. V. APARTMENTS, SECTOR-4, DWARKA. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AJNPB AJNPB AJNPB AJNPB- -- -6966 6966 6966 6966- -- -A AA A APPELLANT BY : MRS. ANUSHA KHURANA, SR. DR. RESPONDENT BY : SHRI KN GUPTA & SHRI JITAN JINDAL, C.A. ORDER PER A.K. GARODIA, AM: THIS IS REVENUE'S APPEAL FILED AGAINST THE ORDER OF LD CIT(A)-XXX, NEW DELHI DATED 8.9.2010 FOR ASSESSMENT YEAR 2005-06. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN EM PLOYEE OF M/S DAKSH E. SERVICES PVT. LTD. (DAKSH) FOR THE YEAR IN QUESTION TILL 31.3.2005. IN CONSEQUENCE OF IBM GLOBAL SERVICE IND IA PVT. LTD. (IGSIPL) TAKING OVER M/S DAKSH IN THE MONTH OF APRIL, 2004, THE ASSESSEE HAS SOLD TO IGSIPL (AS PER SCHEME OF TAKEOVER ARRA NGEMENT) 24150 SHARES OF M/S DAKSH ISSUED UNDER ESOP IN EARLIER YE AR. AS PER THE SAID SCHEME, THE PAYMENTS WERE MADE TO THE ASSESSEE IN PAGE 2 OF 6 ITA NO5597/DEL/10 ACCORDANCE WITH THE TERMS AND CONDITIONS MENTIONED IN THE SCHEME. 50% OF THE PAYMENT OF CONSIDERATION I.E. AN AMOUNT O F `.19,01,887/- WAS PAID TO THE ASSESSEE IMMEDIATELY I.E. IN JUNE, 2004 AND THE ASSESSEE HAS OFFERED THE SAME FOR TAX IN ASSESSMENT YEAR 2005 -06. 15% OF THE CONSIDERATION HOLD BACK AMOUNT I.E. `.5,9 8,749/- WAS PAID TO THE ASSESSEE IN JUNE, 2005 AND THE ASSESSEE OFFERED THE SAME FOR TAX IN ASSESSMENT YEAR 2006-07. 50% OF THE REMAINING 35 % CONSIDERATION I.E. 17.5% OF TOTAL CONSIDERATION `.6,4 5,407/- WAS PAYABLE TO THE ASSESSEE IN JUNE, 2005 IF THE ASSESSEE CONTINUED TO BE AN EMPLOYEE OF IGSIPL TILL JUNE, 2005 AND THE REMAININ G 50% OF 35% OF CONSIDERATION I.E. 17.5% OF TOTAL CONSIDERATION I.E. `.6,45,407/- WAS PAYABLE TO THE ASSESSEE IN JUNE, 2006 IF THE ASSESSEE CONTI NUED TO BE AN EMPLOYEE OF IGSIPL TILL JUNE, 2006. THE ASSESSEE LEF T THE JOB ON 31.3.2005 AND THEREFORE, HE DID NOT RECEIVE THE REM AINING PAYMENT OF 35% BECAUSE THE ASSESSEE DID NOT FULFILL THE CONDITION OF THE SCHEME TO CONTINUE IN EMPLOYMENT OF IGSIPL WITHER TILL JUNE, 2005 OR TILL JUNE, 2006. HENCE, THESE AMOUNTS OF CONSIDERATION OF `.6,45 ,407/- + `.6,45,407/- WERE NOT CONSIDERED BY THE ASSESSEE AS HIS IN COME IN THIS YEAR OR IN ANY SUBSEQUENT YEAR. SUCH SUBMISSION WAS MADE BY THE ASSESSEE BEFORE THE ASSESSING OFFICER BUT THE ASSESSING OFFICER WAS NOT SATISFIED AND HE PROCEEDED TO COMPUTE THE CAPITAL GAINS BY TAKING THE FULL VALUE OF CONSIDERATION I.E. `,37,91,550/- A ND THUS MADE AN ADDITION OF `.18,89,663/-. BEING AGGRIEVED, THE ASSE SSEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT (A) WHO HAD HELD THA T 35% OF THE CONSIDERATION I.E. `.12,90,914/- WHICH WAS CONTINGENT UPON CERTAIN CONDITION HAS NEITHER BEEN RECEIVED NOR ACCRUED AND THEREFORE, DOES NOT FORM PART OF THE FULL VALUE OF CONSIDERATION OF SALE OF SHARES. NOW, THE REVENUE IS IN APPEAL BEFORE US. PAGE 3 OF 6 ITA NO5597/DEL/10 3. LD DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER W HEREAS LD AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD CIT(A). IT IS ALSO SUBMITTED THAT AS PER PROVISIONS OF SECTION 48 OF THE I T ACT, CAPITAL GAIN TAX SHALL BE PAID ONLY ON AMOUNT OF FULL CONSIDERATIO N RECEIVED OR ACCRUED TO THE ASSESSEE. IT IS ALSO SUBMITTED THAT IN THE PRESENT CASE, 35% OF TOTAL AMOUNT OF CONSIDERATION WAS NEITHER RECE IVED NOR DID IT ACCRUE TO THE ASSESSEE AS IT HAD BEEN DEPENDENT UPON CE RTAIN CONDITIONS AND THEREFORE, THE ORDER OF LD CIT(A) SHOU LD BE CONFIRMED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT AS PER TH E PROVISIONS OF SECTION 48, THE INCOME CHARGEABLE UNDER THE HEAD CAP ITAL GAIN SHALL BE COMPUTED BY DEDUCTING FROM THE FULL VALUE OF THE CO NSIDERATION RECEIVED OR ACCRUED AS A RESULT OF TRANSFER OF CAPITAL ASSET, THE EXPENDITURE INCURRED IN CONNECTION WITH SUCH TRANSFER AND THE COST OF ACQUISITION OF ASSET AND THE COST OF ANY IMPROVEMENT TH EREOF. HENCE, IT HAS TO BE SEEN AS TO HOW MUCH OF THE SALE CONSIDERAT ION FULFILLED THIS REQUIREMENT OF HAVING RECEIVED OR ACCRUED IN THE PR ESENT YEAR. OUT OF TOTAL CONSIDERATION OF `.37,91,550/-, 50% WAS RECEIVE D IN THE PRESENT YEAR ITSELF AND THE SAME WAS OFFERED TO TAX BY THE ASSE SSEE AND HENCE THERE IS NO DISPUTE ON THIS PORTION OF THE TOTAL CONSID ERATION. 15% OF THE CONSIDERATION WAS OFFERED BY THE ASSESSEE IN ASSESSMENT Y EAR 2006-07 BECAUSE THE SAME WAS RECEIVED BY THE ASSESSEE IN T HAT YEAR. FOR THIS AMOUNT, IT IS HELD BY LD CIT(A) THAT THIS AM OUNT OF CONSIDERATION IS TO BE TAXED IN THE PRESENT IN WHICH T HE TRANSFER TOOK PLACE AND HE DIRECTED THE ASSESSING OFFICER TO EXCLUDE THIS AMOUNT IN ASSESSMENT YEAR 2006-07 BUT HE CONFIRMED THE ACTION OF THE ASSESSING OFFICER FOR ADDING THIS AMOUNT IN THE PRESENT YEAR. ON THIS ASPECT, NO APPEAL HAS BEEN FILED BY THE ASSESSEE AND IN THE APPEAL FILED BY THE REVENUE ALSO, THIS IS NOT A POINT OF DISPUTE AND HENCE , TO THE EXTENT OF PAGE 4 OF 6 ITA NO5597/DEL/10 65% OF TOTAL CONSIDERATION, THERE IS NO DISPUTE. REGAR DING THE BALANCE AMOUNT OF 35%, WE FIND THAT PAYMENT OF THIS 35% OF T OTAL CONSIDERATION WAS DEPENDENT UPON CERTAIN CONDITIONS. HALF OF THAT I.E. 17.5% OF TOTAL CONSIDERATION EQUAL TO `.6,45,407/- W AS PAYABLE TO THE ASSESSEE IN JUNE, 2005 IF THE ASSESSEE CONTINUED TO BE AN EMPLOYEE OF IGSIPL TILL JUNE, 2005 AND THE REMAINING 50% OF THE BALANCE AMOUNT I.E. `.17.5% OF TOTAL CONSIDERATION EQUAL TO `.6,45,407/- WAS PAYABLE TO THE ASSESSEE IN JUNE, 2006, IF THE ASSESSEE CONTINUED TO BE AN EMPLOYEE OF IGSIPL TILL JUNE, 2006. THE ASSESSEE HAS LEFT THE JOB ON 31.3.2005 I.E. DURING THE PRESENT YEAR UNDER CONSIDERATION. HENCE, THIS AMOUNT OF 35% OF TOTAL CONSIDERATION EQUAL TO `.12,90,814/- WA S NEITHER RECEIVED BY THE ASSESSEE IN THE PRESENT YEAR OR IN SUBSEQUENT YEAR NOR IT HAS ACCRUED TO THE ASSESSEE BECAUSE SUCH PAYMENT TO THE ASSESSEE WAS DEPENDENT UPON THE FULFILLMENT OF A CONDITION THAT THE ASSESSEE SHOULD CONTINUE IN EMPLOYMENT OF IGSIPL TILL JUNE, 2005 FO R `..6,45,407/- AND TILL JUNE, 2006 FOR THE REMAINING AMOUNT OF `.6,45, 407/-. THE ASSESSEE HAS LEFT THE JOB ON 31.3.2005 ITSELF AND IT IS THE CLA IM OF THE ASSESSEE THAT THE ASSESSEE HAS JOINED EXCEL INDIA BUSINESS SERVICE P VT. LTD. IN MAY, 2005 AND RECEIVED AS BONUS AS COMPENSATION TOWARDS THE FOREGONE RIGHT. BE THAT AS IT MAY, BUT THE FACTS IN THE PRESENT YEAR ARE THAT TO THE EXTENT OF 35% OF TOTAL SALE CONSIDERATION EQUAL TO `.12,90,814/-, IT CANNOT BE SAID THAT THE SALE CONSIDE RATION HAS BEEN RECEIVED BY THE ASSESSEE OR IT HAS ACCRUED TO THE ASSESSEE I N THE PRESENT YEAR BECAUSE ACCRUAL IS DEPENDED UPON THE COND ITION TO BE FULFILLED BY THE ASSESSEE IN FUTURE AND IN CASE, THE ASSESSE E FAILS TO FULFILL SUCH CONDITION, THIS AMOUNT IS NOT PAYABLE TO THE ASSESSEE AND THE SAME HAS HAPPENED ALSO BECAUSE THE ASSESSEE HAS LEFT THE JOB ON 31.3.2005 AND THEREFORE, THE ASSESSEE CANNOT FULFILL TH ESE CONDITIONS OF CONTINUING IN SERVICE WITH IGSIPL TILL JUNE, 2005 OR JUNE, 2006 AND THEREFORE, THIS AMOUNT OF `.12,90,804/- HAS NOT ACCR UED TO THE PAGE 5 OF 6 ITA NO5597/DEL/10 ASSESSEE IN THE PRESENT YEAR. WE, THEREFORE, DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD CIT(A). 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . 6. ORDER PRONOUNCED IN THE OPEN COURT ON THE DAY OF 18TH FEBRUARY, 2011. SD/- SD/- (I.P. BANSAL) (A.K. GAROD IA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 18.2.2011. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). PAGE 6 OF 6 ITA NO5597/DEL/10