Mr. Sunil Goyal, Noida V. ITO, New Delhi

ITA 719/DEL/2010

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 4659 (ITAT-DELHI)
• Duration Of Justice: 9 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 09-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 17-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: R SANTHAN AM; DEEPAK OSTWAL; RISHABH OSTWAL
• Keywords: Capital asset; Business income; Opportunity of being heard; Principle of natural justice; Cost of acquisition; Non compliance; Onus to prove; Set aside; Capital Gains
• Section: 143(3); 191; 54EC; 263; 28

Judgement Text

ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 1 OF 42 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: G: NEW DELHI) BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA NO:- 719/DEL/2010 ( ASSESSMENT YEAR: 2006-07) SHRI SUNIL GOYAL, B-50, SECTOR-14, NOIDA, U.P. VS. INCOME TAX OFFICER, WARD 5(4), NEW DELHI. PAN NO: AAAPG6445M APPELLANT RESPONDENT ASSESSEE BY : SHRI R. SANTHANAM, ADV. AND SHRI DEEPAK OSTWAL, CA AND SHRI RISHABH OSTWAL, ADV REVENUE BY : SHRI SARAS KUMAR, SR. DR PER ANADEE NATH MISSHRA, AM (A) THIS APPEAL HAS BEEN FILED BY ASSESSEE AGAINST TH E IMPUGNED APPELLATE ORDER DATED 29.01.2010 PASSED BY LEARNED COMMISSION ER OF INCOME TAX (APPEALS)-VIII, NEW DELHI, [LD. CIT(A),FOR SHORT] PERTAINING TO ASSESSMENT YEAR 2006-07, ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE IMP UGNED ILLEGAL ORDER OF THE ITO DATED 31.12.2008 INSTEAD OF VACATING THE SA ME AND THE IMPUGNED ORDERS CANNOT BE SUSTAINED. 2. THE CIT(A) HAD CONDUCTED HEARING TILL 06.15 PM O N 29.1.2010 AND THE IMPUGNED ORDER COULD NOT HAVE BEEN PASSED BY HI M ON THE SAME DAY ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 2 OF 42 AND THE IMPUGNED ORDER APPEARS TO HAVE ALREADY BEEN PREPARED AND KEPT READY AND THE VARIOUS FACTUAL AND LEGAL SUBMISSIONS CONTAINED IN THE SUBMISSIONS WITH CASE LAW FILED ON 27.1.2010 AND EX PLAINED ON 29.1.2010 FROM 3.00 PM TO 6.15 PM HAD BEEN ALTOGETHER DISREGA RDED AND ALL THE BINDING DECISIONS OF THE SUPREME COURT AND THE HIGH COURTS REFERRED TO AND RELIED UPON BY THE APPELLANT HAD NOT BEEN FOLLOWED AND HENCE THE IMPUGNED ORDER IS TOTALLY UNSUSTAINABLE AND UNAUTHO RISED BOTH ON FACTS AND IN LAW. 3. THE RESPONDENT PASSED THE ILLEGAL ORDER OF ASSES SMENT DATED 31.12.2008 IN CLEAR VIOLATION OF NATURAL JUSTICE AS NO SHOW CAUSE NOTICE AND NO EFFECTIVE OPPORTUNITY OF PERSONAL HEARING IN REG ARD TO THE PROPOSED ADDITION UNDER THE HEAD BUSINESS AND ENHANCEMENT OF THE TAX LIABILITY BY SPLITTING THE CONSIDERATION FOR TRANSFER OF SHARES , REFLECTED IN THE IMPUGNED ORDER HAD NOT BEEN GIVEN EARLIER TO THE ASSESSEE TO INDICATE WHAT IS THE CASE OF THE DEPARTMENT WHICH THE ASSESSEE WAS REQUI RED TO MEET AND INSPITE OF THE FLAGRANT VIOLATION OF NATURAL JUSTIC E HAVING BEEN POINTED OUT AND EXPLAINED BEFORE THE CIT(A) HE HAS DISREGARDED THE SAME TO CONFIRM THE IMPUGNED ILLEGAL ORDER INSTEAD OF ANNULLING / V ACATING THE SAME, WHICH CANNOT BE JUSTIFIED BOTH ON FACTS AND IN LAW AND TH E IMPUGNED ORDERS BE QUASHED. 4. THE LOWER AUTHORITIES HAVE MISLED THEMSELVES BY MIS-INTERPRETING THE CONTRACT AND RE-WRITING THE TERMS THEREOF TO SH IFT THE CAPITAL GAIN DERIVED BY THE ASSESSEE FOR TAXING THE SAME AS INCO ME FROM BUSINESS INSPITE OF THERE BEING NO BUSINESS WHATSOEVER CARRI ED ON BY THE ASSESSEE AND NO LIABILITY TO TAX ATTRACTED UNDER SECTIONS 28 TO 44D OF THE I.T.ACT AND ALSO BY IGNORING THE FACT THAT SECTION 28(VA) OF TH E I.T.ACT HAS NO APPLICATION AT ALL IN THE FACTS AND CIRCUMSTANCES O F THE CASE. 5. THE AUTHORITIES BELOW HAVE ERRED IN ATTEMPTING T O JUSTIFY THEIR ILLEGAL ACTION AND ALSO THE HOSTILE DISCRIMINATION OF THE A PPELLANT VIS-A-VIS OTHER SHAREHOLDERS WHO HAD ALSO TRANSFERRED THEIR SHARES HELD AS CAPITAL ASSET AND AT THE SAME PRICE WHICH HAD BEEN DULY ACCEPTED IN THEIR CASES AND THE REVENUE CANNOT DISCRIMINATE BETWEEN ONE SHAREHOLDER AND ANOTHER IN REGARD TO TRANSACTIONS FOR TRANSFER OF SHARES UNDER THE SAME AGREEMENT SIMULTANEOUSLY BY ALL OF THEM. 6. THE AUTHORITIES BELOW HAVE ERRED IN IGNORING THE FACT THAT THE ONUS OF PROOF IS SQUARELY ON THE REVENUE TO PROVE WHAT I S APPARENT IS NOT REAL AND SUCH ONUS HAD NOT BEEN DISCHARGED BY THE REVENU E IN THIS CASE AND HENCE THE ASSESSEES PLEAS, RECORDS, DOCUMENTS SUBM ISSIONS AND TRANSACTIONS CANNOT BE DISREGARDED OR MODIFIED UNIL ATERALLY BY THE REVENUE TO CREATE ARTIFICIAL BUSINESS INCOME WHEN NO BUSINE SS WHATSOEVER HAS BEEN CARRIED ON BY THE APPELLANT WHO IS ONLY AN EMPLOYEE -CUM-SHAREHOLDER AND NOT DOING ANY BUSINESS WHATSOEVER. 7. THE AUTHORITIES BELOW HAVE ERRED IN IMAGINING A BUSINESS AND ATTRIBUTING INCOME THERETO WHICH THE ASSESSEE HAD N EITHER CARRIED ON NOR ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 3 OF 42 DERIVED AND NO JURISDICTION IS VESTED IN THE LOWER AUTHORITIES TO SHIFT AND SPLIT THE CONSIDERATION FOR TRANSFER OF SHARES HELD AS CAPITAL ASSET AS BUSINESS INCOME AND SECTIONS 14 AND 45 DO NOT EMPOW ER THE REVENUE TO DO SO. 8. THE LOWER AUTHORITIES HAVE ERRED IN PASSING THE IMPUGNED ILLEGAL ORDERS IN CLEAR DISREGARD OF THE BINDING STATUTORY PROVISIONS AND THE VARIOUS JUDGEMENTS OF THE SUPREME COURT AND THE HIGH COURTS BROUGHT TO THEIR NOTICE AND THE IMPUGNED ORDERS PERVERSELY AND VEXAT IOUSLY PASSED CANNOT BE SUSTAINED BOTH ON FACTS AND IN LAW. 9. THE FIRST APPELLATE AUTHORITY AS WELL AS THE ITO HAD ERRED IN ADOPTING A REVENUE BIAS AND PREJUDICED APPROACH TO REACH ERRONEOUS CONCLUSIONS CONTRARY TO THE STATUTORY MANDATE IN RE GARD TO DIFFERENT HEADS OF INCOME AND COMPUTATION OF INCOME THEREUNDER WHIC H THEY CANNOT CHANGE ACCORDING TO THEIR WHIMS TO RAISE ILLEGAL DE MANDS BY IMPOSING HIGHER RATE OF TAX OF 30% ON ASSUMED BUSINESS INCOM E AS AGAINST LONG TERM CAPITAL GAIN RIGHTLY SHOWN BY THE ASSESSEE AND TAX PAID @ 20% THEREON. 10. THE ENTIRE DISPUTED ILLEGAL DEMAND OF TAX AND I NTEREST AS WELL AS PENALTY ATTRIBUTABLE TO THE PERVERSE CHANGE IN THE HEAD OF INCOME AND RATE OF TAX RESORTED TO BY THE REVENUE IS ARBITRARY AND UNAUTHORISED BY LAW AND HENCE LIABLE TO BE QUASHED IN THIS APPEAL. (A.1) DURING THE APPELLATE PROCEEDINGS IN INCOME TAX AP PELLATE TRIBUNAL (ITAT, FOR SHORT), THE ASSESSEE SUMMARIZED THE AFORESAID G ROUNDS OF APPEAL INTO CONCISE GROUNDS OF APPEAL, WHICH ARE REPRODUCED AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE IMP UGNED ILLEGAL ORDER OF THE ITO DATED 31.12.2008 AND THE ENTIRE DISPUTED ILLEGA L DEMAND OF TAX AND INTEREST AS WELL AS PENALTY ATTRIBUTABLE TO THE PER VERSE CHANGE IN THE HEAD OF INCOME AND RATE OF TAX RESORTED TO BY THE REVENUE I S ARBITRARY AND UNAUTHORISED BY LAW AND HENCE LIABLE TO BE QUASHED IN THIS APPEAL. 2. THE CIT(A) HAD CONDUCTED HEARING TILL 06.15 PM O N 29.1.2010 AND THE IMPUGNED ORDER COULD NOT HAVE BEEN PASSED BY HI M ON THE SAME DAY AND THE IMPUGNED ORDER APPEARS TO HAVE ALREADY BEEN PREPARED AND KEPT READY AND THE VARIOUS FACTUAL AND LEGAL SUBMISSIONS CONTAINED IN THE SUBMISSIONS WITH CASE LAW FILED ON 27.1.2010 AND EX PLAINED ON 29.1.2010 FROM 3.00 PM TO 6.15 PM HAD BEEN ALTOGETHER DISREGA RDED AND ALL THE BINDING DECISIONS OF THE SUPREME COURT AND THE HIGH COURTS REFERRED TO AND ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 4 OF 42 RELIED UPON BY THE APPELLANT HAD NOT BEEN FOLLOWED AND HENCE THE IMPUGNED ORDER IS TOTALLY UNSUSTAINABLE AND UNAUTHORISED BOT H ON FACTS AND IN LAW. 3. THE RESPONDENT PASSED THE ILLEGAL ORDER OF ASSES SMENT DATED 31.12.2008 IN DEAR VIOLATION OF NATURAL JUSTICE WIT HOUT ISSUING SHOW CAUSE NOTICE AND EFFECTIVE OPPORTUNITY OF PERSONAL HEARIN G AND WITHOUT DISCHARGING ONUS TO PROVE THAT WHAT IS APPARENT IS NOT REAL. 4. THE LOWER AUTHORITIES HAVE MISLED THEMSELVES BY MISINTERPRETING THE CONTRACT TO SHIFT THE CAPITAL GAIN DERIVED BY THE A SSESSEE FOR TAXING THE SAME AS INCOME FROM BUSINESS INSPITE OF THERE BEING NO B USINESS WHATSOEVER CARRIED ON BY THE ASSESSEE AND HO LIABILITY TO TAX ATTRACTED UNDER SEC .IONS 28 TO 44D OF THE I.T.ACT AND ALSO BY IGNORING THE F ACT THAT SECTION 28(VA) OF THE I.T.ACT HAS NO APPLICATION AT ALL IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE AUTHORITIES BELOW HAVE ERRED IN ATTEMPTING T O JUSTIFY THEIR ILLEGAL ACTION AND ALSO THE HOSTILE DISCRIMINATION OF THE A PPELLANT VIS-A-VIS OTHER SHAREHOLDERS WHO HAD ALSO TRANSFERRED THEIR SHARES HELD AS CAPITAL ASSET AND - AT THE SAME PRICE WHICH HAD BEEN DULY ACCEPTED IN T HEIR CASES AND THE REVENUE CANNOT DISCRIMINATE BETWEEN ONE SHAREHOLDER AND ANOTHER IN REGARD TO TRANSACTIONS FOR TRANSFER OF SHARES UNDER THE SA ME AGREEMENT SIMULTANEOUSLY BY ALL OF THEM. 6. THE AUTHORITIES BELOW HAVE ERRED IN IMAGINING A BUSINESS AND IN ADOPTING A REVENUE BIAS AND PREJUDICED APPROACH TO REACH ERRONEOUS CONCLUSIONS CONTRARY TO THE STATUTORY MANDATE IN RE GARD TO DIFFERENT HEADS OF INCOME AND COMPUTATION OF INCOME THERE UNDER WHICH THEY CANNOT CHANGE ACCORDING TO THEIR WHIMS TO RAISE ILLEGAL DEMANDS B Y IMPOSING HIGHER RATE OF TAX OF 30% ON ASSUMED BUSINESS INCOME AS AGAINST LO NG TERM CAPITAL GAIN RIGHTLY SHOWN BY THE ASSESSEE AND TAX PAID @ 20% TH EREON. (B) ASSESSMENT ORDER UNDER SECTION 143(3) OF INCOME TA X ACT, 1961 (I.T. ACT, FOR SHORT) WAS PASSED ON 31.12.2008. IN THIS ASSES SMENT ORDER INCOME AMOUNTING TO RS. 1,32,11,569/- OFFERED BY THE ASSESSEE IN THE RETURN OF INCOME AS LONG TERM CAPITAL GAIN WAS SPLIT INTO TWO PARTS BY THE ASSESS ING OFFICER (AO, FOR SHORT). IN RESPECT OF THE FIRST PART, AMOUNTING TO RS. 17,92,5 44/-, THE AO ACCEPTED THE ASSESSEES CLAIM FOR LONG TERM CAPITAL GAIN. AN AS SESSED CORRESPONDENCE AMOUNT TO RS. 17,10,906/- AS LONG TERM CAPITAL GAIN BY ALLOWI NG INDEX COST OF RS. 81,638/-. ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 5 OF 42 HOWEVER, THE REMAINING AMOUNT OF RS. 1,15,00,663/- WAS ASSESSED AS INCOME OF BUSINESS OR PROFESSION. RELEVANT PORTION OF THE AS SESSMENT ORDER DATED 31.12.2008 IS REPRODUCED AS UNDER: 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED THAT THE ASSESSEE HAS CLAIMED THE FOLLOWING AND THE SAME ARE BEING DEALT WITH SEPARATELY AS DISCUSSED ON THE BASIS OF FACTS AND M ATERIAL ON RECORD. ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 6 OF 42 ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 7 OF 42 ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 8 OF 42 ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 9 OF 42 (C) THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). VIDE IMPUGNED APPELLATE ORDER DATED 29.01.2010 OF LD. CIT(A) CONFIRMED THE ACTION OF THE AO ON THIS POINT. THE RELEVANT PORTION OF ORDER DATED 29.01.2010 OF LD. C IT(A) IS REPRODUCED AS UNDER: 2. THE FIRST ISSUE WHICH FALLS FOR CONSIDERATION R ELATES TO AN ADDITION OF RS 1,15,00,663/- MADE BY THE AO TREATING PART OF CONSI DERATION OF RS {.,32,11,569 RECEIVED BY THE APPELLANT DURING THE YEAR UNDER CON SIDERATION AS A RESULT OF SALE OF 24800 SHARES OF M/S MOMENTUM INDIA (P) LTD, 2.1 BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT 'SHR I.SUNIL GOYAL, THE APPELLANT IS A TECHNICALLY QUALIFIED .PERSON AND HAS LOT' OF EXP ERTISE AMI EXPERIENCE AT MS CONIMAND.THEREFOREIN 'ORDER TO ACCOMPLISH/REALIZE H IS DREAMS, HE ALONGWITH HIS ASSOCIATES NAMELY, SHRI PANKAJ AGGARWAL & SLIRI PRAMOD SAINT (ALL THE THREE PERSONS REFERRED TO AS MANAGEMENT VENDORS IN THE FU TURE REFERENCES) PROMOTED A COMPANY KNOWN AS M/S MOMENTUM INDIA (P) LTD (MIPL) IN SHORT AND IN TERMS OF SHARE HOLDERS V AGREEMENT DATED 01- 04-2000, HE WAS GRANTED 9900 SHARES OF THE SAID, COMPANY. THEREAFTER, IN DU E COURSE MORE SHARES WERE ACQUIRED BY HIM AS BONUS SHARES AND AT THE TIM E OF AGREEMENT WITH M/ S NEWELL & BUDGE HOLDINGS LTD (N & B), EDINBURGH,UK HE WAS HOLDING 248000 SHARES OF MIPL. 2.1.1 APART FRONT BEING SHARE HOLDER, HE WAS ALSO IN THE EMPLOYMENT OF THE COMPANY AND WAS CLOSELY ASSOCIATED/ENGAGED IN T HE SOFTWARE DEVELOPMENT, WHICH WAS THE MAIN, PROBABLY ONLY, ACT IVITY OF MIPL. 2.1.2 AS MENTIONED EARLIER, ON 21-10-2004, THE ASSESSEE ALONGWITH OTHER ASSOCIATES ENTERED INTO AN AGREEMENT WITH M/S NEWELL & ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 10 OF 42 BUDGE HOLDINGS LTD, WHEREIN APART FROM THE MANAGEME NT VENDORS, NAMELY, THE APPELLANT SHRI PANKAJ AGGARWAL & SHRI P RAMOD SAINI, CITI CORP FINANCE (INDIA) LTD WAS ALSO A PARTY IN T HE CAPACITY OF FINANCIAL VENDOR. 2.1.3 AS PER THE TERMS AND CONDITIONS SET OUT IN THE AGRE EMENT THE APPELLANT SOLD HIS ENTIRE HOLDING OF 248000 SHARES TO M/S NEWELL & BUDGE HOLDING LTD WHICH WERE TRANSFERRED TO THE BUY ER IN TWO INSTALLMENTS I.E. 223200 SHARES IN F.Y.2004-05 ASSE SSABLE IN ASSESSMENT YEAR 2005-06 AND BALANCE 24800 SHARES IN F.Y.2005- 06 WHICH ARE SUBJECT MATTER OF PRESENT APPEAL. AS P ER THE AGREEMENT WHILE THE SALE PRICE OF 223200 SHARES SOL D IN THE F.Y.2004-0S WAS FIXED AT RS 72.28 PER SHARE, THE SA LE PRICE OF 24800 SHARES WAS DETERMINED AT RS 536,02 PER SHARE. HOWEVER, THE SALE PRICE OF RS 536.02 PER SHARE WAS SUBJECT T O FULFILLMENT OF CERTAIN CONDITIONS/OBSERVANCE OF CERTAIN RESTRICTIO NS PLACED ON THE APPELLANT ASSESSEE, DISCUSSION OF WHICH WILL BE MAD E AT APPROPRIATE STAGE IN THIS ORDER. 2.1.4 AS REGARDS SHARES SOLD BY THE APPELLANT DURING THE F.Y.2004-05, THE SALE CONSIDERATION WAS DISCLOSED BY HIM AS CAPI TAL GAINS AND THE SAME WAS ACCEPTED BY THE DEPARTMENT. IN THE YEA R UNDER CONSIDERATION ALSO THE ASSESSEE DISCLOSED THE ENTIR E CONSIDERATION OF RS 1,32,11,569/- AS CAPITAL GAINS ONLY. HOWEVER, THIS TIME THE LD.AO DISAGREED WITH THE APPELLANT AND INSTEAD OF A CCEPTING THE ENTIRE SUM OF RS 1,32,11,569. HE ACCEPTED ONLY A SU M OF RS 17,10,906/- CALCULATED AT THE RATE OF RS 72.28 PER SHARE AS IN THE LAST YEAR AS CAPITAL GAINS AND BALANCE OF RS 1,15,0 0,663/- WAS TREATED BY HIM AS INCOME FROM BUSINESS OR PROFESSIO N IN TERMS OF SECTION 28(VA) OF THE ACT. 2.2 FOR THE SAKE OF CONVENIENCE, THE FINDINGS RECORDED BY THE LD.AO IN THIS REGARD ARE BEING EXTRACTED AS BELOW 3. LONG TERM CAPITAL GAINS FROM SALE OF SHARES OF M/S M OMENTUM INDIA PVT LTD:- DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAS SOLD 24800 SHARES OF M/S MOMENTUM INDIA PVT LTD (MIPL). THESE SHARES HAVE BE EN SOLD AT PRICE OF RS 536.02. THE TOTAL CONSIDERATION RECEIVED BY THE ASS ESSEE IS SHOWN AT RS 1,32,93,207/-. ON THIS SALE CONSIDERATION THE ASSE SSEE HAS SHOWN CAPITAL GAIN OF RS 132,11,569/-, THIS AMOUNT HAS HAS BEEN OFFERE D TO TAX AT THE APPLICABLE RATE. ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 11 OF 42 3.1 THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS REGA RDING THE SALE OF THESE SHARES TO M/S NEWELL SC BUDGE HOLDINGS LTD (N & B H OLDINGS LTD), EDINBURGH, UK. IN THE PREVIOUS YEAR 200-06. THE ASSESSEE HAS F ILED THE SALE AND PURCHASE AGREEMENT AMONG M/S NEWELL & BUDGE HOLDING S LTD AND THE SHARE HOLDERS OF M/S MOMENTUM INDIA PVT LTD. THIS AGREEME NT RELATES TO THE, SALE AND PURCHASE OF THE ENTIRE ISSUED SHARE CAPITAL OF MOMENTUM INDIA PVT LTD. THE AGREEMENT IS DATED 21/10/2004 AND IT IS SIGNED BY THE ASSESSEE ALONGWITH THE PURCHASER, FINANCIAL VENDOR AND THE M ANAGEMENT VENDORS. AS PER THIS AGREEMENT, THE ASSESSEE HAS AGREED TO SELL HIS ENTIRE SHARE HOLDING OF 248000 SHARES HELD BY HIM IN MIPL ALONGWITH OTHER K EY PERSONS NAMELY SH.PANKAJ AGGARWAL AND SH, PRATNOD SAINI. THE AGREE MENT ALSO SPECIFIES THE CONSIDERATION (PARA 3.1 TO 3.10), DETAILS REGARDING CONDUCT OF BUSINESS (PARA 6.1 TO 6.5) AND WARRANTIES AND UNDERTAKINGS BY THE VENDORS (PARA 7.1TO7.13). THE AGREEMENT ALSO DISCUSSES IN DETAILS REGARDING T HE PROTECTION OF GOODWILL (PARA 10.1 TO 10.13). IT IS SPECIFICALLY STATED IN THE AGREEMENT THAT NO MODIFICATION OR ALTERATION SHALL BE ENFORCEABLE EXC EPT BY AN AGREEMENT IN WRITING DULY EXECUTED BY ALL THE PARTY. SCHEDULE 1A AND IB TO THE AGREEMENT GIVE THE DETAILS OF THE SHARE CAPITAL, DIRECTORS OF MIPL AND SCHEDULE OF PAYMENT TO THE ASSESSEE AND OTHER KEY PERSONS CALLE D (MANAGEMENT VENDORS. 3.2 CONSEQUENT TO THE ABOVE AGREEMENT, THE ASSESSEE HAS RECEIVED THE PAYMENTS. MOST OF . THE PAYMENTS HAVE BEEN RECEIVED IN FINANCIAL YEAR 2004- 05. TOTAL NO. OF SHARES SOLD BY THE ASSESSEE IN F.Y . 2004*05 IS 223200, THIS IS 90% OF THE TOTAL SHARE HOLDING OF THE ASSESSEE. THESE .SHARES HAVE BEEN SOLD AT THE RATE OF RS 72,28/-PER SHARE. TOTAL CONS IDERATION RECEIVED HAS BEEN SHOWN RS 1,61,32,896/-(2232O0 X 72.28). THE ASSESSE E HAS COMPUTED AND SHOWN CAPITAL GAINS ON THE ABOVE SALES CONSIDERATIO N IN THE A.Y 2005-06. 3.3 IN THE CURRENT A.Y I.E. 2006-07, THE ASSESSEE HAS HOWEVER SHOWN SALE PRICE PER SHARE AT RS 536.02/, VIZ 2004-05 & 2005-06. THI S IS IN SPITE OF THE FACT THAT THE ORIGINAL AGREEMENT .AS DISCUSSED IN PARA 3 .2 ABOVE, WAS A SINGLE AGREEMENT, RELATED TO THE SALE OF ENTIRE SHARE CAPI TAL OF MIPL AND DID NOT ALLOW ANY ALTERATION/MODIFICATION WITHOUT ANY FURTH ER AGREEMENT IN WRITING EXECUTED BY ALL PARTIES ( NO SUCH SUBSEQUENT AGREEM ENT HAS BEEN FURNISHED BY THE ASSESSEE). THEREFORE, THE TRANSACTION VALUE PER SHARE SHOULD HAVE BEEN UNIFORM, EVEN IF THE PAYMENTS WERE SPREAD OVER A TWO FINANCIAL PERIOD. 3.4 HERE IS PERTINENT TO DISCUSS THE SKILL LEVEL, TECH NICAL EXPERTISE AND THE ROLE OF THE ASSESSEE IN THE AFFAIRS OF M/S MOMENTUM INDIA P VT LTD (THE COMPANY WHOSE SHARES WERE SOLD). THE ASSESSEE IS A KEY DIRE CTOR OF MIPL. HE HAS STARTED THE COMPANY ALONG WITH TWO OTHER PERSONS NA MELY SH. PANKAJ AGGARWAL & SHRI PRAMOD SAINI (ALL THREE REFERRED TO AS MANAGEMENT VENDORS IN THE SALE PURCHASE AGREEMENT. 3.5 VIDE, SHAREHOLDERS AGREEMENT DATED 01/04/20 THE AS SESSEE WAS GRANTED ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 12 OF 42 9920 SHARES OF MIPL. THE REMAINING SHARES WERE ACQU IRED BY WAY OF BONUS SHARES. SOME DEBENTURES WERE ALSO CONVERTED INTO EQ UITY SHARES AND AS ON 28/5/2005, THE TOTAL NO. OF SHARES HELD BY THE ASSE SSEE WERE 248000. ALL THESE SHARES HAVE BEEN SOLD BY THE ASSESSEE TO M/S N & B HOLDINGS LTD, UK. THE MAIN PURPOSE OF STALLING THE COMPANY WAS TO DEV ELOP SOFTWARE PRODUCTS AND TO PROVIDE CONSULTANCY IN THIS REGARD. THE PRIM ARY PURPOSES OF THE COMPANY HAVE BEEN STATED AS TO UNDERTAKE SOFTWARE C ONSULTANCY AND SERVICES FOR EXPORT MARKET, INTERNET AND INTERNET BASED TRAI NING, MULTIMEDIA BASED TRAINING, DEVELOPMENT OF WEBSITES AND. MULTIMEDIA B ASED TITLES ETC. THE SHAREHOLDERS AGREEMENT DATED 01/04/200 MAKES IT AMP LY CLEAR THAT THE ENTERPRISES IS A CLOSELY HELD COMPANY WITH COMPLETE CONTROL IN THE HANDS OF THREE PERSONS (MANAGEMENT VENDORS) INCLUDING THE AS SESSEE. FURTHER, REFERENCE TO THE SALE PURCHASE AGREEMENT E NTERED IN BETWEEN M/S N & B HOLDINGS LTD AND M/S MIPL, CLEARLY BRINGS OUT THE FACT THAT THIS AGREEMENT HAS TO BE IMPLEMENTED AS ONE DOCUMENT AND THERE IS NO SCOPE FOR ENHANCED RATE PAYMENT IN RESPECT OF THE SHAREHO LDINGS OF THE ASSESSEE AND OTHER MANAGEMENT VENDORS. PARA 22.1 OF THE AGRE EMENT STATES UNDER- 22.1: THIS AGREEMENT, THE DISCLOSURE LETTER AND T HE OTHER DOCUMENTS TO BE DELIVERED AT COMPLETION IN ACCORDANCE WITH PART 2B OF THE SCHEDULE CONTAIN THE ENTIRE AGREEMENT BETWEEN THE PARTIES OR ANY OF THEM WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT AND SHA LL ( SAVE WHERE THERE HAS BEEN A FRAUDULENT MISREPRESENTATION) SUPERSEDE ALL PRIOR PROPOSALS, REPRESENTATIONS, AGREEMENTS AND NEGOTIATIONS RELATI NG THERETO WHETHER WRITTEN, ORAL OR IMPLIED, BETWEEN THE PARTIES OR AN Y OF THEM OR THEIR RESPECTIVE ADVISERS PR ANY OF THEM AND NO MODIFICAT ION OR ALTERATION OF THIS AGREEMENT SHALL BE ENFORCEABLE EXCEPT BY AN AMENDME NT IN WRITING DULY EXECUTED BY ALL THE PARTIES HERETO OR, IN THE CASE OF A WAIVER, DULY EXECUTED BY THE PARTY WAIVING COMPLIANCE,(NO SUBSEQUENT AGR EEMENT HAS BEEN FURNISHED). 3.7 CONSIDERING THE FACTS DISCUSSED ABOVE, IT IS AM PLY CLEAR THAT THE ASSESSEE IS ONE OF THE KEY PERSON WHO IS IN THE OVE RALL MANAGEMENT CONTROL OF M/S MIPL. HE HAS ACQUIRED THE SHARES OF MIPL WIT HOUT MAKING ANY SUBSTANTIAL PAYMENT AND ON THE BASIS OF HIS TECHNIC AL AND MANAGEMENT EXPERTISE. THE SALE OF HIS SHARES IN MIPL WAS INITI ALLY MADE AT THE RATE OF RS 72,28/- PER SHARE IN THE FY 2004-05. HOWEVER, THE S ALE PRICE PER SHARE HAS BEEN INCREASED TO RS 536.02/- IN THE FY 2005-06. TH IS IS IN SPITE OF THE FACT THAT THE SAME AGREEMENT FORMS THE BASIS OF THE SALE OF ALL THE SHARES HELD BY THE ASSESSEE. THEREFORE, THE ONLY CONCLUSION THA T COULD BE DRAWN IS THAT THE EXCESS AMOUNT OF RS 463,74/-(536.02- 72.28) PER SHARE RECEIVED BY THE ASSESSEE IS ON ACCOUNT OF THE TECHNICAL EXPERTISE O F THE ASSESSEE IN THE FIELD OF SOFTWARE DEVELOPMENT. THIS AMOUNT HAS BEEN RECEI VED FOR NOT CARRYING OUT ACTIVITIES IN RELATION TO THE BUSINESS OF MIPL AND FOR NOT SHARING KNOW - HOW, COPYRIGHT, PATENT OR ANY OTHER BUSINESS OR COM MERCIAL RIGHT OF SIMILAR NATURE OR . INFORMATION OR TECHNIQUE/TECHNOLOGY REL ATED TO THE SOFTWARES ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 13 OF 42 TOOLS BEING DEVELOPED BY MIPL. EFFECTIVELY, THE EXC ESS PAYMENT OF RS 463.74/- MADE TO THE ASSESSEE BY N& B HOLDINGS LTD, IS TO RESTRAIN THE ASSESSEE FROM INDULGING IN COMPETITION OR SHARING I NFORMATION WITH BUSINESS RIVALS. HENCE, THIS CONSIDERATION IS CHARGEABLE TO INCOME TAX UNDER THE HEAD PROFITS & GAINS OF BUSINESS OR PROFESSION AS PER THE PROVISION OF SECTION 28(VA) OF THE IT ACT, 1961. 2.3 BEING AGGRIEVED BY THE AFORESAID ACTION OF THE AO, THE ASSESSEE IS IN PRESENT APPEAL. 3. IN THE COURSE OF APPELLATE PROCEEDINGS LD. COUNSEL APPEARING ON BEHALF OF THE APPELLANT HAVE VEHEMENTLY ARGUED AND SUBMITTED THAT THE ACTION OF THE AO IS NOT SUSTAINABLE EITHER ON FACTS OR IN LAW. THE CASE OF THE LD. COUNSELS IS THAT THE LAW DOES NOT GIVE ANY POWER TO THE AO TO EITHER TINKER WITH THE CONSIDERATION DECLARED BY THE ASSESSEE OR TO CHANGE THE NATURE OF A PARTICULAR RECEIPT DECLARED BY HIM. IT IS SUBMITTED BY THE LD. COUNSELS THAT THE IAAO HAS TOTALLY IGNORED THE FACT THAT APART FROM MANAGEMENT VENDORS, THERE WERE OTHER SHARE HOLDERS ALSO LIKE CITI BANK ETC WHO WER E ALSO PAID THE IDENTICAL SALE CONSIDERATION AND THEREFORE, THE CONDITIONS PL ACED ON THE APPELLANT AND OTHER MANAGEMENT VENDORS WERE OF NO CONSEQUENCE SO FAR AS THE TAXABILITY OF CONSIDERATION IS CONCERNED. AS REGARDS APPLICABILITY OF PROVISIONS OF SECTION 2 8(VA) OF THE ACT, THE CASE OF THE LD. COUNSELS IS THAT THE ACTION OF THE AO IN SO FAR AS HE WANTED TO SPLIT THE CONSIDERATION IN TWO PARTS, I.E. CAPITAL GAINS AND BUSINESS INCOME WAS NOT IN ACCORDANCE WITH THE LAW. THE LD. COUNSELS FURTHE R SUBMIT THAT THE CONDITIONS/RESTRICTIONS PLACED ON THE MANAGEMENT VE NDORS WERE ONLY WITH A VIEW TO ENSURE THAT THE BUSINESS TO BE CONDUCTED BY M/S NEWELL & BUDGE HOLDINGS LTD SHOULD NOT GET AFFECTED IN THE INITIAL YEARS OF TAKE OVER AND IT SHOULD REST AT THAT AND NO FURTHER READING INTO THE CLAUSES OF AGREEMENTS IS REQUIRED. IN FURTHERANCE OF THESE ARGUMENTS, THE LD . COUNSELS HAVE ALSO MADE DETAILED WRITTEN ARGUMENTS AS UNDER- ARGUMENTS OF ASSESSING OFFICER REBUFFED 1. THE BASIC ASSUMPTION OF LD. A.O. THAT AS PER THE AG REEMENT, IT COULD HAVE BEEN AMENDED ONLY BY A SUBSEQUENT AGREEMENT IS CONTRARY TO RECORD. PARA 22 OF THE AGREEMENT (REPRODUCED AT PAG E 5 OF ASSESSMENT ORDER) CLEARLY PROVIDES THAT AN AMENDMEN T IN WRITING CAN BE INTRODUCED IN THE AGREEMENT. THERE HAD BEEN A GR OSS MISINTERPRETATION OF THE AGREEMENT BY LD. A.O. IN T HIS REGARD. 2. THERE IS NOTHING IN THE AGREEMENT WHICH SAY THAT T RANSACTION VALUE OF THE SHARES SOLD IN ALL PARTS' SHALL BE SAME, AS ASS UMED BY LD. A.O. ON THE CONTRARY THE AGREEMENT CLEARLY PROVIDES THAT VA LUE OF 14,57,322 SHARES INITIAL SHARES (TO BE TRANSFERRED IN A.Y. 20 05 - 06) SHALL BE GBP 14,00,000 (PLEASE REFER PART IB AND 9 OF THE SCHEDU LE TO THE AGREEMENT) TRANSLATING INTO PRICE OF GBP .96 PER SHARE WHEREAS FOR 45000 SHARES EACH (INCLUDING 6200 SHARES EACH O F THE ASSESSEE) TO ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 14 OF 42 BE TRANSFERRED IN FIRST AND SECOND PART AFTER INITI AL SHARES (PLEASE REFER PART IB AND 9 OF THE SCHEDULE TO THE AGREEMENT) CON SIDERATION WAS FIXED AT GBP 3,00,000 EACH (PLEASE REFER DEFINITION S OF FIRST ADDITIONAL CONSIDERATION AND SECOND ADDITIONAL CONSIDERATION I N PART 7 OF THE SCHEDULE) TRANSLATING INTO PRICE OF GBP 6.67 PER SHARE . SIMILARLY, PART 7 AND 8 OF THE SCHEDULE TO THE AGREEMENT ALSO PRESCRIBES THE METHOD OF COMPUTATION OF CONSIDERATION FOR OTHER PA RTS OF SHARES IN MIPL TOTALING 76000 SHARES INCLUDING 12,400 OF THE ASSESSEE. THE CONSIDERATION COULD HAVE VARIED FROM 0 TO GBP 5,5 0,000 OR MAXIMUM UP TO GBP 7.24PER SHARE. 3. THERE IS NO CLAUSE IN THE AGREEMENT WHICH PRESCRIB ES THAT CONSIDERATION CAN NOT BE ENHANCED AND THE ORDER OF LD. A.O. IS AGAIN FACTUALLY INCORRECT IN THIS REGARD. 4. IN ANY CASE AND WITHOUT PREJUDICE TO ABOVE, IT IS A FACT THAT THE ASSESSEE HAS SOLD ALL THE IMPUGNED SHARES AT RS. 53 6.02 PER SHARE - A CLEAR AND UNAMBIGUOUS AND UNDISPUTED FACT. AS FAR A S INCOME TAX LIABILITY IS CONCERNED THE SAME HAD TO BE WORKED OU T ON THE BASIS OF CONSIDERATION RECEIVED AND COST OF ACQUISITION. EVE N IF PRESUMED THAT SOME TERM OF THE AGREEMENT WAS NOT COMPLIED WITH, I T DOES NOT CHANGE THE CHARACTER OF THE INCOME. IF THE ASSESSEE HAS SOLD A CAPITAL ASSET THEN IF AT ALL SOME TERMS AGREED BETWEEN THE PARTIES WAS NOT COMPLIED WITH OR THE PARTIES DID NOT ADHERE TO THE TIME SCHEDULE, IT DOES NOT FOLLOW THAT NATURE OF INCOME EARNED WOULD CHANGE. THE RESULTANT INCOME REMAINS THE SAME- CAPITAL GAIN IN THE INSTANT CASE. THUS, THE REASONING OF LD. A.O. REGARDING UNIFORM T RANSACTION VALUE AND NON-AMENDMENT OF THE AGREEMENT IS NOT ONLY FACT UALLY INCORRECT BUT ALSO IRRELEVANT. 5. COMING TO THE MAIN ARGUMENT OF LD. A.O. THAT DIFFE RENCE IN THE CONSIDERATION PER SHARE FOR SHARES TRANSFERRED IN D IFFERENT YEARS IS ON ACCOUNT OF HIS TECHNICAL EXPERTISE IN THE FIELD OF SOFTWARE DEVELOPMENT AND THUS, CHARGEABLE U/S 28 (VA) OF THE ACT, THERE IS NOTHING OF SUCH SORT MENTIONED IN THE AGREEMENT. IT IS CORRECT THAT THE ASSESSEE HAD BEEN ABLE TO COMMAND HIGH PRICE FOR PART OF HIS SHA RES DUE TO THE FACT THAT HIS ASSOCIATION WITH MIPL AS AN EMPLOYEE WOULD HAVE INCREASED ITS PROFITS AND, HENCE, SHARE PRICE. BUT IT DOES NO T FOLLOW FROM IT THAT RESULTANT RISE IN PRICE IS TAXABLE U/S 28 (VA), LD. A.O. SEEMS TO HAVE BEEN CONFUSED BETWEEN CAPACITY' OF THE ASSESSEE AS SHARE HOLDER AND AS AN EMPLOYEE. IF AN EMPLOYEE WORKS HARD AND MAKES HIS COMPANY EARN MORE, IN TURN, INCREASING VALUE OF HIS SHARES HELD IN THE COMPANY THEN THE SAME DOES NOT BECOME BUSINESS GAIN OR SALA RY. FOR HIS SERVICES, EMPLOYEE IS GETTING THE SALARY AND ENHANC ED VALUE OF SHARES IS A CAPITAL GAIN FOR HOLDING A CAPITAL ASSET, IN T HIS CASE SHARES OF THE COMPANY. GOING BY THE LOGIC OF LD. A.O. SALE OF EVE RY ESOP BY AN EMPLOYEE WOULD BE BUSINESS PROFIT AND NOT CAPITAL G AINS WHICH IS NOT SO. 6. IN ANY CASE SECTION 28 (VA) DEALS WITH ENTIRELY DI FFERENT SUBJECT ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 15 OF 42 MATTER VIZ. ANY SUM RECEIVED/ RECEIVABLE UNDER AN A GREEMENT FOR NOT CARRYING OUT ANY ACTIVITY IN RELATION TO ANY BUSINE SS OR NOT SHARING ANY KNOW-HOW, PATENTS, COPYRIGHTS, ANY OTHER COMMERCIAL OR BUSINESS RIGHTS OF SIMILAR NATURE, ETC. IN PRESENT CASE, THE RE IS NO MENTION OF ANY SUCH PAYMENT IN THE AGREEMENT. 7. FURTHER, IF THE APPROACH ADOPTED BY LD. A.O. IS UPH ELD THEN IT MEANS THAT WHEN THE ASSESSEE SOLD ITS SHARES FOR RS . 72.28 PER SHARE, THERE WAS NO ELEMENT OF CONSIDERATION FOR TECHNICAL EXPERTISE OF THE ASSESSEE IN IT AND THAT TOO WHEN THESE SHARES ACCOU NTED FOR 90% OF THE TOTAL SHARES. IT ALSO FOLLOWS THAT IF THE ASSES SEE WOULD HAVE TRANSFERRED ONLY 90 % OF HIS HOLDING TO THE N & B, HE WAS NOT BOUND BY THE ALLEGED NON-COMPETE CLAUSE SINCE THERE IS NO CONSIDERATION FOR IT IN RS. 72.28 AS PER LD. A.O. IT WOULD BE COMPLET E MISINTERPRETATION OF THE AGREEMENT. 8. IT MAY PLEASE BE APPRECIATED THAT ANY BENEFIT THAT HAD, IS BEING OR WILL ACCRUE TO THE COMPANY WOULD BE REFLECTED IN TH E PRICES OF ITS SHARES. THE PRICE OF THE IMPUGNED SHARES HAS BEEN F IXED ON BASIS OF SUCH CONDITIONS ONLY THAT CONTEMPLATES THE HIGHER P RICE DUE TO HIGH FUTURE EARNING CAPACITY. FOR THE PURCHASE OF 12,400 SHARES MENTIONED IN PARA 3.3 AND 3.4, IT WAS NECESSARY FOR THE ASSES SEE TO BE IN EMPLOYMENT OF MIPL NATURALLY, IT WAS DECIDED BY N & B THAT IF THE ASSESSEE CONTINUES ON THE ROLL OF -MIPL, HE WILL BE ABLE TO BRING IN FURTHER VALUE TO THE COMPANY. THIS FACT IS A MATTER OF RECORD AND IS VERY WELL ACCEPTED BY THE ASSESSING OFFICER ALSO IN MS ORDER ALSO THAT THE ASSESSEE HAD ADDED VERY SIGNIFICANT VALUES TO T HE, COMPANY AND HE IS ONE OF THE KEY PERSONS IN THE OVERALL MANAGEM ENT CONTROL OF MIPL THUS, N & B OFFERED HIGH RATE FOR THE REMAININ G SHARES. SIMILARLY IT MAY PLEASE BE SEEN THAT HIGHER RATES FOR OTHER P ART OF SHAREHOLDING WERE ALSO BASED ON BETTER PERFORMANCE OF THE COMPAN Y IN THE FORTHCOMING PERIOD. THEREFORE, EVEN THE COMMERCIAL LOGICAL OF THE HIGHER PRICE IS ALSO EXPLICIT THOUGH THE PARTIES AR E FREE TO DETERMINE THEIR OWN COMMERCIAL TERMS WHATSOEVER. 9. THERE IS NO DISPUTE REGARDING THE FACT THAT THE SUB JECT MATTER OF THE AGREEMENT IS ONLY THE TRANSFER OF SHARES. THE O NLY CAPITAL ASSET THAT HAS BEEN TRANSFERRED IS THE SHARES. THE CONSID ERATION STIPULATED IN THE AGREEMENT IS AGAINST SUCH SHARES ONLY. THAT BEI NG SO, THERE IS NO QUESTION OF ANY GAINS OTHER THAT CAPITAL GAIN ON SA LE OF THESE SHARES. 10. THE ONLY CONSIDERATION STIPULATED IN THE AGREEMENT IS AGAINST THE SALE OF THE SHARES. NOWHERE IS ANY MENTION IN THE A GREEMENT THAT THE CONSIDERATION IS FOR ANY THING OTHER THAN SHARES. 11. THERE IS A MENTION OF TERM MANAGEMENT VENDOR IN THE AGREEMENT WHICH SIMPLY IMPLIES THAT THE INDIVIDUAL SELLERS (INCLUDING THE ASSESSEE) WERE ALSO IN THE CONTROL OF THE AFFAI RS OF THE COMPANY. ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 16 OF 42 THIS IS A NORMAL RIGHT ATTACHED TO SHAREHOLDING. IN ANY CASE, NO CONSIDERATION HAS BEEN PAID FOR SUCH RIGHT SEPARATE LY. AND FURTHER, IN ANY CASE, EVEN TRANSFER OF MANAGEMENT RIGHTS WOULD HAVE ALSO ATTRACTED CAPITAL GAINS ONLY. THUS, VIEWED FROM ANY ANGLE, THE TRANSACTION WOULD HAVE RESULTED IN CAPITAL GAIN ONL Y. 12. THE INCREASE IN PRICE FOR THE IMPUGNED SHARES IS ON LY DUE TO THE DIFFERENT MECHANISM OF CALCULATION ADOPTED IN THE A GREEMENT. 13. THE CAPITAL GAIN ON THE SALE OF IMPUGNED SHARES HAS BEEN DULY DISCLOSED IN RETURN BY THE ASSESSEE. 14. AN AGREEMENT HAS TO BE READ IN ITS ENTIRETY. THE NE T RESULT OF THE AGREEMENT IS THAT SHARES HAVE EXCHANGED HANDS FOR A CONSIDERATION SUBJECT TO TERMS AND CONDITIONS FIXED BETWEEN PARTI ES. IF A PART OF THE CONSIDERATION IS TAXABLE IN ONE YEAR AND OTHER IN A NOTHER YEAR OR IF THERE IS SOME DIFFERENCE IN CONSIDERATION FOR DIFFE RENT .PARTS OF SHARES, THEN IT DOES NOT FOLLOW THAT THEY ARE SEPARATE AND ARE NOT PART OF SAME AGREEMENT OR HAVE SEPARATE NATURE. IN PRESENT CASE, THERE IS A TRANSFER OF ASSETS AND THERE IS A CONSIDERATION FOR IT. THERE IS NO CONSIDERATION FOR ANY OTHER THING. 15. IT IS THE PREROGATIVE OF THE ASSESSEE AND PARTIES TO COMMERCIAL AGREEMENTS TO DECIDE THEIR TERMS AND CONSIDERATION. UNLESS THERE IS SPECIFIC ENUMERATION IN THE LAW THAT A PARTICULAR C ONSIDERATION SHALL BE TREATED IN A PARTICULAR MANNER, THE WILL AND INTENT ION OF THE PARTIES SHALL PREVAIL. FOR DIFFERENT PARTS PRICING CAN BE D ONE DIFFERENTLY BY THE PARTIES. 16. YOUR GOOD SELF WOULD KINDLY APPRECIATE THAT IT IS A LSO TRITE LAW THAT APPARENT SHALL NOT TO BE DISTURBED UNLESS THERE IS EVIDENCE FOR PROVING BEYOND DOUBTS THAT APPARENT IS NOT REAL. MERE SURMI SES ARE NOT SUFFICIENT TO ASSUME THAT APPARENT IS NOT REAL. 17. IN THE PRESENT CASE THERE IS NOT EVEN SINGLE EVIDE NCE ON RECORD BY WHICH IT CAN BE EVEN PRESUMED THAT CONSIDERATION HA D BEEN PAID FOR ANY THING OTHER THAN SHARES. 18. THERE IS NO WHERE ANY MENTION IN ANY OF THE AGREEME NT WHICH EVEN REMOTELY SUGGESTS THAT PAYMENT IS FOR ANY THIN G OTHER THAN FOR SHARES. 19. IT HAS BEEN HIMSELF MENTIONED BY LD. AO THAT IN TAX LAW THERE IS NO EQUITY. NOTHING CAN BE READ INTO AND NOTHING IS TO BE IMPLIED. BUT VERY APPROACH OF LD. AO IN THE CASE IS TO PRESUME T HE FACTS. 20. THERE IS MENTION OF BY LD, AO THAT HE IS EMPOWERED TO GO BEHIND APPARENT AND LOOK INTO REAL. INDEED SO, BUT THEN TH E ONUS TO PROVE ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 17 OF 42 THAT APPARENT IS NOT REAL WOULD BE UPON AO ONLY. IN PRESENT CASE, THERE IS NOTHING ON RECORD WHICH SAYS THAT ANY PAYM ENT HAS BEEN MADE FOR NOT CARRYING ANY ACTIVITY IN RELATION TO B USINESS OR FOR NOT SHARING ANY IPR, IT IS MERE AND PURE ASSUMPTION. 21. THERE IS MENTION OF BY LD. AO OF COLORABLE DEVICE BEING USED. BUT LD. A.O, HAD FAILED TO PROVE WHAT COLORABLE DEVICE HAS BEEN USED AND HOW. IT IS A BALD ALLEGATION WITHOUT BASIS AND SUBS TANCE. HERE THE SUBJECT MATTER IS AN AGREEMENT BETWEEN A NON RESIDE NT THIRD PARTY AND SHARE HOLDERS OF AN INDIAN COMPANY INCLUDING A REPUTED* FINANCIAL VENDOR. THE AGREEMENT HAS BEEN SUBJECT TO SCRUTINY BY RBI AND FEMA AUTHORITIES AND HAS BEEN EXECUTED ONLY AFTER OBTAIN ING THEIR PETTNISSION. THERE IS NOT AN IOTA OF EVIDENCE FOR A LLEGATION OF LD. A.O, THAT PAYMENT HAS BEEN RECEIVED FOR NOT CARRYING ANY ACTIVITY IN RELATION TO BUSINESS OR FOR NOT SHARING ANY IPR, IN SUCH CIRCUMSTANCES, HOW THE AGREEMENTS SPECIFICALLY APPROVED BY ENFORCE MENT AUTHORITIES LIKE RBI CAN BE SAID TO BE A COLORABLE DEVICE. IT I S JUST A PURE BALD ALLEGATION. SIMILARLY, OBSERVATION OF LD. AO REGARDING LETTER DT. 10.11.2004 OF N & B FORWARDING THE AMENDMENTS IN AGREEMENTS FOLLOWS F ROM HIS MISUNDERSTANDING THAT .AGREEMENT COULD NOT HAVE BEE N AMENDED LEADING HIM TO CONCLUDE THAT A THIRD PARTY EVIDENCE IS MANIPULATED. NO DOUBT THAT TRANSACTION HAS BEEN COMPLETED BEFORE SC HEDULE, BUT IT DOES NOT FOLLOW FTOM IT THAT DOCUMENTS ARE MANIPULA TED. IN FACT, THIS SUPPORTS THE GENUINENESS OF THE DOCUMENT SINCE IN A CTUAL, THE TRANSACTION ' WAS COMPLETED BEFORE SCHEDULE AND IF ASSESSEE WAS TO FILE ANY MANIPULATED DOCUMENT, HE WOULD HAVE FILED SUCH DOCUMENTS WHICH MATCH WITH WHAT HAD BEEN ACTUALLY DONE. IN AN Y CASE, COMPLETION OF A TRANSACTION BEFORE SCHEDULE DOES NO T MEAN THAT AGREEMENT IS MANIPULATED. THERE IS ONE POINT IN THE AGREEMENT WHICH SAYS LIK E THIS THAT IF THERE IS A CHANGE IN THE MANAGEMENT/ SHAREHOLDING OF N&B, THEN THE ENTIRE SHARE LEFT (WITH THE MANAGEMENT VENDOR) WILL BE SOL D IN THAT PARTICULAR YEAR OF SUCH CHANGE SINCE THE N&B WAS TAKEN OVER BY SOPRA GROUP IN THE FY 2005-06, HENCEFORTH THE ENTIRE SHAREHOLDING LEFT BY THE VEND OR WAS TAKEN BY SOPRA GROUP IN FY 2005-06 SO THE PAYMENT WAS RECEIV ED IN THE SAME YEAR. 22. LD, A.O, HAS MIS-APPRECIATED THE FACT IN STATING TH AT CONSIDERATION RECEIVED VARIES FROM THE CONSIDERATION WORKED OUT I N REVISED PART IB. IT MAY PLEASE BE SEEN THAT CONSIDERATION IN PART IB ARE ONLY TENTATIVE AND QUALIFIED AND SECONDLY THAT CONSIDERATION IS IN GBP AND THERE WOULD ALWAYS BE FOREIGN EXCHANGE VALUE DIFFERENCES. IN REVISED SCHEDULE, EXCHANGE RATE HAS BEEN PRESUMED AT 82.3 R S/ GBP WHEREAS ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 18 OF 42 ACTUAL RATE WOULD CERTAINLY DIFFER. HOWEVER, WHAT I S UNDISPUTED FACT IS THAT ASSESSEE HAS RECEIVED RS. 536.02 PER SHARE FOR IMPUGNED SHARES SOLD. 23. SIMILARLY, IF CONSIDERATION ACTUALLY RECEIVED DIFFE RS SLIGHTLY FROM AGREEMENT, THEN IT DOES NOT FOLLOW THAT AGREEMENT I S MANIPULATED. IN ANY CASE, THE TAX HAS TO BE LEVIED ON FOIL VALUE OF CONSIDERATION RECEIVED LESS COST OF ACQUISITION AND ANY CHANGE IN CONSIDERATION DOES NOT ALTER CHARACTER OF INCOME THE LEAST. THUS, ACTION OF LD, AO IN ALTERING THE CHARACTER OF INCOME IS NEITHER HERE NOR THERE AND IT IS PRAYED THAT THE SAID ACTIO N MAY PLEASE BE SET AT NAUGHT. - LETTER FILED ON 6-11 - 2009 1. THE ISSUE IN DISPUTE RELATES TO THE ACTION OF T HE ITO BY WHICH HE HAS REDUCED THE ACTUAL CONSIDERATION FOR THE SHARES SOLD BY THE ASSESSEE AND THE AMOUNT SO REDUCED HAS BEEN TREATED AS BUSINESS PROFITS OF THE ASSESSEE UNDER SECTION 28. IT IS SUB MITTED THAT NO POWER IS VESTED IN THE AO TO INCREASE OR DECREASE T HE ACTUAL CONSIDERATION FOR TRANSFER OF CAPITAL ASSET SUBJECT ED TO CAPITAL GAINS TAX AS HELD BY THE SUPREME COURT IN CIT VS SHIVAKAN I CO. PVT LTD (1986) 159 ITR 71 SC AND K.P.VARGHESE VS.ITO CANNOT TINKER WITH OR ENHANCE THE LIABILITY TO CAPITAL GAINS TAX ON TH E GROUND OF UNDER STATEMENT OF CONSIDERATION BY THE ASSESSEE. FOR THE VERY SAME REASONS AND LAW LAID DOWN BY THE SUPREME COURT IN T HE ABOVE CASES, IT IS NOT PERMISSIBLE FOR THE AO EVEN TO RED UCE THE ACTUAL CONSIDERATION FOR THE TRANSFER OF SHARES HELD AS CA PITAL ASSET AND TREAT THE AMOUNT SO REDUCED AS BUSINESS PROFIT AND SUCH ILLEGAL ACTION OF THE REVENUE CANNOT BE SUSTAINED BOTH ON F ACTS AND IN LAW. 2. THE APPELLANT IS ONE OF THE SHAREHOLDERS AND TH E SHARES HAVE BEEN SOLD AT THE VERY SAME RATE AT WHICH OTHERS HAD ALSO SOLD AND THEREFORE THERE CANNOT BE DIFFERENTIAL OR DISCRIMIN ATORY TREATMENT TO THE ASSESSEE BY THE REVENUE AS MAY BE SEEN FROM THE FACT THAT IN THE CASE OF OTHER SHARE HOLDERS LIKE CITI BANK I .E. NON-EMPLOYEE SHAREHOLDERS, THE SAME CONSIDERATION HAS BEEN ACCEP TED BY THE REVENUE AS CORRECT CONSIDERATION AND TAX HAS BEEN L EVIED ACCORDINGLY ON THEM AS PER THEIR RESPECTIVE RETURNS . THEREFORE THE STAND OF THE REVENUE AGAINST THE APPELLANT IS CLEAR LY UNSUSTAINABLE BOTH ON FACTS AND IN LAW. 3. THE AO IN THE ABOVE CASE WANTED TO SPLIT THE CO NSIDERATION OF SHARES SOLD, IN TWO PARTS, ONE IS THE CONSIDERATION , AND SECOND IS ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 19 OF 42 BUSINESS INCOME TAXABLE U/S 28(VA), ON THE GROUND, THAT THE EMPLOYEE SHARE HOLDERS; WERE REQUIRED TO STAY IN TH E COMPANY FOR AT LEAST TWO YEARS AND ONLY BECAUSE OF THIS CLAUSE THE AO DRAWN THE INTERFERENCE, BUT THE SAME IS NOT CORRECT, DISR EGARDING THE FACT THE DIRECTOR/ EMPLOYEE SHAREHOLDERS BUT WAS FOR ALL THE SHARE HOLDERS. THERE WAS NO DISCRIMINATION UNDER THE CONT RACT FOR ALL THE SHARE HOLDERS. IT IS ONLY ITO WHO WANTS TO MAKE SUC H UNLAWFUL DISCRIMINATION NOT PERMISSIBLE IN LAW. IT WAS THE F ACT, THAT THE PRICE OF SHARE WILL INCREASE BECAUSE OF STAY OF PARTICULA R EMPLOYEES THOSE WHO WERE INVOLVED IN THE COMPLETION OF PARTIC ULAR PROJECT FOR WHICH THEY WERE PAID THE SALARY, BUT THE PRICE OF SHARES, WHICH WAS IN FACT, WAS INCREASED FOR ALL THE SHARE HOLDER S ' WHEREAS NO SALARY WAS PAID, TO OTHER SHARE HOLDERS, 4. THUS INCREASED, PRICE PER SHARE TO THE EMPLOYEE /DIRECTOR SHAREHOLDERS AND OTHER SHARE HOLDERS WERE PAID FOR THEIR HOLDINGS NOT FOR ANY OTHER REASON. AND SUM PAID TO THE EMPLO YEE DIRECTORS ON ACCOUNT OF THEIR EMPLOYMENT WAS IN THE FORM OF S ALARY AND WHICH WAS DECLARED CORRECTLY IN THE RETURN OF INCOM E FILED AND TAX WAS PAID ACCORDINGLY. HENCE THE CORRECT INTERPRETAT ION TO THE ENTIRE AGREEMENT IS: IF, THE PERSONS INVOLVED INTO THE DEV ELOPMENT OF PARTICULAR WORK WILL STAY IN TO THE COMPANY FOR MOR E TWO YEARS THE COMPANY WILL EARN THE PROFIT AND THE EARNING PER SH ARE WILL GO UP, WHICH WILL LEAD TO INCREASE IN THE PRICE PER SHARE NOT ONLY OF EMPLOYEE SHARE HOLDERS BUT OF ALL THE SHARES OF ALL THE SI TARE HOLDERS IRRESPECTIVE OF THEIR EMPLOYMENT. IF THE SA ME EMPLOYEES WILL NOT STAY INTO THAT SOFTWARE COMPANY, THE COMPA NY WILL BE COMPELLED TO EMPLOY OTHER EMPLOYEES, MAY LEAD TO EX TRA COST OR NON COMPLETION OF WORK WHICH MAY LEAD TO LOSS TO TH E COMPANY, AND ACCORDINGLY THE PRICE SHARE MAY COME DOWN. 5. FURTHER TO UNDERSTAND THE PRICE PER SHARE IT IS VERY IMPORTANT, ESPECIALLY IN CASE OF A SOFTWARE COMPANY, THE PRICE OF SHARE IS VERY MUCH DEPENDENT OR HAVE DIRECT RELATION WITH THE EAR NINGS OF THE COMPANY AND EARNINGS ARE VERY MUCH INFLUENCED BY TH E MAN POWER OF THAT COMPANY SO AS TO INCREASE THE PROFITS OF THAT COMPANY AND ULTIMATELY THE PRICE OF SHARE OF ALL TH E SHARE HOLDERS. THEREFORE IT WAS IT OBVIOUS THAT IF THE MAN POWER W ILL STAY WITH COMPANY PROFITS WILL INCREASE AND ACCORDINGLY PRICE OF SHARES OF ALL THE SHAREHOLDERS WILL INCREASE WITH NO DISCRIMINATI ON I.E. NOT ONLY OF THE EMPLOYEE SHARE HOLDERS BUT OF ALL THE SHAREH OLDERS THOSE WHO HAVE INVESTED THEIR FUND AS VENTURE CAPITAL IN TO A SOFTWARE COMPANY TO EARN, THE PROFIT FROM INVESTMENT IN TO T HAT COMPANY. THE CASE OF SATYAM COMPUTERS IS WITH US TO UNDERSTA ND THE IMPORTANCE OF THE EMPLOYEES. 6. FURTHER THE PROFITS FROM THE SALE OF SHARES AT T HE SAME PRICE BY INVESTMENT COMPANY HOW IT WAS TREATED BY INCOME TAX ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 20 OF 42 DEPARTMENT I.E. WHETHER IT WAS A CAPITAL GAINS OR A S BUSINESS PROFIT IS ALL DEPEND ON VARIOUS FACTORS AS PROVIDER UNDER INCOME TAX ACT AND THE BUSINESS OF THAT COMPANY. A FLAT OR LAND SO LD BY DLP IS TREATED AS A PART OF THE TURNOVER BUT FLAT SOLD BY AN INDIVIDUAL MAY/CANNOT BE CONSIDERED AS BUSINESS INCOME, AND SA ME WAY IF ANYBODY HOLDING SHARES AS STOCK IN TRADE THEN IT IS BUSINESS INCOME AND IF AS AN INVESTMENT IT IS CERTAINLY CAPI TAL GAIN WHICH IS FURTHER TO BE DIVIDED IN TO TWO PARTS ONE IS SHORT TERM AND OTHER IS LONG TERM DEPENDING ON THE PERIOD OF HOLDING OF A C APITAL ASSET/SHARE. 7. THEREFORE THE ORDER PASSED BY THE AO CANNOT BE S USTAINED/UPHELD. IT IS PRAYED ACCORDINGLY. -SUMMARY OF ARGUMENTS FILED VIDE LETTER DATED 29-01 -2010 4. I HAVE GIVEN A CAREFUL THOUGHT TO THE SUBMISS IONS AND ARGUMENTS MADE ON BEHALF OF THE APPELLANT AND HAVE ALSO GONE THROUGH FINDINGS RECORDED BY THE LD.AO. ON CONSIDERATION, I FIND THA T THE ISSUE INVOLVED HERE ESSENTIALLY RELATES TO THE TREATMENT OF SALE CONSID ERATION RECEIVED BY THE APPELLANT AS A RESULT OF SALE OF 24800 SHARES AT TH E RATE OF RS 536.02 PER SHARE AS AGAINST RS 72.28 PER SHARE SOLD IN THE IMM EDIATELY PRECEDING FINANCIAL YEAR. THE VIEW TAKEN BY THE LD.AO IS THUH AS PER THE TERMS & CONDITIONS SET OUT IN THE SALE AND PURCHASE AGREEME NT DATED 21-10-2004 THE DIFFERENCE BETWEEN RS 536.02 PER SHARE AND RS. 72. 28 PER SHARE WAS IN CONSIDERATION OF APPELLANT'S TECHNICAL EXPERTISE AN D HIS COMMITMENT TO NOT TO CARRY OUT ANY ACTIVITY IN RELATION TO BUSINESS AND NON DISCLOSURE OF TECHNICAL KNOW-HOW, COPYRIGHT, PATENT OR ANY OTHER BUSINESS O R COMMERCIAL RIGHTS OF SIMILAR NATURE. THEREFORE, IN HIS OPINION, THE CONS IDERATION AT THE RATE OF RS 463.74 PER SHARE WAS ASSESSABLE AS BUSINESS INCOME UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION AND CONSIDERATION AT TH E RATE OF RS 72.28PER SHARE WAS ONLY TO BE TAXED AS . CAPITAL GAINS. ON T HE OTHER HAND, THE CASE OF THE APPELLANT IS THAT THE SALE CONSIDERATION HAS BE EN RECEIVED BY THE APPELLANT AS A COMPOSITE AMOUNT AND THE AO HAS NO LEGAL AUTHO RITY TO SPLIT IT IN TWO PARTS. THEREFORE, AS PER THE LD.COUNSELS FOR THE AP PELLANT THE ACTION OF THE LD. AO IS NOT SUSTAINABLE IN LAW. ON CONSIDERATION, I F IND THAT THE ACTION OF THE AO IS BEING CONTESTED BY THE LD.COUNSELS MAINLY ON ACC OUNT OF THE FOLLOWINGS- (I) IT IS A FACT THAT THE ASSESSEE HAS SOLD ALL THE IMP UGNED SHARES AT THE RATE OF RS 536.02 PER SHARE WHICH IS A CLEAR AND UN AMBIGUOUS AND UNDISPUTED FACT. (II) NON COMPLIANCE WITH SOME OF THE TERMS OF AGREEMENT WOULD NOT BY ITSELF ALTER THE NATURE OF INCOME. THE ASSESSEE HEL D SHARES AS CAPITAL ASSETS AND THAT ASSET WAS ONLY SOLD BY MM AND IS SU BJECT MATTER OF DISCUSSION, (III) IT IS UNDISPUTED POSITION OF LAW THAT THE CONSIDERA TION RECEIVED AS A RESULT OF SALE/TRANSFER OF A CAPITAL ASSET IS TAXAB LE AS CAPITAL GAINS ONLY. (IV) THERE IS NO MERIT IN THE AO'S ARGUMENT REGARDING U NIFORM TRANSACTION ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 21 OF 42 VALUE AND NON AMENDMENT OF THE AGREEMENT AS THE SAM E IS NOT ONLY FACTUALLY INCORRECT BUT ALSO IS IRRELEVANT. (V) THERE IS NO BASIS FOR THE AO TO HOLD THAT THE DIFFE RENCE IN THE CONSIDERATION PER SHARE TRANSFERRED IN DIFFERENT YE ARS WAS IN CONSIDERATION OF ASSESSEES TECHNICAL EXPERTISE IN THE FIELD OF SOFTWARE DEVELOPMENT AND THUS THE SAME WAS CHARGEABLE U/S 28 (VA) OF THE ACT, AS THERE IS NO SUCH CLAUSE IN THE AGREEMENT. MAY BE THAT ASSOCIATION OF THE APPELLANT WITH MIPL WOULD HAVE INCREASED ITS PROFITS BUT THAT WOULD NOT CHANGE THE CHARACTER OF RECEIPTS IN THE H ANDS OF THE APPELLANT. (VI) SECTION 28(VA) HAS NO APPLICABILITY TO THE FACTS O F THE PRESENT CASE AS THERE IS NO MENTION IN THE AGREEMENT THAT ANY PAYME NT MADE TO THE APPELLANT WAS FOR NOT CARRYING OUT ANY ACTIVITY IN RELATION TO ANY BUSINESS OR NOT SHARING ANY KNOW-HOW, PATENTS, COPY RIGHTS, ANY OTHER COMMERCIAL OR BUSINESS RIGHTS OF SIMILAR NATURE ETC . (VII) THE LD,AO HIMSELF HAS ACCEPTED SALE CONSIDERATION OF 90% OF SHARES IN THE PRECEDING YEARS AS CAPITAL GAINS ONLY AND TH EREFORE, HE WAS NOT PERMITTED TO TREAT PART OF THE SALE CONSIDERATION, AS CAPITAL GAINS AND PART OF IT AS BUSINESS INCOME. (VIII) THE AO HAS FAILED TO APPRECIATE THAT THE HIGHER PUR CHASE PRICE IN THE YEAR UNDER CONSIDERATION WAS FIXED KEEPING IN VIEW THE HIGH FUTURE EARNING CAPACITY OF MIPL AND FOR THIS PURPOSE ONLY THE STIPULATION WITH RESPECT TO ASSESSEES CONTINUED EMPLOYMENT WITH MIP L WAS MADE INTEGRAL PART OF THE AGREEMENT. (IX) THE TERM MANAGEMENT VENDORS USED IN. THE AGREEMENT SIMPLY IMPLIES THAT THE INDIVIDUAL SELLERS (INCLUDING THE ASSESSEE ) WERE ALSO IN THE CONTROL THE AFFAIRS OF MIPL AND NOTHING MORE SHOULD BE READ INTO IT. EVEN OTHERWISE, TRANSFER OF MANAGEMENT RIGHTS WOULD HAVE ATTRACTED CAPITAL GAINS ONLY. THUS, VIEWED FROM ANY ANGLE, TH E TRANSACTIONS WOULD HAVE RESULTED GAINS ONLY. (X) THE INCREASE IN THE PRICE OF IMPUGNED SHARES WAS O NLY DUE TO DIFFERENT MECHANISM OF CALCULATION ADOPTED IN THE A GREEMENT AND' THE SAID AGREEMENT HAS TO BE READ IN ITS ENTIRETY. THE NET RESULT OF THE AGREEMENT IS THAT WHAT HAVE EXCHANGED FOR CONSIDERA TION WAS SHARES ONLY,, WHICH IS A CAPITAL, ASSET IN THE HANDS OF TH E VENDOR AND WOULD THEREFORE BE TAXABLE AS CAPITAL GAINS ONLY. (XI) IT IS THE PREROGATIVE OF THE PARTIES TO THE AGREEME NT TO DECIDE UPON THEIR TERMS AND CONSIDERATIONS AND UNLESS THERE IS ANY STIPULATION TO THE CONTRARY THE WILL AND INTENTION OF THE PARTIES SHALL ONLY PREVAIL. THERE IS NO BAR IN THE LAW ON FIXING DIFFERENT PHAS ES FOR THE DIFFERENT YEARS. (XII) IT IS TRITE LAW THAT APPARENT SHALL NOT BE DISTURB ED UNLESS THERE IS EVIDENCE FOR PROVING THAT APPARENT IS NOT REAL. ADM ITTEDLY, IN THE PRESENT CASE THERE IS NOT EVEN A SINGLE EVIDENCE ON RECORD WHICH CAN SUGGEST THAT CONSIDERATION HAD BEEN PAID FOR ANY TH ING OTHER THAN SHARES. (XIII) IT MAY BE NOTED THAT THE SUBJECT MATTER IS AN AGREE MENT BETWEEN A NON RESIDENT THIRD PARTY AND SHARE HOLDERS OF AN IN DIAN COMPANY ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 22 OF 42 INCLUDING A REPUTED FINANCIAL VENDOR. THE AGREEMENT WAS A SUBJECT MATTER OF SCRUTINY BY RBI AND FEMA AUTHORITIES AND WAS EXECUTED ONLY AFTER THEIR APPROVAL. (XIV) THERE IS NO IOTA OF EVIDENCE TO SUGGEST THAT PAYMEN T WAS RECEIVED BY THE APPELLANT FOR NOT CARRYING ON ANY ACTIVITY IN R ELATION TO BUSINESS OR FOR NOT SHARING ANY IPR AND THEREFORE, THE AO WAS N OT JUSTIFIED IN STATING THAT THE DRAFTING OF VARIOUS CLAUSES OF AGR EEMENTS WAS A COLORABLE DEVICE. THUS, IN THE ABSENCE OF ANY EVIDE NCE THE AVERMENT MADE BY THE AO REMAINS A BALD ALLEGATION. 4.1 BEFORE COMING TO THE VARIOUS SUBMISSIONS MADE ON BE HALF OF THE APPELLANT AND FINDINGS RECORDED BY THE LD. AO, IT MAY BE BENE FICIAL TO MAKE A REFERENCE TO THE VARIOUS CLAUSES OF THE PURCHASE AG REEMENT EXECUTED BY THE MANAGEMENT VENDORS, AND M/S NEWELL & BUDGE HOLD INGS LTD, AS THE SAME WOULD ENABLE US IN PUTTING THE THINGS IN RIGHT PERSPECTIVE. THEREFORE, THE RELEVANT CLAUSES OF THE AGREEMENT AR E BEING EXTRACTED BELOW AS UNDER- SALE AND PURCHASE 2.1 SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREE MENT AND IN RELIANCE OF THE WARRANTIES OF THE VENDORS AND IN CO NSIDERATION OF THE CONSIDERATION TO BE PAID HEREUNDER BY THE PURCHASER , EACH OF THE VENDORS, AS THE LEGAL AND BENEFICIAL OWNER, SHALL S ELL TO THE PURCHASER AND THE PURCHASER SHALL PURCHASE FROM THE VENDORS, THE SALE SHARES SET OPPOSITE HIS NAME IN COLUMN 4 OF PART IB OF THE SCHEDULE, WITH ALL RIGHTS AND PRIVILEGES ATTACHED TO THEM AT THE COMPL ETION DATE, FREE AND CLEAR OF ALL AND ANY ENCUMBRANCES. 3. CONSIDERATION: 3.1 SUBJECT TO THE TERMS OF THIS AGREEMENT, THE CONSIDE RATION FOR THE SALE AND PURCHASE OF THE SALE SHARES SHALL COMPRISE THE CONSIDERATION. 3.2 UPON COMPLETION OF THE MATTERS REFERRED TO IN PARAG RAPHS 1,2, AND 3 OF SUB- PART A OF PART 2B OF THE SCHEDULE, AND IN C ONSIDERATION FOR SALE AND TRANSFER OF THE INITIAL SHARES, THE PURCHASER S HALL PAY THE INITIAL CONSIDERATION TO THE VENDORS IN THE AMOUNTS SHOWN I N COLUMN. 5 OF PART IB OF THE SCHEDULE. 3.3 IN CONSIDERATION FOR SALE AND TRANSFER OF THE FIRST ANNIVERSARY SHARES, THE PURCHASER SHALL PAY THE FIRST ADDITIONAL CONSID ERATION TO THE VENDORS (IN THE PROPORTIONS SET OUT IN COLUMN 6 OF PART IB OF THE SCHEDULE) ON THE FIRST ADDITIONAL CONSIDERATION PAY MENT DATE SUBJECT TO THE CONDITIONS AND DEDUCTIONS SET FORTH BELOW. (I) FULL 100% OF THE FIRST ADDITIONAL CONSIDERATION SHA LL BE PAYABLE TO THE VENDORS (IN THE PROPORTIONS SET OUT IN COLUMN 6 ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 23 OF 42 OF PART IB OF THE SCHEDULE) ON THE FIRST ADDITIONAL CONSIDERATION PAYMENT DATE IN THE EVENT ALL THREE MANAGEMENT VEND ORS ARE IN THE EMPLOYMENT OF THE PURCHASERS GROUP ON THE F IRST ADDITIONAL CONSIDERATION PAYMENT DATE, (II) IN THE EVENT EITHER OF SUNIL GOYAL OR PRAMOD SAINI ARE NOT IN THE EMPLOYMENT OF THE PURCHASERS GROUP BUT THE OTH ER TWO MANAGEMENT VENDORS ARE IN THE EMPLOYMENT OF THE PURCHASERS GROUP ON THE FIRST ADDITIONAL CONSIDERA TION PAYMENT DATE, THEN ONLY 75% OF THE FIRST ADDITIONAL CONSIDERATION SHALL BE PAYABLE TO THE VENDORS, OTHE R THAN SUNIL GOYAL OR PRAMOD SAINI ( AS THE CASE MAY BE) (IN THE PROPORTIONS AMONGST THE OTHER VENDORS AS SET OUT IN COLUMN 6 OF PART IB OF THE SCHEDULE, AS SUITABLY ADJUSTED) O N THE FIRST ADDITIONAL CONSIDERATION PAYMENT DATE. (III) IN THE EVENT BOTH SUNIL GOYAL OR PRAMOD SAINI ARE N OT IN THE EMPLOYMENT OF THE PURCHASERS GROUP BUT PANKAJ AGGA RWAL IS IN THE EMPLOYMENT OF THE PURCHASERS GROUP ON THE F IRST ADDITIONAL CONSIDERATION PAYMENT DATE, THEN ONLY 50 % OF THE FIRST ADDITIONAL CONSIDERATION SHALL BE PAYABLE TO THE VENDORS, OTHER THAN SUNIL GOYAL AND PRAMOD SAINI (IN THE PRO PORTIONS AMONGST PANKAJ AGGARWAL AND THE FINANCIAL VENDOR AS SET OUT IN COLUMN 6. OF PART IB OF THE SCHEDULE, AS SUITABL Y ADJUSTED) ON THE FIRST ADDITIONAL CONSIDERATION PAYMENT DATE. (IV) THE FIRST ADDITIONAL CONSIDERATION SHALL NOT BE PAY ABLE IN THE EVENT PANKAJ AGGARWAL IS NOT IN THE EMPLOYMENT OF T HE PURCHASERS GROUP ON THE FIRST ADDITIONAL CONSIDERA TION PAYMENT DATE, NOTWITHSTANDING THAT EITHER OR BOTH O F THE OTHER MANAGEMENT VENDORS ARE IN THE EMPLOYMENT OF THE PURCHASERS GROUP ON SUCH DATE. NOTWITHSTANDING ANYTHING CONTAINED HEREIN, IN. THE EVENT ANY ONE OR MORE MANAGEMENT VENDOR IS NOT IN THE EMP LOYMENT OF THE PURCHASERS GROUP ON THE FIRST ADDITIONAL CONSI DERATION PAYMENT DATE AS A RESULT OF MATERIAL BREACH OF THE SERVICE CONTRACTS) BY THE TARGET OR THE PURCHASER GROUP OR AS A RESULT OR THE TERMINATION OF THE SERVICE CONTRACT BY THE COMP ANY (OTHER THAN AS A RESULT OF BREACH BY THE RELEVANT MANAGEME NT VENDOR OF THE TERMS OF HIS SERVICE CONTRACT) BY GIVING SIX MO NTHS WRITTEN NOTICE PURSUANT TO CLAUSE 2 OF THE SERVICE CONTRACT , THEN NO DEDUCTION SHALL BE MADE IN THE FIRST ADDITIONAL CON SIDERATION AS A RESULT OF SUCH NON-CONTINUANCE IN EMPLOYMENT OF SUC H MANAGEMENT VENDORS(S). ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 24 OF 42 3.4 IN CONSIDERATION, FOR SALE AND TRANSFER OF THE SECO ND ANNIVERSARY, THE PURCHASERS SHALL PAY THE SECOND ADDITIONAL CONSIDER ATION TO THE VENDORS (IN THE PROPORTIONS SET OUT IN COLUMN 7 OF PART IB OF THE SCHEDULE) ON THE SECOND ADDITIONAL CONSIDERATION PA YMENT DATE SUBJECT TO THE CONDITIONS AND DEDUCTIONS SET FORTH BELOW: (I) FULL 100% OF THE SECOND ADDITIONAL CONSIDERATION SH ALL BE PAYABLE TO THE VENDORS (IN THE PROPORTIONS SET OUT IN COLUMN 7 OF PART IB OF THE SCHEDULE) ON THE SECOND ADDITIONA L CONSIDERATION PAYMENT DATE IN THE EVENT ALL THREE MANAGEMENT VENDORS ARE IN THE EMPLOYMENT OF THE PURCHASERS GROUP ON THE SECOND ADDITIONAL CONSIDER ATION PAYMENT DATE'. (II) IN THE EVENT EITHER OF SUNIL GOYAL OR PRAMOD SAINI ARE NOT IN THE EMPLOYMENT OF THE PURCHASERS GROUP BUT THE OTH ER TWO MANAGEMENT VENDORS ARE IN THE EMPLOYMENT OF THE PURCHASERS GROUP ON THE FIRST ADDITIONAL CONSIDERA TION PAYMENT DATE, THEN ONLY 75% OF THE FIRST ADDITIONAL CONSIDERATION SHALL BE PAYABLE TO THE VENDORS, OTHE R THAN SUNIL GOYAL OR PRAMOD SAINI (AS THE CASE MAY BE) (IN THE PROPORTIONS AMONGST THE OTHER VENDORS AS SET OUT IN COLUMN 6 OF PART IB OF THE SCHEDULE,*AS SUITABLY ADJUSTED) ON THE FIRST AD DITIONAL CONSIDERATION PAYMENT DATE. (III) IN THE EVENT BOTH SUNIL GOYAL OR PRAMOD SAINI ARE N OT IN THE EMPLOYMENT OF THE PURCHASERS GROUP BUT FANKAJ AGGA IWAL IS IN THE EMPLOYMENT OF THE PURCHASERS GROUP ON THE F IRST ADDITIONAL CONSIDERATION PAYMENT DATE, THEN ONLY 50 % OF THE FIRST ADDITIONAL CONSIDERATION SHALL BE PAYABLE TO THE VENDORS, OTHER THAN SUNIL GOYAL AND PRAMOD SAINI (IN THE PRO PORTIONS AMONGST FANKAJ AGGARWAL AND THE FINANCIAL VENDOR AS SET OUT IN COLUMN 6 OF PART IB OF THE SCHEDULE, AS SUITABLY ADJUSTED) ON THE FIRST ADDITIONAL CONSIDERATION PAYMENT DATE. (IV) THE SECOND ADDITIONAL CONSIDERATION SHALL NOT BE PA YABLE IN THE EVENT PANKAJ AGGARWAL IS NOT IN THE EMPLOYMENT OF T HE PURCHASERS GROUP ON THE SECOND ADDITIONAL CONSIDER ATION PAYMENT DATE, NOTWITHSTANDING THAT EITHER OR BOTH O F THE OTHER MANAGEMENT VENDORS ARE IN THE EMPLOYMENT OF THE PURCHASERS GROUP ON SUCH DATE. NOTWITHSTANDING ANYTHING CONTAINED HEREIN, IN THE E VENT ANY ONE OR MORE MANAGEMENT VENDOR IS NOT IN THE EMPLOYMENT OF THE PURCHASERS GROUP ON THE SECOND A DDITIONAL CONSIDERATION PAYMENT DATE AS A RESULT OF MATERIAL BREACH OF ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 25 OF 42 THE SERVICE CONTRAET(S) BY THE TARGET OR THE PURCHA SER GROUP OR AS A (IV) THE COMPANY CEASING TO BE A PRIVATE LIMITED CO MPANY FOR ANY REASON WHATSOEVER; OR (V) FURTHER OF ANY SPECIAL RIGHTS TO THIRD PARTIES ALLOWING THOSE THIRD PARTIES TO TAKE OR VETO FROM TAKING ANY DECIS IONS OR WHICH MAY HAVE A MATERIAL EFFECT ON OR OF THE BUSINESS OF THE COMPANY, INCLUDING, TO DISCONTINUE THE BUSINESS, OR REMOVE OR APPOINT DIRECTORS TO THE BOARD OF THE COMPANY, 3.7 THE PURCHASER SHALL PAY TO THE VENDORS (IN THE PRO PORTIONS SET OUT IN COLUMN 9 OF PART IB OF THE SCHEDULE) ON THE THIRD CONSIDER ATION ADDITIONAL SHARES AND SHALL PAY TO THE VENDORS (IN THE PROPORTIONS SE T' OUT IN COLUMN 10 OF PART IB OF THE SCHEDULE) THE FOURTH ADDITIONAL CONSIDERA TION FOR THE FOURTH CONSIDERATION ADDITIONAL SHARES TO THE MANAGEMENT V ENDORS ( AS DETERMINED BY PART 8 OF THE SCHEDULE)) ON THE THIRD ADDITIONAL CONSIDERATION PAYMENT DATE AND THE FOURTH ADDITIONAL CONSIDERATION PAYMEN T DATE, RESPECTIVELY. PROVIDED, HOWEVER, THAT A MANAGEMENT VENDOR SHALL N OT BE ELIGIBLE TO RECEIVE ITS SHARE OF THE THIRD ADDITIONAL CONSIDERATION OR THE FOURTH ADDITIONAL CONSIDERATION IN THE EVENT SUCH MANAGEMENT VENDOR I S NOT IN THE EMPLOYMENT OF THE PURCHASERS GROUP ON THE THIRD AD DITIONAL CONSIDERATION PAYMENT DATE OR THE FOURTH ADDITIONAL CONSIDERATION PAYMENT DATE (AS THE CASE MAY BE) FOR ANY REASON WHATSOEVER, EXCEPT IN T HE EVENT ARTY SUCH MANAGEMENT VENDOR IS NOT IN THE EMPLOYMENT OF THE P URCHASERS GROUP ON SUCH DATE AS A RESULT OF MATERIAL BREACH OF, THE RE LEVANT MANAGEMENT VENDORS SERVICE CONTRACT BY THE RELEVANT EMPLOYING MEMBER OF THE PURCHASER GROUP OR UNLESS SUCH MANAGEMENT VENDOR HA S BEEN SERVED WITH A NOTICE UNDER CLAUSE 2 OF THE SERVICE CONTRACT BY TH E COMPANY OR THE PURCHASER (OTHER THAN AS A RESULT OF BREACH BY THE RELEVANT MANAGEMENT VENDOR OF THE TERMS OF HIS SERVICE CONTRACT). 3.8 IN THE EVENT THE PURCHASER HAS MADE A CLAIM AGAINS T THE MANAGEMENT VENDORS UNDER THE WARRANTIES OR UNDER THE INDEMNITI ES OR AGAINST THE FINANCIAL VENDORS UNDER RITE REPRESENTATIONS AND WA RRANTIES CONTAINED IN CLAUSE 7.1 AND THE CLAIM HAS BEEN AGREED OR DETERMI NED OR A FINAL AND NON- APPEALABLE JUDGMENT HAS BEEN OBTAINED ON OR PRIOR T O THE FIRST ADDITIONAL CONSIDERATION PAYMENT DATE OR THE SECOND ADDITIONAL CONSIDERATION PAYMENT DATE OR THE THIRD ADDITIONAL CONSIDERATION PAYMENT DATE OR FOURTH ADDITIONAL CONSIDERATION PAYMENT DATE OR THE EARN OUT CONSIDER ATION PAYMENT DATE (AS THE CASE MAY BE) (A SETTLED CLAIM), AND THE CONCE RNED MANAGEMENT VENDORS OR FINANCIAL VENDOR HAVE/ HAS NOT PAID TO T HE PURCHASERS ALL SUMS DUE TO THE PURCHASER FROM MUCH MANAGEMENT VENDOR OR FINANCIAL VENDOR IN RESPECT OF THE SETTLED CLAIM ON OR PRIOR TO THE FIR ST ADDITIONAL CONSIDERATION PAYMENT DATE OR THE SECOND ADDITIONAL CONSIDERATION PAYMENT DATE OR THE ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 26 OF 42 FOURTH ADDITIONAL CONSIDERATION PAYMENT DATE OR THE EARNOUT CONSIDERATION PAYMENT DATE (AS APPROPRIATE), THE PURCHASER SHALL BE ENTITLED TO SET OFF ANY SUMS DUE TO IT SUCH CONCERNED MANAGEMENT VENDORS OR FINANCIAL VENDOR PURSUANT TO THE SETTLED CLAIM TOGETHER WITH INTERES T ON SUCH SUM (SUCH INTEREST ACCRUING AT THE RATE IN THE PERIOD BETWEEN (1) THE LATER OF THE DATE OF AGREEMENT OR DETERMINATION OF THE CLAIM AND (2) THE DATE OF SET OFF HEREIN UNDER) (THE SETTLED CLAIM AMOUNT) AGAINST THE FIR ST ADDITIONAL CONSIDERATION OR THE SECOND ADDITIONAL CONSIDERATION OR THE THIRD ADDITIONAL CONSIDERATION PAYMENT DATE OR THE FOURTH ADDITIONAL CONSIDERATION PAYMENT DATE OR THE EARNOUT CONSIDERATION (AS APPROPRIATE) PAYABLE TO S UCH CONCERNED MANAGEMENT VENDORS OR FINANCIAL VENDOR AND THE AMOU NT OF THE FIRST ADDITIONAL CONSIDERATION OR THE SECOND ADDITIONAL C ONSIDERATION OR THE THIRD ADDITIONAL CONSIDERATION PAYMENT DATE OR THE FOURTH ADDITIONAL CONSIDERATION PAYMENT DATE OR THE EARNOUT CONSIDERATION (AS APPRO PRIATE) SHALL BE SUITABLY REDUCED BY THE SETTLED CLAIM AMOUNT. 4. COMPLETION 4.1 THE PURCHASE AND SALE OF THE INITIAL SHARES SHALL B E COMPLETED OF THE OFFICERS OF THE PURCHASERS SOLICITORS (OR' OF SUCH OTHER PLACE AS THE PARTIES MAY AGREE) ON THE COMPLETION DATE WHEN THE PARTIES SHALL EACH - COMPLY WITH THEIR RESPECTIVE OBLIGATIONS SET OUT IN PART 28 OF THE SCHEDULE SUBJECT TO THE FULFILLMENT OF THE COND ITIONS PRECEDENT. 4.2 THE PURCHASER SHALL NOT BE OBLIGED TO COMPLETE OF ANY OF THE INITIAL SHARES UNLESS ALL OF THE INITIAL SHARES ARE SOLD AN D PURCHASED SIMULTANEOUSLY. 4.3 IN THE EVENT OF NON SATISFACTION OF THE CONDITIONS PRECEDENT ON OR BEFORE 120 DAYS FROM THE DATE HEREOF, THE PURCHASER , THE MANAGEMENT VENDOR, THE FINANCIAL VENDOR MAY TERMINA TE THE AGREEMENT, WITHOUT ANY LIABILITIES TO THE OTHER PAT TIES. PROVIDED THAT, IN SUCH EVENT: 4.3.1 THE PROVISIONS OF CLAUSE 17 (NOTICES), CLAUSE 19 (C OSTS AND EXPENSES) AND 21 (GOVERNING LAW AND JURISDICTION) W ILL SURVIVE THE TERMS OF THIS AGREEMENT. 4.3.2 THE PURCHASER SHALL (AND SHALL ENSURE THAT ITS EMP LOYEES AND REPRESENTATIVES SHALL RETURN ALL CONFIDENTIAL, INFORMATION AND (B) TREAT ANY AND ALL CONFIDENTIAL INFORMATION AS CONFIDENTIAL AND SHALL NOT DISCLOSE SUCH INFORMATIO N TO ANY OTHER PERSON: 4.3.3 FOR A PERIOD OF FIVE (5) YEARS FROM THE DATE HEREOF THE PURCHASER SHALL NOT DIRECTLY OR INDIRECTLY (I) SOLI CIT FOR ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 27 OF 42 EMPLOYMENT OR EMPLOY, ANY INDIVIDUAL WHO IS CURRENT LY ENGAGED IN THE EMPLOYMENT WITH THE COMPANY; OR (II) SOLICIT, ANY CURRENT CUSTOMER OF THE COMPANY (OTHER THAN NASSCOM); AND 4.3.4 THE CONFIDENTIALLY OBLIGATIONS CONTAINED IN CLAUSE 4.3.2,ABOVE SHALL SURVIVE FOR A PERIOD NOT EXCEEDIN G 5 (FIVE YEARS FROM THE DATE HEREOF. 4.4 PROVIDED HOWEVER THAT, NOTWITHSTANDING ANYTHING CO NTAINED HEREIN, IN THE EVENT THIS AGREEMENT IS TERMINATED PURSUANT TO CLAUSE 4.3. ABOVE, EACH PARTY SHALL BEAR ITS OWN COSTS AND EXPENSES IN CONNECTION WITH THE PREPARATION AND NEGOTIATION OF THIS AGREEMENT A ND IN PREPARING AND NEGOTIATING THIS AGREEMENT AND ANY OTHER DOCUME NTS REFERRED TO IN THIS AGREEMENT. 4.4 THE PURCHASE AND SALES OF THE FIRST ANNIVERSARY SH ARES, THE SECOND ANNIVERSARY SHARES, THE THIRD CONSIDERATION ADDITIO NAL SHARES, THE FOURTH CONSIDERATION ADDITIONAL SHARES AND THE EARN OUT SHARES SHALL HE COMPLETED OF THE OFFICES OF THE PURCHASERS INDI AN SOLICITORS (OR AT SUCH OTHER PLACE AS THE PARTIES MAY AGREE) ON THE F IRST ADDITIONAL CONSIDERATION PAYMENT DATE, SECOND ADDITIONAL CONSI DERATION PAYMENT DATE, THE THIRD ADDITIONAL CONSIDERATION PA YMENT DATE, FOURTH ADDITIONAL CONSIDERATION PAYMENT DATE AND TH E EARNOUT CONSIDERATION PAYMENT DATE , RESPECTIVELY. THE PROV ISIONS OF PART 2B OF THE SCHEDULE SHALL, TO THE EXTENT APPLICABLE, AP PLY MUTATIS MUTANDIS TO COMPLETION OF EACH OF THE AFORESAID TRANSFER OF SHARES. 7.3 THE MANAGEMENT VENDORS HEREBY JOINTLY AND SEVERALLY WARRANT AND REPRESENT TO AND UNDERTAKE WITH THE PURCHASER THAT THE WARRANTIES, BOTH AS AT THE DATE OF THIS AGREEMENT AND. AT THE C OMPLETION DATE; 7.3.1 SAVE AS FULLY AND FAIRLY DISCLOSED IN THE DISCLOSU RE LETTER, ARE TRUE AND ACCURATE IN ALL RESPECTS; 7.3.2 ARE NOT AND ARE NOT TO BE AFFECTED OR LIMITED BY AN Y PREVIOUS OR OTHER DISCLOSURE EXPRESS OR IMPLIED, WRITTEN OR ORAL TO THE PURCHASER, ITS OFFICERS OR REPRESENTATIVES OF PROFE SSIONAL ADVISERS OR BY ANY INVESTIGATION MADE BY OR ON BEHA LF OF THE PURCHASER INTO THE AFFAIRS OF ANY MEMBERS OF THE TA RGET GROUP OR BY ANY INFORMATION OF WHICH THE PURCHASER OR ITS AGENTS HAVE KNOWLEDGE (ACTUAL OR CONSTRUCTIVE); AND 7.3.3 SHALL NOT BE ANY RESPECT BE EXTINGUISHED OR AFFECTE D BY COMPLETION. ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 28 OF 42 7.5 FOR THE AVOIDANCE OF DOUBT IT IS EXPRESSLY AGREED A ND DECLARED THAT SAVE FOR THE DISCLOSURE LETTER, NO LETTER, DOCUMENT OR OTHER COMMUNICATION SHALL BE DEEMED TO CONSTITUTE A DISCL OSURE FOR THE PURPOSES OF THE WARRANTIES. 7.6 THE VENDORS UNDERTAKE NOT TO MADE AND WILL PROCURE (TO THE EXTENT THAT THEY ARE ABLE) THAT NO OTHER PERSON CLA IMING UNDER OR THROUGH ANY OF THEM WILL MADE ANY CLAIM AGAINST ANY MEMBER OF THE GROUP OR ANY OFFICER OR EMPLOYEE OF ANY MEMBER OF THE TARGET GROUP ON WHOM THEY MAY HAVE RELIED BEFORE ENTERING INTO ANY TERM OF THIS AGREEMENT OR IN THE PREPARATION OF THE DISCLOSURE LETTER IN RESPECT OF ANY CLAIM UNDER THIS AGREEMENT OR ANY OMISSION FROM OR STATEMENT IN THE DISCLOSURE LETTER . 7.7 EACH OF THE WARRANTIES SHALL BE CONSTRUED AS SEPARA TE AND INDEPENDENT AND SAVE AS EXPRESSLY OTHERWISE PROVIDE D SHALL NOT BE LIMITED BY REFERENCE TO ANY OTHER SUCH WARRANTY OR BY ANYTHING IN THIS AGREEMENT. 10. PROTECTION OF GOODWILL 10.1 THE COVENANTORS HEREBY UNDERTAKE TO THE PURCHASER W ITH THE INTENT OF ASSURING TO THE PURCHASER THE FRILL BENEF IT AND VALUE OF THE GOODWILL AND CONNECTIONS OF THE TARGET GROUP AND AS A CONSTITUENT PART OF THE AGREEMENT FOR THE SALE OF THE SALE SHAR ES THAT NEITHER OF THEM WILL AND THAT THEY PROCURE 'THAT NONE OF THEIR RESPECTIVE CONNECTED WILL: 10.1.1. IN THE TERRITORY FOR THE PERIOD OF TWO (2) YEARS NE XT FOLLOWING THE DATE OF THIS AGREEMENT DIRECTLY OR INDIRECTLY AND W HETHER FOR THEIR OWN ACCOUNT OR IN PARTNERSHIP WITH ANOTHER OR OTHER S OR AS AGENT FOR ANOTHER OR OTHERS, BE ENGAGED IN OR INTERESTED OR CONCERNED IN (EXCEPT AS THE HOLDER FOR INVESTMENT OF SECURITIES DEALT ON A STOCK EXCHANGE AND NOT EXCEEDING 3% IN NOMINAL VALUE OF T HE SECURITIES OF ANY CLASS) OR PROVIDE FINANCIAL, TECHNICAL OR OT HER SUPPORT TO ANY BUSINESS WHICH COMPETES DIRECTLY OR SEEKS TO COMPLE TE DIRECTLY WITH ANY BUSINESS CARRIED ON BY THE TARGET GROUP AT THE DATE ' OF THIS AGREEMENT. 10.1.2. EXCEPT TO THE EXTENT REQUIRED BY LAW NOT AT ANY TIM E FOLLOWING THE DATE OF THIS AGREEMENT, DIVULGE TO ANY PERSON OR OT HERWISE MADE USE OF ANY SECRETS, TRADE SECRETS, CONFIDENTIAL KNO WLEDGE OR INFORMATION CONCERNING EITHER THE BUSINESS , FINANC E OR AFFAIRS OF THE TARGET GROUP OR ANY OTHER MATTER CONTEMPLATED B Y OR RELATING TO THIS AGREEMENT; 10.1.3. (WITHOUT PREJUDICE TO THE GENERALITY OF THE PROVISI ONS CONTAINED IN ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 29 OF 42 CLAUSES 10.1.1. AND 10.1.2 OF THIS CLAUSE) FOR THE PERIOD OF TWO (2) YEARS NEXT FOLLOWING THE DATE OF THIS AGREEMENT, DI RECTLY OR INDIRECTLY ENTICE, SOLICIT OR ENDEAVOUR TO ENTICE O R SOLICIT AWAY FROM THE TARGET GROUP ANY PERSON WHO IS A DIRECTOR OR EM PLOYEE OF SUCH COMPANY ENGAGED IN ITS MANAGEMENT. OR THE MANA GEMENT OF ANY OF ITS BRANCHES OR IN A SALES CAPACITY OR OTHER WISE IN A COMMERCIALLY SENSITIVE POSITION (WHETHER OR NOT SUC H PERSON WOULD COMMIT ANY BREACH OF HIS CONTRACT OF EMPLOYMENT OR ENGAGEMENT BY REASON OF LAVING THE SERVICE OF SUCH COMPANY) NO R KNOWINGLY EMPLOY OR AID OR ASSIST IN OR PROCURE THE EMPLOYMEN T BY ANY OTHER PERSON, FIRM OR COMPANY OF ANY SUCH PERSON; 10.1.4. (WITHOUT PREJUDICE TO THE GENERALITY OF THE PROVIS IONS CONTAINED IN CLAUSES 10,1.1. AND 10,1.2) FOR THE PERIOD OF TWO ( 2) YEARS NEXT FOLLOWING THE DATE OF THIS AGREEMENT, NOT DO ANY AC T OR THING LIKELY TO HAVE THE EFFECT OF CAUSING ANY CUSTOMER OR ANY S UPPLIERS OF GOODS OR SERVICES TO ANY OF THE TARGET GROUP OR OTH ER PERSON DEALING WITH THE TARGET ON A REGULAR BASIS TO CEASE TO DEAL WITH THE TARGET GROUP EITHER AT ALL OR IN PART OR ON THE TERMS ON WHICH HE HAD PREVIOUSLY DEALT WITH THE TARGET GROUP OR LI KELY TO HAVE THE EFFECT OF CAUSING ANY PERSON HAVING A CONTRACT OR A RRANGEMENT WITH THE TARGET GROUP TO BREACH, TERMINATE OR MODIF Y THAT CONTRACT OR ARRANGEMENT; 10.1.5. NOT ANY TIME FOLLOWING THE COMPLETION DATE IN CONN ECTION WITH ANY BUSINESS USE THE NAME OF THE TARGET, TARGET GRO UP OR THE WORD MOMENTUM OR ANY NAMES, WORDS OR INITIALS SIM ILAR TO OR LIKELY TO BE CONFUSED WITH IT EXCEPT THAT MOMENTUM INFOCARE PVT. LTD SHALL CONTINUE TO HAVE THE RIGHT TO USE ITS CUR RENT NAME. 10.1.6. THE COVENANTORS BY THEIR EXECUTION HEREOF HEREBY AG REE THAT HAVING REGARD INTER ALIA TO THE PRICE PAID BY THE P URCHASER FOR THE SALE SHARES, THE RESTRICTIONS CONTAINED IN THIS CLA USE ARE REASONABLE AND NECESSARY FOR THE PROTECTION OF THE LEGITIMATE INTERESTS OF THE PURCHASERS AND THAT HAVING REGARD TO THOSE CIRCUMST ANCES THOSE COVENANTS DO NOT WORK HARSHLY ON THEM. 12. EFFECT OF COMPLETION 12.1 ANY PROVISION OF THIS AGREEMENT AND ANY OTHER DOCUM ENTS REFERRED TO IN IT WHICH IS CAPABLE OF BEING PERFORMED AFTER BUT WHICH HAS NOT BEEN PERFORMED AT OR BEFORE COMPLETION AND ALL WARRANTIE S AND THE INDEMNITIES, COVENANTS, REPRESENTATIONS AND UNDERTA KINGS CONTAINED IN OR ENTERED INTO PURSUANT TO THIS AGREEMENT SHALL REMAI N IN FULL FORCE AND EFFECT NOTWITHSTANDING COMPLETION. IT IS CLARIFIED THAT THE WARRANTIES ARE . DEEMED TO BE MADE AS OF THE DATE OF THIS AGREEMENT AND ON COMPLETION AND SHALL NOT BE DEEMED TO BE MADE SUBSEQUENTLY. ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 30 OF 42 5. THUS, IT MAY BE SEEN THAT THERE ARE SPECIFIC STIPUL ATIONS IN THE VARIOUS CLAUSES OF THE AGREEMENT TO THE EFFECT THAT THE ADDITIONAL CONSIDERATION I.E. DIFFERENCE BETWEEN RS 536,02 PER SHARE AND RS 72.28 PER SHARE WOULD DEPEND ON FULFILLMENT OF CERTAIN CONDITIONS INCLUDING THAT TH E MANAGEMENT VENDORS INCLUDING THE APPELLANT REMAIN IN THE EMPLOYMENT OF THE PURCHASERS GROUP ON THE PAYMENT DATES. FOR INSTANCE, CLAUSE 3.3(H) CLEA RLY STATES THAT IN THE EVENT OF SUNIL GOYAL OR PRAMOD SAINI BEING NOT IN THE EMP LOYMENT OF THE PURCHASERS GROUP THEY WILL NOT GET ANY ADDITIONAL CONSIDERATION. SIMILAR STIPULATIONS ARE AVAILABLE IN CLAUSES 3.4(11) & 3.7 ETC. THEREFORE, THERE IS NO SUBSTANCE IN THE APPELLANTS CLAIM THAT THE ENTIRE CONSIDERATION WAS RECEIVED ONLY IN LIEU OF SALE OF SHARES BY MM. THE LANGUAGE USED IN CLAUSES 3.3,3-4 & 3.7 IS UNAMBIGUOUS AND CLEARLY STATES THAT, FIRST, SECOND, THIRD AND FOURTH INSTALLMENTS OF ADDITIONAL CONSIDERATION WAS TO BE PAID ON RESPECTIVE PAYMENT DATES, ONLY IF THE APPELLANT WAS IN THE EMPLOYMENT OF PURCHASERS GROUP, MEANING THEREBY THAT NO AMOUNT IN EXCESS OF RS 72.2 8 PER SHARE WAS PAYABLE TO THE APPELLANT, IF HE DOES NOT REMAIN IN THE EMPL OYMENT OF THE PURCHASER GROUP. AS STATED EARLIER, THE APPELLANT IS A TECHNI CALLY QUALIFIED PERSON AND HAS VAST EXPERTISE AND RICH EXPERIENCE AT HIS COMMAND W HICH WOULD HELP INCREASE THE PROFITABILITY OF THE PURCHASER GROUP. IT WAS FO R THIS REASON ONLY THAT THE PURCHASER GROUP WANTED TO ENSURE APPELLANTS CONTIN UED ASSOCIATION WITH MIPL SO AS TO REAP BENEFITS OF MS KNOWLEDGE, TECHNI CAL EXPERTISE AND EXPERIENCE. THEREFORE, THE PAYMENT OF ADDITIONAL CO NSIDERATION WAS, IN A WAY, SHARING OF THE PROFITS EARNED BY THE PURCHASERS GR OUP BECAUSE OF VALUABLE SUPPORT EXTENDED BY THE APPELLANT. IN FACT, THIS HA S BEEN ADMITTED IN PARA 5 OF THE WRITTEN . SUBMISSIONS FILED ON BEHALF OF THE APPELLANT ON 6-11-2009 AS REPRODUCED IN PARA 3 ABOVE. IN THE CIRCUMSTANCES, I DO NOT FIND ANY MERIT IN THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT THA T THE ENTIRE CONSIDERATION WAS RELATABLE ONLY TO THE SALE OF SHARES, AS THE FA CTS CLEARLY STATED IN THE AGREEMENT DO NOT SUPPORT IT. 5.1 FURTHER, THE APPELLANT ALONGWITH OTHER MANAGEMENT V ENDORS HAS UNDERTAKEN TO NOT, EVEN REMOTELY, PROVIDE ANY FINAN CIAL, TECHNICAL OR OTHER SUPPORT TO ANY BUSINESS WHICH COMPETES DIRECT LY OR DISCREETLY WITH ANY BUSINESS CARRIED ON BY THE TARGET GROUP. S IMULTANEOUSLY, HE HAS ALSO UNDERTAKEN TO NOT TO DIVULGE OR OTHERWISE, USE ANY SECRETS, TRADE SECRETS, CONFIDENTIAL KNOWLEDGE OR INFORMATIO N CONCERNING THE BUSINESS, FINANCE OR AFFAIRS OF THE TARGET GROUP. T HEREFORE, A CUMULATIVE READING OF CLAUSES 3,7.3 &10 REGARDING C ONSIDERATION, RESTRICTIONS PUT ON/WARRANTIES UNDERTAKEN BY THE MA NAGEMENT VENDORS AND PROTECTION OF GOODWILL CLEARLY SUGGESTS THAT TH E ENHANCED PAYMENT OF CONSIDERATION WAS FOR AND IN LIEU OF EXP LOITATION OF EXPERTISE, TECHNICAL KNOW-HOW AND EXPERIENCE CONTRO LLED BY THE MANAGEMENT VENDORS INCLUDING THE APPELLANT. I HAVE ALREADY STATED IN THE INITIAL STAGES OF THIS ORDER THAT MIPL WAS CREA TED BY THE APPELLANT WITH HIS OTHER TWO ASSOCIATES SO AS TO UTILIZE THEI R TECHNICAL KNOWLEDGE, EXPERTISE AND EXPERIENCE FOR COMMERCIAL GAINS. AT T HE SAME TIME, THE PURCHASER GROUP ALSO WANTED TO ENSURE THAT THE SAID TECHNICAL ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 31 OF 42 EXPERTISE, KNOWLEDGE AND EXPERIENCE REMAINS AVAILAB LE TO THEM SO AS TO EXPLOIT THE SAME FOR COMMERCIAL GAINS AND FOR TH IS PURPOSE ONLY ADDITIONAL PAYMENT OF CONSIDERATION WAS AGREED UPON TO BE PAID TO THE MANAGEMENT VENDORS INCLUDING THE APPELLANT. THI S VIEW OF MINE IS FURTHER SUPPORTED BY THE NOTES GIVEN BELOW THE TABL E CONTAINING CALCULATION OF SALE CONSIDERATION, AS AVAILABLE ON PAGES 106 & 107 OF THE PAPER BOOK FILED BY THE APPELLANT, WHICH READ A S UNDER- CCPS COMPULSORILY CONVERTIBLE PREFERENCE SHARES AS PER THE PROVISIONS OF THE SALE AND PURCHASE AGRE EMENT ENTERED BETWEEN THE TRANSFERORS AND THE TRANSFEREE, CONSIDERATION OF FIRST ANNIVERSARY SHARES AND THE S ECOND ANNIVERSARY SHARES IS DEPENDENT ON THE CONTINUANCE OF PANKAJ AGGARWAL, SUNIL GOYAL AND PRAMOD SAINI IN THE EMPLO YMENT OF MIPL AND OR ANY OF THE AFFILIATE OF THE INVESTOR CO MPANY TILL THE DATE OF SUCH PAYMENT AND CAN BE 100%, 75%, 50% OR 0 % -OF THE AMOUNTS STATED ABOVE DEPENDING ON TILE CONTINUE S EMPLOYMENT OF ONE OR MORE OF THE ABOVE PERSONS. AS PER THE PROVISIONS OF THE SALE AND PURCHASE AGRE EMENT ENTERED BETWEEN THE .TRANSFERORS AND AMORTIZATION ( EBIDTA, AS DEFINED IN THE SALE AND PURCHASE AGREEMENT ) EARNED BY MIPL FOR THE TWELVE MONTH PERIOD ENDING MARCH 31,2005 AND CA N VARY BETWEEN 0% TO 10,0% OF THE AMOUNTS STATED ABOVE. AS PER PROVISIONS OF THE SALE AND PURCHASE AGREEMEN T ENTERED BETWEEN THE TRANSFERORS AND THE TRANSFEREE, CONSIDE RATION OF THIRD ADDITIONAL SHARES AND THE FOURTH ADDITIONAL S HARES IS DEPENDED ON THE EARNINGS BEFORE INTEREST, TAXES, DE PRECIATION AND AMORTIZATION (2005EBIDTA AND 2006 EBIDTA, AS DE FINED IN THE SALE AND PURCHASE AGREEMENT) EARNED BY MIPL FOR THE TWELVE MONTHS PERIODS ENDING OCTOBER 31, 2005 AND OCTOBER 31,2006. AND CAN VARY BETWEEN 0% TO 100% OF THE AMOUNTS STAT ED ABOVE. 5.2 THEREFORE, THE RECEIPT OF RS 1,15,00,663/- HAS TO BE SEEN IN THE LIGHT OF CUMULATIVE ESSENCE/IMPORT OF VARIOUS STATEMENTS/ STIPULATIONS MADE IN THE PURCHASE AGREEMENT. THIS VIEW FURTHER STRENG THEN WHEN WE GO TO PART IB OF SCHEDULE FORMING PART OF THE MAIN AGR EEMENT WHEREIN THE CALCULATION OF ADDITIONAL CONSIDERATION HAS BEE N MADE WITH REFERENCE TO EBIDTA PERCENTAGE. THE EBIDTA HAS BE EN DEFINED TO MEAN PROFITS OF THE TARGET I.E. MIPL FOR A PERIOD O F 12 MONTHS (REFERENCE INVITED TO PART 8 OF SCHEDULE AVAILABLE ON PAGES 97 & 98 OF THE PAPER BOOK). 5.3 AT THIS STAGE, IT MAY BE RELEVANT TO MAKE A REFEREN CE TO SECTION 28(VA) WHICH READS AS . UNDER- ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 32 OF 42 ANY SUM, WHETHER RECEIVED OR RECEIVABLE, IN CASH OR KIND, UNDER AN AGREEMENT FOR- (A) NOT CARRYING PUT ANY ACTIVITY IN RELATION TO ANY BU SINESS; OR (B) NOT SHARING ANY KNOW-HOW, PATENT, COPYRIGHT, TRADE MARK, LICENSE, FRANCHISE OR ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF SIMILAR NATURE OR INFORMATION OR TECHNIQUE LIKELY TO ASSIST IN THE MANUFACTURE OR PROCESSING OF GOODS OR PROVISION FOR SERVICE. 5.4 WHEN THE FACT SITUATION OF THE PRESENT CASE IS SEEN IN TERMS OF CLAUSES (A) & (B) OF SECTION 28(VA) THE IT ACT, THERE REMAI NS NO DOUBT THAT THE STIPULATIONS/RESTRICTIONS PLACED ON THE APPELLANT I N TERMS OF PURCHASE AGREEMENT DATED 21-10-2004 ARE IDENTIFIABLE WITH TH E ITEMS COVERED BY THE AFORESAID CLAUSES. SINCE AN ELABORATE DISCUS SION HAS ALREADY BEEN MADE WITH REFERENCE TO THE VARIOUS UNDERTAKING S, WARRANTIES AND RESTRICTIONS UNDERTAKEN/ PLACED ON THE APPELLANT IN THE FORGOING PARAGRAPHS, THE SAME ARE NOT BEING REPEATED HERE. THERE IS ALSO NO MERIT IN THE APPELLANTS ARGUMENT THAT THE LAW DOES NOT PERMIT THE TAXING AUTHORITIES TO SPLIT THE SALE CONSIDERATION INTO TWO PARTS AND TAX PART OF IT AS CAPITAL GAINS AND THE B ALANCE AS INCOME FROM BUSINESS OR PROFESSION. AS ELABORATED EARLIER, THIS DIVISION OF CONSIDERATION IS STIPULATED IN THE AGREEMENT ITSELF AND THEREFORE, THERE IS NO REQUIREMENT EITHER FOR THE AO OR FOR THE UNDE RSIGNED TO DO IT NOR THERE IS A NEED TO READ INTO THE VARIOUS CLAUSES OF PURCHASE AGREEMENT. IT IS NOT THE REVENUE AUTHORITIES WHICH ARE INTENDING TO NOT TO ACCEPT THE APPARENT, BUT IT IS THE APPELLANT WHO IS NOT WILLING TO ACCEPT THE CLEAR .STATEMENT OF THE FACT THAT ADDITI ONAL CONSIDERATION WAS IN LIEU OF EXPLOITATION OF HIS EXPERTISE, TECHN ICAL KNOWLEDGE AND EXPERIENCE FOR COMMERCIAL GAINS AND THE SAME WAS AL SO, DEPENDENT ON EBIDTA WHICH IS DIRECTLY LINKED WITH THE AFORESAID ATTRIBUTES OF THE APPELLANT. 5.5 AS REGARDS, LD. COUNSELS ARGUMENT THAT OTHER STAKE HOLDERS INCLUDING FINANCIAL VENDOR HAVE ALSO BEEN PAID CONSIDERATION AT THE RATE OF RS 536.02 PER SHARE, ON CONSIDERATION THE SAME HAS ALS O NOT BEEN FOUND TO HAVE MUCH RELEVANCE SO FAR AS THE APPELLANTS CA SE IS CONCERNED. FIRSTLY, THE LD. COUNSEL COULD NOT EXPLAIN AS TO HO W AND WHAT TREATMENT HAS BEEN GIVEN TO THE SALE CONSIDERATION IN THE CASE OF THE FINANCIAL VENDOR. SECONDLY, MAJORITY OF SHARES WERE HELD BY THE FINANCIAL VENDOR AS COMPULSORILY CONVERTIBLE PREFER ENCE SHARES (CCPS) AND THE ARRANGEMENT BETWEEN THE ERSTWHILE MANAGEMEN T OF MIPL AND FINANCIAL VENDOR HAS NOT BEEN MADE AVAILABLE TO THE UNDERSIGNED. THIRDLY, THE AGREEMENT IN QUESTION DOES NOT SPELL O UT AS TO HOW THE OTHER LIABILITIES AND ASSETS WERE TO BE DEALT WITH BY THE PURCHASERS GROUP. THEREFORE, IN THE ABSENCE OF ALL THESE MATER IAL INFORMATION, NO COGNIZANCE OF THIS ARGUMENT CAN BE TAKEN AT THIS ST AGE. 5.6 IN VIEW OF THE ABOVE DISCUSSION, I AM IN TOTAL AGRE EMENT WITH THE AO THAT THE EXCESS AMOUNT OF RS 463.74 PER SHARE WAS R ECEIVED BY THE APPELLANT ON ACCOUNT OF EXPLOITATION OF MS TECHNICA L EXPERTISE IN THE ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 33 OF 42 FIELD OF SOFTWARE DEVELOPMENT COUPLED WITH MS A COM MITMENT TO NOT TO CARRY OUT ACTIVITIES IN RELATION TO BUSINESS AND FO R NOT SHARING KNOW - HOW, COPYRIGHT, PATENT OR ANY OTHER BUSINESS OR COM MERCIAL RIGHT OF SIMILAR NATURE OR INFORMATION OR TECHNIQUE RELATED TO SOFTWARE DEVELOPMENT WHEREIN MIPL WAS ENGAGED. I ALSO HOLD T HAT THE CASES RELIED UPON BY THE LD.AO SUPPORT MS ACTION. IT IS T HE SETTLED POSITION OF LAW THAT WHILE DEALING WITH TAX MATTERS THE AUTHORI TIES ARE NOT SUPPOSED TO PUT ON BLINKERS BUT THEY SHOULD MAKE HO NEST AND SINCERE ATTEMPTS TO EXAMINE THE MATERIAL PLACED BEFORE THEM AND THEN REACH LOGICAL CONCLUSIONS. THEREFORE, THE DECISION OF THE LD.AO, BEING BASED ON REAL IMPORT OF THE VARIOUS STATEMENTS IN THE PUR CHASE AGREEMENT, DESERVES TO BE UPHELD. 5.7 ACCORDINGLY, THE ADDITION OF RS 1,15,00,663/- IS BE ING SUSTAINED. (C.1) ` THIS PRESENT APPEAL FILED BY THE ASSESSEE AGAINST T HE AFORESAID IMPUGNED APPELLATE ORDER DATED 20.01.2010 OF LD. CIT(A). DU RING APPELLATE PROCEEDINGS IN ITAT, ASSESSEE FILED PAPER BOOK CONTAINING THE FOLLOWING PARTICULARS: 1. COPY OF ACKNOWLEDGMENT OF RETURN AND COMPUTATI ON OF INCOME OF THE ASSESSEE FOR THE A.Y. 2006-07. 2. COPY OF BALANCE SHEET OF THE ASSESSEE FOR THE Y EAR ENDING AS ON 31.03.2006. 3. COPY OF ASSESSEES LETTER FILED TO LD. A.O. DAT ED 12-12-2008 ALONG WITH FOLLOWING: I-COPY OF THE SALE AND PURCHASE AGREEMENT AMONG N& B HOLDINGS LTD. AMD MOMENTUM INDIA PVT. LTD. DATED 31.10.2004 AND 10.11.2004. 4. COPY OF ASSESSEES LETTER FILED TO LD. A.O. DTED 1 3-12-2008 ALONGWITH AFFIDAVIT DULY SIGNED BY MR. SUNIL GOYAL. 5. SUBMISSION MADE DATED 30.11.2009 BEFORE LD. CIT(A). 6. SUBMISSION DATED 22.01.2010 7. SUBMISSION DATED 29.01.2010 ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 34 OF 42 (C.2) THE ASSESSEE ALSO FIELD A COMPILATION OF CASES RELI ED UPON, CONTAINING COPIES OF THE FOLLOWING ORDERS: 1. CIT VS D.P. SANDHU BROS. CHEMBUR (P) LTD. (2005) 273 ITR 1 (S.C.) 2. CIT VS. MEDIWORLD PUBLICATION (P) LTD. (2011) 11 TAXMANN.COM 374 (DELHI), 244 CTR 387 (DELHI) 3. MRS. HAMI APSI BALSARA VS. ACIT (2010) 126 ITD 100 (MUM. TRIB.) 4. HULAS RAHUL GUPTA VS. CIT (2012) 24 TAXMANN.COM 191 (DELHI), & 17 (TRIB.) 336 (DELHI). 5. ACIT VS. DR.B.V. RAJU [2012] 18 TAXMANN.COM 188 (HYD. TRIB.) (SB), & 144 TTJ 537. 6. ACIT VS SAVITA N. MANDHANA [2010] ITA 3900/MUMB AI/2010 (C.3) FURTHER THE ASSESSEE FILED A SYNOPSIS WHICH IS REP RODUCED AS UNDER: THE ABOVE TWO APPEALS FILED BY THE REVENUE AND THE ASSESSEE IN THE APPEALS INDICATED ABOVE INVOLVE COMMON ISSUES FOR DECISION AND HAVE BEEN CLUBBED TOGETHER FOR BEING HEARD AND DECIDED. BOTH APPEALS RELATE TO THE ASSESSMENT YEAR 2006-07 FOR WHICH THE PREVIOUS YEAR WAS F.Y. 2 005-06. THE APPEAL NO. 2918/DEL/2011 FILED BY THE REVENUE AGAINST PRAMOD S AINI IS AGAINST THE ORDER OF THE COMMISSIONER OF APPEALS-XXX DT. 29.3.2011 IN AP PEAL NO. 279/2008-09 WHEREBY THE COMMISSIONER OF APPEAL ALLOWED THE APPE LLANTS CLAIM AND HELD THAT THE LONG TERM CAPITAL GAIN EARNED BY THE ASSESSEE W AS RIGHTLY OFFERED FOR TAX UNDER THE HEAD CAPITAL GAIN AND SHOULD BE TAXED U /S. 112 AT 20% AS CLAIMED BY THE ASSESSEE. WHILE REJECTING THE STAND OF THE REVE NUE THAT THE CAPITAL GAIN COULD BE SPLIT INTO CAPITAL GAIN AND BUSINESS INCOME AS W RONGLY ADOPTED BY THE AO. THE ITA NO. 719/DEL/2010 IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-VIII DT. 29.1.2010 IN APPEAL NO. 172/08-09 FOR A.Y. 2006-07 HOLDING THAT THE LONG TERM CAPITAL GAIN OF RS. 1,32,11,569/- SHOWN BY THE ASSE SSEE COULD BE ASSESSED AS BUSINESS INCOME TO THE EXTENT OF RS. 1,15,00,663/- AND THE BALANCE ALONE IS TAXABLE AS LONG TERM CAPITAL GAIN AS CLAIMED BY THE ASSESSEE. THE OBJECTIVE OF THE REVENUE IN BOTH CASES WAS TO IMPOSE HIGHER BURDEN O F TAX ON THE ASSESSEE BY TREATING THE AMOUNT ASSUMED AS BUSINESS INCOME AS T AXABLE AT THE RATE OF 30% AS AGAINST 20% APPLICABLE TO LONG TERM CAPITAL GAIN U/S. 112. THE COMPUTATION OF INCOME AS WELL AS CONSIDERATION FOR TRANSFER OF SHA RES HELD AS LONG TERM CAPITAL ASSET BY BOTH THE ASSESSES HAVE BEEN ACCEPTED BY TH E REVENUE. THE ENTIRE ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 35 OF 42 AMOUNT OF CONSIDERATION FOR SALE OF SHARES HELD BY BOTH THE ASSESSEE IN THE SAME COMPANY HAD BEEN ACCEPTED AS CORRECT AND ASSESSED A S LONG TERM CAPITAL GAIN EVEN IN THE PRECEDING YEAR FOR BOTH. THE ASSESSMENT ORDERS IN BOTH CASES HAVE ADOPTED THE SHARE PRICE OF RS. 72.28 PER SHARE, AS WAS ADOPTED IN THE PRECEDING YEAR AND THE EXCESS OF SALE PRICE OVER 72.28 PER SH ARE HAS BEEN TREATED AS BUSINESS INCOME TO IMPOSE HIGHER RATE OF TAX ALTHOU GH THE INCOME COMPUTED BY THE ASSESSEE AS WELL AS THE REVENUE IS THE SAME. TH US THE SHORT ISSUE IN BOTH CASES IS WHETHER THE INCOME RIGHTLY TAXED AND TAXAB LE AS LONG TERM CAPITAL GAIN AS OFFERED BY THE ASSESSEE COULD BE SPLIT PARTLY TO BE TAXED AS LONG TERM CAPITAL GAIN AND THE BALANCE AS BUSINESS INCOME IN THE HAND S OF THE ASSESSEE. 2. THE COMPUTATION OF INCOME FILED WITH THE RETURN BY PRAMOD SAINI FOR A.Y. 2006-07 CLEARLY SHOWS LONG TERM CAPITAL GAIN OF RS. 30,61,73.2/- AND TAX ON LONG TERM CAPITAL GAIN AFTER AVAILING DEDUCTION / EXEMPT ION U/S. 54EC ON INVESTMENT OF RS. 1,01,50,000/- HAS BEEN SHOWN AT RS. 30,61,732/- . THE AO IN HIS ORDER OF ASSESSMENT HAS SPLIT THE INCOME BY WAY OF LONG TERM CAPITAL GAIN TO SUBJECT RS. 1,15,00,752/- TO TAX AS BUSINESS INCOME AND REDUCED THE LONG TERM CAPITAL GAIN TO NIL FIGURE AFTER TAKING DEDUCTION U/S. 54EC INTO ACCOUNT. THE ASSESSEE IS AGGRIEVED BY THE ILLEGAL ACTION OF THE AO AND AGITA TED THE MATTER BEFORE THE CIT (A) WHO ALLOWED THE APPEAL OF THE ASSESSEE AFTER HO LDING THAT THE ENTIRE AMOUNT OF SALE CONSIDERATION FOR SHARES MUST BE TREATED AS FALLING ONLY UNDER THE HEAD CAPITAL GAIN AND THERE IS NO BUSINESS CARRIED ON BY THE ASSESSEE AND THERE IS NO BUSINESS ACTIVITY NOR ANY BUSINESS INCOME LIABLE TO TAX. THE WELL REASONED ORDER OF THE CIT(A) ALLOWING THE APPEAL OF THE ASSESSEE I S UNDER CHALLENGE BY THE REVENUE IN ITA NO. 2918/DEL/2011 FOR A.Y. 2006-07. 3. THE COMPUTATION OF INCOME FILED WITH THE RETURN BY SUNIL GOYAL FOR A.Y. 2006-07 CLEARLY SHOWS LONG TERM CAPITAL GAIN WORKED OUT AT RS. 1,32,11,569/- FROM THE SALE OF SHARES AND THE CAPITAL GAIN AT 20% THEREON HAS BEEN WORKED OUT AND PAID. HOWEVER, THE AO SPLIT THE CAPITAL GAIN TO TREAT A SUBSTANTIAL PART THEREOF AS BUSINESS INCOME AS MAY BE SEEN FROM THE ASSESSME NT ORDER DT. 31.12.2008 IN WHICH RS. 1,15,00,663/- HAS BEEN TAKEN AS BUSINESS PROFIT AND BALANCE OF RS. 17,10,906/- AS LONG TERM CAPITAL GAIN. THE REASON G IVEN BY THE AO IS THAT THE CAPITAL GAIN IS ACCEPTED ONLY TO THE EXTENT OF THE PRICE FOR THE SAME SHARES ADOPTED IN THE PRECEDING YEAR AND THE EXCESS OVER R S. 72.28 PER SHARE IS BUSINESS INCOME OF THE ASSESSEE. 4. IN BOTH CASES THE AO INVOKED SECTION 28 (VA) OF THE INCOME TAX ACT TO ASSUME THAT THE CONSIDERATION FOR SALE OF SHARES CO ULD BE TAXED AS BUSINESS PROFIT OF THE ASSESSEE IGNORING THE FACT THAT U/S. 28 (VA) THERE IS SPECIFIC EXCLUSION OF CAPITAL GAINS FROM THE SCOPE OF TAX LIABILITY UNDER THE HEAD BUSINESS OR PROFESSION. THE TERMS OF THE CONTRACT BETWEEN THE ASSESSES / SHAREHOLDERS AND THE BUYERS OF THE SHARE HAD NOT BEEN PROPERTY APPRE CIATED OR UNDERSTOOD BY THE AO IN BOTH CASES WHO APPEAR TO HAVE BEEN DIRECTED B Y THE REVENUE OFFICERS ABOVE THEM TO PASS ORDER ON SIMILAR TERMS TO REJECT THE ASSESSEES CLAIM FOR LOWER RATE OF TAX ON LONG TERM CAPITAL GAIN SHOWN BY THEM . ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 36 OF 42 5. IT IS POINTED OUT THAT THERE WAS AN AGREEMENT DT . 21.10.2004 BY WHICH THE SHARES HELD BY THE APPELLANTS AS WELL AS TWO OT HER SHAREHOLDERS WERE SOLD AT THE PRICE AGREED UPON UNDER THE CONTRACT TO M/S. NE WELL & BUDGE HOLDINGS LTD., SCOTLAND. THE PERCENTAGE OF SHARES HELD BY EACH SHA RE HOLDER AND THE PRICE FOR SALE ARE INDICATED IN SCHEDULE PART IB TO THE AGREE MENT. IT MAY BE NOTED THAT PANKAJ AGARWAL WHO HELD 7,44,000 SHARES (41.33%) HA S BEEN ALLOWED THE TAX ON LONG TERM CAPITAL GAIN AT 20% OFFERED BY HIM AND NO DISPUTE HAS BEEN RAISED BY THE REVENUE. BOTH SUNL GOYAL AND PRAMOD SAINI HELD 2,48,000 SHARES EACH (I.E. 13.78% EACH) AND IN BOTH THEIR CASES THE SALE CONSI DERATION FOR THE SHARES IN THE YEAR UNDER DISPUTE HAS BEEN SOUGHT TO BE TAXED SUBS TANTIALLY AS BUSINESS INCOME TO IMPOSE HIGHER BURDEN OF TAX. THE FOURTH SHAREHOL DER I.E. CITICORP FINANCE(INDIA) LIMITED DOES NOT APPEAR TO HAVE BEEN SUBJECTED TO ANY VARIATION IN THE ASSESSMENT AS PER THE INCOME TAX PROCEEDINGS IN THESE TWO CASES AS NO INDICATION IS GIVEN BY THE REVENUE IN THIS REGARD. 6. THE TERMS AND CONDITIONS OF THE AGREEMENT BETWEEN THE SHAREHOLDERS HOLDING THE SHARES AND THE BUYERS OF THE SHARES AS PERT HE AGREEMENT ARE NOT IN DISPUTE AND CANNOT BE VARIED BY THE REVENUE. THE SHARES HAVE HELD AS LONG TERM CAPITAL ASSET BY BOTH THE ASSESSEES AND THE TAX THEREON U/S. 112 HAS BEEN ACCEPTED IN THE LAST YEAR ALSO. THERE IS NO REASON WHY THE REVENUE CANNOT ACCEPT THE SALE CONSIDERATION FOR SHARES HELD AS LONG TERM CAPITAL ASSET AS GIVING RISE ONLY TO LONG TERM CAPITAL GAIN AS CLAIM ED BY THE ASSESSEE. THE PRICE FOR THE SHARES IS WHAT THE PARTIES HAVE FIXED TO BE PAI D AS PER THE AGREEMENT AND THERE CANNOT BE ANY STIPULATION BY THE REVENUE THAT THE PRICE SHOULD BE THE SAME IN BOTH THE YEARS NOR CAN THEY TAKE DIFFERENT STANDS IN THE CASE OF DIFFERENT SHAREHOLDERS RELATING TO THE SAME ISSUE AND SAME ASSESSMENT YEAR. THE COMPANY WAS PROVIDING SOFTWARE DEVELOPMENT BY USE O F TECHNICAL EXPERTISE OF THE CONCERNED DIRECTORS AND EMPLOYEES AND THE DIREC TORS AND EMPLOYEES CONTINUED TO CARRY ON THEIR ACTIVITIES WITH THE TRANSFEREE COMPANY EVEN AFTER THE SHARES WERE TRANSFERRED SO AS TO ENSURE THAT THE COMPANIES WORKING AND THE CLIENTS ARE NOT AFFECTED. THE ASSESSEES PRAMOD SAIN I AND SUNIL GOYAL ALSO CONTINUE TO REMAIN AND WORK AS DIRECTORS AND EMPLOY EES OF THE COMPANY TO WHOM THE SHARES WERE TRANSFERRED AND HENCE THE TERMS OF THE AGREEMENT WERE IMPLEMENTED WHILE ENABLING THE ASSESSEES TO SELL THEIR SHARES AT THE AGREED PRICE. 7. THE LAW IS WELL SETTLED THAT THE HEAD OF INCOME UNDER WHICH THE RESPECTIVE INCOME IS SUBJECTED TO TAX UNDER THE STA TUTE IS STIPULATED BY SECTION 14 AND THAT MANDATE OF THE STATUTE CANNOT BE CHANGED B Y THE REVENUE. INCOME FALLING UNDER A PARTICULAR HEAD FOR TAXATION CAN ONLY BE TAXED UNDE R THAT HEAD AND CANNOT BE TAKEN TO A DIFFERENT HEAD OF INCOME AS MAY BE SEEN FROM THE JUDGEMENTS OF THE SUPREME COURT IN THE CASES OF - I) CIT VS. D.P. SANDHU BROS. CHEMBUR (P) LTD. (2005) 273ITR 1 (SC) II) UNITED COMMERCIAL BANK LTD.VS.CIT (1957) 32 ITR 688(SC) III) EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD. VS.CIT(1961) 42 ITR 49 (SC) ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 37 OF 42 IV) CIT VS. CHUGANDAS & CO. (1964) 55 ITR 17(SC) V) S G MERCANTILE CORPORATION VS. CIT (1972) 83 ITR 700 (SC) 8. IN THE PRESENT CASE THERE IS NO DISPUTE THAT TH E SHARES WERE HELD BY THE ASSESSEE AS LONG TERM CAPITAL ASSET AND HENC E THE SAME SHOULD TAXED ONLY UNDER THE HEAD CAPITAL GAIN AS OFFERED BY THE ASSESSEE. HOWEVER, ONLY BECAUSE OF THE HIGHER RATE OF TAX APP LICABLE TO BUSINESS INCOME THE AO HAD ATTEMPTED TO BRING THE CONSIDERAT ION FOR TRANSFER OF SHARES HELD AS CAPITAL ASSET AS INCOME FROM BUSINES S AND THAT BY SPLITTING THE SALE CONSIDERATION WITHOUT EVEN ALLOWING THE CO ST OF ACQUISITION OF THE SHARES. THUS THE AO COMMITTED GRAVE ERROR IN MAKING THE ENHANCEMENT OF INCOME TAX LIABILITY SOLELY TO RAISE ADDITIONAL DEMAND UNAUTHORIZED BY LAW. 9. THE FACT THAT SECTION 28 (VA) HAS NO APPLICATIO N IN THE FACTS OF THE PRESENT CASE IS CLEAR BOTH FROM THE LANGUAGE OF THA T PROVISION AND ALSO XHE EXPLANATION AND THE PROVISO THERETO. THE JUDGEM ENT OF THE DELHI HIGH COURT IN CIT VS. MEDIWORLD PUBLICATIONS PVT. LTD. ( 2011) 244 CTR 387 (DEL.) HAS ANALYSED THE SCOPE OF SECTION 28(VA) IN THE CONTEXT OF SALE OF SHARES AND HELD THAT THE LONG TERM CAPITAL GAIN ON SALE OF THOSE ASSETS CANNOT BE DISREGARDED AND THE INCOME THERE FROM CAN NOT BE BROUGHT TO TAX AS BUSINESS INCOME U/S.28(VA) - PARA 10 &11. 10. THE DELHI BENCH OF IT AT IN THE CASE OF HULAS RAHUL GUPTA (2012) 24 TAXMANN.COM 191 HAS ALSO DEALT WITH AN IDENTICAL SITUATION IN REGAI D TO THE TRANSFER OF SHARES HELD AS CAPITAL ASSETS AN D ALLOWED THE ASSESSEES CLAIM FOR BEING TAXED ON LONG TERM CAPITAL GAIN WHI LE REJECTING THE DEPARTMENTAL STAND TO TREAT IT AS BUSINESS INCOME T HE ORDERS OF LOWER AUTHORITIES WERE SET ASIDE AND THE APPEAL OF THE AS SESSEE AGAINST THE ORDER PASSED BY THE COMMISSIONER U/S. 263 WAS ALLOW ED BY THE TRIBUNAL AS MAY BE SEEN FROM PARA 18. THE DECISION OF THE MU MBAI BENCH OF ITAT IN MRS. HAMI ASPI BALSARA VS. ASSTT. CIT (2010) 126 IT'D 100 ALSO UPHOLDS THE PLEA THAT SHARES HELD AS CAPITAL ASSET WOULD ON TRANSFER GIVE RISE TO CAPITAL GAM AND THE SAME CANNOT BE BROUGHT TO TAX A S INCOME FROM BUSINESS. THE ABOVE DECISION HAVE BEEN FOLLOWED BY THE MUMBAI BENCH OF ITAT IN THE CASES OF ASSTT. CIT VS. SAVITA N. MANDH ANA AND VICE VERSA IN ITA NO. 3900/MUM/2010 FOR A.Y. 2006-07 DECIDED ON 7 .10.2011. THE DELHI BENCH OF ITAT IN ASSTT. CIT VS. SMT. SANGEETA VIJ DECIDED ON 25.5.2012 FOR A.Y. 2005-06 IN ITA NO. .ALSO LAYS DOWN THAT WHERE THE TRANSFER IS OF BUSINESS HELD AS CAPITAL ASSET AS A GOING CONCERN THE AMOUNT RECEIVED AS CONSIDERATION WOULD BE TAXABLE O NLY AS LONG TERM CAPITAL GAIN AND THE ASSESSEES CLAIM TO BE SUBJECT ED TO TAX ON LONG TERM CAPITAL GAIN CANNOT BE REJECTED BY THE REVENUE SO AS TO IMPOSE HIGHER BURDEN OF TAX ON HIM. 11. IN VIEW OF THE ABOVE SETTLED LEGAL POSITION AND THE BINDING PRECEDENTS THE APPEAL FILED BY THE REVENUE AGAINST PRAMOD SAINI DESERVES ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 38 OF 42 TOBE REJECTED AS BEING DEVOID OF MERIT. THE APPEAL FILED BY SUNIL GOYAL AGAINST THE IMPUGNED ORDERS AGAINST HIM DESERVES TO BE ALLOWED WITH CONSEQUENTIAL RELIEF. IT IS PRAYED ACCORDINGLY. (D) WE HAVE HEARD BOTH SIDES. WE HAVE PERUSED THE MAT ERIALS ON RECORD. IN THE SECOND GROUND OF CONCISE GROUNDS OF APPEAL, IT HAS BEEN CONTENDED BY THE ASSESSEE THAT THE LD. CIT(A) HAD CONDUCTED HEARING TILL 6:15 PM ON 29.01.2010 AND THE IMPUGNED ORDER COULD NOT HAVE BEEN PASSED BY HIM ON THE SAME DAY AND THE IMPUGNED ORDER APPEARS TO HAVE ALREADY BEEN PREPARED AND KEPT READ Y AND THE VARIOUS FACTUAL AND LEGAL SUBMISSIONS CONTAINED IN THE SUBMISSIONS WITH CASE LAW FILED ON 27.1.2010 AND EXPLAINED ON 29.1.2010 FROM 3.00 PM TO 6.15 PM HAD BEEN ALTOGETH ER DISREGARDED AND ALL THE BINDING DECISIONS OF THE SUPREME COURT AND THE HIGH COURTS REFERRED TO AND RELIED UPON BY THE APPELLANT HAD NOT BEEN FOLLOWED AND HENCE THE IMPUG NED ORDER IS TOTALLY UNSUSTAINABLE AND UNAUTHORISED BOTH ON FACTS AND IN LAW . THE FACT ALLEGED BY THE ASSESSEE IN THIS GROUND, THAT HEARINGS BEFORE LD. CIT(A) HAD TAKEN PLACED TI LL 6:15 PM ON 29.01.2010 HAS NOT BEEN DISPUTED FROM THE SIDE OF REVENUE AT THE TIME OF HEARING BEFORE US. WHEN THE HEARING HAS TAKEN PLACED TILL 6:15 PM ON 29.01.2010 ; THEN IT IS CONTRARY TO ALL HUMAN PROBABILITIES THAT A DETAILED AND LENGTHY ORDER [SU CH AS THE IMPUGNED ORDER DATED 29.01.2010 PASSED BY LD. CIT(A)] CAN BE PASSED ON T HE SAME DAY; UNLESS THE ORDER IS ALREADY PREJUDGED AND A PREMEDITATED ORDER IS KEPT READY AND UNLESS THE LD. CIT(A) HAD ALREADY DECIDED THE ISSUE EVEN BEFORE THE HEARI NG TOOK PLACED ON 29.01.2010. THIS IS A GROSS VIOLATION OF THE PRINCIPLE OF NATURAL JU STICE. THE LD. CIT(A) IS REQUIRED TO FIRST HEAR THE ASSESSEE AND THEN DECIDE THE ISSUE IN DISP UTE; RATHER THAN PREJUDGING THE ISSUE EVEN BEFORE THE HEARING TAKES PLACE AND PASSI NG A PREMEDITATED ORDER. ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 39 OF 42 (D.1) MOREOVER, IN GROUND 5 OF THE CONCISE GROUNDS OF AP PEAL, THE ASSESSEE HAS ALLEGED HOSTILE DISCRIMINATION AGAINST THE ASSESSEE VIS--VIS OTHER SHAREHOLDERS WHO HAD ALSO TRANSFERRED THEIR SHARE HELD AS CAPITAL AS SET, AND AT THE SAME PRICE, WHICH HAD BEEN DULY ACCEPTED BY REVENUE IN THEIR CASES. IT I S CONTENDED BY THE ASSESSEE IN THIS GROUND OF APPEAL THAT REVENUE CANNOT DISCRIMINATE B ETWEEN ONE SHAREHOLDER AND ANOTHER IN REGARD TO TRANSACTIONS FOR TRANSFER OF S HARES WHEN SUCH TRANSFER OF SHARES TAKES PLACE UNDER THE SAME AGREEMENT SIMULTANEOUSLY BY ALL OF THEM. (D.2) AT THE TIME OF HEARING BEFORE US, THE FACT ALLEGED BY THE ASSESSEE, THAT THERE IS DISCRIMINATION AGAINST THE ASSESSEE, AND THAT ON ID ENTICAL FACTS AND CIRCUMSTANCES THE ASSESSEE HAS BEEN PICKED UP FOR HOSTILE ASSESSMENT WHEREAS TWO OTHER SHAREHOLDERS [NAMELY, MR. PANKAJ AGARWAL AND M/S CITICORP FINANC E (INDIA) LTD.] HAVE NOT BEEN SUBJECTED TO SIMILARLY HOSTILE ASSESSMENT BY REVENU E; WAS NOT DISPUTED FROM THE SIDE OF REVENUE. FROM PERUSAL OF RECORDS, INCLUDING THE ASSESSMENT ORDER AS WELL AS IMPUGNED APPELLATE ORDER OF LD. CIT(A), WE FIND NO MENTION OR JUSTIFICATION, AS TO WHY, IN THE CASE OF THE ASSESSEE SUBSTANTIAL PART O F INCOME OFFERED AS LONG TERM CAPITAL GAIN HAS BEEN ASSESSED AS BUSINESS INCOME WHEREAS O N IDENTICAL FACTS AND CIRCUMSTANCES INCOME OF THE AFORESAID TWO OTHER SHA REHOLDERS UNDER THE HEAD LONG TERM CAPITAL GAIN HAS BEEN FULLY ACCEPTED BY REVENU E. (D.2.1) IN THESE FACTS AND CIRCUMSTANCE, AS DISCUSSED IN F OREGOING PARAGRAPHS (D), (D.1) AND (D.2) ; WE ARE OF THE VIEW THAT THE IMPUGNED APPELLATE OR DER DATED 29.01.2010 OF LD. CIT(A) CANNOT BE SUSTAINED AT PRE SENT AND THAT THE LD. CIT(A) NEEDS ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 40 OF 42 TO PASS A FRESH ORDER TAKING INTO ACCOUNT THE FACTS STATED BY ASSESSEE IN AFORESAID GROUNDS 2 AND 5 OF CONCISE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IN THE APPEAL FILED BY THE ASSESSEE IN ITAT. ACCORDINGLY, WE SET ASIDE THE IMPUGNED APPELLATE ORDER DATED 29.01.2010 OF LD. CIT(A) AND DIRECT HIM TO PA SS FRESH ORDER AFTER PROVIDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND DEAL ING WITH THE ISSUE, WHY IN THE CASE OF THE ASSESSEE SUBSTANTIAL PORTION OF LONG TERM CA PITAL GAIN HAS BEEN ASSESSED AS BUSINESS INCOME WHEREAS ON IDENTICAL FACTS AND CIRC UMSTANCES, THE CLAIM OF LONG TERM CAPITAL GAIN BY THE AFORESAID OTHER TWO SHAREHOLDER S HAS BEEN ACCEPTED BY REVENUE. THE FRESH ORDER TO BE PASSED BY THE LD. CIT(A) SHOU LD BE PASSED AFTER GIVING DUE CONSIDERATION TO THE SUBMISSIONS MADE BY THE ASSESS EE, INSTEAD OF PASSING A PREMEDITATED ORDER, PREJUDGED EVEN BEFORE THE ACTUA L HEARING TAKE PLACE. THIS APPEAL IS DISPOSED OF IN ACCORDANCE WITH THE AFORESAID DIR ECTIONS. THE IMPUGNED ORDER DATED 29.01.2010 OF LD. CIT(A) STANDS SET ASIDE WITH THE DIRECTION TO THE LD. CIT(A) TO PASS A FRESH ORDER, TAKING INTO ACCOUNT OUR AFORESAID OBSE RVATIONS AND DIRECTIONS. FOR STATISTICAL PURPOSES, THE APPEAL IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 26/11/19 . SD/- SD/- (AMIT SHUKLA) (ANADEE NATH MISSH RA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26/11/19. POOJA/- ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 41 OF 42 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION ITA NO.- 719/DEL/2010 SHRI SUNIL GOYAL. PAGE 42 OF 42 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER