The ACIT, Circle-4, Baroda V. M/s. Nuova Finstock Pvt.Ltd., Baroda

ITA 732/AHD/2009

• Counselvise Citation: 73220514 RSA 2009
• Duration Of Justice: 3 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 24-04-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 05-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: MRS URVASHI SHODHAN
• Keywords: Capital asset; Cost of acquisition; Fair market value
• Section: 45(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI, D.K.TYAGI, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT ME MBER I.T.A. NO. 732 /AHD/ 2009 & C.O. NO. 73/A/2009 (ARISING OUT OF ITA NO. 732/AHD/2009) ASSESSMENT YEAR :2004-05 ASST. COMMISSIONER OF INCOME TAX, CIR-4, BARODA M/S NUOVA FINSTOCK PVT LTD CREATIVE CASTLE, 70, SAMPATRAO COLONY PRODUCTIVITY ROAD BARODA V/S . V/S . M/S NUOVA FINSTOCK PVT LTD CREATIVE CASTLE, 70, SAMPATRAO COLONY PRODUCTIVITY ROAD BARODA ASST. COMMISSIONER OF INCOME TAX, CIR-4, BARODA PAN NO. AAACN 3674P (APPELLANT) .. (RESPONDENT) BY REVENUE SHRI B.L.YADAV, SR.D.R. /BY ASSESSEE MRS. URVASHI SHODHAN, A.R. /DATE OF HEARING 25.04.2012 /DATE OF PRONOUNCEMENT 18.05.2012 O R D E R ITA NO.732/AHD/2009 & C.O.NO.73/A/2009 PAGE 2 PER : A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE REVENUE AND THE C.O. IS FILED BY THE ASSESSEE. BOTH ARE DIRECTED AGAINST THE ORDER OF L D. CIT (A)-III, BARODA DATED 03.12.2008 FOR THE ASSESSMENT YEAR 2004-05. 2. FIRST, WE TAKE UP THE APPEAL FILED BY THE REVENU E. 3. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT (A) HAS ERRED IN SCALING DOWN THE SALE PRICE OF SHARE FROM RS. 9.94 TO RS. 1.52 OVERLOOKING THE FACT THAT THE RATE PER SHARE AT RS. 1.52 WAS INFLUENCED BY THE RELATED PARTIES OF THE A SSESSEE COMPANY. 2. THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND OR A LTER THE ABOVE GROUNDS AS MAY BE DEEMED NECESSARY. 4. LD. D.R. OF THE REVENUE HAS SUPPORTED THE ASSESS MENT ORDER WHEREAS LD. A.R. OF THE ASSEESSEE SUPPORTED THE ORDER OF LD . CIT (A). IT WAS ALSO SUBMITTED THAT THIS ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNALS ORDER RENDERED IN THE CASE OF ALLURE INVESTMENTS & FINANCE PVT. LTD. VS. ACIT IN ITA NO. 3431/AHD/2010 DATED 05.08.2011. HE SBUBMITTED THE COPY OF THIS TRIBUNALS DECISION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE TRIBUNALS DECISION CITED BY LD. A.R. OF THE AS SESSEE. PARA NOS. 7 & 8 OF THE TRIBUNALS DECISION CITED BY LD. A.R. OF THE ASSESSEE ARE RELEVANT AND HENCE THE SAME ARE REPRODUCED BELOW FOR THE SAK E OF READY REFERENCE: 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW AS WELL AS THE JUDGMENTS CITED BY BOTH THE SIDES. WE FIND T HAT AS PER SECTION 48, ITA NO.732/AHD/2009 & C.O.NO.73/A/2009 PAGE 3 CAPITAL GAIN HAS TO BE WORKED OUT AFTER REDUCING TH E COST OF ACQUISITION OF CAPITAL ASSET ALONG WITH COST OF IMPROVEMENT THERET O AND THE EXPENSES INCURRED ON TRANSFER OF A CAPITAL ASSET FROM FULL V ALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET. THERE IS NO REFERENCE TO THE MARKET VALUE OF THE CAPITAL ASSET TRANSFERRED IN SECTION 48 OR IN ANY OTHER SECTION EXCEPT SECTION 5 0C, WHICH IS APPLICABLE ONLY IN CASE OF SALE OF LANDED PROPERTY. IN THE CAS E OF JUDGMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. SHRI GIRISH DAMJIBHAI PATEL (SUPRA), HONBLE GUJARAT HIGH COURT HAS ALSO REFERRED TO THE SAME PROVISIONS OF SECTION 48 AND ON THE BAS IS OF SAME SECTION 48 OF THE ACT, IT WAS HELD THAT SINCE SECTION 48 OF TH E ACT DOES NOT HAVE ANY REFERENCE TO THE MARKET VALUE BUT ONLY TO THE CONSI DERATION REFERRED TO IN THE SALE DEED, THERE IS NO ERROR IN THE ULTIMATE CO NCLUSION ARRIVED AT BY THE CIT(A) AS WELL AS BY THE TRIBUNAL IN THAT CASE. HENCE, RATIO OF THIS DECISION OF HONBLE GUJARAT HIGH COURT IS THIS THAT FOR THE PURPOSE OF WORKING OUT CAPITAL GAIN, THE SALE CONSIDERATION RE CEIVED BY THE ASSESSEE OR ACCRUED SALE CONSIDERATION HAS TO BE ADOPTED BEC AUSE THERE IS NO REFERENCE IN SECTION 48 TO THE MARKET VALUE OF THE ASSET FOR THE PURPOSE OF COMPUTING THE CAPITAL GAIN.. REGARDING THIS CONTENT ION THAT THE ASSET IN THE PRESENT CASE IS QUOTED SHARES AND NOT LANDED PR OPERTY AS IN THE CASE OF DECISION OF BOMBAY HIGH COURT OR SHARES OF PRIVA TE LTD. CO., AS IN THE CASE OF ITAT ORDER CITED SUPRA, WE ARE OF THE CONSI DERED OPINION THAT IT DOES NOT HAVE ANY IMPACT ON THE RATIO OF THE JUDGME NT AND THE LEGAL POSITION. LEGAL POSITION REMAINS THE SAME IRRESPECT IVE OF THE TYPE OF CAPITAL ASSET AND HENCE, WE DO NOT FIND ANY MERIT IN THIS CONTENTION OF THE LD. D.R. OF THE REVENUE THAT THIS JUDGMENT OF HONB LE GUJARAT HIGH COURT IS NOT APPLICABLE IN THIS CASE BECAUSE ASSETS IN THAT WAS LANDED PROPERTY WHEREAS IN PRESENT CASE, IT IS QUOTED SHA RE. AS PER THE RATIO LAID DOWN BY HONBLE GUJARAT HIGH COURT, CAPITAL GAIN HA S TO BE COMPUTED ITA NO.732/AHD/2009 & C.O.NO.73/A/2009 PAGE 4 ON THE BASIS OF CONSIDERATION ACCRUING OR RECEIVED FOR TRANSFER OF CAPITAL ASSET AND FOR THAT PURPOSE, NO REFERENCE IS REQUIRE D TO BE MADE TO THE MARKET VALUE OF THE ASSET IN QUESTION BECAUSE THERE IS NO PROVISION IN SECTION 48 OF THE ACT. IN THAT JUDGMENT, REFERENCE HAS BEEN MADE TO SECTION 45(2) ALSO WHERE IT IS SPECIFIED THAT MARKE T VALUE OF THE ASSET IN QUESTION HAS TO BE CONSIDERED WHERE THERE IS CONVER SION BY THE OWNER OF THE CAPITAL ASSET INTO STOCK IN TRADE BUT IT WAS H ELD THAT PROVISION OF SECTION 45(2) ARE NOT APPLICABLE IN THE CASE OF SAL E OF CAPITAL ASSET AND THE SAME IS APPLICABLE WHERE THERE IS CONVERSION OF CAPITAL ASSET INTO STOCK IN TRADE. IT WAS NOTED BY HONBLE GUJARAT HIG H COURT IN PARAGRAPH 19 THAT COUNSEL FOR THE REVENUE WAS UNABLE TO POINT OUT ANY OTHER PROVISION IN WHICH IN A SITUATION LIKE THE PRESENT CASE, THE ASSESSING OFFICER COULD HAVE MADE A REFERENCE TO A VALUER FOR ASCERTAINING THE FAIR MARKET VALUE OF THE ASSETS IN QUESTION AS ON THE DA TE OF ITS TRANSFER IN THE PRESENT CASE ALSO, NO PROVISION IN THE INCOME TAX A CT HAS BEEN BROUGHT TO OUR NOTICE AS PER WHICH, MARKET VALUE CAN BE CONSID ERED FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN. REGARDING THE RELI ANCE PLACED BY LD. D.R. OF THE REVENUE ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF MCDOWELL & CO. LTD. VS. C.T.O. (SUPRA), WE FIND THAT IN THAT CASE, THE ISSUE INVOLVED WAS REGARDING LEGAL TAX PL ANNING OR TAX AVOIDANCE. IN THE PRESENT CASE, WE FIND THAT EVEN A FTER ADDITION MADE BY THE A.O. OF RS.4,19,504/-, THE LOSS ASSESSED BY THE A.O. IS OF RS.28,23,396/-. THE FACTS OF THE PRESENT CASE DOES NOT INDICATE THAT THERE WAS ANY CASE OF WILFUL TAX AVOIDANCE OR TAX EVASION . HENCE, IN OUR CONSIDERED OPINION, THE JUDGMENT OF HONBLE APEX CO URT RENDERED IN THE CASE OF MCDOWELL & CO. LTD. VS. C.T.O. (SUPRA) HAS NO RELEVANCE IN THE PRESENT CASE BECAUSE WE FIND THAT IN THE PRESENT CA SE, THE REASONS ARE ALSO GIVEN FOR ADOPTING LOWER PRICE OF RS.0.26 PER SHARE AS AGAINST THE QUOTATION AT BOMBAY STOCK EXCHANGE OF RS.1.52 PER S HARE. IT IS SUBMITTED ITA NO.732/AHD/2009 & C.O.NO.73/A/2009 PAGE 5 THAT THE ASSESSEE COMPANY HAS SOLD THE SHARES IN PH YSICAL FORM TO THE RELATED PARTY WHEREAS THE SHARES TRADED AT BOMBAY S TOCK EXCHANGE WERE DEMAT SHARES AND IF THE ASSESSEE WANTS TO SALE THE SHARES AT A STOCK EXCHANGE, IT HAS GOT THE SHARES DEMATERIALIZED WHIC H WILL REQUIRE TIME AND WILL ALSO HAVE ITS COST AND MOREOVER, THE QUANT ITY OF SHARES TRADED IN THE STOCK EXCHANGE IN VARIOUS MONTHS OF THE FINANCI AL YEAR AT VARIOUS DATES IN THE MONTH OF MARCH,2004 OR IN FEBRUARY,200 4 WAS 100 SHARES ON SOME DATES, 200 SHARES ON SOME DATES, 300 SHARES ON SOME DATES AND 1100 SHARES ON ONE DATE ONLY WHEREAS THE QUANTITY O F SHARES SOLD BY THE ASSESSEE IS 3,32,940 SHARES. IT WAS SUBMITTED THAT IT CANNOT BE SAID THAT THE PRICE CHARGED BY THE ASSESSEE WAS UNREASONABLY LOW IN THE FACTS OF THE PRESENT CASE. 8. CONSIDERING THE FACTS OF THE PRESENT CASE IN ITS ENTIRETY AS DISCUSSED ABOVE AND BY RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. GIRISH D AMJIBHAI PATEL (SUPRA), WE ARE OF THE CONSIDERED OPINION THAT FOR THE COMPUTATION OF CAPITAL GAIN IN THE PRESENT CASE, THE A.O. SHALL WO RK OUT THE CAPITAL GAIN/CAPITAL LOSS ON THE BASIS OF CONSIDERATION REC EIVED BY THE ASSESSEE AND NOT ON THE BASIS OF ALLEGED MARKET VALUE OF THE SHARES SOLD BY THE ASSESSEE. WE DIRECT THE A.O. ACCORDINGLY. 6. FROM THE ABOVE PARAS OF THE TRIBUNALS ORDER, IT IS SEEN THAT THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE JUDGMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. SHRI GIRISH DAMJIBHAI PATEL IN TAX APPEAL NO.1016, 1015 AND 1012 OF 2009 DATED 28-03-2011. IN THAT CASE, IT WAS HELD BY HONBLE GUJARAT HIGH COUR T THAT SECTION 48 OF THE I.T. ACT DOES NOT HAVE ANY REFERENCE TO THE FAIR MARKET VALUE BUT ONLY TO THE CONSIDERATION REFERRED TO IN SALE DEED AND, THEREF ORE, THE CAPITAL GAIN HAS TO BE COMPUTED ON THE BASIS OF SALE CONSIDERATION RECE IVED BY THE ASSESSEE OR ITA NO.732/AHD/2009 & C.O.NO.73/A/2009 PAGE 6 ACCRUED SALE CONSIDERATION BUT THERE IS NO REFERENC E IN SECTION 48 TO THE MARKET VALUE OF THE ASSET FOR THE PURPOSE OF COMPU TING THE CAPITAL GAIN. IN THE PRESENT CASE, IT IS ALSO AN UNDISPUTED FACT THA T THE ASSESSEE COMPANY HAD SOLD THE ENTIRE INVESTMENT IN SHARE OF RS.33.39 LAC S FOR RS. 86000/- ONLY AND THUS HE CLAIMED LOSS OF RS. 32.43 LACS. THE LD. A. O. HAD ADOPTED THE MARKET VALUE OF SHARES FOR THE PURPOSE OF COMPUTING THE CA PITAL GAIN BUT THIS ACTION OF THE LD. A.O. CANNOT BE SUSTAINED AS PER THE JUDGMEN T OF THE GUJARAT HIGH COURT, WHICH WAS FOLLOWED BY THE TRIBUNAL IN THE CA SE CITED BY LD. A.R. OF THE ASSESSEE. 7. UNDER THIS FACTUAL AND LEGAL POSITION, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT (A). 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. 9. NOW, WE TAKE UP THE C.O. FILED BY THE ASSESSEE. 10. THE GROUNDS RAISED BY THE ASSESSEE IN C.O. ARE AS UNDER:- 1. THE LD. CIT (A) HAS GROSSLY ERRED IN PARTLY CON FIRMING THE ACTION OF AO IN REDUCING THE CAPITAL LOSS CLAIMED BY THE A PPELLANT ON SALE OF SHARES BY TAKING THE SHARE VALUE AT RS. 1.52 PER SH ARE INSTEAD RS. 0.26 AT WHICH THE APPELLANT ENTERED INTO THE TRANSACTION . 2. THE LD. CIT (A) HAS FURTHER ERRED IN TREATING TH E LOSS ON SALE OF SHARES AS CAPITAL LOSS AND NOT BUSINESS LOSS AS CLA IMED BY THE APPELLANT. 11. WE FIND THAT AS PER THE C.O., THE ASSESSEE IS M ERELY SUPPORTING THE ORDER OF LD. CIT (A). WE HAVE ALREADY UPHELD THE O RDER OF LD. CIT (A) BY DISMISSING THE APPEAL OF REVENUE AND HENCE THE C.O. HAS BECOME INFRUCTUOUS AND DISMISSED ACCORDINGLY. 12. IN THE COMBINED RESULT, THE APPEAL OF THE REV ENUE AS WELL AS C.O. OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. ITA NO.732/AHD/2009 & C.O.NO.73/A/2009 PAGE 7 SD/- SD/- ( D.K.TYAGI) ( A.K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. '#$ / APPELLANT 2. &'#$ / RESPONDENT 3. )*)+ ' ', / CONCERNED CIT 4. ' ',- ' / CIT (A) 5. 01'' +, ' ''' +, 34 * / DR, ITAT, AHMEDABAD 6. 167 89 / GUARD FILE. BY ORDER/ , :/3' )' ' ''' +, 34 * <