A.C.I.T. 12(1), MUMBAI V. ABHIMANYU THACKERSEY, MUMBAI

ITA 7614/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3660 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 06-03-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 11-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAVIN KUMAR
• Assessee Lawyers: FAROOKH IRANI
• Keywords: Cost of acquisition
• Section: 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI BEFORE SHRI R.K.GUPTA, JM & SHRI P.M.JAGTAP , AM ITA NO S . 7618 /MUM/20 1 1 ( ASSESSMENT YEAR : 200 8 - 0 9 ) ACIT 12(1), MUMBAI . VS. SHRI HRISHIKESH J. THACKERSEY, 213, VITHALDAS CHAMBERS, 3 RD FLOOR, 16, MUMBAI SAMACHAR MARG,FORT, MUMBAI - 400 023 PAN NO. : ABZPT 8307 M ( APP ELLANT ) .. ( RESPONDENT ) AND ITA NO. 7614 /MUM/20 11 ( ASSESSMENT YEAR :2008 - 09 ) ACIT 12(1), MUMBAI. VS. SHRI ABHIMANYU THACKERSEY, 213, VITHALDAS CHAMBERS, 3 RD FLOOR, 16, MUMBAI SAMACHAR MARG,FORT, MUMBAI - 400 023 PAN NO. : A LTPT 1395 E ( APP ELLANT ) .. ( RESPONDENT ) REVENUE BY : MR. PRAVIN KUMAR ASSESSEE BY : MR. FAROOKH IRANI DATE OF HEARING : 1 6 TH APRIL , 2013 DATE OF PRONOUNCEMENT : 8 TH MAY, 2013 O R D E R PER B E NCH : TH ESE TWO APPEAL S HAVE BEEN PREFERRED BY THE DEPARTMENT AGAINST THE ORDER LEANED CIT (A) - 23 , MUMBAI RELA TING TO THE ASSESSMENT YEAR 200 8 - 09 . 2 . SINCE COMMON ISSUES ARE INVOLVED IN BOTH THE CASES, THEREFORE, FOR THE SAKE OF CONVENIENCE, BOT H THESE CASES HAVE BEEN HEARD AND DISPOSED OF BY THIS CONSOLIDATED ORDER. 3 . THE DEPARTMENT IN BOTH THE APPEALS HAS RAISED THE FOLLOWING GROUNDS : - ITA NO S . 7618 & 7614 /2011 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THAT T HE ASSESSEE WAS ALLOTTED 119 SHARES OF CHAITRA REALTY LTD. AS A RESULT OF ASSESSEE'S SHAREHOLDING IN HSWML AND FRACTION COUPONS WHEN THE ASSESSEE HAD FAILED TO FURNISH ANY PROOF OR DOCUMENTARY EVIDENCE BEFORE THE A.O. 2. ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THAT THE SCHEME DRAWN BY BIFR FOR PLEDGE/TRANSFER OF SHARES HAD NOT BEEN ALTERED WITH AS THE DATE OF SALE OF SHARES IS AFTER THE DATE WHEN THE COMPANY HSWML CEASED TO BE A SICK UNDERTAKING EVEN WHEN THE MOU FOR SALE OF SHARES HAD ALREADY BEEN ENTERED INTO MUCH EARLIER I.E. ON 8/5/2006 AND THE CREDITORS OF THE SPY HAVE ALSO BEEN PAID OFF FROM THE ADVANCE RECEIVED ON ACCOUNT OF SUCH SALE AGREEMENT THROUGH ESCROW AGENT WHILE NO PROOF OF BIFR APPROVA L FOR THE SAME HAD BEEN PRODUCED BY THE ASSESSEE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN CONCLUDING THAT THE HIGH VALUE OF SHARES (UNLISTED) SOLD APPEARS TO BE BASED ON THE VALUE OF UNDERLYING ASSET I.E . LAND WHEN THE YIELD METHOD HAS TO BE FOLLOWED BY GOING CONCERNS AND NOT SICK CONCERNS LIKE THE INSTANT CASE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THAT THE SUM RECEIVED BY THE ASSESSEE WAS FR OM THE SALE OF SHARES AND NOT AN APPROPRIATION OF THE SURPLUS OF THE SPY WHICH WAS NOT AN ASSET IN THE HANDS OF THE ASSESSEE. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THAT THE PRABHADEVI PROPERTY HAS NOT BEEN SOLD WHEN THE RE - CONVEYANCE DEED OF PRABHADEVI PROPERTY ALONG WITH ORIGINAL DOCUMENTS OF TITLE HAD BEEN ACQUIRED BY THE PURCHASERS I.E. VISHAL NIRMAN (INDIA) PVT. LTD. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CI T(A) HAS ERRED IN TREATING THE INCOME FROM SALE OF SHARES OF CHAITRA REALITY LTD. AS CAPITAL GAINS AS CLAIMED BY THE ASSESSEE INSTEAD OF INCOME FROM OTHER SOURCES AS TAXED BY THE AO BY NOT APPRECIATING THE FACT THAT THE AO HAS RIGHTLY TAXED SURPLUS ARISING OUT OF SALE TRANSACTION. 7. 'THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED.' 4 . DURING THE ASSESSMENT PROCEEDING, THE AO NOTICED THAT THE ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN OF RS. 2,06,54,160/ - AND THE SAME WAS CLAIMED AS ARISING OUT OF SALE OF SHARES HELD BY THE ASSESSEE IN M/S CHAITRA REALTY LIMITED. IN ORDER TO VERIFY THE CORRECTNESS OF THE INCOME SHOWN BY THE ASSESSEE, THE ASSESSEE ITA NO S . 7618 & 7614 /2011 3 REQUIRED TO FILE DETAIL OF D ATE OF PURCHASE, RATE AT WHICH IT WAS PURCHASED, PROOF OF PURCHASE INCLUDING DEMAT ACCOUNT, BROKERS NOTE, DETAILS OF PAYMENT, NAME AND ADDRESS OF THE PERSON TO WHOM IT WAS SOLD AND DIVIDEND THEREOF ETC.. IT WAS EXPLAINED BY THE LEARNED AR THAT M/S.CHAITRA REALTY LTD. IS A SPECIAL PURPOSE VEHICLE (SPV) FORMED IN ACCORDANCE WITH THE SCHEME OF REHABILITATION FORM ULATED BY BIFR IN THE CASE OF M / S HINDOOSTAN SPINNING AND WEAVING MILLS LTD. (HSWML). IT WAS FURTHER SUBMITTED T HAT THE SALE OF SHARES HELD BY THE AS SESSEE IN M/S.CHAITRA REALTY LTD. WERE SOLD LATER RESULTING IN LONG TERM CAPITAL GAINS. IN SUPPORT THEREOF COPY OF BIFR SUMMARY RECORD OF THE PROCEEDINGS OF THE HEARING WHEREBY THE BIFR SCHEME FOR REHABILITATION OF M / S. HINDOOSTAN SPINNING & WEAVING MILLS LTD. WERE SANCTIONED U/S.18(4) UNDER THE SICK INDUSTRIAL COMPANIES ACT, 1985 AND COPY OF ANNUAL REPORT OF M/S.CHAITRA REALTY LTD. FOR F.Y. 2005 - 06 WERE FILED. THE ASSESSEE ALSO FILED MOU DATED 08/05/2006 ENTERED INTO BETWEEN THREE PARTIES, NAMELY, THE ASSE SSEE AND 9 OTHERS BELONGING TO SHRI SUDHIR THACKERSEY & FAMILY AS THE 'SELLERS', M/ S. VISHAL NIRMAN (INDIA) P. LTD. AS THE 'BUYER' AND M/S.CHAITRA REALTY LTD. AS THE 'COMPANY'. THE ASSESSEE ALSO FILED COPY OF THE LETTER DATED 27/6/2007 FROM VISHAL NIRMAN INDIA LTD. ADDRESSED TO THE ASSESSEE ALONG WITH 9 OTHERS ('SELLERS'), THE COMPANY AND THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD. (' ESCROW AGENT'). LIMITED REVIEW OF UNAUDITED FINANCIAL RESULTS FROM 01/04/2007 TO 16106/2007 OF M/S.CHAITRA REALTY LT D. WERE ALSO FILED ALONG WITH THE LETTER DATED 27106/2007 ADDRESSED TO THE ITA NO S . 7618 & 7614 /2011 4 BUYER IN THE FORM OF TITLE CERTIFICATE REGARDING THE FREE, CLEAR AND MARKETABLE TITLE OF M / S. CHAITRA REALTY LTD. IN RESPECT OF THE CONCERNED PROPERTY. 4.1 IT WAS FURTHER SUBMITTE D THAT SHARES PURCHASED FROM CERTAIN ENTITIES FOR WHICH PAYMENTS HAVE BEEN MADE THROUGH BANKS BUT NO CONFIRMATION OR CORRESPONDENCE IN THIS REGARD BETWEEN THE PARTIES WERE FURNISHED. THE ASSESSING OFFICER NOTICED THAT THE HINDUSTAN SPINNING & WEAVING MILLS LTD. (HSWML) PROMOTED BY THE THACKERSEY AND PURSHOTTAM VOHRA FAMILIES FINALLY CAME TO BE KNOWN AS HSWML AND HAD FOUR UNITS AT PRIME LOCATIONS AT MUMBAI AT PRABHADEVI, DADAR, MAHALAXMI, & KARAD, MAHARASHTRA. THE COMPANY STARTED INCURRING LOSSES FROM 1996 - 9 7 ONWARDS AND BY SEPTEMBER 2002 ACCUMULATED LOSSES STOOD AT RS.185 CRORE. THE COMPANY HAS DECLARED AS A 'SICK UNIT BY THE BIFR ON 4 - 12 - 2002. PERMISSION FOR CLOSURE FOR 3 MILLS AT MUMBAI EXCEPT KARAD WAS ALSO ACCEPTED BY THE LABOUR COMMISSIONER. A COMPREHE NSIVE REHABILITATION SCHEME WAS DRAWN UP BY BIFR. IT WAS DECIDED TO REALIZE THE VALUE OF LAND THROUGH JOINT DEVELOPMENT WITH RENOWNED DEVELOPERS SINCE THE SAME WAS EXPECTED TO FETCH MORE REALIZATION TO THE COMPANY AND IN THE BELIEF THAT NO BUYER COULD BE L OCATED FOR UPFRONT PURCHASE FOR LAND FOR SUCH HUGE SUMS. HSWML WAS ALLOWED TO CREATE 3 SPVS (FOR 3 PROPERTIES AT PRABHADEVI, MAHALAXMI AND DADAR). THE UNSUSTAINABLE DEBT WAS PROPOSED TO BE SETTLED OUT OF REALIZATION OF NON- MANUFACTURING ASSETS OF THE COMP ANY I.E. DEVELOPMENT OF LAND . AN ARRANGEMENT FOR COMPREHENSIVE REHABILITATION ITA NO S . 7618 & 7614 /2011 5 SCHEME WAS MADE WHEREIN HSWML WAS DEMERGED INTO 4 ENTITIES, 3 SPVS, RESIDUAL COMPANY WITH TEXTILE OPERATION ONLY AT KARAD, LAND/DEVELOPMENT RIGHTS IN RESPECT OF THE MILL LAND AT THE THREE LOCATIONS WOULD BE TRANSFERRED TO THE SPVS. THE VRS LIABILITIES AND DUES OF WORKERS OF INDUSTRIAL UNITS WOULD BE ASSIGNED TO RESPECTIVE SPVS. LIABILITIES OF THE TERM LENDERS AND WORKING CAPITAL BANKS (RT AND 2ND CHARGE HOLDERS) WOULD BE TRANSFERR ED OR ASSIGNED TO THE SPVS IN THE PROPORTION OF THE EXPECTED NET REALIZATION FROM SPY ASSETS. THE REMAINING ASSETS AND LIABILITIES AFTER ASSIGNING THEM TO THE' 3 SPVS WOULD' REST WITH THE RESIDUAL HSWML ALONG WITH EXISTING CURRENT LIABILITIES AND BOOK DEBT S OF KARAD UNIT. THE PROMOTERS OF HSWML WERE TO CONTRIBUTE ADDITIONAL REQUIREMENTS FOR INCREASE IN WORKING CAPITAL OF THE RESIDUAL HSWML UNIT AT KARAD TO THE EXTENT OF RS.11.S0 CRORES. INTER - ALIA, IT WAS STIPULATED THAT EQUITY SHARE CAPITAL OF THE SPVS WER E T O BE HELD BY THE EXISTING SHAREHOLDERS OF THE COMPANY HSWML IN THE RATIO OF THE EXISTING HOLDING PATTERN. THE PROMOTERS WERE ALSO UNDER STATUTORY OBLIGATION TO PLEDGE THEIR SHARES IN THE SPVS ON PARI - PASSU BASIS WITH EXISTING LENDERS AS COLLATERAL SECUR ITY. THE COMPANY HSWML WAS NOT PERMITTED TO DECLARE DIVIDENDS WITHOUT COMPLETING THE REQUIREMENTS OF THE COMPANIES ACT OR THE PROVISIONS OF THE SANCTIONED SCHEME DURING THE PERIOD OF REHABILITATION. THE COMPANY WAS ALSO MANDATED TO ADHERE THE SHAREHOLDING PATTERN AS PER THE SCHEME,' NO ALTERATION WAS PERMITTED EXCEPT WITH BIFR'S PRIOR APPROVAL. ITA NO S . 7618 & 7614 /2011 6 4.2 THE A O ALSO NOTED FROM THE LEGAL ARRANGEMENTS BY VIRTUE OF BIFR SCHEME, THE SPVS WERE CREATED NOT AS A BUSINESS UNDERTAKING BUT FOR THE PURPOSE OF DEVELOPMENT OF THE THREE PROPERTIES THROUGH JOINT VENTURES IN ORDER TO SETTLE THE DEBT OF THE COMPANY. THE ARRANGEMENT WAS NOT IN THE NATURE OF DEMERGER AS DEFINED UNDER SECTION 2(19AA) OF THE IT ACT. M/S.CHAITRA REALTY LTD. WAS ONE OF THE SPVS. THE ALLOTMENT OF SHAR ES WAS NEITHER IN THE FORM OF SPLITTING UP OF HSWML SHARES NOR IN THE NATURE OF ANY RIGHTS OR BONUS ISSUE. THE AO HELD THAT THE ASSESSEE'S CLAIM THAT SHARES WERE PURCHASED FOR THE SUM DECLARED DOES NOT FIND ANY SUPPORT IN THE FINAL ACCOUNTS AND THE AUDIT R EPORT OF CHAITRA REALTY LTD. NO DETAILS OR EVIDENCE AS TO THE NATURE OF ACQUISITION AND THE DETAILS OF PAYMENTS MADE WERE FILED BY THE ASSESSEE. THUS, THE AO CONCLUDED THAT THE SAID SHARES ARE NOTHING BUT EQUITY SHARES ALLOTTED TO THE ASSESSEE BY VIRTUE OF BEING AN EXISTING SHAREHOLDER OF HSWML WITHOUT ANY PAYMENT BEING MADE THEREON. HENCE, THE COST OF ACQUISITION TO THE ASSESSEE WAS TAKEN AS NIL AND MOU BY A TRIPARTITE AGREEMENT WAS ENTERED INTO. THE A O HAS DISCUSSED THE SEQUENCE, OF EVENTS IN TERMS OF MOU AT FIRST CLOSURE, SECOND CLOSURE AND THIRD CLOSURE AND HAS HELD THAT IN EFFECT THE SURPLUS ON SUCH DE - FACTO WINDING UP OF CHAITRA REALTY LTD. AS A SPY, WHICH OUGHT TO HAVE GONE BACK TO THE POOL OF HSWML WAS APPROPRIATED AMONG THE EXISTING SHAREHOLDERS INC LUDING THE ASSESSEE WITHOUT ROUTING IT, TO THE PROFIT AND LOSS ACCOUNT OF EITHER CHAITRA REALTY LTD. OR HSWML. ONCE THE BINDING LIABILITIES WERE PAID OFF, FIRST BY ACQUIRING ITA NO S . 7618 & 7614 /2011 7 THEM IN THE SHAREHOLDERS' NAME AS A TRUSTEE FOR THE BUYER OF THE PROPERTY AND THEN SURRENDERING THE SAME TO THE BUYER FOR CANCELLATION, THE NEXT STEP WAS TO HAND OVER THE TITLE DEEDS OF THE PROPERTY WITH CLEAR AND MARKETABLE TITLE AND FINALLY THE SURPLUS AFTER FULL AND FINAL SETTLEMENT OF ALL OUTSTANDING DUES WAS DISTRIBUTED TO THE SHAR EHOLDERS THROUGH THE ESCROW AGENT WITHOUT ROUTING IT THROUGH THE BOOKS OF 'ACCOUNTS OF THE COMPANY,' M/S.CHAITRA REALTY LTD. HAD IT BEEN DONE SO, THEN THE RECEIPT IN ASSESSEE'S HANDS WOULD HAVE ACQUIRED THE NATURE OF DIVIDENDS, WHICH WAS NOT THE CASE. HAD IT BEEN POOLED WITH HSWML, AS PER THE SCHEME OF BIFR, THEN, IT COULD NOT HAVE BEEN DISTRIBUTED TO ASSESSEE OR OTHER SHAREHOLDERS WITHOUT BIFR APPROVAL TILL SUCH TIME. IT THEREFORE, EMERGES THAT WHAT WAS RECEIVED IN AS SESSEE'S HANDS , WAS BASICALLY IN THE N ATURE OF SURPLUS ARISING OUT OF PAYMENT BY VISHAL NIRMAN (INDIA) P LTD. FOR ACQUIRING THE PRABHADEVI PROPERTY AND THE LEGAL IDENTITY OF THE COMPANY CHAITRA REALTY LTD. AFTER CONSIDERING THE SUBMISSIONS, THE AO HELD THAT NO DOCUMENTARY EVIDENCES REGARDING P URCHASE OF SHARES HAVE BEEN SUBMITTED, ONLY UNSIGNED EXTRACTS PURPORTEDLY IN THE FORM OF PAYMENT VOUCHERS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAVE BEEN FURNISHED. THE DEBIT ENTRIES IN THE BANK PASSBOOK DO NOT REVEAL NATURE OF SUCH PAYMENTS OR THE PAYE ES THEREOF. AS PER BIFR SCHEME SHARE HOLDING PATTERN HAS NOT TO BE ALTERED, THE ASSESSEE DID NOT FURNISH EVIDENCE AS TO HOW AND WHEN APPROVAL OF BIFR WAS OBTAINED FOR TRANSFER OF SHARES. THE REAL PURPOSE AND INTENT BEHIND THE MOU WAS TO ACQUIRE THE PROPERT Y AT PRABHADEVI AND NOT THE ITA NO S . 7618 & 7614 /2011 8 SHARES OF SPV PER SE. THE CONTENTION THAT HSWML HAS SINCE CEASED TO BE A SICK INDUSTRIAL COMPANY FROM 20 - 2 - 2007 DOES NOT HELP THE ASSESSEES CASE SINCE THE CHAIN OF EVENTS FOR TRANSFER OF THE IMPUGNED PROPERTY HAS ALREADY BEEN S ET IN MOTION AS EARLY AS ON 8 - 5 - 2006 BY THE MOU. SINCE THE RECEIPTS IN THE HANDS OF THE ASSESSEE DOES NOT FLOW FROM THE SHARES OF THE SPV BUT ONLY AS A COROLLARY TO THE ACQUISITION OF THE PROPERTY, THE INCOME WAS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES. HENCE, THE DEDUCTION CLAIMED UNDER SECTION 54F WAS TREATED AS INFRUCTUOUS AND DENIED BY THE AO. 5 . ASSESSEE PREFERRED APPEALS BEFORE THE CIT(A) , BEFORE WHOM DETAILED SUBMISSIONS WERE FILED. IT WAS SUBMITTED THAT THE RECEIPT WAS THE RESULT OF SALE OF SHARES OF CHAITRA REALTY LTD. RECEIVED FROM VISHAL NIRMAN (INDIA) PVT. LTD. AND NOT AS A .COROLLARY TO THE ACQUISITION OF THE PROPERTY IN CHAITRA REALTY LTD. IT WAS FURTHER SUBMITTED THAT THE AMOUNTS WERE RECEIVED FROM VISHAL NINNAN (INDIA) PVT. LTD. A ND NOT FROM CHAITRA REALTY LTD. AND THE RECEIPT CANNOT BE TAXED UNDER THE HEAD OTHER SOURCES. THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE APPELLANT SOLD SHARES ONLY AND THE PROPERTY AT PRABHADEVI CONTINUES TO BELONG TO CHAITRA REALTY LTD. AND THE S AME IS NOT SOLD OR TRANSFERRED HENCE THE ENTIRE ASSESSMENT MADE ON THE BASIS THAT CHAITRA REALTY LTD. HAS CEASED TO EXIST AND THE BUYER HAS ACQUIRED THE PROPERTY AT PRABHADEVI IS ERRONEOUS AND UNWARRANTED. THE AGREEMENT WITH VISHAL NIRMAN (INDIA) PVT. LTD. WAS ENTERED INTO BY ONLY BY 10 SHARE HOLDERS AND M/S.CHAITRA REALTY LTD. HAD 330 SHARE HOLDERS. A FEW SHAREHOLDERS ITA NO S . 7618 & 7614 /2011 9 CANNOT SELL AWAY THE ASSETS OF THE COMPANY. THE COMPANY BELONGS TO ALL THE SHAREHOLDERS. A SHAREHOLDER CAN ONLY SELL AWAY HIS SHARES IN THE COMPANY. A TOTAL OF 80 SHARES OF CHAITRA RE ALTY LTD. ('COMPANY') WERE SOLD BY THE ASSESSEE TO VISHAL NIRMAN (INDIA) PVT. LTD. THE PER SHARE SALE CONSIDERATION REALIZ ED BY THE ASSESSEE IS RS.2,58, 177 / - TOTA L ING TO RS.2,06,54,160/ - . THE INCOME ARISING THEREO F HAS BEEN RIGHTLY OFFERED BY THE ASSESSEE UNDER THE HEAD INCOME FROM CAPITAL GAINS. OF THE TOTAL 80 SHARES SOLD BY THE ASSESSEE, 63 SHARES WERE ALLOTTED TO THE ASSESSEE ON 13 - 1 - 2005 AS A RESULT OF HIS SHAREHOLDING IN M/S THE HINDUSTAN SPG. & WVG. MILLS LTD.(HSWML). THE SAID ALLOTMENT TOOK PLACE AS A RESULT OF DEBT RESTRUCTURING SCHEME (DRS) SANCTIONED BY THE BOARD OF INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR) IN CASE OF M/S HSWML VIDE THEIR ORDER DATED 1 - 4 - 2004. A CERTIFICATE ISSUED BY THE HSWML CONF IRMING THE ABOVE WAS FILED. REMAINING 17 SHARES HAVE BEEN ALLOTTED TO HRISHIKESH TRUST AS A RESULT OF TRUSTS HOLDING IN HSWML AND SUBSEQUENTLY ON 19 - 1 - 2006 WERE TRANSFERRED IN THE NAME OF THE ASSESSEE BEING BENEFICIARY IN THE SAID TRUST. A CERTIFICATE ISS UED BY THE HSWML CONFIRMING THE INITIAL ALLOTMENT IN THE NAME OF TRUSTEES WAS FILED. ACCORDINGLY, IT WAS SUBMITTED THAT THE ABOVE FACTS ABUNDANTLY CLARIFY THE MODE OF ACQUISITION OF THE SAID SHARES AND THERE CANNOT BE ANY DISPUTE AS TO THE FACT THAT THE AS SESSEE WAS OWNER OF THE SAID SHARES AND WAS ENTITLED TO ALL THE BENEFITS/RIGHTS ARISING THERE FROM. WORKING OF CAPITAL GAIN ON ACCOUNT OF SALE OF 80 SHARES WAS ALSO FILED. ITA NO S . 7618 & 7614 /2011 10 5.1 AFTER CONSIDERING THE SUBMISSION MADE ON BEHALF OF THE ASSESSEE AND PERUSING TH E MATERIAL ON RECORD, LEARNED CIT(A) HELD THAT THE ASSESSEE ONLY TRANSFERRED SHARES TO VISHAL NIRMAN (INDIA) PVT. LTD., AND CAPITAL GAINS ARISE FROM THE TRANSACTION WHICH ARE TO BE TAXED AS INCOME UNDER THE HEAD CAPITAL GAINS. ACCORDINGLY, APPEAL OF THE AS SESSEE WAS ALLOWED AND THE AO WAS DIRECTED TO GRANT DEDUCTION UNDER SECTION 54F AFTER DUE VERIFICATION THAT INVESTMENT HAS BEEN MADE IN APPROVED ASSETS WITHIN THE TIME ALLOWED. 6 . NOW, THE DEPARTMENT IS IN APPEALS HERE BEFORE THE TRIBUNAL. 7 . LEARNED DR READ THE ORDER OF THE LEARNED CIT(A) NARRATING THE FACTS OF THE CASE AND SUBMITTED THAT THE AO WAS CORRECT AS THERE WAS NO EVIDENCE IN REGARD TO HAVING SHARES IN THE HANDS OF THE ASSESSEE. IT WAS A MANIPULATING TRANSACTION TO AVOID TAX BURDEN. IT WAS A SCH EME OF REHABILITATION FORMULATED BY BIFR . RELIANCE WAS HEAVILY PLACED ON THE FINDINGS OF THE AO . 8 . ON THE OTHER HAND, LEARNED COUNSEL OF THE ASSESSEE PLACED RELIANCE ON THE ORDER OF THE LEARNED CIT(A) . COPY OF THE EQUITY SHARES ISSUED BY THE M/S HINDUST AN SPG. & WVG. MILLS LIMITED AND COPY OF THE SHAREHOLDING IN M/S CHAITRA REALTY LIMITED WERE ALSO FILED. IT WAS EXPLAINED THAT THE SHARES IN M/S CHAITRA REALTY LIMITED WERE SOLD TO M/S VISHAL NIRMAN (INDIA) LTD. VIA OFFER LETTER DATED 30 - 7 - 2007 AT THE RATE OF RS. 2,58,177/ - PER SHARE AND RESULTANT CONSIDERATION WAS SHOWN AS LONG TERM CAPITAL GAIN AS THE ASSESSEE HAS DEPOSITED THE AMOUNT OF CONSIDERATION UNDER THE SCHEME OF SECTION 54F AND, THEREFORE, ITA NO S . 7618 & 7614 /2011 11 DEDUCTION UNDER SECTION 54F WAS RIGHTLY CLAIMED. FURTHER RE LIANCE WAS PLACED ON THE FINDINGS OF THE LEARNED CIT(A) . 9 . AFTER CONSIDERING THE ORDER OF THE AO, CIT(A) AND SUBMISSION OF BOTH THE PARTIES, WE FOUND THAT THE LEARNED CIT(A) HAS PASSED A VERY REASONABLE ORDER. CIT(A) IN FACT CONSIDERED THE ASPECT IN RIG HT PERSPECTIVE, IN OUR VIEW, THE AO COULD NOT UNDERSTAND THE FACTS OF THE CASE PROPERLY. THE FINDINGS OF THE CIT(A) HAVE BEEN RECORDED IN PARA 2.3 AT PAGES 8 & 9, WHICH ARE AS UNDER : - 2.3 THE ASSESSMENT ORDER, SUBMISSIONS MADE FOR THE APPELLANT AND MATER IALS ON RECORD HAVE BEEN CONSIDERED. THE TRANSACTION UNDER CONSIDERATION IS THE RECEIPT OF MONEY BY THE APPELLANT CLAIMED AS ARISING OUT OF TRANSFER OF SHARES HELD IN MI S CHAITRA REALTY' LTD (AS SPY OF HSWML). THE APPELLANT HAS CLAIMED THAT LONG TERM CAPI TAL GAINS HAVE ARISEN AND HAVE BEEN OFFERED FOR TAX, WHICH HAVE ARISEN OUT OF SALE OF SHARES HELD BY HIM IN CHAITRA REALTY LTD. (SOME SHARES WERE ALLOTTED TO HIM IN THE SPY AS EXISTING SHAREHOLDER OF HSWML) AND SOME WERE ALLOTTED SUBSEQUENTLY ON 19/01/2006 AS A RESULT OF TRUST'S HOLDING IN HSWML. THE SHARES OF THE SPY WERE SOLD TO VISHAL NIRMAN (INDIA) PVT. LTD. AND CAPITAL GAINS HAVE ARISEN FROM THIS SALE OF SHARES; THE ASSESSING OFFICER HAS HELD THAT THE REAL TRANSACTION WAS THE SALE OF ENCUMBERED PROPERT Y BETWEEN CHAITRA REALTY LTD AND MIS VISHAL NIRMAN (INDIA) PVT LTD. AND THE SUM RECEIVED BY THE APPELLANT WAS NOT FROM THE SALE OF SHARES BUT WAS IN EFFECT AN APPROPRIATION OF THE SURPLUS OF SALE OF THE SPY WHICH WAS NOT AN 'ASSET' IN THE HANDS OF THE APPE LLANT. THE FACTS SHOW THAT THE APPELLANT WAS ALLOTTED 63 SHARES OF CHAITRA REALTY LTD (SPV OF HSWML) WHICH WERE ALLOTTED TO HIM AS A RESULT OF HER SHAREHOLDING IN HSWML, AS PER CERTIFICATE OF HSWML FILED AND 17 SHARES WHICH WERE ALLOTTED SUBSEQUENTLY ON 19/01/2006 AS A RESULT OF TRUST'S HOLDING IN HSWML. THE ORIGINAL CONCERN HSWML WAS DECLARED AS A SICK INDUSTRIAL UNDERTAKING BY BIFR AND A DEBT RESTRUCTURING SCHEME DRAWN UP VIDE ORDER DATED 1 - 4 - 2004. THE APPELLANT IS NOT ONE OF THE PERSONS WHO ENTERED I NTO AN MOU, WITH VISHAL NIRMAN (INDIA) PVT. LTD. TO SELL SHARES AND HAS CLAIMED SALE OF SHARES OF CHAITRA REALTY LTD HELD BY HIM. THE APPELLANT HAS SOLD HIS SHARES IN RESPONSE TO THE OFFER LETTER RECEIVED BY HIM FROM MIS VISHAL NIRAMNA (INDIA) LTD. DATED 3 0107/2007. THE SAID COMPANY CONTINUES - TO, EXIST AND THERE ARE SEVERAL OTHER SHAREHOLDERS WHO HAD NOT ENTERED INTO THE MOU WITH VISHAL NIRMAN (INDIA) PVT. LTD. THE APPELLANT IS ONE 'OF THE ITA NO S . 7618 & 7614 /2011 12 SHAREHOLDERS OF CHAITRA REALTY LTD. AND THERE IS NO SALE OF THE UNDE RTAKING (CHAITRA REALTY LTD. SPY), ONLY SHARES HELD BY THE APPELLANT (AND SOME OTHERS) HAVE BEEN TRANSFERRED. THE COMPANY CHAITRA REALTY. LTD HAS NOT BEEN WOUND UP AND IS A SEPARATE DISTINCT ENTITY. THE HIGH VALUE OF THE SHARES (UNLISTED) SOLD (FINAL PURCH ASE PRICE PER SH A RE WAS DETERMINED AT RS.2,58,177/ - ) APPEARS TO BE BASED ON THE VALUE OF THE UNDERLYING ASSET (LAND), HOWEVER THE ASSET (LAND) CONTINUES TO BE HELD - BY THE COMPANY. THE PROPERTY IN QUESTION CONTINUES TO BE HELD BY, CHAITRA REALTY LTD AND IS REFLECTED IN ITS BALANCE SHEET AS ON 31.03.2010. 'WITH TRANSFER OF 77.47% OF THE SHAREHOLDING (AS MENTIONED IN THE MOU), THE, CONTROLLING INTEREST IN THE PROPERTIES OF CHAITRA REALTY LTD., INCLUDING THAT IN THE LAND WOULD VEST IN THE PURCHASER, VIZ. VISHA L NIRMAN (INDIA) PVT. LTD. HOWEVER THE FACT REMAINS THAT THE COMPANY CHAITRA REALTY LTD HAS NOT BEEN SOLD AND CONTINUES TO EXIST AS A DISTINCT ENTITY, AND THE PROPERTY IN ITS NAME IS REFLECTED IN THE BALANCE SHEET. AN INDIVIDUAL SHAREHOLDER CANNOT TRANSFER ASSETS OF THE COMPANY OF WHICH HE IS A SHAREHOLDER. HENCE IT IS HELD THAT THE APPELLANT ONLY TRANSFERRED SHARES TO VISHAL NIRMAN (INDIA) PVT. LTD., AND CAPITAL GAINS ARISE 'FROM THE TRANSACTION WHICH ARE TO BE TAXED AS INCOME UNDER THE HEAD CAPITAL GAINS. AS REGARDS THE ASSESSING OFFICER'S CONTENTION THAT THE SHAREHOLDING PATTERN COULD NOT BE CHANGED AS PER THE SCHEME DRAWN UP BY BIFR AND THAT THE SHARES WERE PLEDGED, IT IS SEEN THAT THE DATE OF SALE OF SHARES IS 29/06/2007, AND BEFORE THE DATE OF SALE T HE BIFR HAD DISCHARGED HSWML FROM THE PURVIEW OF SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 VIDE ITS ORDER DATED 20102/2007, AND HSWML CEASED TO BE A SICK INDUSTRIAL UNDERTAKING. THE SALE OF SHARES MADE BY THE APPELLANT IS AFTER THE COMPANY C EASED TO BE A SICK UNDERTAKING, THUS RESTRICTIONS PLACED ON PLEDGE I TRANSFER OF SHARES WOULD NO LONGER BE OPERATIVE ON THE DATE OF SALE OF SHARES. THE ASSESSING OFFICER IS DIRECTED TO COMPUTE CAPITAL GAINS ON SALE OF SHARES BY THE APPELLANT AFTER VERIFI CATION OF THE COST OF ACQUISITION. THE ASSESSING, OFFICER IS ALSO DIRECTED TO GRANT CLAIM FOR DEDUCTION U / S 54F AFTER DUE VERIFICATION THAT INVESTMENT HAS BEEN MADE IN APPROVED ASSETS WITHIN THE TIME ALLOWED. THE FINDINGS OF THE CIT(A) HAVE BEEN GIVEN AF TER APPRECIATING ALL THE FACTS IN DETAIL. IN FACT, M/S HSWML HAVING FOUR SUBSIDIARIES I.E. AT PRABHADEVI, DADAR, MAHALAXMI AND KARAD. THE ASSESSEE SOLD 80 SHARES EACH AT THE RATE OF RS. 2,58,177/ - PER SHARE VIA OFFER LETTER DATED 30 - 7 - 2007. THE TOTAL CONSID ERATION WAS RECEIVED BY THE ASSESSEE AT RS. 2,06,54,160/ - . THIS WAS SHOWN AS LONG TERM CAPITAL GAIN. AFTER GOING ITA NO S . 7618 & 7614 /2011 13 THROUGH ALL THESE FACTS, WE ARE NOT UNDERSTANDABLE THAT HOW THE AO VIEWED/OPINED THAT THE ASSESSEE HAS NOT SOLD ANY SHARES HAS DONE TRANSACTION ON SALE OF PROPERTY OF PRABHADEVI. PRABHADEVI PROPERTY STILL OWNED BY M/S CHAITRA REALTY LIMITED AND THIS COMPANY IS CONTINUING . IT IS CLEAR THAT A SHAREHOLDER CAN SELL ITS SHARES ONLY BUT NOT ASSET OF THE COMPANY. THERE ARE THREE HUNDRED SHAREHOLDERS IN M/S CHAI TRA REALTY LIMITED AND FEW SHAREHOLDERS HAVE SOLD THEIR SHARES TO M/S VISHAL NIRMAN (INDIA) LTD. THEREFORE, IN OUR CONSIDERED VIEW, THE SALE CONSIDERATION, WHICH WAS ON ACCOUNT OF SALE OF SHARE HAS TO BE TREATED UNDER THE HEAD CAPITAL GAIN, NOT UNDER THE HEAD INCOME FROM OTHER SOURCES. 1 0 . LEARNED DR BASICALLY RELIED UPON THE FINDINGS OF THE AO BUT HE COULD NOT CONTROVERT THE FINDINGS OF THE LEARNED CIT(A) , WHICH WAS GIVEN AFTER APPRECIATING ALL THE FACTS EXPLAINED BEFORE HIM. WE HAVE GONE THROUGH THE OR DER OF THE AO AS WELL AS LEARNED CIT(A) AND FOUND THAT THE LEARNED CIT(A) HAS APPRECIATED ALL THE FACTS IN DETAIL WITH RIGHT PERSPECTIVE. ACCORDINGLY, WE HOLD THAT LEARNED CIT(A) WAS JUSTIFIED IN ALLOWING THE ISSUE IN FAVOUR OF THE ASSESSEE. HENCE, THE ORD ER OF LEARNED CIT(A) IS HEREBY CONFIRMED. 1 1 . SIMILAR FACTS ARE INVOLVED IN THE CASE OF OTHER ASSESSEE I.E. IN CASE OF SHRI ABHIMANYU J. THA C KERSEY ( I.E ITA NO. 7614/M/2011) . THE ADDITION HAS BEEN MADE SIMILARLY IN THIS CASE ALSO BY THE AO. LEARNED CIT(A) HAS DELETED THE ADDITION ON THE SAME REASONING AS GIVEN IN THE CASE OF ANOTHER ASSESSEE I.E SHRI HRISHIKESH J. THACKERSEY (I.E ITA ITA NO S . 7618 & 7614 /2011 14 NO. 7618/M/2011) . WE HAVE ALREADY DISPOSED OF THE ABOVE APPEAL, WHEREBY, WE HAVE CONFIRMED THE ORDER OF THE CIT(A). THEREFORE , ON THE SAME REASONING, THE ORDER OF LEARNED CIT(A) IN CASE OF THE ASSESSEE SHRI ABHIMANYU J. THACKERSEY, IS ALSO CONFIRMED. 1 2 . IN THE RESULT, APPEAL S OF THE DEPARTMENT ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF MAY . 2013 . SD/ - SD/ - ( P.M.JAGTAP ) ( R.K.GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED : 0 8 /05/ 2013 . PKM , PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - X, MUMBAI. 4. CIT 5. DR, ITAT, MUM BAI 6. GUARD FILE. //TRUE COPY// BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI