DCIT, CHENNAI V. Shri V.Prabhakar Ram, CHENNAI

ITA 784/CHNY/2011

• Counselvise Citation: 78421714 RSA 2011
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 29-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V RAVICHANDRAN FCAS; K R RAJAGOPALKRISHNAN
• Keywords: Cost of acquisition
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER I.T.A.NO.784/MDS/2011 (ASSESSMENT YEAR : 2005-06) THE DEPUTY COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE IV(4), CHENNAI. VS. SHRI V.PRABHAKAR RAM, OLD NO.268, NEW NO.68, ROYAPETTAH HIGH ROAD, CHENNAI 600 014. PAN AACPP3492P. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.B.NAIK, COMMISSIONER OF INCOM E-TAX RESPONDENT BY : S/SHRI K.R.RAJAGOPALKRISHNAN & V.RAVICHANDRAN, FCAS. DATE OF HEARING : 1 ST DECEMBER, 2011 DATE OF PRONOUNCEMENT : 20 TH DECEMBER, 2011 O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT THIS APPEAL FILED BY THE REVENUE RELATES TO THE ASS ESSMENT YEAR 2005-06. THE APPEAL IS DIRECTED AGAINST THE O RDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-V AT CHENNAI D ATED 21-1- 2011. THE APPEAL ARISES OUT OF THE ASSESSMENT COMP LETED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. ITA 784/11 :- 2 -: 2. THE FIRST GROUND RAISED BY THE REVENUE IS THAT T HE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN D IRECTING THE ASSESSING OFFICER TO ALLOW THE EXPENDITURE OF ` 49,53,250/- PAID TO M/S. VEDA CORPORATE ADVISORY PVT. LTD., AND ` 4,65,000/- PAID TO SHRI H.SHANKAR CA WHILE COMPUTING CAPITAL GAINS ON SALE OF SHARES IN M/S.NISPL. IT IS THE CASE OF THE REVENU E THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) FAILED TO APPR ECIATE THAT DEDUCTION CAN BE ALLOWED ONLY IF THE EXPENSES ARE I NCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF THE ASSETS. 3. REGARDING THE ABOVE GROUND, IT IS TO BE SEEN THA T THERE IS NO DISPUTE REGARDING THE FACT THAT THE DISPUTED PAYMEN TS WERE ACTUALLY PAID BY THE ASSESSEE TO M/S. VEDA CORPORAT E ADVISORY PVT. LTD. AND SHRI H. SHANKAR. IT IS TO BE FURTHER SEEN THAT THE ONLY CONTEXT IN WHICH THE PAYMENTS WERE MADE WAS THE INV ESTMENT MADE BY CARLYLE VENTURES. IT IS ALSO SEEN FROM THE RELEVANT AGREEMENT THAT M/S. VEDA CORPORATE ADVISORS PVT. LT D. WERE ENGAGED FOR THE BUYERS AND FOR NEGOTIATIONS OF THE SHARE PRICE. IT IS AS A RESULT OF THESE EFFORTS THAT M/S. CARLYLE V ENTURES HAPPENED TO INVEST IN THE SHARES OF NISPL. AS RIGHTLY POINT ED OUT BY THE COMMISSIONER OF INCOME-TAX (APPEALS), FOR THE SALE OF SHARES ITA 784/11 :- 3 -: MADE BY THE ASSESSEE TO ENGINEER AS SPECIAL PURPOSE VEHICLE, THERE WOULD HAVE BEEN NO QUESTION OF CAPITAL GAINS AT ALL. WHEN THE ASSESSEE HAS FOLLOWED A WELL DEFINED COURSE OF ACTION PERMITTED UNDER LAW TO BRING INVESTORS INTO HIS VEN TURES, IT IS INCUMBENT UPON THE REVENUE TO GIVE DEDUCTION FOR TH E CORRESPONDING EXPENDITURE. IT IS NOT POSSIBLE TO A RGUE THAT THE ASSESSEE OUGHT TO HAVE EARNED THAT MUCH CAPITAL GAI NS WITHOUT INCURRING ANY AMOUNT OF EXPENDITURE. THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS POINT IS EXHAUSTIVE AND WE DO NOT WANT TO BURDEN THE FINDINGS WITH FURT HER REPETITIONS. WE AGREE WITH THE COMMISSIONER OF INCOME-TAX (APPEA LS) ON THIS POINT AND FIND THAT THE GROUND RAISED BY THE REVENU E IS LIABLE TO BE DISMISSED. 4. THE SECOND GROUND RAISED BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN H OLDING THAT THE INDEXATION HAS TO BE COMPUTED WITH REFERENCE TO THE DATE OF ACQUIRING SHARES IN M/S.REGAL PRODUCTS WHICH AMALGA MATED AS M/S NISPL. THERE IS NO MERIT IN THE CONTENTION OF T HE REVENUE ON THIS POINT. THE COMMISSIONER OF INCOME-TAX (APPEAL S) HAS RIGHTLY HELD THAT THE INDEXED COST OF ACQUISITION HAS TO BE COMPUTED WITH REFERENCE TO 877023 NISPL SHARES SOLD BY THE ASSESS EE WHICH ITA 784/11 :- 4 -: AROSE OUT OF THE AMALGAMATION APPROVED BY THE HONB LE MADRAS HIGH COURT WITH EFFECT FROM 1.4.2003. THIS GROUND IS ALSO LIABLE TO BE DISMISSED. 5. IN RESULT THE APPEAL FILED BY THE REVEN UE IS DISMISSED. ORDER PRONOUNCED ON TUESDAY, THE 20 TH OF DECEMBER, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 20 TH DECEMBER, 2011 MPO* COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR