ITO, Ward-1, Chittoor, Chittoor V. V. Indira, Chittoor, Chittoor

ITA 786/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6568 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 13-04-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 08-06-2015
• Court: TRIBUNAL
• Keywords: Share purchase agreement; Additional evidence; Cost of acquisition
• Section: 6; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH ES B , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO S . 786 & 787 /H YD /201 5 ASSESSMENT YEAR S : 20 0 6 - 0 7 & 2007 - 08 INCOME TAX OFFICER , WAR D - 1 , CHITTOOR VS SMT. V. INDIRA , (REPRESENTED BY MRS. NAITHA, D/O. LATE MRS. V. INDIRA) CHITTOOR [PAN: ABZPV2454M ] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI B .R. RAMESH, D R FOR ASSESSEE : SHRI S. RAMA RAO, AR DATE OF HEARING : 13 - 0 4 - 2 01 6 DATE OF PRONOUNCEMENT : 13 - 0 5 - 201 6 O R D E R PER B. RAMAKOTAIAH, A.M. : TH E S E APPEAL S ARE BY REVENUE AGAINST THE ORDER S OF THE LD. COMMISSIONER OF INCOME TAX ( APPEALS ) , TIRUPATI DATED 2 0 - 0 3 - 201 5 . AS A SIMILAR ISSUE IS INVOLVED, TH ESE ARE HEARD TOGETHER AND DECIDED BY THIS COMMON ORDER. I.T.A. NO S . 786 & 787 / HYD / 20 15 : - 2 - : ITA NO. 786/HYD/2015 (AY. 2006 - 07): 2. THE ISSUE IN THIS APPEAL IS WITH REFERENCE TO QUANTUM OF CAPITAL GAINS EARNED BY ASSESSEE. 3. BRIEFLY STATED, ASSESSEE SMT. V. INDIRA, IS ONE OF THE 13 O WNERS OF SHARES (6891) IN NUTRINE CONFECTIONERY COMPANY P VT. LTD. (NCCPL)' A ND HA S BECOME ONE OF THE PARTNERS IN THE FIRM , M/S. B.V. REDDY ENTERPRISES , BY TRANSFERRING THE PERSONAL SHARES IN THE COMPANY M / S. NCCPL. THE COMPANY M / S. NCCPL, TILL THE YEAR 2 005 WAS A C L OSELY A HELD COMPANY OF THE BV REDDY GROUP. M / S. B . V . REDDY ENTERPRISES (FIRM) WAS FOR MED IN 1971 CONSISTING OF THE SO ME OF THE FAMILY MEMBERS. THE BVRE FIRM WAS RECONSTITUTED ON 24 - 03 - 2006 AND SEVEN NEW PARTNERS WERE IN DUCTED INTO THE FIRM . T HESE PARTNERS, INC L UDING ASSESSEE CONTRIBUTED THEIR SHARES OF M / S. NCCPL AS THEIR RESPECTIVE CAPITAL TO THE FIRM ON 24 - 03 - 2006. M / S. NCCPL ALSO PASSED A RESOLUTION THAT ALL THE THIRTEEN PARTNERS AGREED TO TRANSFER THEIR RESPECTIVE SHARES TO THE COMPANY. TH E FIRM BVRE ON 05 - 05 - 2006, THROUGH A WRITTEN BUSINESS TRANSFER AGREEMENT ENTERED WITH NUT R INE CONFECTIONERY S WEETS PVT. LTD. (NCSPL) WAS SUCCEEDED BY NCSPL. AT THE FINA L STAGE, ON 10 - 06 - 2006, A SHARE PURCHASE AGREEMENT WAS MADE BETWEEN GODREJ FOOD AND BEVE RAGES(GBFL), MUMBAI, AND NCSPL WHEREBY THE SHARES OF NCCPL WERE TRANSFERRED TO GBFL FOR A CONSIDERATION OF RS. 265 C RORES ON 29 - 06 - 2006. FURTHER, M/S. NCSPL GOT ITS NAME CHANGED ON 18 - 08 - 2006 TO B.V. REDDY ENTERPRISES PVT. LTD., (BVREPL). 3.1. DURING THE FY. 2006 - 07 PERTAINING TO AY. 2007 - 08, M/S. BVREPL CLAIMED THAT THE COST OF ACQUISITION OF THE SHARES I.T.A. NO S . 786 & 787 / HYD / 20 15 : - 3 - : WAS RS. 270 CRORES AND SALE PRICE TO M/S. GBFL WAS RS. 265 C R ORES, THEREBY IT CLAIMED TO HAVE SUFFERED LOSS. THE AO OBSERVED THAT IN THE PROCESS OF TRANSFER OF SHARES, ASSESSEE AND THE OTHER FAMILY MEMBERS HAVE MADE HUGE CAPITAL GAINS, BUT HAS OFFERED CAPITAL GAIN OF RS. 36,52,000/ - O NLY DURING THE AY. 2006 - 07. AO OPINED THAT ASSESSEE ADOPTED A COLOURABLE DEVICE AND RESORTED TO VARIOUS SHAM TRANSACT IONS WHICH WERE NOT GENUINE, AND FELT IT APPROPRIATE TO LIFT THE CORPORATE VEIL TO TAX ASSESSEE AS THE REAL BENEFICIARY AND BRING THE CAPITAL GAINS TO TAX. 4. ASSESSEE CONTESTED THE SAME BEFORE LD. CIT(A) , CONTENDING THAT THE CAPITAL GAINS WHICH AROSE I N THE HANDS OF ASSESSEE WAS ALREADY OFFERED AND NO CAPITAL GAINS AROSE DUE TO TRANSFER OF SHARES BY M/S. BVREPL TO GODREJ GROUP. LD. CIT(A) CONSIDERING ASSESSEES SUBMISSIONS AND ALSO ORDERS OF ITAT, BANGALORE IN THE CASE OF OTHER SHAREHOLDERS OF THE GROU P HAS DELETED THE ADDITION MADE BY THE AO STATING AS UNDER: 5.1 I HAVE CONSIDERED THE OBJECTION RAISED BY THE APPELLANT IN THE GROUNDS OF APPEAL. EXCEPT RAISING GROUNDS IN THIS REGARD, NO ADDITIONAL EVIDENCE WAS FURNISHED BY THE APPELLANT IN SUPPORT OF ITS CONTENTION THAT THE ASSESSING OFFICER IS BARRED FROM JURISDICTION, HENCE, I DO NOT FIND ANY MERIT IN THE OBJECTION RAISED BY THE ASSESSEE. FURTHER IN THE LIGHT OF THE JUDGEMENT OF HON'BLE APEX COURT IN (1997) 63 ITR 219 S. NARAYANAPPA VS. CIT, I FIND T HAT THE AG, HAD RECORDED AND COMMUNICATED ELABORATE REASONS FOR REOPENING THE ASSESSMENT, WHICH DISCUSSED THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED THE ASSESSMENT. CONSIDERING THE ABOVE FACTS, I DO NOT FIND ANY MERIT IN THE CONTENTION OF THE APPELLANT THAT THE REOPENING OF THE ASSESSMENT FOR RE - EXAMINATION OF THE MATTER BY THE AO IS UNLAWFUL, AND ACCORDINGLY DISMISS THESE GROUNDS. 6.0 GROUND NOS. 5 TO 7 RELATE TO THE ADDITION MADE BY THE AO IN RESPECT OF CAPITAL GAINS U/S. 45(3). THE AO ON EXAMINATI ON OF THE CASE IN THE COURSE OF SCRUTINY PROCEEDINGS, CAME TO THE CONCLUSION THAT THE CAPITAL CONTRIBUTION OF THE NEW PARTNERS WAS NOT ACTUALLY RS. 35.72 CRORES, BUT RS. 270 CRORES, BASED ON THE CONSIDERATION FOR I.T.A. NO S . 786 & 787 / HYD / 20 15 : - 4 - : TAKEOVER OF THE FIRM BY A COMPANY STYLED AS NUTRINE CONFECTIONERY AND SWEETS PVT. LTD WHICH WAS INCORPORATED ON 28.12.2005. LATER, ON THE NAME OF THE COMPANY WAS CHANGED TO BV REDDY ENTERPRISES PVT. LTD W.E.F. 18.08.2006. THE AO FOUND THAT THE APPELLANT, WHO IS ONE OF THE PARTNERS INTRODUCED INTO T HE ERSTWHILE FIRM BVRE, WAS TO BE CONSIDERED TO HAVE ACTUALLY CONTRIBUTED AN AMOUNT OF RS. 271,81,550/ - INTO THE FIRM. ACCORDINGLY, THE AO BROUGHT THE DIFFERENCE AMOUNT OF RS. 2,42,67,766/ - (LESS RS. 29,13,784/ - ALREADY DECLARED) TO TAX, IN THE ASSESSMENT ORDER, AGAINST WHICH ADDITION, THE APPELLANT IS IN APPEAL. 6.1 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAD SUBMITTED THAT THE VERY ISSUES WHICH ARE UNDER APPEAL HAD BEEN ADJUDICATED BY THE HON'BLE ITAT, BANGALORE BENCH AND DECIDED UPON BY THEIR ORDER IN ITA 'NOS. 149 AND 150 (BANG)/2011 AND ITA NOS. 158 & 159/BANG./2011 IN THE CASES OF SRI. V. MADHUSUDHAN REDDY (HUF) AND SMT. V. SOUMINI REDDY AND SRI. V.VIKRAM REDDY, ALL OF WHOM WERE PART OF THE GROUP OF SEVEN NEW SHAREHOLDERS IN THE FI RM BVRE ALONGWITH THE APPELLANT, AND WHO HAD INTRODUCED THE CAPITAL CONTRIBUTION IN THE FORM OF THE SHARES OF NCCPL TOTALLING TO RS. 35.72 CRORES AS RECORDED IN THE BOOKS OF ACCOUNT. THE APPELLANT HAD FURNISHED COPIES OF THE ABOVE ORDERS BEFORE ME. 6.2 THE APPELLANT VIDE SUBMISSIONS DT. 20.02.2015, DRAWING THE ATTENTION ON THE DECISIONS OF THE HON'BLE ITAT, BANGALORE (SUPRA),SUBMITTED THAT THE ITAT, BANGALORE, CONCLUDED THAT: 'THERE WAS A VALID TRANSFER OF SHARES OF NUTRINE CONFECTIONERY COMPANY PVT.L TD. HELD BY THE ASSESSE IN FAVOUR OF THE FIRM B. V. REDDY ENTERPRISES DURING THE PREVIOUS YEAR RELEVANT TO THE AY 2006 - 07. IT CANNOT BE SAID THAT THERE WAS ANY TRANSFER OF SHARES OF NUTRINE CONFECTIONERY COMPANY PVT.LTD. BY THE ASSESSE TO GBFL DURING THE P REVIOUS YEAR RELEVANT TO AY 2007 - 08. IT IS TO BE HELD THAT THE ENTIRE SERIES OF TRANSACTIONS BY WHICH THE SHARES OF NUTRINE CONFECTIONERY COMPANY PVT. LTD WERE ULTIMATELY TRANSFERRED TO GODREJ BEWERAGES AND FOODS LTD. WERE ALL VALID AND WERE NOT COLOURABLE OR DUBIOUS DEVICE OR SUBTERFUGE AND WERE LEGAL AND VALID. FURTHER THAT THE ORDER OF THE REVENUE AUTHORITIES BRINGING TO TAX CAPITAL GAIN ON SALE OF SHARES OF NUTRINE CONFECTIONERY COMPANY PVT. LTD. TO GODREJ BY NUTRINE CONFECTIONERY AND SWEETS PVT. LTD. I N THE HANDS OF THE ASSESSE IS NOT SUSTAINABLE AND THE ADDITION MADE BY THE REVENUE AUTHORITIES IN THE CASE OF THE ASSESSE IS DIRECTED TO BE DELETED . 6.3 I HAVE CAREFULLY CONSIDERED THE GROUNDS OF APPEAL RAISED BY THE APPELLANT AND THE ORDERS OF THE HON 'BLE ITAT, BANGALORE. ON A CONSIDERATION OF THESE ABOVE, I AM OF THE VIEW THAT THE ESSENTIAL I.T.A. NO S . 786 & 787 / HYD / 20 15 : - 5 - : POINT OF DISPUTE IN THIS APPEAL HAS BEEN DULY ADJUDICATED BY THE ITAT, WHICH HAS FOUND THAT THE TRANSFER OF SHARES OF NCCPL HELD BY THE APPELLANT IN THE FIRM M / S. B V REDDY ENTERPRISES (BVRE) DURING THE PREVIOU S YEAR RELEVANT TO THE AY 2006 - 07 WAS LEGALLY VALID. THE HON'BLE TRIBUNAL HAVE ALSO HELD THAT THERE WAS NO REASON TO HOLD THAT THE PARTNERS IN INDIVIDUAL CAPACITY HAD TRANSFERRED THE SHARES TO M / S. GODREJ BEVE RAGES (GBFL) IN THE FY 2006 - 07 FOR A PROFIT. VIDE PARAGRAPHS OF THE 81 AND 82 OF THEIR ORDER THE I TAT, BENGALORE HAVE OBSERVED THAT: 'WE SHALL NOW TURN TO THE FACTS OF THE PRESENT CASE TO SEE IF THE PROPOSED INTENTION AND THE INTENTION GATHERED FROM THE DOCUMENTATION ARE THE SAME. FOR THIS PURPOSE, WE NEED TO CONFINE OURSELVES ONLY TO THE FIRST SET OF TRANSACTIONS BY WHICH THE SHARES OF NCCPL HELD BY THE 13 PARTNERS OF THE FIRM BVRE IN THEIR NAMES WERE TRANSFERRED TO THE FIRM BVRE . SUFFICE TO SAY THAT THERE WAS A VALID TRANSFER OF SHARES OF INDIVIDUALS TO THE FIRM BRE. THE LAW IS WELL SETTLED WHATEVER IS BROUGHT IN BY THE PARTNERS AS CAPITAL CONTRIBUTION OR TREATED AS PROPERTY OF THE FIRM IN THE FORM ORF RESOLUTION, DECLARATION U/S. 187C OF THE INCOME - T AX ACT, 1956. THUS, THE ASSESSEE COULD NO LONGER BE CONSIDERED AS OWNER OF THE SHARES OF NCCPL BROUGHT IN AS CAPITAL OF THE FIRM, ON AND FROM 24.03.2006. THERE IS NOTHING ON RECORD TO SUGGEST REAL INTENTION OF THE PARTIES WAS TO TREAT THE ASSESSE AS OWNER OF THE SHARES EVEN AFTER THE TRANSFER OF SHARES TO THE FIRM. 82. EVEN IN THE SHARE PURCHASE AGREEMENT DATED 10.06.2006, THE 13 PARTIES WERE NOT THE SELLERS AND WERE ONLY CONFIRMING PARTIES. THE SELLERS WERE THE THREE OTHER PERSONS (OTHER THAN THE 13 PA RTIES OF BVRE) AND THE COMPANY NCSPL AS IS EVIDENT FROM CLAUSE 3.1 OF THE SHARE PURCHASE AGREEMENT DT.10.06.2006. THE 13 PARTNERS SIGNED THE AGREEMENT ONLY TO CONFIRM THE FACT THAT THEY HAD ALREADY TRANSFERRED THE SHARES HELD BY THEM TO THE FIRM BVRE AS CA PITAL CONTRIBUTION AND THEY HAVE NO OTHER RIGHTS OVER THE BUSINESS OF NCCPL OR AS SHAREHOLDERS OF NCCPL. ON THE OTHER HAND IT IS ONLY NCSPL THAT TRANSFERRED THE SHARES TOGETHER WITH THE 'THREE OTHER SHAREHOLDERS OF THE ENTIRE PAID UP SHARE CAPITAL OF NCCPL . IT IS NO DOUBT TRUE THAT IF THE CORPORATE VEIL OF NCSPL IS REMOVED, WE WILL FIND ONLY THE 13 SHAREHOLDERS OF BVRE AS THE PERSONS BEHIND THE CORPORATE VEIL. IT IS NOT POSSIBLE TO LIFT THE CORPORATE VEIL JUST FOR THE ASKING. A CASE OF DEFRAUDING THE REVENU E HAS TO BE MADE OUT. THE QUESTION IS AS TO WHETHER THE COURSE OF ACTION ADOPTED BY THE ASSESSE WAS PERMISSIBLE OR NT. THE ANSWER TO THE QUESTION WOULD BE THAT THERE WERE TWO WAYS IN WHICH THE SHARES OF NCCPL HELD BY THE 13 PARTNERS OF BVRE COULD HAVE BEEN TRANSFERRED TO GBFL. ONE WAY WAS THAT THE 13 PARTNERS IN THEIR INDIVIDUAL CAPACITY COULD HAVE TRANSFERRED THE SHARES OF NCCPL HELD BY THEM TO GBFL AT A PRICE AT WHICH THEY WERE ULTIMATELY SOLD TO GBFL THROUGH NCSPL. THE OTHER WAY WAS THE MANNER IN WHICH T HE ASSESSES HAVE TRANSFERRED THE SHARES THROUGH THE MEDIUM OF THE FIRM BVRE. THE LATTER COURSE WOULD CERTAINLY RESULT IN LESSER TAX BURDEN TO THE ASSESSES BUT THAT IS A COURSE WHICH THE I.T.A. NO S . 786 & 787 / HYD / 20 15 : - 6 - : LAW PERMITS. THE ASSESSES HAVE ALTERED THEIR LEGAL RIGHTS UNDER THE VA RIOUS DOCUMENTS. IT IS NOT POSSIBLE TO IGNORE THE LEGAL EFFECTS OF ALL THE ACTIONS CARRIED OUT BY THE ASSESSES AND PROCEED ON THE BASIS THAT IT IS THE ASSESSES WHO SOLD THEIR SHARE HOLDING IN NCCPL TO GBFL DURING THE PREVIOUS YEAR RELEVANT TO THE AY 2007 - 08. 84. AS ALREADY STATED THE SERIES OF TRANSACTIONS BY WHICH THE SHARES OF NCCPL HELD BY THE ASSESSE ULTIMATELY WAS TRANSFERRED TO GBFL WERE INTENDED TO LESSEN THE TAX BURDEN ON CAPITAL GAIN ON TRANSFER OF SHARES. THE COURSE ADOPTED BY THE ASSESSES WAS WITHIN THE FRAMEWORK OF LAW AND WAS PERMISSIBLE. IN FACT THERE WAS A LACUNA IN THE LAW WHICH HAS NOW BEEN FILLED UP BY A RETROSPECTIVE STATUTORY AMENDMENT TO THE PROVISIONS OF LAW. THAT ONLY SHOWS THAT THE COURSE ADOPTED BY THE ASSESSES WAS LEGALLY AND VAL ID ..... THE CONCLUSION ON THE COMMON ISSUE THAT ARISES FOR CONSIDERATION IN THESE APPEALS BY THE ASSESSES IS THAT THE ORDER OF THE REVENUE AUTHORITIES BRINGING TO TAX CAPITAL GAIN ON SALE OF SHARES OF NCCPL TO GODREJ BY NCSPL IN THE HANDS OF THE ASSESSES CANNOT BE SUSTAINED AND THE ADDITION MADE BY THE REVENUE AUTHORITIES IN THE CASE OF THE ASSESSE ES IS DIRECTED TO BE DELETED. 6.4 THE POINT THAT ARISES AS A CONSEQUENCE OF THE I TAT'S ORDER IS NULLIFICATION OF THE AO'S CONTENTION THAT THE INTERMEDIARY TRA NSACTIONS SUCH AS THE TRANSFER OF PERSONAL SHARES TO THE FIRM AND THE TAKEOVER OF THE FIRM BY THE COMPANY BVREPL ONLY TO SELL THE SHARES TO M / S. GBFL LATER WERE ALL CONTRIVED TRANSACTIONS, IS NOT EXPLICIT IN STATING THAT THE VALUATION OF THE CAPITAL CONTRI BUTION AS PER THE BOOKS OF BVRE ARE TO BE ADOPTED. ON A CLOSE READING OF THE !TAT'S ORDER, AND GIVEN THE CONTEXT OF THE DISPUTE, IT IS APPARENT THAT ONCE THE TRANSACTION U/S.45(3) IS REGARDED TO BE GENUINE AND LEGALLY VALID, AND THERE EXISTS NO FURTHER CAS E TO SUPER IMPOSE A SEPARATE VALUATION OF THE SHARES UPON THE AMOUNT ALREADY RECORDED IN THE BOOKS AND UPON THE ENHANCED VALUE THE APPELLANT HAS ALREADY PAID THE CAPITAL GAINS. IN VIEW OF THE ABOVE, IT BECOMES CLEAR THAT AS THE ORDER OF THE AO IN PROCEEDIN G 'BEHIND THE VEIL OF THE PARTNERSHIP FIRM' IS NOT VALIDATED BY THE SPECIFIC ADJUDICATION OF THE HON'BLE ITAT, BANGALORE AND THE FINDING ARISING FROM SUCH AN APPROACH BY THE AO, WOULD THEREFORE HAVE TO BE DEEMED UNSUSTAINABLE. RESPECTFULLY FOLLOWING THE DE CISION OF THE HON'BLE ITAT, BANGALORE, THE ADDITION OF RS. 2.71 CRORES MADE BY THE AO IN THE HANDS OF THE ASSESSEE WHO HAS ALREADY OFFERED THE CAPITAL GAIN ON TRANSFER OF SHARES AS PER THE PROVISIONS OF SEC. 45(3), IN THE AY 2006 - 07, IS HELD TO BE UNSUSTAI NABLE. IT MAY ALSO BE RELEVANT TO OBSERVE THAT THE APPELLANT HAD COMPUTED THE CAPITAL GAINS ON TRANSFER OF SHARES TO THE AMOUNT OF RS. 35,42,553/ - BUT NOT RS. 29,13,784/ - AS ADOPTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. IN FACT, THE AMOUNT OF R S. 29,13,784/ - IS DERIVED AFTER SETTING OFF THE CARRIED FORWARD LOSS OF RS. 6,28,769/ - , WHILE FURNISHING THE RETURN OF INCOME. ON THESE ISSUES THE GROUND OF APPEAL IS TREATED AS ALLOWED . I.T.A. NO S . 786 & 787 / HYD / 20 15 : - 7 - : 5. LD. DR REITERATED THE CONTENTIONS OF THE AO WHEREAS LD. AR P LACED ON RECORD THE ORDER OF THE CO - ORDINATE BENCH IN THE CASE OF B.V. REDDY ENTERPRISES PVT. LTD., IN ITA NO. 152/MDS/2011 FOR THE AY. 2007 - 08 DT. 03 - 03 - 2014. 6. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERUSING THE ORDERS OF CO - ORDINATE BENCH ES OF THE TRIBUNAL AT BANGALORE IN THE CASES OF OTHER CO - SHAREHOLDERS AND AT CHENNAI IN THE CASE OF THE COMPANY (WHICH GOT CONVERTED FROM A FIRM), WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDERS OF THE CIT(A). WHEN ASSESSEE HAS JOINED AS PARTNER IN THE F IRM, B.V. REDDY ENTERPRISES IN MARCH, 2006, THE RESULTANT CAPITAL GAIN OF RS. 35,42,553/ - WAS OFFERED TO TAX. THEREAFTER, AS HELD BY THE BANGALORE BENCH OF ITAT, ASSESSEE CEASED TO BE A SHAREHOLDER OF THE SHARES WHICH WERE ULTIMATELY TRANSFERRED BY THE CO MPANY, B.V. REDDY ENTERPRISES PVT. LTD., TO THE GODREJ GROUP. DURING THE YEAR UNDER CONSIDERATION, THE ONLY TRANSACTION WHICH OCCUR RED WAS CONTRIBUTION OF ASSESSEES SHARES AS CAPITAL CONTRIBUTION IN THE FIRM ON WHICH CAPITAL GAINS WERE ALREADY OFFERED. REVALUATION OF THE SHARES, CONVERSION OF FIRM INTO COMPANY, SUBSEQUENT SALE TO GODREJ GROUP BY THE COMPANY IN WHICH ASSESSEE HAS SHARES ORIGINALLY , HAVE HAPPENED IN AY. 2007 - 08. AO BROUGHT TO TAX THE RESULTANT CAPITAL GAIN IN THE HANDS OF THE COMPANY AS W ELL WHICH WAS THE SUBJECT MATTER OF APPEAL BEFORE THE ITAT, CHENNAI BENCH. CO - ORDINATE BENCH AT CHENNAI HAS CONSIDERED THE CONTENTIONS OF REVENUE VIDE PARA 48 TO 54 AND HELD THAT ON REVALUATION OF SHARES, THERE AROSE NO CAPITAL GAINS AND THE COST OF ACQUI SITION IN THE HANDS OF THE PREVIOUS OWNER I.E., THE FIRM WOULD BE AT RS 270.07 CRORES. RELEVANT PORTION OF T HE ORDER OF THE ITAT IN THIS REGARD IS AS UNDER: I.T.A. NO S . 786 & 787 / HYD / 20 15 : - 8 - : 48. WE HEARD BOTH SIDES IN DETAIL AND EXAMINED THE ISSUE CAREFULLY. WE NEED NOT REPEAT THE PROVI SIONS OF LAW STATED IN SECTION 49, AS THE SAME HAS ALREADY BEEN SUFFICIENTLY DISCUSSED IN EARLIER PARAGRAPHS OF THIS ORDER. SO, WE STRAIGHTAWAY GO INTO THE ISSUE TO DECIDE WHETHER THE COST OF ACQUISITION ARRIVED BY THE ASSESSEE IN COMPUTING THE CAPITAL GAI NS IS ACCEPTABLE OR NOT. THE HISTORY OF THE TRANSFERS OF SHARES IS ALREADY BEFORE US. THE MEMBERS OF B.V. REDDY FAMILY JOINED THE FIRM BVRE BY CONTRIBUTING THEIR SHAREHOLDING IN M / S . NCCPL AS THEIR CAPITAL CONTRIBUTION. AT THE TIME OF ENTERING THE PARTNERS HIP, THE VALUE OF THE SHARES WAS ASSIGNED AT RS. 35,27,48,0001 / - . THEREAFTER, THE SHARES WERE REVALUED AT HIGHER AMOUNT OF RS. 270,07,53,0001 / - . T HE FIRST QUESTION IS WHETHER THE REVALUATION IS JUSTIFIED OR NOT. IT CANNOT BE DISPUTED THAT THE VALUE OF THE SHARE OF A COMPANY SHOULD REASONABLY REPRESENT THE INTRINSIC BUSINESS WORTH OF THE COMPANY. THERE MUST BE PARITY BETWEEN THE SHARE VALUE AND THE COMPANY'S BUSINESS WORTH. IF THE REVALUATION OF THE SHARE IN THE PRESENT CASE IS EXAMINED IN THE LIGHT OF THE A BOVE PRINCIPLE, WE FIND THAT THE' FIRM BVRE WAS JUSTIFIED IN REVALUING THE SHARES OF NCCPL, HELD BY IT. AS POINTED OUT BY THE COMMISSIONER OF INCOME TAX (APPEALS) IN HIS ORDER AND ALSO ARGUED BY THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE AT THE TIME OF HEARING, EARLIER, THERE WAS AN OFFER MADE BY M / S ACTIS TO BUY THE SHARES OF M / S NCCPL FROM THE MEMBERS OF B.V. REDDY FAMILY. THE OFFER MADE AT THAT TIME WAS USD 62.5 MILLION. THIS OFFER WAS FAR HIGHER THAN THE AMOUNT OF RS. 35,27,48,0001 / - FOR WHICH THE S HARES WERE INITIALLY ASSIGNED BY THE REDDY FAMILY MEMBERS TO THE FIRM BVRE. IT CLEARLY SHOWS THAT THE AMOUNT OF RS. 35,27,48,0001 - DID NOT REFLECT THE CORRECT VALUE ASSIGNABLE TO THE SHARES ON THE BASIS OF THE NET WORTH OF THE BUSINESS OWNED BY M / S NCCPL. AS ARGUED BY THE LEARNED COUNSEL, M / S GBFL PURCHASED SHARES OF M / S NCCPL FROM THE ASSESSEE - COMPANY FOR A SUM OF RS. 257,52,32,953/ - . THIS PURCHASE CONSIDERATION IS VERY NEAR TO THE REVALUATION PRICE OF RS. 270,07,53,0001 / - WORKED OUT BY THE FIRM BVRE. FROM THESE TWO INSTANCES, IT IS REASONABLY PROVED THAT THE VALUE OF THE SHARES OF NCCPL HELD BY THE FIRM BVRE WAS REVOLVING AROUND THE REVALUED AMOUNT OF RS. 270,07,53,0001 / - . THE EARLIER PURCHASE OFFER MADE BY M / S ACTIS WAS FOR AN AMOUNT VERY NEAR TO THIS REVAL UATION FIGURE; SO ALSO THE PURCHASE PRICE PAID BY GBFL. 49. IN THE LIGHT OF THE ABOVE FACTS, IT IS TO BE REASONABLY UNDERSTOOD THAT THE FIRM BVRE WAS JUSTIFIED IN REVALUING THE SHARES OF NCCPL HELD BY IT. IT IS ALSO TO BE SEEN THAT THE VALUATION HAS BEEN PROPERLY MADE BY THE FIRM BVRE BRINGING THE REVALUATION FIGURE TO RS. 270,07,53,000 / - . 50. IN SHORT, IT IS APPARENT ON RECORD THAT THERE WERE SUFFICIENT REASONS FOR THE FIRM BVRE TO REVALUE THE SHARES OF NCCPL AND THE FIRM HAS RIGHTLY REVALUED THE SHARE S AT RS. 270,07,53,000/ - . 51. NEXT IS THE QUESTION WHETHER THIS REVALUED FIGURE SHOULD BE ACCEPTED AS THE COST OF ACQUISITION OF NCCPL SHARES IN THE HANDS OF BVRE. THE ANSWER IS 'YES'. THIS IS BECAUSE THE CAPITAL ACCOUNTS OF THE PARTNERS OF THE FIRM BVRE HAVE BEEN REVISED WITH THEIR PROPORTIONATE SHARE IN THE I.T.A. NO S . 786 & 787 / HYD / 20 15 : - 9 - : INCREASED AMOUNT OF SHARE VALUE RESULTED BY THE REVALUATION OF SHARES. THE FIRM BVRE HAS CREDITED THE CAPITAL ACCOUNTS OF ITS PARTNERS WITH ADDITIONAL AMOUNTS CORRESPONDING TO THE SHARE VA L UE INCREAS ED BY REVALUATION. IN THAT WAY, THE FIRM BVRE HAS BORNE THE COST OF ADDITIONS CREDITED IN THE CAPITAL ACCOUNTS OF THE PARTNERS OF THE FIRM. THEREFORE, IT IS TO BE SEEN THAT THE REVALUATION HAS NOT BEEN MADE BY THE FIRM BVRE GRATUITOUSLY. THE REVALUATION HA S BEEN MADE FOR A COST. THE COST OF REVALUATION IS THE ADDITIONAL AMOUNT OF CAPITAL CREDITED IN THE CAPITAL ACCOUNTS OF THE PARTNERS OF THE FIRM. THE FIRM BVRE HAS SUFFERED THAT INCREMENTAL LIABILITY AGAINST THE ENHANCED VALUE REFLECTED IN THE CAPITAL ACCO UNTS OF THE PARTNERS OF THE FIRM. THEREFORE, IT IS TO BE SEEN THAT THE FIRM BVRE HAS BORNE THE LIABILITY OF REVALUATION WHICH SHOULD BE ADDED TO THE COST OF ACQUISITION OF SHARES MADE FROM B.V. REDDY FAMILY MEMBERS. THEREFORE, AS FAR AS THE FIRM BVRE, THE PREVIOUS OWNER OF THE SHARES, IS CONCERNED, THE COST OF ACQUISITION OF SHARES IS RS. 270,07,53,000/ - . 52. MOREOVER, WHEN THE FIRM BVRE WAS TAKEN OVER AND SUCCEEDED BY THE ASSESSEE - COMPANY M/S NCSPL / BVREPL, THE VALUE OF NCCPL SHARES IN THE BOOKS OF THE F IRM BVRE WAS RS. 270,07,53,000/ - . IT IS FOR THAT AMOUNT, THE SHARES WERE TAKEN OVER BY THE ASSESSEE - COMPANY. THE PARTNERS OF THE FIRM BVRE ABSORBED THIS HIGHER AMOUNT OF REVALUATION IN PROPORTION TO THE CAPITAL ACCOUNTS STOOD IN THE BOOKS OF THE FIRM. THER EFORE, THE COST OF THE SHARES IN THE HANDS OF THE FIRM BVRE AS WELL AS THE COST OF ACQUISITION INCURRED BY THE ASSESSEE - COMPANY, IS RS. 270,07,53,000/ - . THEREFORE, IT IS TO BE SEEN THAT THE COST OF SHARES IN THE HANDS OF THE FIRM BVRE, BEING THE PREVIOUS OW NER, IS CORRECTLY COMPUTED BY THE ASSESSEE WHICH IS UPHELD BY THE COMMISSIONER OF INCOME TAX (APPEALS) AT RS. 270,07,53,0001 / - . 53. REGARDING INVOKING SECTION 47A, WE AGREE WITH THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS). THE CONDITIONS SPE C IFIED IN SECTION 47(XIII) HAVE BEEN COMPLIED IN THE PRESENT CASE. ALL THE ASSETS AND LIABILITIES OF THE FIRM RELATING TO THE BUSINESS IMMEDIATELY BEFORE THE SUCCESSION HAD BECOME THE ASSETS AND LIABILITIES OF THE COMPANY. THERE IS NO DISPUTE ON THIS FACT. THE FIRST CONDITION IS SATISFIED. ALL THE PARTNERS OF THE FIRM BVRE BECAME THE SHAREHOLDERS OF THE ASSESSEE - COMPANY IN THE SAME PROPORTION IN WHICH THEIR CAPITAL ACCOUNTS STOOD IN THE BOOKS OF THE FIRM ON THE DATE OF SUCCESSION. REGARDING PROPORTIONATE AL LOCATION OF SHARES, THERE IS NO DISPUTE AT ALL. THE ONLY OBJECTION POINTED OUT BY THE ASSESSING OFFICER IS THAT THE CAPITAL ACCOUNTS OF THE PARTNERS WERE CREDITED WITH HIGHER AMOUNTS RESULTING FROM SHARE REVALUATION. THE OBJECTION OF THE ASSESSING OFFICER IS ON THE QUANTUM OF THE AMOUNT AND NOT ON THE PROPORTION IN WHICH SHARES WERE ALLOTTED. THE PRINCIPLE LAID DOWN IN PROVISO (B) TO SECTION 47(XIII) IS THAT THE PARTNERS BECOME THE SHAREHOLDERS OF THE COMPANY IN THE SAME P RO P ORTION IN WHICH THEIR CA P ITAL AC COUNTS STOOD IN THE BOOKS OF THE FIRM ON THE DATE OF SUCCESSION . THE REQUIREMENT IS THE SATISFACTION OF THE PROPORTION. IT IS NOT THE QUANTUM OF THE AMOUNT. IN THE PRESENT CASE, THE PROPORTION HAS BEEN COMPLIED WITH. THEREFORE, THIS CONDITION IS ALSO SATI SFIED. REGARDING THE THIRD CONDITION, IT IS A MATTER ON I.T.A. NO S . 786 & 787 / HYD / 20 15 : - 10 - : RECORD THAT THE PARTNERS OF THE FIRM BVRE DID NOT RECEIVE ANY CONSIDERATION OR BENEFIT, DIRECTLY OR INDIRECTLY, IN ANY FORM OR MANNER, OTHER THAN BY WAY OF ALLOTMENT OF SHARES IN ASSESSEE - COMPANY. 5 4. AS SUCH, WE HAVE TO HOLD THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS CORRECTLY HELD THAT THERE WAS NO VIOLATION OF THE CONDITIONS LAID DOWN IN SECTION 47(XIII) AND AS SUCH, THERE IS NO JUSTIFICATION IN INVOKING SECTION 47A(3) AGAINST THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALSO RIGHTLY HELD THAT FOR THE PURPOSE OF SECTION 49, THE COST OF ACQUISITION IN THE HANDS OF THE PREVIOUS OWNER IS RS. 270,07,53,000/ - . 7. FURTHER, CO - ORDINATE BENCH AT CHENNAI ALSO EXTRACTED THE ORDERS OF ITAT, BANGALORE BENCH WHICH WAS FOLLOWED BY THE LD. CIT(A) VIDE PARA 55 AND 56 AS UNDER: 55. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE CIT(A) HAS ACCEPTED THE LEGAL POSITION THAT WHEN A PERSON IS SHOWN IN THE PARTNERSHIP DEED AS PARTNER REPRESENTI NG THE HUF, THE HUF DOES NOT BECOME THE PARTNER. THE CLT(A) HAS HOWEVER PROCEEDED ON THE B A SIS THAT THE DESCRIPTION IN THE PARTNERSHIP DEED IN THE PRESENT CASE SHOWED THAT HUF WAS THE PARTNER. THEREAFTER, THE CIT(A) APPLIED THE PROPOSITION THAT HUF CANNOT ENTER THE PARTNERSHIP AND CARRY ON BUSINESS AND FINALLY CONCLUDED THAT THE PARTNERSHIP ITSELF IS ILLEGAL AS HUF WAS A PARTNER OF THE FIRM. IN OUR VIEW, THE CIT (A) HAS NOT PROPERLY APPRECIATED THE TRUE EFFECT OF THE DESCRIP T ION IN THE PARTNERSHIP DEED. AS FAR AS V.MADHUSUDAN REDDY, V.VIKRAM REDDY AND V.DINESH REDD Y ARE CONCERNED, THEY WERE SHOWN AS PARTNERS IN THEIR INDIVIDUAL CAPACITY IN ALL THE PARTNERSHIP DEEDS PRIOR TO 24.3.2006. THE FACT THAT THEIR NAMES APPEARING IN INDIVIDUAL CAPACITY IN ALL THE DEE DS PRIOR TO 24.3.2006 WAS IN FACT IN THEIR CAPACITY VIZ., REPRESENTING THE HUF HAS BEEN BROUGHT OUT IN THE PARTNERSHIP DEED DATED 24.3.2006. THIS BECAME NECESSARY BECAUSE, THESE 3 PERSONS ALSO BECAME PARTNERS OF THE FIRM BVRE IN THEIR INDIVIDUAL CAPACITY U NDER THE DEED OF PARTNERSHIP DATED 24.3.2006. AS FAR AS DWARKANATH REDDY IS CONCERNED, HE BECAME PARTNER IN TWO CAPACITIES UNDER THE DEED OF PARTNERSHIP DATED 24.3.2006 VIZ., IN HIS CAPA C ITY ON BEHALF OF THE HUF AND IN HIS INDIVIDUAL CAPACITY. HERE AGAIN T O DISTINGUISH THE TW O CAPACITIES IN WHICH HE WAS A PARTNER, THE DESCRIPTION 'IN HIS HUF CAPACITY' AND 'IN - HIS INDIVIDUAL CAPACITY' HAD BEEN USED IN THE PARTNERSHIP DEED DATED 24.3.2006. AS RIGHTLY CONTENDED ON BEHALF OF THE ASSESSEE, THE FACT THAT THE NAM E OF AN INDIVIDUAL IS WRITTEN IN THE PARTNERSHIP DEED FOLLOWED BY THE DESCRIPTION 'PARTNER IN HIS HUF CAPACITY' CANNOT CONSTITUTE THE HUF AS A PARTNER. THE INTENTION OF THE PARTIES IS VERY CLEAR THAT THE INDIVIDUAL IS A PARTNER OF THE FIRM AS FAR AS THE FI RM IS CONCERNED. AS FAR AS THE MEMBERS OF THE HUF ARE CONCERNED, HE IS ACTING ON THEIR BEHALF IN 'A REPRESENTATIVE CAPACITY. THIS I.T.A. NO S . 786 & 787 / HYD / 20 15 : - 11 - : FACT IS ALSO CORROBORATED BY THE FACT THAT THE SHARE INCOME OF V.MADHUSUDAN REDDY, V.VIKRAM REDDY AND V.DINESH REDDY, WHO WERE SHOWN AS INDIVIDUALS IN THE PARTNERSHIP DEEDS PRIOR TO 24.3.2006, THE CONCERNED INDIVIDUAL OFFERED TO TAX IN THE HANDS OF THE HUF AND TAXED IN THE HANDS OF THE RESPECTIVE HUFS. THE DETAILS IN THIS REGARD HAVE ALREADY BEEN GIVEN IN PARA - 3 TO 15 OF THIS ORD ER. A PARTNER MAY BE THE KARTA OF A JOINT HINDU FAMILY, HE MAY BE A TRUSTEE, HE MAY BE A REPRESENTATIVE OF A GROUP OF PERSONS, HE MAY BE A BENAMIDAR FOR ANOTHER. IN ALL SUCH CASES HE OCCUPIES A DUAL POSITION; QUA THE PARTNERSHIP, HE FUNCTIONS IN HIS PERSON AL CAPACITY; QUA THE THIRD PARTIES, IN HIS REPRESENTATIVE CAPACITY; THIRD PARTIES, WHOM ONE OF THE PARTNERS REPRESENTS, CANNOT ENFORCE THEIR RIGHTS AGAINST THE OTHER PARTNERS, NOR CAN THE OTHER PARTNERS DO SO AGAINST THE SAID THIRD PARTIES. THEIR RIGH T IS ONLY TO A SHARE IN THE PROFITS OF THEIR PARTNERS WHO (QUA THEM) WAS REPRESENTATIVE. IT IS THUS CLEAR THAT HUF WAS NEVER PARTNER IN THE FIRM BVRE AND THE CONCLUSIO NS TO TH E CONTRARY BY THE CIT(A) CANNOT BE SUSTAINED. THUS IT IS HELD ON ISSUE NO.(2) THAT HUF WAS NOT PARTNER OF THE ' FIRM BVRE AND THEREFORE THE FIRM BVRE CANNOT BE SAID TO BE NOT VALID. 56. THE THIRD ISSUE THAT ARISES FOR CONSIDERATION IS AS WHETHER THERE WERE MORE THAN 20 PERSONS AS PARTNERS IN THE FIRM BVRE, AND CONSEQUE N TLY THE FIRM IS NO T VALID? SEC. 11 OF THE COMPANIES ACT, 1956 PROVIDES THAT NO PARTNERSHIP SHALL CONSIST OF MORE THAN 10 PERSONS IF IT CARRIES ON BUSINESS OF BANKING AND 20 PERSONS IN THE CASE OF ANY OTHER BUSINESS. THE FIRM BVRE WAS NOT CARRYING ON BANKING BUSINESS AND THE REFORE COULD HAVE 20 PARTNERS AND ON THIS THERE IS NO DISPUTE. A PARTNERSHIP FIRM IF IT VIOLATES THE ABOVE PROVISIONS WILL BE CONSIDERED ILLEGAL. THE CIT(A) IN HIS ORDER FOUND THAT THERE FOUR OF THE PARTNERS WHO WERE DESCRIBED AS REPRESENTING THEIR HUFS VI Z., V.MADHUSUDHAN REDDY, V.VIKRAM REDDY, V.DINESH REDDY AND V.DWARAKANATH REDDY. HE ALSO LISTED MEMBERS OF EACH OF THE HUFS AS FOLLOWS: 1. V.DWARAKANATH REDDY (HUF) (A) SRI.V.DWARAKANATH REDDY (B) SRIV.DINESH REDDY (SON) (C ) SRNT.V.ANITA REDDY (DAUGHTER) (D) SRNLV.SANDHYA REDDY (DAUGHTER) II. V.VIKRARN REDDY (HUF) (A) SR I. V.VIKRAM REDDY (B) SRIV.NITYA REDDY (WIFE) (C ) SRNT.BINDUVASINI (DAUGHTER) (D) SRNT.BHANYATINI (DAUGHTER) I.T.A. NO S . 786 & 787 / HYD / 20 15 : - 12 - : III . V . MADHUSUDAN REDDY (HUF) (A) SRI.V.M ADHUSUDAN REDDY (B) S RNT . SOUMINI REDDY (WIFE) (C) NACH I KET A (SO N) IV. V.DINESH REDDY (HUF) (A) SRI.V.DINESH REDDY (B) SMT.SRUTHI REDDY (DAUGHTER) (C) KIRTANA (SON) (D) TANNA (SON). ACTUAL NAME IS TARUN NOT TANNA AS RECORDED IN THE ORDER OF CIT(A) THE CIT(A) T HEREAFTER CONCLUDED THAT THE NUMBER OF MEMBERS OF THE HUF WAS 15. THERE WERE 13 PARTNERS INCLUDING THE 4 HUFS UNDER THE DEED OF PARTNERSHIP DATED. 24.3.2006. ACCORDING TO THE CIT(A), IF THE OTHER 9 PARTNERS (OTHER THAN THE 4 HUFS) WERE TAKEN INTO CONSIDERA TION THEN THE PARTNERSHIP WOULD CONSIST OF MORE THAN 20 PERSONS AND HENCE ILLEGAL . 7.1. IN VIEW OF THE DECISION S OF THE CO - ORDINATE BENCHES AT BANGALORE AND CHENNAI NOTED ABOVE , WE ARE OF THE OPINION THAT THE TRANSACTIONS UNDERTAKEN BY ASSESSEE ARE NOT COLOURABLE TRANSACTIONS AND ASSESSEE HAS CORRECTLY OFFERED THE CAPITAL GAINS ARISING BY WAY OF CONTRIBU TING THE SHARES AS SHARE CAPITAL IN THE FIRM, B.V.R. ENTERPRISES. CONSEQUENTLY, AO HAS ERRED IN BRINGING TO TAX THE SO CALLED GAIN IN THE HANDS OF THE INDIVIDUAL SHAREHOLDER DURING THE YEAR UNDER CONSIDERATION. THERE IS NO MERIT IN THIS APPEAL OF REVENUE. GROUNDS ARE DISMISSED. 8. IN THE RESULT, THIS APPEAL OF REVENUE IS DISMISSED. ITA NO. 787/HYD/2015 (AY. 2007 - 08): 9. THIS APPEAL IS ALSO FILED BY REVENUE PERTAINING TO THE AY. 2007 - 08. IN THIS ASSESSMENT YEAR, ASSESSEE FILED HER RETURN OF I.T.A. NO S . 786 & 787 / HYD / 20 15 : - 13 - : INCOME ON 28 - 07 - 2008 DISCLOSING LOSS OF RS. ( - )38,294/ - AND AGRICULTURAL INCOME OF RS. 12,884/ - . THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT ON 10 - 11 - 2008. 10. THE DISPUTE IN THIS APPEAL PERTAIN S TO THE SAME ISSUE . AO CONCLUDED THAT THE EVENT OF INTRODUCTION OF SHARES AND OBTAINING VALUE AS CAPITAL CONTRIBUTION IN THE BOOKS OF THE FIRM, BVRE HAPPENED IN THE FY. 2005 - 06 AND REVALUATION OF SHARES HAPPENED SUB SEQUENTLY IN THE FY. 2006 - 07 . IN VIEW OF THIS , CORRESPONDING INCOME EARNED ON SALE OF SHARES OF NC CPL TO GODREJ GROUP WAS ASSESSABLE IN HANDS OF THE PARTNERS ON SUBSTANTIVE BASIS FOR THE AY. 2006 - 07 AND ON PROTECTIVE BASIS FOR THE AY. 2007 - 08. THUS, T HE AO CONSIDERING THE SHARE VALUE OF EACH SHARE AT RS. 3944.50/ - FOR 6891 SH A RES HAD ARRIVED A T THE LONG TERM CAPITAL GAINS AT RS. 2,71,81,550/ - . HE THUS REDUCED THE CAPITAL GAINS OF RS. 35,42,553/ - ALREADY OFFERED BY ASSESSEE FOR THE AY. 2006 - 07 , AND BROU GHT TO TAX THE CAPITAL GAINS WHICH HAS ESCAPED TAX OF RS. 2,36,38,997/ - . THE AO HAD THUS MADE PROTECTIVE ASSESSMENT FOR THE AY. 2007 - 08. 11. ON CAREFUL CONSIDERATION OF THE MATTER, WE FIND THAT THE BANGALORE BENCH OF THE TRIBUNAL IN ITS ORDER DATED 0 8 - 0 2 - 2013, REFERRED TO ABOVE, VIDE PARA 62, HAS HELD THAT THERE WAS NO CAPITAL GAINS IN THE HANDS OF ASSESSEE ON TRANSFER OF SHARES OF NCCPL TO GBPL DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007 - 08. IT IS ONLY BY TAKING NOTE OF THIS DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL, THE CIT(A) IN THE IMPUGNED ORDER, HAS DELETED THE ADDITION MADE BY THE AO FOR THE AY. 2007 - 08 ALSO . AS DISCUSSED IN THE ABOVE APPEAL, FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH ES AT BANGALORE AND CHENNAI , WE DO NOT FIND ANY I.T.A. NO S . 786 & 787 / HYD / 20 15 : - 14 - : INFIRMITY IN THE ACTION OF THE CIT(A) IN THIS BEHALF. GROUNDS OF THE REVENUE ARE ACCORDINGLY DISMISSED. 12. IN THE RESULT, THIS APPEAL OF REVENUE IS DISMISSED. 13. TO SUM - UP, ITA NO S . 786/HYD/2015 & 787/HYD/2015 , BOTH THE RE VENUE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH MAY , 2016 SD/ - SD/ - (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 13 TH MAY , 2016 TNMM COPY TO : 1. INCOME TAX OFFICER, WARD - 1 , GANDHI ROAD, CHITTOOR. 2 . SMT. V. INDIRA, (REPRESENTED BY MRS. NAITHA, D/O. LATE MRS. V. INDIRA), 2 - 1285, B.V. REDDY COLONY, CHITTOOR. 3 . CIT (APPEALS), TIRUPATI. 4. CIT , TIRUPATI. 5 . D.R. ITAT, HYDERABA D. 6 . GUARD FILE.