RIPU DAMAN MAGON, Jaipur V. DCIT, Jaipur

ITA 804/JPR/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74836 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 15-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: SANJAY JHAWAR
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Salary income; Share purchase agreement; Advance ruling; Cost of acquisition; Fair market value; Bad and doubtful debts; Assessment record
• Section: 54F; 234B; 12; 10

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI H.M. MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER) I.T.A. NO. 804/JP/2012 ASSTT. YEAR- 2009-10 RIPU DAMAN MAGON, THE D.C.I.T., E-26, SIDHARTH NAGAR, VRS. CIRCLE-6, JAIPUR. MALVIYA NAGAR, JAIPUR. PAN NO. ABMPM1852B (APPELLANT) (RESPONDENT) I.T.A. NO. 951/JP/2013 ASSTT. YEAR- 2009-10 SHRI KRISHAN LAL MAGON, THE INCOME TAX OFFICER, E-26, SIDHARTH NAGAR, VRS. WARD 6(1), JAIPUR. MALVIYA NAGAR, JAIPUR. PAN NO. ABMPM2672F (APPELLANT) (RESPONDENT) I.T.A. NO. 952/JP/2013 ASSTT. YEAR- 2009-10 SHRI MAHENDRA R SARAF, THE A.C.I.T., R-6, TILAK NAGAR, C-SCHEME, VRS. CIRCLE-6, JAIPU R. JAIPUR, RAJASTHAN. PAN NO. ADTPS8670C (APPELLANT) (RESPONDENT) ASSESSEES BY:- SHRI SANJAY JHAWAR DEPARTMENT BY :- SHRI D.C. SHARMA, D.R. DATE OF HEARING : 29/01/2014 DATE OF PRONOUNCEMENT : 26/02/2014 ITA 804/JP/2012 & ITA 951-952/JP/2013 2 O R D E R PER: N.K. SAINI, A.M. THESE THREE APPEALS BY THE ASSESSEES ARE DIRECTED A GAINST THE SEPARATE ORDERS OF THE LD. CIT (A)-II, JAIPUR AS PER FOLLOWI NG DETAILS. APPEAL NO. ASSESSEES NAME ORDER DATED A.Y I.T.A. NO.804/JP/2012 SHRI TIPU DAMAN MAGON 16/08/2 012 2009-10 I.T.A. NO. 951/JP/2013 SHRI KRISHAN LAL MAGON 30/09 /2013 2009-10 I.T.A. NO. 952/JP/2013 SHRI MAHENDRA R. SARAF 04/09 /2013 2009-10 IN THESE APPEALS, COMMON ISSUES ARE INVOLVED HAVING SIMILAR FACTS AND THE APPEALS WERE HEARD TOGETHER, SO THESE ARE BEING DIS POSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE WILL DEAL WITH I.T.A. NO. 804/JP/2012, FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A)-II HAS ERRED IN INTERPRETING THE 'CONSIDERATION' STIPULATED IN THE SHARE PURCHASE AGREEMENT EXECUTED BY THE APPELLANT WITH HCL INFOSYSTEMS LIMITED ('THE BUYER') WITH REFERENCE TO THE PHRASE 'FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING' APPEARING IN TH E PROVISIONS OF SECTION 48 OF THE INCOME TAX ACT, 1961. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A)-II, JAIPUR HAS, WHILE COMPUTING THE CAPITAL GAINS ON SA LE OF SHARES, ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFI CER IN TAKING THE FULL VALUE OF CONSIDERATION FOR SALE OF SHARES OF M/S NATURAL TECHNOLOGIES PVT. LTD. AT RS.8,38,69,000/- (AT RS. 172.98 PER SHARE) INSTEAD OF THE ACTUAL CONSIDERATION OF RS.7, 14,69,000/- (RS.147.40 PER SHARE) ACCRUED, COMPUTED AND ACTUALL Y ITA 804/JP/2012 & ITA 951-952/JP/2013 3 RECEIVED AS PER THE TERMS & CONDITIONS OF THE SHARE PURCHASE AGREEMENT BETWEEN THE APPELLANT AND THE BUYER. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A)-II HAS ERRED IN HOLDING THAT FOR COMPUTI NG THE FULL VALUE OF CONSIDERATION, THE ADJUSTMENT OF RS. 1,24 ,00,000/- IN TERMS OF SCHEDULE 6 OF THE SHARE PURCHASE A GREEMENT WAS NOT ALLOWABLE AS THIS REPRESENTED A POST TRANSFER L IABILITY AND FURTHER ERRED IN STATING THAT AS PER THE COUNSEL OF THE APPELLANT THIS WAS AN AD-HOC ADJUSTMENT/ESTIMATED ADJUSTMENT DESPITE AVAILABILITY OF EVIDENCES AND DETAILS IN RELATION T O THE SAME IN THE ASSESSMENT RECORDS. 4. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A)-II HAS ERRED IN AFFIRMING THE O RDER OF LD. AO TO THE EXTENT THAT THE CONSIDERATION FOR SH ARE PURCHASE BETWEEN THE PARTIES TO THE SHARE PURCHASE AGREEMENT WAS DECIDED AT RS.8,38,69,000/- AT THE TIME OF EXECUTIO N OF THE AGREEMENT INSTEAD OF THE FACT THAT THE AMOUNT OF RS.8,38,69,000/- WAS MERELY A PART OF FORMULAE TO C ALCULATE THE ACTUAL CONSIDERATION FOR TRANSFER OF SHARES. 5. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A)-II HAS ERRED IN NOT DIRECTING THE AO TO GIVE CREDIT OF THE ACTUAL TAXES ALREADY PAID BY THE APPELLANT A MOUNTING TO RS.9,34,324/-. 6. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, LD. CIT(A)-II HAS ERRED IN UPHOLDING THE LEVIABILITY OF INTEREST U/S 234A, 234B AND 234C OF THE ACT. 7. THE APPELLANT CRAVES TO ALTER, AMEND AND MODIFY ANY GROUND OF APPEAL. 3. GROUNDS NO. 1 TO 4 ARE CORRELATED, WHICH RELATES TO VALUATION OF THE SHARES OF M/S NATURAL TECHNOLOGIES PVT. LTD FOR THE PURPOS ES OF SALE CONSIDERATION AND COMPUTING THE LONG TERM CAPITAL GAIN. ITA 804/JP/2012 & ITA 951-952/JP/2013 4 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE E-FILED THE RETURN OF INCOME ON 27/1/2010 DECLARING AN INCOME OF RS. 29,22,125/- . THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE DECLARED SHORT TERM CAPIT AL LOSS AND LONG TERM CAPITAL GAIN ON TRANSACTIONS OF SHARES OF M/S NATURAL TECHN OLOGIES PVT. LTD. (NTPL) IN THE FOLLOWING MANNER: (I) STATEMENT OF SHORT TERM CAPITAL GAIN NAME OF COMPANY DATE OF SALE SALES PRICE TR. EXP. NET SALE PRICE PURCHASE DATE PURCHASE COST LOSS U/S 94(7)/(8) CAPITAL GAIN NTPL (54856) 08.05.2008 8085913 0 8085913 21.3.08 10450000 0 -2364087 TOTAL 8085913 8085913 10450000 2364087 (II) STATEMENT OF LONG TERM CAPITAL GAIN NAME OF COMPANY DATE OF SALE SALES PRICE TR. EXP. NOT SALE PRICE PURCHASE DATE PURCHASE COST INDEX COST CAPITAL GAIN NTPL (54856) 08.05.2008 30954531 500000 30454531 23.01.02 2100000 2869014 27585517 TOTAL 30954531 500000 30454531 2100000 2869014 27585517 THE ASSESSEE SUBMITTED TO THE ASSESSING OFFICER THA T THE COMPANY NTPL WAS INCORPORATED IN JULY, 1995 AND DEALS IN THE PRODUCT ION AND SERVICE OF COMPUTER AND THAT THE ASSESSEE BECAME ITS DIRECTOR IN 2002. THE ASSESSEE ACQUIRED THE SHARES IN FOLLOWING MANNER: DATE NO OF SHARES OF RS. 10/EACH NAME OF SELLER AMOUNT 07.02.2002 16667 GOLD STONE TECHNOLOGIES LTD. RS.166670/- 3 0 .04.2002 63333 ALLOTTED BY NTPL RS.633330/ - 26.02.2004 130000 ALLOTTED BY NTPL RS.1300000/ TOTAL 210000 RS.21,00,000 / - ITA 804/JP/2012 & ITA 951-952/JP/2013 5 THE A.O. FURTHER OBSERVED THAT AFTERWARDS, IN ORDE R TO MEET THE REQUIREMENT OF THE FUNDS FOR EXPANSION OF BUSINESS, NTPL APPROACHE D RAJASTHAN VENTURE CAPITAL FUND (RVFC), WHO AGREED TO PROVIDE VENTURE CAPITAL ASSISTANCE TO NTPL OF RS. 250 LACS. OUT OF IT RS. 50 LACS WERE PROVIDE D BY WAY OF EQUITY OF RS. 10 EACH FOR CASH AT A PREMIUM OF RS. 85.50 PER SHARE AND RS. 2.00 CRORES BY WAY OF 8.5% OPTIONALLY CONVERTIBLE DEBENTURE (DCDS. THE AS SESSEE AVAILED THE EQUITY PARTICIPATION OF RS. 50 LACS WHILE OFFER OF OCDS WA S NOT AVAILED. LATER ON THE ASSESSEE PURCHASED BACK 52356 SHARES OF RVFC FOR RS . 1 CRORE ON 31/3/2008 @ RS. 191 PER SHARE AND ALSO PURCHASED 2500 SHARES OF ANOTHER DIRECTOR SHRI NAREN BAKSHI FOR RS. 50 LACS ON 20/4/2008 @ RS. 180 PER S HARE. PRIOR TO PURCHASE OF EQUITY VENTURE FROM RVFC AND ALLOTMENT OF SHARES TO SHRI NAREN BAKSHI, TOTAL PAID UP CAPITAL OF NTPL WAS RS. 43 LACS AND IT WAS SUBSCRIBED BY THREE SHARE HOLDERS WITH THEIR SHARE HOLDINGS AS UNDER:- (I) SHRI RIPU DAMAN MAGON (THE ASSESSEE) 2,10,00 0 (II) SHRI K.L. MAGON 76,000 (III) SHRI MAHENDRA R SARAF 1,43,300 TOTAL 4,30,300 AFTER ACQUIRING 52356 SHARES OF RVFS AND 2500 SHARE S OF SHRI NAREN BAKSHI, TOTAL SHARE HOLDING OF THE ASSESSEE BECOMES 264856 (210000+52356+2500). ALL THE THREE SHARE HOLDERS ENTERED INTO AN AGREEMENT W ITH HCL INFOSYSTEM LTD., NEW DELHI FOR TRANSFER OF ALL 484856 SHARES FOR A C ONSIDERATION OF RS. 8,38,69,000/-. THUS, TOTAL SUBSCRIBED SHARES OF 484 856 (RIPU DAMAN MAGAO- ITA 804/JP/2012 & ITA 951-952/JP/2013 6 264856, K.L. MAGAO- 76700 AND MAHENDRA R SARAF- 143 300) WITH PAID UP CAPITAL OF RS. 48,48,560/- WERE TRANSFERRED TO HCL INFOSYSTEM LTD. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, NOTICED THAT AS PER PARA 2.2 OF ARTICLE-2 OF THE AGREEMENT OF SALE, 484856 SHARES OF NTPL HAVE BEEN AGREED UPON TO PURCHASE FOR RS. 8,38,69,000/- MENTIONED AS PURCHASE PRICE IN THE AGREEMENT. HE FURTHER OBSERVED THAT ACCORDIN G TO TOTAL PURCHASE PRICE, THE VALUE OF EACH SHARE WOULD BE RS. 172.98 WHILE THE ASSESSEE HAD SOLD 264856 SHARES FOR RS. 3,90,40,444/-, WHICH GAVE THE RATE O F RS. 147.40 PER SHARE. HE, THEREFORE ASKED THE ASSESSEE TO EXPLAIN THE FOLLOWI NG QUERIES:- 1. ORIGINALLY SHARES OF NTPL WERE PURCHASED ON 07/02/2 002, 20/04/2002 AND 26/02/2004 BUT IN COMPUTATION OF CAP ITAL GAIN COST INDEX HAS BEEN APPLIED FROM 23/01/2002, PLEASE CORR ECT THE COST OF ACQUISITION/JUSTIFY YOUR CLAIM. 2. PRODUCE EVIDENCE REGARDING PURCHASE OF SHARES I N 2002 AND 2004. 3. PRODUCE EVIDENCE REGARDING LOAN OF RS. 60 LACS, LOAN FROM SHRI K.L. MAGON AND M.R. SARAF. 4. PURCHASE PRICE OF TOTAL 484856 SHARES HAS BEEN DECI DED AT RS.83869000/- I.E. RS. @ 172.98 BUT SALE CONSIDERATION IS SHOWN AT RS. 39040444 FOR THE SALE OF 264856 SHOWN I.E. @ RS.147.40 WHILE IT SHOULD BE RS .45814790/-. PLEASE JUSTIFY THE DEDUCTION OF RS.6774346/- FROM THE FULL VALUE OF CONSIDERATION. 5. AS PER SALE AGREEMENT OF SHARES THE PAYMENTS ARE TO BE RELEASED FROM THE ESCROW ACCOUNT SUBJECT TO CERTAIN CONDITIONS AGAINST EACH ASSET OR LIABILITY. PLEASE EXPLAIN WHETHER THE TRANSACTION IS TRANSFER OF MANA GEMENT OF NTPL TO HCL INFOSYSTEM OR MERGER. 6. THE ASSESSEE HAS TRANSFERRED SHARES HOW THE DEDUCTI ON AGAINST CREDITORS AND DEBTORS AMOUNTS TO TRANSFER OF CAPITAL ASSET AND DE DUCTION FROM FULL VALUE OF CONSIDERATION IS ADMISSIBLE. ITA 804/JP/2012 & ITA 951-952/JP/2013 7 5. THE ASSESSEE SUBMITTED TO THE ASSESSING OFFICER VIDE REPLY DATED 27/08/2011 AS UNDER:- '3. THAT ASSESSEE HAS SOLD 264856 EQUITY SHARES OFN TPL, IN TERMS OF AGREEMENT DT. 1.5.2008, TO HCL INFOSYSTEMS LTD. THA T, AS PER PARA 2.2 OF THE AGREEMENT, SALE CONSIDERATION OF 484856 EAUITY SHAR ES OFNTPL WAS DECIDED TO BE RS.8,38,69,000/- SUBJECT TO CERTAIN DEDUCTIONS A S MENTIONED IN SCHEDULE 6 TO THE AGREEMENT. 'THAT TOTAL DEDUCTION HAVE BEEN WORKED OUT AT RS.1, 24,00,000/-. THUS, THE SALE CONSIDERATION OF TOTAL 484856 SHARES WORKED OU T TO RS.7,14,69,000/- AND CAPITAL GAIN HAS BEEN CALCULATED ACCORDINGLY. THAT, AS PER SEC 48 OF IT. ACT, CAPITAL GAIN HAS TO BE COMPUTED BY TAKING INTO ACCOUNT THE FULL VALUE OF SALE CONSIDERATION RECEIV ED OR ACCRUED. 'THE EXPRESSION FULL VALUE OF CONSIDERATION CANNOT BE CONSTRUED AS THE MARKET VALUE BUT AS THE PRICE BARGAINED FOR BY THE PARTIES TO THE SALE.' 'LT FOLLOWS THAT THE EXPRESSION 'FULL CONSIDERATION ' IN THE MAIN PART OF SEC. 12B(2) CANNOT BE CONSTRUED AS HAVING A REFERENCE TO THE ASSET TRANSFERRED BUT THE EXPRESSION ONLY MEANS THE FULL VALUE OF THE THING R ECEIVED BY THE TRANSFEROR IN EXCHANGE FOR THE CAPITAL ASSET TRANSFERRED BY HIM. 'IN CASE OF A SALE, THE FALL VALUE OF THE CONSIDERA TION IS THE FULL SALE PRICE ACTUALLY PAID.' CIT V. GEORGE HENDERSON & CO. LTD., (1967) 66 ITR 6 22 (SC) CAPITAL GAINS - FULL VALUE OF THE CONSIDERATION IN SALE -FULL VALUE MEANS SALE PRICE ACTUALLY RECEIVED.' 'IN THE CASE OF A SALE FOR A PRICE, THERE IS NOT QU ESTION FOR ANY MARKET VALUE UNLIKE IN THE CASE OF AN EXCHANGE. THEREFORE, IN TH E CASE OF SALE, ALL THAT ONE HAS TO SEE IS WHAT IS THE CONSIDERATION BARGAINED F OR.' CIT V GILLANDERS ARBUTHNOT & CO. (1973)87 ITR407 (S C) 'EXPRESSION FULL VALUE OF CONSIDERATION USED IN SEC TION 48 DOES NOT HAVE ANY REFERENCE TO MARKET VALUE BUT ONLY TO CONSIDERATION REFERRED TO IN SALE DEEDS AS SALE PRICE OF ASSETS WHICH HAVE BEEN TRANSFERRED.' ITA 804/JP/2012 & ITA 951-952/JP/2013 8 CIT VS SMT. NILOFER I. SINGH (2009) 309 ITR 233 (D ELHI) SHARES IN A PRIVATE LIMITED COMPANY WOULD COME WITH IN THE PHRASE 'NOT EASILY OBTAINABLE IN THE MARKET'. SUBJECT TO THIS RESTRICT ION, A HOLDER OF SHARES IN A PRIVATE LIMITED COMPANY MAY AGREE TO SELL HIS SHARE S TO A PERSON OF HIS CHOICE. SUCH AGREEMENTS ARE SPECIFICALLY ENFORCEABLE UNDER SECTION 10 OF THE SPECIFIC RELIEF ACT, 1963, WHICH CORRESPONDS TO SECTION 12 O F THE SPECIFIC RELIEF' ACT, 1877,' 'THE QUESTIONS AS TO WHAT WOULD BE THE REASONABLE P RICE FOR THE SHARES, THE MODE OF ITS DETERMINATION AND WHETHER ANY CONSIDERATION HAS ALREADY BEEN PAID BY THE TRANSFEREE TO THE TRANSFEROR WERE CONSIDERED SUBSEQ UENTLY. SEC. 9 OF THE SALES OF GOODS ACT PERMITS THIS. SEC-4 READ WITH SEC.2(10) O F THE SALE OF GOODS ACT 1930 REQUIRES THAT THE CONTRACT OF SALE MUST PROVIDE FO R THE PAYMENT OF MONEY AS A CONSIDERATION FOR THE TRANSFER OF GOODS, OR TO PUT IN. DIFFERENTLY, THAT A PRICE MUST BE PAID. BUT SEC.9 OF THE 1930 ACT ALLOWS THE PARTIES NOT TO FIX THE PRICE AT THE TIME OF THE TRANSFER AND TO LEAVE THE DETERMINA TION OF THE AMOUNT OF CONSIDERATION TO A LATER DATE. AN AGREEMENT WHICH P ROVIDES FOR THE FUTURE FIXATION OF PRICE EITHER BY THE PARTIES THEMSELVES OR BY A THIRD PARTY CAPABLE OF BEING MADE CERTAIN AND IS NOT INVALID AS PROVIDED U NDER SEC.29 OF CONTRACT ACT, 1872.' M S MADHUSOODANAN AND ANOTHER VS KERALA KAUMUDI P L TD. AND OTHERS (2004) 9 SUPREME COURT CASES 2004. THUS IN VIEW OF THE ABOVE IT IS AMPLY CLEAR THAT TH E BARGAINED PRICE FOR TRANSFER OF SHARES HAS FINALLY BEEN DETERMINED AFTER DEDUCTION MADE AS PROVIDED IN SCHEDULE 6 TO THE AGREEMENT OUT OF THE AMOUNT MENTIONED IN PAR A 2.2 OF THE AGREEMENT. THEREFORE, THE SALE CONSIDERATION PER SHARE SHALL B E RS.147.40 PER SHARE AND NOT RS.172.98 PER SHARE.' 6. THE ASSESSING OFFICER AFTER CONSIDERING THE SUBM ISSIONS OF THE ASSESSEE, WAS OF THE VIEW THAT THE ASSESSEE HAD TAKEN THE REM AINING AMOUNT OF SALE CONSIDERATION AFTER DEDUCTION OF RS. 1.24 CRORES BY HCL INFOSYSTEM LTD. THE ASSESSEE STATED TO THE ASSESSING OFFICER THAT THE B ALANCE AMOUNT WAS FULL VALUE OF CONSIDERATION. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PURCHASE PRICE ITA 804/JP/2012 & ITA 951-952/JP/2013 9 DECIDED AT THE CLOSING DATED I.E. ON 01/05/2008 BY THE PURCHASER AND SELLER WAS THE FULL VALUE OF CONSIDERATION. THE ASSESSING OFFI CER WAS OF THE VIEW THAT THE CLAIM OF DEDUCTION OF RS. 1.24 CRORES, EIGHT MONTH S AFTER THE DATE OF TRANSFER OF SHARE OF NTPL AND COMPLETION OF TRANSACTIONS FOR CA PITAL GAIN PURPOSES FROM TOTAL SALE PROCEEDS OF RS. 8,38,69,000/- WAS NOT AL LOWABLE FOR THE FOLLOWING REASONS:- 8.4. SEC. 48 OF THE ACT STATES THAT CAPITAL GAIN SHALL B E COMPUTED BY DEDUCTING FROM THE FULL VALUE OF CONSIDERATION RECE IVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET. I N THE CASE OF THE ASSESSEE FULL VALUE OF CONSIDERATION HAS BEEN DEPOS ITED IN THE ESCROW ACCOUNT DESIGNATED FOR THE PURPOSE AND SETTING APAR T OF TOTAL SUM OF RS.8,38,69,000/- BY THE PURCHASER. IT CLEARL Y MANIFEST THE INTENTION OF THE PURCHASER AND SELLERS THAT THE TRA NSFER OF 484856 SHARES OF NTPL HAS BEEN AGREED UPON AT FULL VALUE OF CONSI DERATION AT RS.8,38,69,000/-. 8.5. SUBSEQUENT CONDITIONS GIVEN IN AGREEMENT FOR TRANSF ER OF SHARES ARE THE DISBURSEMENT OF PURCHASE PRICE AFTER HAPPENING OF DIFFERENT CONDITIONS AFTER THE DATE OF TRANSFER OF SHARES. IT IS WORTHWHILE TO MENTION THAT THE SELLERS HAVE NO CONTROL OVER TH E ACTIVITIES OF COMPANY (NTPL) AFTER THE DATE OF TRANSFER (ADMITTED IN REPLY DATE 23.08.2011). ALL THE ACTIVITIES OF THE COMPANY WERE EXCLUSIVELY UNDER THE CONTROL OF THE PURCHASER COMPANY (HCL INF OSYSTEMS LTD.). BUT IN AGREEMENT DEDUCTION FROM PURCHASE PRICE ARE SUBJ ECT TO SUCH REALIZATION OR FINALIZATION OF BUSINESS TRANSACTION S OR LIABILITIES. ALL ITA 804/JP/2012 & ITA 951-952/JP/2013 10 THESE CONDITIONS PERTAIN TO BUSINESS ACTIVITIES AND THEY CAN NOT BE ALLOWED FOR DEDUCTION FROM THE FULL VALUE OF CONSID ERATION OF SHARES DETERMINED AT THE TIME OF TRANSFER OF SHARES . FOR THE PURPOSES OF CAPITAL GAINS THE TRANSACTIONS OF TRANSFER OF SHARES WAS COMPLETED ON 01.05.2008. FROM THIS DATE THE PUR CHASER COMPANY BECOMES OWNER OF NTPL AND FULL VALUE OF CONSIDERATI ON OF SHARES WAS DEPOSITED IN A DESIGNATED BANK ACCOUNT. SUBSEQUENT MODE OF DISBURSEMENT OF PURCHASE PRICE WILL NOT CHANGE THE CHARACTER OF THE SALE CONSIDERATION RECEIVED ON THE TRANSFER OF SHAR ES. 8.6. THE ASSESSEE AND OTHER SHARE HOLDERS OF THE COMPANY HAVE TRANSFERRED SHARES OF NTPL COMPANY FREE FROM ALL EN CUMBRANCES AND CHARGES ON THE DATE OF TRANSFER. THE TRANSFER O F SHARES WAS IN ABSOLUTE TERMS AND THE PURCHASER COMPANY (HCL INFOS YSTEM) GOT ABSOLUTE CONTROL OVER NTPL COMPANY. IT IS A MATTER OF TRANSFER OF SHARES OF THE COMPANY NOT THE TRANSFER OF INDIVIDUA L ASSETS. THEREFORE ANY PROFIT OR LOSS DUE TO BUSINESS ACTIVI TIES CARRIED ON BY THE PURCHASER COMPANY AFTER THE DATE OF PURCHASE OF TOTAL SHARES OF THE NTPL COMPANY, WHICH ARE NOT UNDER THE CONTROL O F THE ASSESSEE AND OTHER SHARE HOLDERS, CAN NOT AFFECT THE VALUE O F SHARES DETERMINED EIGHTS MONTHS BEFORE, THUS THE VALUE OF SHARES DETE RMINED AT THE TIME OF TRANSFER IS THE FULL VALUE OF CONSIDERATION FOR TRANSFER OF SHARES. 8.7. AS PER PROVISIONS OF SEC. 48 OF THE ACT ONLY DIRECT EXPENSES INCURRED IN THE TRANSFER OF CAPITAL ASSET OR COST OF IMPROVE MENT IS DEDUCTIBLE FROM FULL VALUE OF CONSIDERATION FOR DET ERMINING CAPITAL GAIN. NATURE OF DEDUCTIONS SUBSEQUENT TO THE TRANSF ER OF THE ASSET ITA 804/JP/2012 & ITA 951-952/JP/2013 11 (SHARES) AS MADE BY THE ASSESSEE DOES NOT PARTAKE O F THE CHARACTERS OF DIRECT EXPENSES INCURRED IN TRANSFER OF CAPITAL ASSET NOR ARE THEY COST OF IMPROVEMENT. HENCE THEY ARE NO T ADMISSIBLE. 8.8. CASE LAWS CITED BY THE ASSESSEE IN HIS REPLY ARE ON DIFFERENT FACTS AND ARE NOT APPLICABLE ON THE FACTS AND CIRCUMSTANC ES OF THE CASE OF THE ASSESSEE. 7. THE A.O., THEREFORE, FOR THE PURPOSES OF COMPUTA TION OF CAPITAL GAINS HAS TAKEN THE SALE VALUE OF 484856 SHARES AT RS. 8,38, 69,000/- I.E. @ RS. 172.98 PER SHARE. HE ACCORDINGLY, WORKED OUT THE NET LONG TERM CAPITAL GAIN AT RS. 66,29,495 AND SHORT TERM CAPITAL LOSS AT RS. 10,17, 511/- IN THE FOLLOWING MANNER:- 10.2 COMPUTATION OF LONG TERM CAPITAL GAIN. SALE CONSIDERATION OF 2,10,000 SHARES OF NTPL @ RS. 172.98 PER SHARE RS. 3,63,25,800/- (FULL VALUE OF CONSIDERATION RS. 8,38,69,00/- FOR 484856 SHARES OF NTPL= RS. 172.98 PER SHARE.) LESS:- TRANSFER EXPENSE PROPORTIONATE EXPENSES FOR TRANSFER OF 484856 SHARES OF RS. 5,00,000/- @ RS. 1.03 PER SHARE X 210 000 RS. 2,16,559 NET SALE CONSIDERATION RS. 3,61,09,241/- LESS: INDEXED COST OF PURCHASE OF 210000 SHARES RS . 26,86,433/- TOTAL LONG TERM CAPITAL GAIN RS. 3,34,22,808/- LESS: DEDUCTIONS (I) U/S 54F (DEPOSIT UNDER CAPITAL GAIN ACCOUNT SCHEME RS. 2,35,45,000/-)RS. 2,17,93,3 13/- (II) U/S 54EC (OF RS. 50,00,000/-) RS. 50,00,000 /- ITA 804/JP/2012 & ITA 951-952/JP/2013 12 TOTAL DEDUCTION RS. 2,67,93,313/- RS. 2,67,93,313/- RS. 66,29,495/- COMPUTATION OF SHORT TERM CAPITAL GAIN SALE CONSIDERATION OF 54856 SHARES X 172.98 RS. 94, 88,990/- LESS: TRANSFER EXPENSES (54856X1.03) RS. 56,50 1/- NET SALE CONSIDERATION RS. 94,32,489/- LESS:- PURCHASER PRICE RS. 1,04,50,000/- SHORT TERM CAPITAL LOSS (-) RS. 10,17,511/- 5. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND THE SUBMISSIONS OF THE ASSESSEE AS INCORPORATED IN PARA 3 OF THE IMPUGNED ORDER ARE REPRODUCED VERBATIM AS UNDER:- 3. THAT THE ASSESSEE WAS A SALARIED EMPLOYEE HAVIN G INCOME FROM SALARY AND ALSO FROM OTHER SOURCES AS WELL AS INCOM E FROM LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL LOSS. DURING T HE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE WAS A SHAREHOLDER IN A COMPANY NAMED NATURAL TECHNOLOGIES PVT. LTD. ('NTPL') ALONG WITH 2 OTHER SHAREHOLDERS NAMELY SH. MAHENDRA R. SARAF AND SH. K .L. MAGON. THE ASSESSEE WAS HOLDING 264856 SHARES OF NTPL OUT OF WHICH 210000 SHARES WERE HELD AS LONG TERM CAPITAL ASSET AND THE REMAINING 54856 SHARES WERE HELD AS SHORT TERM CAPITAL ASSET. DURING THE RELEVANT ASSESSMENT YEAR 2009-10, THE ASSESSEE, ALONG WITH 2 ABOVE NAMED SHAREHOLDERS, SOLD THE ENTIRE SHAREHOLDING OF NTPL (484856 SHARES) TO HCL INFOSYSTEMS LTD., WHICH WAS A PUBLIC COMPANY, T HROUGH A SHARE PURCHASE AGREEMENT ('SPA') OF WHICH NTPL WAS ALSO A PARTY. IN THE SPA, THE CONSIDERATION FOR PURCHASE/SALE OF SHARES WAS DETERMINED TO BE THE AMOUNT DERIVED BY REDUCING THE QUALIFYING AD JUSTMENTS AS PER SCHEDULE 6 OF THE SPA FROM THE GROSS VALUATION OF R S.8,38,69,000/- ITA 804/JP/2012 & ITA 951-952/JP/2013 13 (ARTICLE 2 OF THE SPA). ALSO, THE AMOUNT OF SHARE P URCHASE WAS PAYABLE IN DIFFERENT INSTALLMENTS UPON FULFILLMENT OF CERTA IN LANDMARKS/ CONDITIONS AS MENTIONED IN PARA 2.3 OF ARTICLE 2 OF THE SPA ITSELF. THE AGGREGATE AMOUNT MENTIONED IN ARTICLE 2 OF SPA WAS FINALLY DETERMINABLE AT A FIXED PRICE AS PER ADJUSTMENTS PR OVIDED IN SCHEDULE 6 OF SPA WHICH HAD VARIOUS CLAUSES CONTAINING SEVER AL SITUATIONS/CONTINGENCIES ACCORDING TO WHICH, THE FI NAL PURCHASE PRICE WAS TO BE FIXED. THE CONDITIONS MENTIONED IN SCHEDU LE 6 OF SPA WERE AS FOLLOWS 'SCHEDULE 6 ADJUSTMENTS TO PURCHASE PRICE THE PURCHASE PRICE SHALL BE REDUCED BY THE FOLLOWI NG AMOUNTS: I) THE AMOUNT OF LIABILITY ARISING ON ACCOUNT O F ANY GUARANTEE GIVEN BY THE COMPANY TO FEDERAL BANK. II) ANY SHORTAGE IN REALIZATION BY 31 DECEMBER 2008 OF RECEIVABLES (INCLUDING UNBILLED REVENUE AS ON 31 MARCH 2008) SP ECIFIED IN EXHIBIT 6A AND 6B TO THIS SCHEDULE 6 PERTAINING TO TRANSACT IONS OF PERIOD PRIOR TO CLOSING DATE. III) THE AMOUNT OF ANY LIABILITY AND CLAIMS PER TAINING TO PERIOD PRIOR TO CLOSING DATE AND NOT ACCOUNTED IN THE BOOK S OF ACCOUNTS OF THE COMPANY, IV) THE AMOUNTS OF ALL CONTINGENT LIABILITIES WHET HER OR NOT DISCLOSED IN THE FINANCIAL STATEMENTS WHICH ARISE O N THE COMPANY. THE FINAL AMOUNT OF SUCH LIABILITIES WILL BE DETERM INED ON FINAL DISPOSAL OF THE RELEVANT CASE(S). ITA 804/JP/2012 & ITA 951-952/JP/2013 14 V) ANY LIABILITY RELATING TO THE PERIOD PRIOR T O CLOSING DATE WHICH MAY ARISE OVER AND ABOVE THE AMOUNTS OF PROVISIONS MADE IN THE BOOKS OF ACCOUNTS AS ON 31 MARCH 2008. VI) ANY AMOUNT OF SHORTAGE IN REALIZATION BY 31 DECEMBER 2008 OF DOUBTFUL DEBTS SPECIFIED IN EXHIBIT 6 C TO THIS SCHEDULE 6. VII) THE AMOUNT OF ANY REDUCTION IN NET PROFIT AF TER TAX BETWEEN THE UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDIN G AS ON 31 MARCH 2008 AS CERTIFIED BY THE SELLERS AND ANNEXED AS EXH IBIT 6 C TO THIS SCHEDULE 6 AND FINAL AUDITED ACCOUNTS OF THE COMPAN Y FOR THE PERIOD ENDING 31 MARCH 2008 AND FOR THE PERIOD ENDING CLOS ING DATE, BOTH ACCOUNTS BEING PREPARED ON SAME ACCOUNTING PRINCIPL ES.' THE HCL INFOSYSTEMS LTD. INITIALLY MADE A PAYMENT O F RS.2,36,29,000/- TO THE 3 SHAREHOLDERS AND AN AMOUNT OF RS.6,02,40,0 00/- WAS DEPOSITED IN AN ESCROW ACCOUNT WITH HDFC BANK WHICH WAS PAYAB LE TO THE SELLERS IN INSTALLMENTS AS PROVIDED IN PARA 2.3 OF ARTICLE 2 OF SPA SUBJECT TO ADJUSTMENTS PROVIDED IN SCHEDULE 6 OF SP A. ACCORDINGLY, AS THE GROSS VALUATION OF THE COMPANY FOR TRANSFER OF 484856 SHARES OF NTPL WAS DETERMINED AT RS.8,38,69,000/- SUBJECT TO ADJUSTMENTS AS PROVIDED IN SCHEDULE 6 REPRODUCED ABOVE, SUCH ADJUS TMENTS WERE SUBSEQUENTLY WORKED OUT BY HCL INFOSYSTEMS LTD. AT RS. 1,24,00,000/- AND ACCORDINGLY THE FINAL PURCHASE PRICE IN RESPECT OF SALE OF SHARES OF NTPL WAS FIXED/DETERMINED AT RS.7,14,69,000/-. A CE RTIFICATE TO THIS EFFECT WAS ALSO ISSUED BY HCL INFOSYSTEMS LTD. WHIC H CONFIRMED THAT THE PURCHASE PRICE OF SHARES OF NTPL STOOD REDUCED BY RS. 1,24,00,000/- IN TERMS OF SCHEDULE 6 OF SPA. AS A T OTAL OF 484856 SHARES OF NTPL WERE ULTIMATELY SOLD/TRANSFERRED TO HCL AT A TOTAL CONSIDERATION OF RS.7,14,69,000/-, THE PER SHARE VA LUE CAME TO RS. ITA 804/JP/2012 & ITA 951-952/JP/2013 15 147.40 (APPROX.) AND ACCORDINGLY, THE ASSESSEE CALC ULATED HIS LONG TERM CAPITAL GAIN/SHORT TERM CAPITAL LOSS IN RESPECT OF HIS SHAREHOLDING OF 264856 (210000+54856) SHARES AND SHOWED THE SAME IN HIS RETURN OF INCOME ON THE BASIS OF ACTUAL CONSIDERATION RECEIVE D FROM HCL INFOSYSTEMS LTD. IN RESPECT OF HIS SHARES. WHILE CO MPLETING THE ASSESSMENT, THE VALUE OF SALE OF TOTAL SHARES OF NT PL TO HCL INFOSYSTEMS LTD. WAS TAKEN AT RS.8,38,69,000/- BY T HE AO INSTEAD OF THE ACTUAL CONSIDERATION DETERMINED AND RECEIVED BEING RS.7,14,69,000/- AS PER THE MUTUALLY AGREED TERMS OF THE SPA BETWEEN BOTH THE PARTIES AND THEREBY THE LONG TERM CAPITAL GAIN/SHORT TERM C APITAL LOSS ON SUCH SALE OF SHARES TO THE ASSESSEE WAS CALCULATED HIGHE R/LOWER RESPECTIVELY THAN THE ACTUAL CAPITAL GAIN/LOSS OCCURRED TO THE A SSESSEE WHICH HE HAD ALREADY DULY SHOWN IN HIS RETURN OF INCOME FOR THE A.Y. 2009-10. FURTHER, WHILE CALCULATING THE CAPITAL GAINS, THE C OST OF TRANSFER/TRANSFER EXPENSES OF WHOLE SHARES OF NTPL WAS TAKEN BY THE AO AT RS.5,00,000/- ONLY (WHICH WERE THE TRANSFER E XPENSES INCURRED BY THE ASSESSEE ONLY ON SALE OF HIS PORTION OF SHARES BEING PAID TO LEGAL CONSULTANTS NAMELY CHIR AMRIT LAW CHAMBERS APPOINTE D FOR THE PURPOSE OF OVERSEEING THE SHARE PURCHASE/SALE TRANS ACTION), WHEREAS, THE ACTUAL TOTAL COST OF TRANSFER OF WHOLE SHARES O F NTPL WAS RS. 14,75,000/- PAID BY ALL THE 3 SHAREHOLDERS OF NTPL TO THE LEGAL CONSULTANT AND THEREBY THE TRANSFER EXPENSES FOR TH E APPELLANT WERE TAKEN AT A LOWER VALUE THAN THE ACTUAL. FURTHERMORE , WHILE CALCULATING THE NET TAXABLE LONG TERM CAPITAL GAIN, THE SET OFF OF SHORT TERM CAPITAL LOSS WITH THE LONG TERM CAPITAL GAIN W AS NOT GIVEN BY THE AO. THE ASSESSING OFFICER ON THE OTHER HAND CONCLUD ED THAT THE ASSESSEE HAD TAKEN THE REMAINING AMOUNT OF SALE CON SIDERATION AFTER DEDUCTION OF RS. 1.24 CRORES BY HCL INFOSYSTEMS LTD . THE AO ALLEGED ITA 804/JP/2012 & ITA 951-952/JP/2013 16 THAT ALL THE THREE SHARE HOLDERS (INCLUDING THE ASS ESSEE) TRANSFERRED THEIR TOTAL SHARES (484856) OF NTPL TO HCL INFOSYST EMS LTD. FOR A PURCHASE PRICE OF RS.8,38,69,000/-. THIS AMOUNT OF PURCHASE PRICE WAS MENTIONED IN VERY CLEAR TERMS IN ARTICLE-2 PARA 2.2 OF THE SALE AGREEMENT. THE AO DIRECTED THE ASSESSEE VIDE LETTER DATED 12.06.2011 TO GIVE THE BASIS OF VALUATION OF SHARES OF NTPL. T HE AO NOTICED THAT IN THE MONTH OF MARCH, 2008 THE ASSESSEE HAD REPURC HASED THE SHARES FROM RVFC @ RS.191 AND ON 20.04.2008 PURCHAS ED 2500 SHARES FROM ANOTHER DIRECTOR SHRI. NAREN BAKSHI @ R S.180 PER SHARE WHILE ONLY AFTER A COUPLE OF MONTHS THEY HAD NEGOTI ATED WITH HCL INFOSYSTEMS @ RS. 172.98 PER SHARES. IN HIS REPLY D ATED 15.07.2011, THE ASSESSEE SUBMITTED THAT NO VALUATION WAS GOT DO NE BY ASSESSEE FOR SALE OF SHARES TO HCL INFOSYSTEMS LTD. HCL INFOSYST EMS LTD. HAD VALUED THE SHARES FROM THEIR OWN SOURCES BUT NO REP ORT WAS PROVIDED TO ASSESSEE. THE AO ACCORDINGLY HELD THAT PURCHASE PRI CE DECIDED AT THE CLOSING DATE I.E. 1.05.2008 BY THE PURCHASER AND SE LLER WAS THE FULL VALUE OF CONSIDERATION. IN THE CASE OF THE ASSESSEE , FULL VALUE OF CONSIDERATION HAD BEEN DEPOSITED IN THE ESCROW ACCO UNT DESIGNATED FOR THE PURPOSE AND SETTING APART OF TOTAL SUM OF R S. 8,38,69,000/- BY THE PURCHASER. IT CLEARLY MANIFESTED THE INTENTION OF THE PURCHASER AND SELLERS THAT THE TRANSFER OF 484856 SHARES OF N TPL HAD BEEN AGREED UPON AT FULL VALUE OF CONSIDERATION AT RS.8, 38,69,000/-. THE AO HELD THAT SUBSEQUENT CONDITIONS GIVEN IN AGREEME NT FOR TRANSFER OF SHARES WERE THE DISBURSEMENT OF PURCHASE PRICE AFTE R HAPPENING OF DIFFERENT CONDITIONS AFTER THE DATE OF TRANSFER OF SHARES. IT WAS WORTHWHILE TO MENTION THAT THE SELLERS HAD NO CONTR OL OVER THE ACTIVITIES OF COMPANY (NTPL) AFTER THE DATE OF TRANSFER (ADMIT TED IN REPLY DATED 23.08.2011). ALL THE ACTIVITIES OF THE COMPANY WERE EXCLUSIVELY UNDER ITA 804/JP/2012 & ITA 951-952/JP/2013 17 THE CONTROL OF THE PURCHASER COMPANY (HCL INFOSYSTE MS LTD.). BUT IN AGREEMENT DEDUCTION FROM PURCHASE PRICE WAS SUBJ ECT TO SUCH REALIZATION OR FINALIZATION OF BUSINESS TRANSACTION S OR LIABILITIES. ALL THESE CONDITIONS PERTAINED TO BUSINESS ACTIVITIES A ND THEY COULD NOT BE ALLOWED FOR DEDUCTION FROM THE FULL VALUE OF CONSID ERATION OF SHARES DETERMINED AT THE TIME OF TRANSFER OF SHARES. FOR T HE PURPOSES OF CAPITAL GAINS, THE TRANSACTION OF TRANSFER OF SHARES WAS CO MPLETED ON 01.05.2008. FROM THIS DATE, THE PURCHASER COMPANY B ECAME OWNER OF NTPL AND FULL VALUE OF CONSIDERATION OF SHARES WAS DEPOSITED IN A DESIGNATED BANK ACCOUNT. SUBSEQUENT MODE OF DISBURS EMENT OF PURCHASE PRICE DID NOT CHANGE THE CHARACTER OF THE SALE CONSIDERATION RECEIVED ON THE TRANSFER OF SHARES. THE AO HELD THA T THE ASSESSEE AND OTHER SHARES HOLDERS OF THE COMPANY HAD TRANSFERRED SHARES OF NTPL COMPANY FREE FROM ALL ENCUMBRANCES AND CHARGES ON T HE DATE OF TRANSFER. THE TRANSFER OF SHARES WAS IN ABSOLUTE TE RMS AND THE PURCHASER COMPANY (HCL INFOSYSTEMS) GOT ABSOLUTE CO NTROL OVER NTPL COMPANY. IT WAS A MATTER OF TRANSFER OF SHARES OF THE COMPANY NOT THE TRANSFER OF INDIVIDUAL ASSETS. THEREFORE AN Y PROFIT OR LOSS DUE TO BUSINESS ACTIVITIES CARRIED ON BY THE PURCHASER COMPANY AFTER THE DATE OF PURCHASE OF TOTAL SHARES OF THE NTPL COMPAN Y, WHICH WAS NOT UNDER THE CONTROL OF THE ASSESSEE AND OTHER SHARE H OLDERS, COULD NOT AFFECT THE VALUE OF SHARES DETERMINED EIGHT MONTHS BEFORE. THUS THE VALUE OF SHARES DETERMINED AT THE TIME OF TRANSFER WAS THE FULL VALUE OF CONSIDERATION FOR TRANSFER OF SHARES. THE AO HELD T HAT AS PER PROVISIONS OF SEC. 48 OF THE ACT, ONLY DIRECT EXPEN SES INCURRED IN THE TRANSFER OF CAPITAL ASSET OR COST OF IMPROVEMENT WE RE DEDUCTIBLE FROM FULL VALUE OF CONSIDERATION FOR DETERMINING CA PITAL GAIN. NATURE OF DEDUCTION SUBSEQUENT TO THE TRANSFER OF THE ASSE T (SHARES) AS MADE BY ITA 804/JP/2012 & ITA 951-952/JP/2013 18 THE ASSESSEE DID NOT PARTAKE OF THE CHARACTER OF DI RECT EXPENSES INCURRED IN TRANSFER OF CAPITAL ASSET NOR DID THEY CONSTITUTE COST OF IMPROVEMENT. HENCE THESE WERE NOT DEDUCTIBLE. ACCOR DINGLY THE AO DID NOT ALLOW THE CLAIM OF DEDUCTION OF RS. 1.24 CR ORE, MADE EIGHT MONTHS AFTER THE DATE OF TRANSFER OF SHARE OF NTPL AND COMPLETION OF TRANSACTIONS FOR CAPITAL GAIN PURPOSES FROM TOTAL S ALE PROCEEDS OF RS.8,38,69,000/-. FOR THE PURPOSES OF COMPUTATION O F CAPITAL GAINS, SALE VALUE OF 484856 SHARES OF NTPL WAS TAKEN AT RS.8,38,69,000/- I.E. @ RS.172.98 PER SHARE. THE CO UNSEL OF APPELLANT HAS ARGUED THAT THE AO HAD TOTALLY ERRED IN FINALIZING THE ASSESSMENT OF THE APPELLANT BY MISREADING THE PROVI SIONS OF THE SPA BETWEEN THE SHAREHOLDERS INCLUDING THE APPELLANT, H CL INFOSYSTEMS LTD. AND THE NTPL AND THEREFORE THE CALCULATION OF CAPITAL GAINS DONE BY THE AO WAS PATENTLY INCORRECT. IN THE SPA I N PARA 2.3 OF ARTICLE 2 READ WITH SCHEDULE 6, THE CONSIDERATION F OR TRANSFER FOR SHARES WAS MUTUALLY AGREED BETWEEN THE PARTIES IN T ERMS OF A FORMULAE, ACCORDING TO WHICH THE CONSIDERATION FOR PURCHASE/SALE OF SHARES WAS DETERMINED TO BE THE AMOUNT DERIVED BY R EDUCING THE QUALIFYING ADJUSTMENTS AS PER SCHEDULE 6 OF THE SPA FROM THE GROSS VALUATION OF RS.8,38,69,000/- (ARTICLE 2 OF T HE SPA). THE CONSIDERATION WAS FINALLY COMPUTABLE IN ABSOLUTE TE RMS ONLY AFTER DETERMINATION OF THE AMOUNT OF ADJUSTMENTS AS PER S CHEDULE 6 OF THE SPA. HOWEVER, THE AO DID NOT TAKE THE SAME INTO ACC OUNT AND ERRONEOUSLY HELD THAT THE FULL VALUE OF CONSIDERATI ON IN RELATION TO SALE OF SHARES WAS AT RS. 8,3 8,69,000/- WHICH WAS ONLY ONE COMPONENT OF THE FORMULAE PRESCRIBED IN THE AGREEMENT FOR COMPUTATIO N OF THE CONSIDERATION. THE FINALLY COMPUTED CONSIDERATION I N ABSOLUTE TERMS AS PER THE FORMULAE AGREED IN THE SPA WAS RS.7,14,69,0 00/- WHICH WAS ITA 804/JP/2012 & ITA 951-952/JP/2013 19 ACTUALLY RECEIVED AS THE FINAL CONSIDERATION FOR TR ANSFER OF TOTAL SHARES OF NTPL, HOWEVER, THE SAME WAS NOT ACCEPTED BY THE AO. ALTHOUGH THE CONSIDERATION AMOUNT WAS ALREADY FIXED IN SPA IN TE RMS OF FORMULAE BUT IN ABSOLUTE TERMS IT WAS QUANTIFIED/COMPUTED SU BSEQUENTLY AFTER DETERMINATION OF THE VALUE OF ADJUSTMENTS. THE AMOU NT OF RS.8,38,69,000/- WAS ONLY THE BASE FIGURE OF GROSS VALUATION OF THE COMPANY OUT OF WHICH CERTAIN ADJUSTMENT ITEMS WERE TO BE REDUCED TO DETERMINE THE SHARE PRICE. THUS, THIS AMOUNT WAS NE VER THE ACTUAL CONSIDERATION FOR TRANSFER OF THESE SHARES AND THE ACTUAL CONSIDERATION WAS SPECIFIED IN TERMS OF A FORMULAE WHERE BASE FIG URE WAS RS.8,38,69,000/- SUBJECT TO CERTAIN ADJUSTMENTS AND THE CONSIDERATION IN ABSOLUTE TERMS WAS COMPUTABLE AFTE R ALL THE CONDITIONS MENTIONED IN ARTICLE 2 WHICH TALKED ABOU T 'SALE AND PURCHASE OF THE SHARES' WERE TO BE FULFILLED AND AL L THE ADJUSTMENTS PROVIDED IN SCHEDULE 6 WHICH TALKED ABOUT 'ADJUSTME NTS TO PURCHASE PRICE' WERE MADE. IN THIS REGARD, EVEN THE LANGUAGE OF PARA 2.2 OF ARTICLE 2 OF SPA CLEARLY STATED THAT 'SUBJECT TO TH E TERMS AND CONDITIONS HEREOF AND RELYING UPON THE REPRESENTATI ONS, UNDERTAKINGS, ON THE CLOSING DATE, THE PURCHASER AGREES TO PURCHA SE FROM THE SELLERS, THE SHARES FOR AN AGGREGATE PRICE OF RS.8,38,69,000 /- PAYABLE IN MANNER AND SUBJECT TO THE ADJUSTMENTS AND TERMS AND CONDITIONS AS SET FORTH IN THIS AGREEMENT.' THE LANGUAGE OF ABOVE PAR A MADE IT AMPLY CLEAR THAT AMOUNT OF RS.8,38,69,000/- WAS NEVER FIX ED AS THE ACTUAL CONSIDERATION FOR TRANSFER OF SHARES OF NTPL BY ITS SHAREHOLDERS TO HCL INFOSYSTEMS LTD. AND IT WAS MERELY A STATIC FIGURE IN THE FORMULAE FOR COMPUTATION OF CONSIDERATION OF SHARES SUBJECT TO ADJUSTMENTS AS PROVIDED FOR IN THE SPA ITSELF. FURTHER, PARA 2.3 O F ARTICLE 2 OF SPA MENTIONED ABOUT THE PAYMENT CYCLE, FOLLOWING WHICH, THE CONSIDERATION ITA 804/JP/2012 & ITA 951-952/JP/2013 20 FOR SHARE PURCHASE WAS TO BE PAID BY THE PURCHASER TO THE SELLERS AND THEREIN, THE WHOLE AMOUNT OF RS.8,38,69,000/- WAS D IVIDED INTO MANY INSTALLMENTS AND EACH INSTALLMENT WAS TAGGED WITH A CONDITION ON THE FULFILLMENT OF WHICH, THAT INSTALLMENT WAS TO BE PA ID TO THE SELLERS FROM THE ESCROW ACCOUNT OPENED FOR THE PURPOSE. IN THIS CONNECTION, AN AMOUNT OF RS.2,36,29,000/- WAS INITIALLY PAID TO TH E SELLERS ON THE CLOSING DATE MENTIONED IN THE AGREEMENT ITSELF AND AN AMOUNT OF RS.6,02,40,000/- WAS DEPOSITED IN AN ESCROW ACCOUNT OPENED WITH THE HDFC BANK. THIS AMOUNT WAS DIVIDED INTO 7 INSTALLME NTS ATTACHED WITH 7 CONDITIONS AND EACH SUCH INSTALLMENT WAS PAY ABLE UPON FULFILLMENT OF THAT CONDITION ATTACHED TO IT. FOR E XAMPLE, THE SECOND INSTALLMENT OUT OF RS.6,02,40,000/- WHICH WAS DEPOS ITED IN THE ESCROW ACCOUNT WAS OF RS. 1,40,00,000/- AND THE SAME WAS A TTACHED WITH THE CONDITION THAT THE AMOUNT SHALL BE HELD BACK BY THE PURCHASER AS A SECURITY AGAINST GUARANTEES GIVEN BY NTPL TO FEDERA L BANK FOR HIMACHAL PRADESH STATE COOPERATIVE BANK LIMITED ORD ERS AND SHALL BE PAID TO THE SELLERS ON QUARTERLY BASIS UPON PROP ORTIONATE RELEASE OF THE SAID GUARANTEES BY THE FEDERAL BANK EVIDENCE D BY A LETTER ISSUED BY FEDERAL BANK TO BE PROCURED BY THE SELLER S. THE AMOUNT PAYABLE ON QUARTERLY BASIS WAS EQUIVALENT TO THE AM OUNT RECEIVED BY THE COMPANY (NTPL) FROM FIPSCB. THE PURCHASER WAS T O DEPOSIT THE AMOUNT MENTIONED IN THIS SUB-CLAUSE IN THE ESCROW A CCOUNT IN THE FORM OF FIXED DEPOSITS AND THE INTEREST THEREON WAS PAYA BLE TO THE SELLERS. SIMILARLY, THE FIFTH INSTALLMENT OF RS. 18,10,000/- WAS ATTACHED WITH THE CONDITION THAT IT SHALL BE PAID BY THE PURCHASER TO THE SELLERS UPON FINAL DISPOSAL IN FAVOUR OF THE COMPANY (NTPL) OF T HE APPEAL PERTAINING TO DISPUTED INCOME TAX LIABILITY OF THE COMPANY FOR THE FINANCIAL YEAR 2005-06. THE PURCHASER WAS TO DEPOSI T THE AMOUNT ITA 804/JP/2012 & ITA 951-952/JP/2013 21 MENTIONED IN THIS SUB-CLAUSE IN THE ESCROW ACCOUNT IN THE FORM OF FIXED DEPOSIT AND THE INTEREST EARNED THEREON WAS P AYABLE TO THE SELLERS. FURTHERMORE, SCHEDULE 6 OF SPA ALSO STATED THAT THE CONSIDERATION FOR TRANSFER OF SHARES HAD TO BE DECI DED IN ACCORDANCE WITH THE FORMULAE WHERE THE BASE FIGURE WAS PROVIDE D IN THE SPA ITSELF AND THE CONDITIONS FOR ADJUSTMENTS WERE ALSO PROVID ED IN SCHEDULE 6 ITSELF AND SUCH ADJUSTMENTS WERE TO BE QUANTIFIED A T A LATER STAGE. THEREFORE, ON A BARE PERUSAL OF THE ABOVE MENTIONED CLAUSES OF SPA, IT WAS EVIDENT THAT THE BASE FIGURE OF RS.8,38,69,000/ - WAS NEVER THE ACTUAL CONSIDERATION IN RELATION TO SALE/TRANSFER O F SHARES, BUT THE SAME WAS ONLY A PART OF A FORMULAE PROVIDED IN SCHE DULE 6 TO THE SPA ACCORDING TO WHICH, THE ACTUAL VALUE OF SHARE T RANSFER WAS TO BE DETERMINED. AS PER THE PROVISIONS OF SCHEDULE 6 OF SPA, THE PURCHASER COMPANY QUANTIFIED THE ADJUSTMENTS WHICH CAME TO RS. 1,24,00,000/-, AND ACCORDINGLY, THE ACTUAL CONSIDER ATION WAS ARRIVED AT RS.7,14,69,000/-(RS. 8,38,69,000/- MINUS RS. 1,24,00,000/-) AND ON THE BASIS OF THE SAME, THE AS SESSEE CALCULATED HIS CAPITAL GAIN/CAPITAL LOSS. IN THIS REGARD, THE PURC HASER COMPANY I.E. HCL INFOSYSTEMS LTD. EVEN GAVE A CERTIFICATE TO THE EFFECT THAT THEY HAD ADJUSTED RS. 1,24,00,000/- FROM THE PURCHASE PR ICE OF 484856 SHARES OF NTPL IN TERMS OF SCHEDULE 6 OF SPA. A COP Y OF SUCH CERTIFICATE WAS ALSO PRODUCED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. FURTHER, AS THE REMAINING A MOUNT AFTER PAYMENT OF FIRST INSTALLMENT ON CLOSING DATE WAS DE POSITED IN AN ESCROW ACCOUNT MAINTAINED WITH HDFC BANK AND WHICH ACCOUNT DID NOT BELONG TO ANY OF THE PARTIES TO THE SPA AND IT BELO NGED TO THE BANK ONLY, THE SELLERS ALSO GAVE A LETTER TO THE HDFC BA NK STATING THAT RS. 1,24,00,000/- DEPOSITED IN THE ESCROW ACCOUNT BE GI VEN TO HCL ITA 804/JP/2012 & ITA 951-952/JP/2013 22 INFOSYSTEMS LTD AND THE BALANCE AMOUNT BE PAID TO T HE SELLERS AND THE ACCOUNT MAY BE CLOSED THEREAFTER. A COPY OF SUC H LETTER WAS ALSO PRODUCED BEFORE THE AO DURING THE COURSE OF ASSESSM ENT PROCEEDINGS. ALL THESE DOCUMENTS MADE IT EVIDENTLY CLEAR THAT TH E SELLERS RECEIVED THE ACTUAL CONSIDERATION OF RS.7,14,69,000/-FOR SALE OF THEIR WHOLE SHAREHOLDING OF 484856 SHARES OF NTPL AND THE SAME WAS IN FACT THE ACTUAL SALE CONSIDERATION RECEIVED BY THEM AND ACCO RDINGLY, THE PRICE PER SHARE OF RS. 147.40 (APPROX.) WAS CALCULATED AN D THE SELLERS INCLUDING THE ASSESSEE CALCULATED THEIR CAPITAL GAI NS/LOSS. HOWEVER, DESPITE AVAILABILITY OF ALL THESE DETAILS, THE AO S TILL HELD THAT THE FULL VALUE/FINAL VALUE OF CONSIDERATION FOR SALE OF SHAR ES OF NTPL WAS AT RS.8,38,69,000/- WHICH WAS JUST A BASE FIGURE IN TH E FORMULAE FOR CALCULATING THE ACTUAL CONSIDERATION AND THEREFORE, ON ACCOUNT OF THE ABOVE DISCUSSION, IT WAS EVIDENT THAT THE AO HA D ERRED IN HOLDING THAT THE ASSESSEE HAD WRONGLY CALCULATED HIS CAPITA L GAINS/LOSS AND TO THAT EXTENT HIS ORDER WAS BAD IN LAW. THE AO ONLY R EAD THE INITIAL PART OF THE PARA 2.2 OF ARTICLE 2 WHICH MENTIONED THE AB OVE AMOUNT OF RS. 8,38,69,000/- FOR HIS CONVENIENCE AND DID NOT READ THEREAFTER WHERE IT WAS MENTIONED THAT THE ABOVE AMOUNT WAS SUBJECT TO ADJUSTMENTS AND HENCE THE AO ERRED IN NOT READING THE PROVISIONS OF SPA IN ENTIRETY AND ON ACCOUNT OF THIS MANIFEST ERROR ALSO, THE ORDER O F THE AO WAS BAD IN LAW AND LIABLE TO BE QUASHED. FURTHER, THE AO ALSO ERRED IN MISINTERPRETING THE PROVISIONS OF SECTION 48 OF THE ACT AS FAR AS IT TALKED ABOUT 'FULL VALUE OF THE CONSIDERATION' RECEIVED OR ACCRUING IN RELATION TO SALE/TRANSFER OF A CAPITAL ASSET. FROM THE LANGUAGE OF THE ABOVE SECTION, IT WAS IMPORTANT TO NOTE THAT FOR TH E PURPOSE OF COMPUTATION OF CAPITAL GAINS, THE 'FULL VALUE OF TH E CONSIDERATION' WAS AN IMPORTANT FACTOR AND IT WAS FROM THAT AMOUNT THA T THE AGGREGATE OF ITA 804/JP/2012 & ITA 951-952/JP/2013 23 THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER AND THE COST OF THE ACQUISITION OF THE ASS ET AND THE COST OF ANY IMPROVEMENT THERETO, WERE DEDUCTED. THE AO CONS IDERED THE FULL VALUE OF CONSIDERATION IN THE PRESENT CASE AS THE BASE FIGURE TAKEN IN THE SPA FOR CALCULATION OF ACTUAL CONSIDERATION AS PER THE FORMULAE PROVIDED IN THE SPA ITSELF AND WHICH WAS SUBJECT TO CERTAIN ADJUSTMENTS AS PROVIDED IN THE SPA ITSELF. IT WAS IMPORTANT TO MENTION HEREIN THAT THE TERM 'FULL VALUE OF CONSIDERATION' AS USED IN S ECTION 48 OF THE ACT HAD NOT BEEN DEFINED ANYWHERE IN THE ACT. THE HON'B LE SUPREME COURT OF INDIA FIRST EXAMINED THE TERM AND ITS MEANING IN THE CASE OF CIT & ANR. VS. GEORGE HENDERSON & CO. LTD (66 ITR 622) (S C) WHEREIN THE HON'BLE SUPREME COURT DISCUSSED THE MEANING OF THE TERM IN DETAIL. THE HON'BLE SUPREME COURT IN VERY CLEAR TERMS STATE D THAT THE TERM 'FULL VALUE OF CONSIDERATION' HAD NO REFERENCE WHAT SOEVER TO THE MARKET VALUE OF SUCH ASSET WHICH WAS TRANSFERRED AN D IT ONLY REFERRED TO THE SALE PRICE ACTUALLY RECEIVED BY A SELLER. FU RTHER, THE COURT ALSO HELD THAT THE FULL VALUE OF CONSIDERATION WAS THE P RICE BARGAINED FOR BY THE PARTIES TO THE SALE. THIS MADE IT AMPLY CLEAR T HAT IN THE PRESENT CASE OF THE ASSESSEE ALSO, THE ACTUAL CONSIDERATION FOR TRANSFER OF SHARES WAS THE ONE WHICH WAS CALCULATED AFTER MAKING THE ADJUS TMENTS MENTIONED IN SCHEDULE 6 TO SPA. THE HON'BLE SUPREME COURT IN THE CASE CIT VS GILLANDERS ARBUTHNOT & CO., (87 ITR 407) (SC), RELY ING UPON ITS OWN DECISION IN THE CASE OF GEORGE HENDERSON HAD AGAIN HELD THAT IN THE CASE OF SALE FOR A PRICE, THERE WAS NO QUESTION OF ANY MARKET VALUE UNLIKE IN THE CASE OF AN EXCHANGE. THEREFORE, IN CA SES OF SALES TO WHICH THE FIRST PROVISO TO SUB-SECTION (2) OF SECTION 12B WAS NOT ATTRACTED, ALL THAT IT HAD TO SEE WAS WHAT WAS THE CONSIDERATION B ARGAINED FOR. THE HON'BLE ITAT, MUMBAI BENCH IN THE CASE OF RELIANCE ITA 804/JP/2012 & ITA 951-952/JP/2013 24 COMMUNICATIONS INFRASTRUCTURE LTD. VS CIT (40 DTR 1 86), ALSO HELD THAT THE EXPRESSION 'FULL VALUE OF THE CONSIDERATIO N' WAS TOTALLY DIFFERENT THAN THE CONCEPT OF THE 'FAIR MARKET VALUE'. THERE WAS NOTHING IN SECTION 48 OF THE ACT TO SUGGEST THAT THE SAID EXPR ESSION I.E., FULL VALUE OF CONSIDERATION, COULD NOT BE SUBSTITUTED FOR 'MAR KET VALUE', SAVE AS PROVIDED IN SECTION 50C. THE HON'BLE AUTHORITY FOR ADVANCE RULINGS IN THE CASE OF ANURAG JAIN, IN RE, (277 ITR 1) (AAR), IN THE SIMILAR FACT SITUATION AS IN THE PRESENT CASE ALSO HELD THAT THE FULL VALUE OF AN ASSET FOR THE PURPOSE OF SECTION 48 WAS THE T RUE VALUE BARGAINED FOR BY THE PARTIES, WHICH NEED NOT NECESSARILY BE THE MARKET PRICE AND SHOULD NOT BE AN ERSATZ FIGURE. THE APPARENT CONSID ERATION WOULD GENERALLY REPRESENT THE PRICE BARGAINED BY THE PART IES AND THEREFORE IT WOULD BE THE FULL VALUE OF CONSIDERATI ON OF AN ASSET. HOWEVER, THE POSSIBILITY OF THE APPARENT CONSIDERAT ION BEING COMPOSITE CONSIDERATION AND NOT DEPICTING THE FULL VALUE OF THE CONSIDERATION HAD ALSO TO BE KEPT IN MIND. WHETHER THE APPARENT CONSIDERATION WAS THE TRUE FULL VALUE OF THE CONSID ERATION WAS A QUESTION OF FACT WHICH HAD TO BE DETERMINED ON THE FACTS AND IN THE CIRCUMSTANCES OF EACH CASE. THE TERM 'FULL VALUE OF CONSIDERATION' MEANT THE PRICE WHICH HAD BEEN ACTUALLY RECEIVED BY A SELLER OF AN ASSET AND IN SUCH CASES, THE MARKET VALUE/ANY OTHER VALUE INITIALLY AGREED BETWEEN THE PARTIES DID NOT HAVE ANY BEARING WHILE CALCULATING THE CAPITAL GAINS ACCRUING/ARISING TO SUCH AN ASSES SEE TRANSFERRING THE ASSET. WITHOUT PREJUDICE TO THE ABOVE, IT WAS S UBMITTED THAT EVEN IF THE FULL VALUE OF CONSIDERATION WAS TAKEN AT RS.8,3 8,69,000/- AS TAKEN BY THE AO, THEN ALSO, THE SAME COULD NOT BE TAKEN AS T OTAL CONSIDERATION RECEIVED FOR THE PURPOSE OF CALCULATION OF CAPITAL GAINS IN THE HANDS OF THE RESPECTIVE SELLERS OF SHARES AS THE SAME HAD NO T BEEN ACTUALLY ITA 804/JP/2012 & ITA 951-952/JP/2013 25 RECEIVED BY THE SELLERS AND THAT THEY HAD ACTUALLY RECEIVED AMOUNT OF RS.7,14,69,000/- ONLY AND CALCULATED AND OFFERED THEIR CAPITAL GAINS ON THE BASIS OF THAT AMOUNT ONLY. IN THIS REGARD, T HE HON'BLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS SHOORJI VALLAB HDAS & CO., (46 ITR 144), CLEARLY HELD THAT INCOME-TAX WAS A LEVY ON IN COME. NO DOUBT, THE IT ACT TOOK INTO ACCOUNT TWO POINTS OF TIME AT WHIC H THE LIABILITY TO TAX WAS ATTRACTED, VIZ., THE ACCRUAL OF THE INCOME OR I TS RECEIPT; BUT THE SUBSTANCE OF THE MATTER WAS THE INCOME. IF INCOME D ID NOT RESULT AT ALL, THERE COULD NOT BE A TAX, EVEN THOUGH IN BOOK- KEEP ING, AN ENTRY WAS MADE ABOUT A 'HYPOTHETICAL INCOME', WHICH DID NOT M ATERIALIZE. WHERE INCOME HAD, IN FACT, BEEN RECEIVED AND WAS SUBSEQUE NTLY GIVEN UP IN SUCH CIRCUMSTANCES THAT IT REMAINED THE INCOME OF T HE RECIPIENT, EVEN THOUGH GIVEN UP, THE TAX MIGHT BE PAYABLE. WHERE, H OWEVER, THE INCOME COULD BE SAID NOT TO HAVE RESULTED AT ALL, T HERE WAS OBVIOUSLY NEITHER ACCRUAL NOR RECEIPT OF INCOME, EVEN THOUGH AN ENTRY TO THAT EFFECT MIGHT, IN CERTAIN CIRCUMSTANCES, HAD BEEN MA DE IN THE BOOKS OF ACCOUNT. EVEN OTHERWISE, IF THE BASE VALUE OF RS. 8 ,38,69,000/- WAS ADOPTED AS FULL CONSIDERATION, THE AMOUNT OF RS. 1, 24,00,000/- DESERVED TO BE ALLOWED AS A DEDUCTION ON ACCOUNT OF 'EXPENDI TURE IN CONNECTION WITH TRANSFER' AS PER THE PROVISIONS OF SECTION 48 OF THE ACT IN AS MUCH AS SUCH AMOUNT WAS THE NECESSARY COST HAVING DIRECT NEXUS TO THE TRANSFER AS THE TRANSFER OF SHARES WAS SUBJECT TO T HE CONDITIONS AND ADJUSTMENTS SPECIFICALLY MENTIONED THEREON. THE AO DID NOT EVEN ALLOW THIS. THEREFORE, ON THE BASIS OF THE ABO VE FACTS, IT WAS SUBMITTED THAT THE AO HAD ERRED IN TAKING THE FULL VALUE OF CONSIDERATION IN RESPECT OF SALE OF SHARES OF NTPL BY ITS SHAREHOLDERS AT RS. 8,38,69,000/- INSTEAD OF THE AC TUAL CONSIDERATION OF RS.7,14,69,000/- AND THAT THE AO HAD ALSO MISINT ERPRETED THE ITA 804/JP/2012 & ITA 951-952/JP/2013 26 PROVISIONS OF SECTION 48 OF THE ACT AS FAR AS THE M EANING OF THE TERN 'FULL VALUE OF CONSIDERATION' WAS CONCERNED. ALTERN ATIVELY, HE HAD ERRED IN NOT ALLOWING THE DEDUCTION OF RS. 1,24,00, 000/- WHILE COMPUTING THE CAPITAL GAINS IN RESPECT OF TRANSFER OF SHARES OF NTPL. FURTHER, THE AO ALSO REMARKED IN THE ASSESSME NT ORDER ABOUT THE VALUATION OF SHARES OF NTPL TO WHICH THE ASSESS EE HAD REPLIED THAT NO VALUATION WAS GOT DONE BY THE SELLERS AND M/S HC L INFOSYSTEM LTD GOT THE VALUATION DONE THROUGH ITS OWN SOURCES, COP Y OF WHICH WAS NOT PROVIDED TO THE SELLERS. AGAINST THIS REPLY OF THE ASSESSEE, THE AO STATED THAT THIS REPLY CLEARLY SHOWED THAT THE PURCHASE PR ICE INITIALLY DECIDED WAS THE FULL VALUE OF CONSIDERATION. IN THIS REGARD , IT WAS SUBMITTED THAT THE HCL GOT THE VALUATION DONE AND THEREAFTER ONLY SUGGESTED A FORMULAE FOR CALCULATING THE ACTUAL CONSIDERATION F OR TRANSFER OF SHARES IN WHICH THE BASE FIGURE WAS TAKEN AT RS. 8,38,69,0 00/- AND CERTAIN CONDITIONS WERE MENTIONED IN SPA ACCORDING TO WHICH THE ADJUSTMENT TO THE BASE FIGURE WAS TO BE QUANTIFIED AND REDUCED IN ORDER TO ARRIVE AT ACTUAL CONSIDERATION. MOREOVER, THE CASES DISCUS SED ABOVE IN RELATION TO PRINCIPLE OF 'INCOME', MADE IT CLEAR TH AT WHAT WAS ACTUALLY RECEIVED WAS THE 'INCOME' OF A PARTICULAR PERSON AN D NOT THE HYPOTHETICAL INCOME WHICH MIGHT HAVE BEEN SHOWN IN BOOKS OF ACCOUNTS OF THAT PERSON AND SUCH PERSON WAS LIABLE TO TAX ONLY IN RESPECT TO SUCH INCOME WHICH WAS ACTUALLY RECEIVED. FURTHERMORE, THE SHARES HELD BY THE APPELLANT WERE THAT OF A PRI VATE LIMITED COMPANY, IN WHICH CASE THE PRICE OF SHARES COULD BE MUTUALLY DECIDED/BARGAINED BETWEEN THE SELLER AND THE PURCHA SER BY MEANS OF AN AGREEMENT, WHICH WAS ENFORCEABLE UNDER SECTION 1 0 OF THE SPECIFIC RELIEF ACT, 1963. THE AO HAS ALSO STATED IN THE ASS ESSMENT ORDER THAT AS THE PURCHASER HAD SET APART THE TOTAL CONSIDERAT ION OF ITA 804/JP/2012 & ITA 951-952/JP/2013 27 RS.8,38,69,000/- AND THAT THE SAME WAS DEPOSITED IN AN ESCROW ACCOUNT, IT SHOWED THE CLEAR INTENTION OF THE PARTI ES TO THE SPA THAT THEY HAD AGREED UPO THE FULL VALUE OF CONSIDERATION OF R S.8,38,69,000/- ONLY. IN THIS REGARD, IT WAS SUBMITTED THAT ALTHOUGH THE PURCHASER MIGHT HAVE SET APART THE TOTAL AMOUNT OF RS.8,38,69,000/-, HOW EVER, THE SAME WAS NOT THE FULL VALUE OF CONSIDERATION RECEIVED BY THE PURCHASERS AT THAT TIME. INITIALLY, ONLY RS.2,36,29,000/- WAS GIVEN TO THE PURCHASERS AND THE BALANCE AMOUNT WAS DEPOSITED IN AN ESCROW ACCOU NT WHICH DID NOT BELONG TO ANY OF THE PARTIES TO THE SPA AND IT WAS AN INDEPENDENT ACCOUNT MAINTAINED BY THE HDFC BANK ON BEHALF OF THE PARTIES TO THE SPA. THEREFORE, THE PURCHASERS DID N OT HAVE A RIGHT TO THE SAID AMOUNT OF MONEY DEPOSITED IN THE ESCROW ACCOUN T UNTIL AND UNLESS THE ADJUSTMENTS WERE CALCULATED AND REDUCED FROM TH E BASE FIGURE AND HENCE THE AMOUNT OF RS.8,38,69,000/- WAS NEVER EVEN DECIDED AS THE FULL VALUE OF CONSIDERATION IN RESPECT OF SALE OF S HARES OF NTPL. THE AO HAD ALSO STATED IN THE ASSESSMENT ORDER THAT ONC E THE SHARES OF NTPL WERE TRANSFERRED TO M/S HCL INFOSYSTEMS LTD., IT BECAME THE OWNER OF NTPL AND IT CONTROLLED THE ACTIVITIES OF N TPL AFTER THE CLOSING DATE ON WHICH THE SPA WAS SIGNED AND THEREF ORE THE CONDITIONS MENTIONED IN THE SPA IN RELATION TO REAL IZATION OF PAYMENT TO THE SELLERS ON THE HAPPENING OF CERTAIN EVENT/FU LFILLING CERTAIN CONDITION COULD NOT BE ALLOWED FOR THE PURPOSE OF M AKING DEDUCTION IN THE FULL VALUE OF CONSIDERATION. IN THIS REGARD, IT WAS SUBMITTED THAT ALTHOUGH THE SELLERS TRANSFERRED THEIR SHARES TO HC L ON 01.05.2008 AND AFTER THAT HCL BECAME THE OWNER OF NTPL AND ALL ACTIVITIES OF NTPL WERE IN CONTROL OF HCL, HOWEVER, IT WAS PERTIN ENT TO MENTION HEREIN THAT ALL THE CONDITIONS MENTIONED IN THE SPA WHICH HAD A BEARING ON THE FINALIZATION OF ACTUAL CONSIDERATION WERE IN RELATION TO ITA 804/JP/2012 & ITA 951-952/JP/2013 28 THE BUSINESS OF NTPL BEFORE THE DATE OF TRANSFER OF SHARES WHEN THE SAME WAS CONTROLLED BY THE SHAREHOLDERS INCLUDING T HE ASSESSEE. THE CONDITIONS WERE MOSTLY IN RELATION TO REALIZATION O F PAYMENTS DUE TO NTPL FROM ITS DEBTORS BEFORE THE DATE OF TRANSFER A ND SOME CONDITIONS WERE IN RELATION TO PAYMENTS WHICH MIGHT HAVE TO BE PAID ON ACCOUNT OF EARLIER TAX LIABILITY, LITIGATION ETC . AND SUCH CONDITIONS WERE NECESSARY TO BE PUT IN THE SPA AS THE PURCHASI NG PARTY WANTED TO BE SURE ABOUT ANY FURTHER FINANCIAL LIABILITY NO T COMING ON TO THEM IN RESPECT OF BUSINESS OF NTPL BEFORE THE DATE OF T RANSFER. HENCE, THE CONDITIONS WERE VERY MUCH LEGAL AND WERE IN FACT IN STRUMENTAL IN DECIDING THE ACTUAL CONSIDERATION OF SHARES OF NTPL TRANSFERRED TO HCL INFOSYSTEMS LTD. ACCORDINGLY, THE GROUND OF THE APPELLANT DESERVED TO BE ALLOWED AND THEREFORE IT WAS PRAYED THAT THE COMPUTATION OF CAPITAL GAIN FROM TRANSFER OF SHARES OF NTPL ASSESSED BY THE AO BE MODIFIED. WITH REGARD TO THE ABOVE GRO UNDS, IT WAS SUBMITTED THAT, IN THE CALCULATION OF CAPITAL GAIN, DONE BY THE AO IN HIS ASSESSMENT ORDER, HE TOOK THE TRANSFER EXPENSES OF WHOLE SHARES OF NTPL (484856) AT RS.5,00,000/- ONLY WHICH WERE ACTU ALLY THE TRANSFER EXPENSES INCURRED BY THE ASSESSEE ITSELF IN RESPECT OF HIS SHAREHOLDING OF 264856 SHARES. THE ASSESSEE ALONG WITH OTHER 2 S HAREHOLDERS APPOINTED A LEGAL CONSULTANT KNOWN AS CHIR AMRIT LA W CHAMBERS TO OVERSEE THE WHOLE TRANSACTION OF SHARE TRANSFER AND FOR HELPING THEM IN ENTERING THE SPA AND FOR THAT PURPOSE ALL THE 3 PER SONS PAID A TOTAL AMOUNT OF RS. 14,75,000/- TO THE LEGAL CONSULTANT I N WHICH THE ASSESSEE'S SHARE WAS OF RS.5,00,000/-. HOWEVER, THE AO TOOK THE TOTAL TRANSFER EXPENSES FOR 484856 SHARES AT RS,5,00,000/ - ONLY AND ACCORDINGLY CALCULATED AND DEDUCTED THE TRANSFER EX PENSES OF THE ASSESSEE IN THE COMPUTATION OF CAPITAL GAIN DONE BY HIM AND TO THAT ITA 804/JP/2012 & ITA 951-952/JP/2013 29 EXTENT ALSO, HIS ORDER WAS ERRONEOUS. THEREFORE, IT WAS PRAYED HEREIN TO ALLOW THE EXPENSES INCURRED BY THE ASSESSEE IN T HE CALCULATION OF CAPITAL GAINS AND PROVIDE RELIEF TO HIM ACCORDINGLY . FURTHERMORE, WHILE COMPLETING THE SAID ASSESSMENT, THE AO HAD NO T GIVEN THE SET OFF OF SHORT TERM CAPITAL LOSS OF RS.10,17,511/- WITH T HE LONG TERM CAPITAL GAIN OF RS.66,29,495/- (BOTH CALCULATED BY THE AO H IMSELF IN THE ASSESSMENT ORDER) WHILE CALCULATING THE NET TAXABLE LONG TERM CAPITAL GAIN. THE PROVISIONS OF SECTION 74 OF THE ACT DEALT WITH 'LOSSES UNDER THE HEAD 'CAPITAL GAINS'. ALTHOUGH IT PROHIBITED SE TTING OFF OF 'LONG TERM CAPITAL LOSSES' WITH 'SHORT TERM CAPITAL GAINS ' BUT THERE WAS NO SUCH RESTRICTION VICE VERSA. IN OTHER WORDS, SHORT TERM CAPITAL LOSSES COULD BE SET OFF AGAINST ANY INCOME UNDER THE HEAD 'CAPITAL GAINS', WHETHER 'SHORT TERM' OR 'LONG TERM'. THE AO HAD MEN TIONED THAT SINCE THE RETURN OF INCOME FILED BY THE ASSESSEE WAS BELA TED AND THEREFORE IT WAS NOT ENTITLED TO CARRY FORWARD/SET OFF THE CAPIT AL LOSS. IN THIS RESPECT, IT WAS SUBMITTED THAT THE PROVISIONS OF SECTION 80 OF THE INCOME-TAX ACT PROHIBITED CARRY FORWARD & SET OFF AND NOT WITHIN T HE YEAR SET OFF. THE ASSESSEE WAS ENTITLED TO THE SET OFF OF LOSSES IN T HE SAME ASSESSMENT YEAR FOR WHICH THE MISCHIEF OF SECTION 80 WAS NOT A TTRACTED. THEREFORE, AO HAD ERRED IN NOT ALLOWING THE SET OFF OF SHORT T ERM CAPITAL LOSS AGAINST LONG TERM CAPITAL GAINS. ACCORDINGLY, THE G ROUND OF THE APPELLANT DESERVED TO BE ALLOWED AND THEREFORE IT W AS PRAYED THAT THE COMPUTATION OF CAPITAL GAIN FROM TRANSFER OF SHARES OF NTPL ASSESSED BY AO BE MODIFIED. 8. THE LD. CIT (A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE OBSERVED THAT THE ASSESSEE WAS HOLDING 264856 SHARE S OF NTPL ALONGWITH OTHER TWO SHARE HOLDERS. THEY SOLD THE ENTIRE SHARES TO M /S HCL INFOSYSTEMS LTD. ITA 804/JP/2012 & ITA 951-952/JP/2013 30 THROUGH HIS SHARE PURCHASE AGREEMENT (SPA) DATED 01 /5/2008. IN THE SAID AGREEMENT, THE SALE CONSIDERATION WAS DETERMINED AT RS. 8,38,6 9,000/- AS PER ARTICLE 2.2 AND THERE WERE CERTAIN ADJUSTMENTS TO BE MADE FROM THE GROSS SALE CONSIDERATION OF RS. 8,38,69,000/- AS PER SCHEDULE-6 OF SPA WERE AS UNDE R:- 'SCHEDULE 6 ADJUSTMENTS TO PURCHASE PRICE THE PURCHASE PRICE SHALL BE REDUCED BY THE FOLLOWI NG AMOUNTS: I) THE AMOUNT OF LIABILITY ARISING ON ACCOU NT OF ANY GUARANTEE GIVEN BY THE COMPANY TO FEDERAL BANK. II) ANY SHORTAGE IN REALIZATION BY 31 DECEMBE R 2008 OF RECEIVABLES (INCLUDING UNBILLED REVENUE AS ON 31 MARCH 2008) SP ECIFIED IN EXHIBIT 6A AND 6B TO THIS SCHEDULE 6 PERTAINING TO TRANSACTIONS OF PERIOD PRIOR TO CLOSING DATE. III) THE AMOUNT OF ANY LIABILITY AND CLAIMS PE RTAINING TO PERIOD PRIOR TO CLOSING DATE AND NOT ACCOUNTED IN THE BOOKS OF ACCO UNTS OF THE COMPANY. IV) THE AMOUNTS OF ALL CONTINGENT LIABILITIES WHE THER OR NOT DISCLOSED IN THE FINANCIAL STATEMENTS WHICH ARISE O N THE COMPANY. THE FINAL AMOUNT OF SUCH LIABILITIES WILL BE DETERMINED ON FI NAL DISPOSAL OF THE RELEVANT CASES. V) ANY LIABILITY RELATING TO THE PERIOD PRIOR TO CLOSING DATE WHICH MAY ARISE OVER AND ABOVE THE AMOUNTS OF PROVISIONS MADE IN THE BOOKS OF ACCOUNTS AS ON 31 MARCH 2008. VI) ANY AMOUNT OF SHORTAGE IN REALIZATION BY 3 1 DECEMBER 2008 OF DOUBTFUL DEBTS SPECIFIED IN EXHIBIT 6 C TO THIS SCH EDULE 6. ITA 804/JP/2012 & ITA 951-952/JP/2013 31 VII) THE AMOUNT OF ANY REDUCTION IN NET PROFIT AFT ER TAX BETWEEN THE UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDIN G AS ON 31 MARCH 2008 AS CERTIFIED BY THE SELLERS AND ANNEXED AS EXHIBIT 6 C TO THIS SCHEDULE 6 AND FINAL AUDITED ACCOUNTS OF THE COMPANY FOR THE PERIO D ENDING 31 MARCH 2008 AND FOR THE PERIOD ENDING CLOSING DATE, BOTH ACCOUN TS BEING PREPARED ON SAME ACCOUNTING PRINCIPLES.' 9. THE LD. CIT(A) FURTHER OBSERVED THAT THE BUYER M /S HCL INFOSYSTEMS LTD. INITIALLY MADE A PAYMENT OF RS.2,36,29,000/-TO THE SELLERS INCLUDING THE ASSESSEE AND FURTHER AMOUNT OF RS.6,02,40,000/- WAS DEPOSITE D IN AN ESCROW ACCOUNT WITH HDFC BANK WHICH WAS PAYABLE TO THE SELLERS IN INSTA LLMENTS SUBJECT TO ADJUSTMENTS PROVIDED IN SCHEDULE 6 OF SPA. HOWEVER ONE SUCH ADJ USTMENT WAS SUBSEQUENTLY WORKED OUT BY M/S HCL INFOSYSTEMS LTD AT RS.1,24,00 ,000/- ON ACCOUNT OF UNREALIZED RECEIVABLES AND IT WAS REDUCED FROM THE GROSS SALE CONSIDERATION OF RS 8,38,69,000/-. ACCORDINGLY THE FINAL SALE CONSIDERA TION WAS TAKEN BY THE ASSESSEE AT RS.7,14,69,000/- FOR COMPUTING CAPITAL GAINS, TH E ASSESSING OFFICER HOWEVER TOOK THE VALUE OF SALE CONSIDERATION AT RS. 8,38,69,000/ - INSTEAD OF RS. 7,14,69,000/- DECLARED BY THE ASSESSEE. THE LD. CIT(A) DID NOT AG REE WITH THE CONTENTION OF THE ASSESSEE BY OBSERVING THAT THE SALE CONSIDERATION O F RS 8,38,69,000/- WAS CLEARLY MENTIONED IN ARTICLE-2 PARA 2.2 OF THE SHARE PURCHA SE AGREEMENT (SPA). HE ALSO OBSERVED THAT THE ASSESSEE WAS DIRECTED BY THE ASSE SSING OFFICER VIDE LETTER DATED 12.06.2011 TO SUBMIT THE BASIS OF VALUATION OF SHAR ES OF NTPL FOR THE PURPOSE OF SALE. HOWEVER THE ASSESSEE CAME UP WITH A FEEBLE EX PLANATION THAT IT WAS THE BUYER ITA 804/JP/2012 & ITA 951-952/JP/2013 32 WHICH HAD DONE THE VALUATION FOR ASCERTAINING THE M ARKET VALUE OF SHARES AT RS 172.98 PER SHARE AND NO SUCH VALUATION WAS DONE BY HIM. THE LD. CIT(A) ALSO OBSERVED THAT THE ASSESSEE PURCHASED THE SHARES FRO M RAJASTHAN VENTURE CAPITAL FUND @ RS.191 IN THE MONTH OF MARCH, 2008 AND HAD P URCHASED 2500 SHARES ON 20/4/2008 FROM ANOTHER DIRECTOR NAMELY SHRI NAREN B AKSHI @ RS.180 PER SHARE. THEREFORE THE SHARE PRICE MENTIONED IN THE SHARE PU RCHASE AGREEMENT @ RS.172.98 PER SHARE WAS IN CLOSE PROXIMITY AND NEARLY COMPARA BLE WITH THE MARKET PRICE. HE ALSO OBSERVED THAT THE FULL VALUE OF CONSIDERATION HAD BEEN DEPOSITED IN THE ESCROW ACCOUNT DESIGNATED FOR THIS PURPOSE BY THE B UYER, THEREFORE, THE INTENTION OF THE PURCHASER AND SELLER TO NEGOTIATE THE TRANSF ER OF 484856 SHARES OF NTPL @ RS 172.98 PER SHARE WAS QUITE EVIDENT AND THAT MOST OF THE ADJUSTMENTS IN THE SHARE PURCHASE AGREEMENT WERE PROPOSED TO BE MADE ON ACCO UNT OF CONTINGENT LIABILITIES. HE ALSO POINTED OUT THAT SUB-SCHEDULE 2 & 6 CLEARLY STIPULATED THAT ANY SHORTAGE IN REALIZATION OF RECEIVABLES OR DOUBTFUL DEBTS WOULD BE DEDUCTIBLE. HOWEVER ON SPECIFIC QUERY BEING RAISED, THE ASSESSEE FAILED TO FURNISH THE DETAILS OF SHORT REALIZATION OF ANY RECEIVABLES, THEREFORE, IT WAS O BVIOUS THAT BOTH THE PARTIES TO THE SHARE PURCHASE AGREEMENT HAD AGREED TO AD-HOC ADJUS TMENT, WHICH WAS NOT ALLOWABLE. ACCORDINGLY, THE LD. CIT(A) AGREED WITH THE FINDING OF THE LD. ASSESSING OFFICER THAT ALLEGED CONDITIONS STIPULATE D IN THE SPA RELATED TO THE THE DISBURSEMENT OF SALE CONSIDERATION AFTER THE DATE O F TRANSFER OF SHARES AND THAT THE ASSESSEE HAD NO CONTROL OVER THE ACTIVITIES OF COMP ANY (NTPL) AFTER THE DATE OF ITA 804/JP/2012 & ITA 951-952/JP/2013 33 TRANSFER, THEREFORE, ALL THE ACTIVITIES OF THE COMP ANY WERE EXCLUSIVELY UNDER THE CONTROL OF THE BUYER M/S HCL INFOSYSTEMS LTD. HE F URTHER OBSERVED THAT FOR THE PURPOSES OF CAPITAL GAINS, THE TRANSACTION OF TRANS FER OF SHARES WAS COMPLETE AS ON 01.05.2008, THE BUYER COMPANY BECAME ABSOLUTE OWNER OF NTPL AND FULL VALUE OF SALE CONSIDERATION WAS ACCORDINGLY DEPOSITED IN THE DESIGNATED BANK ACCOUNT. THEREFORE, SUBSEQUENT MODE OF DISBURSEMENT OF SALE CONSIDERATION DID NOT CHANGE THE CHARACTER OF THE ENTIRE RECEIPTS RECEIVED ON TH E TRANSFER OF SHARE AND ANY ADJUSTMENT SUBSEQUENT TO THE TRANSFER OF THE SHARES DID NOT CONSTITUTE THE DIRECT EXPENDITURE INCURRED IN TRANSFER OF CAPITAL ASSET N OR DID IT CONSTITUTE COST OF IMPROVEMENT. THERE HAS TO BE DIRECT NEXUS BETWEEN T HE EXPENDITURE AND THE ASSET, I.E., THE SHARE TO QUALIFY FOR DEDUCTION AS CLAIMED BY THE ASSESSEE. THE LD. CIT(A) ALSO POINTED OUT THAT THE EXPLANATION OF THE ASSESSEE WAS REGARDS TO THE ADJUSTMENT OF RS. 1,24,00,000//- THAT THE SAID AMOU NT WAS AN ADHOC ADJUSTMENT MADE BY THE BUYER ON THE ACCOUNT OF NON-REALIZATION OF DEBTS. HOWEVER, NO DETAILS IN RESPECT OF SUNDRY DEBTORS EXISTED AS ON DATE OF TRANSFER AND SUBSEQUENT TO TRANSFER OF SHARES COULD BE SUBMITTED BY THE ASSESS EE. THE LD. CIT(A) WAS OF THE VIEW THAT THE ASSESSING OFFICER HAD ADOPTED THE VAL UE OF SALE CONSIDERATION AS SET OUT IN THE SPA ENTERED INTO BETWEEN THE BUYER & THE SELLER AND NOT THE MARKET VALUE OF THE SHARES AND THAT THERE WAS NO ATTEMPT BY THE ASSESSING OFFICER TO SUBSTITUTE THE AGREED OR DOCUMENTED SALE CONSIDERATION BY THE MARKET VALUE. THE LD. CIT(A) POINTED OUT THAT THE CASES RELIED BY THE ASSESSEE WERE DISTINGUISHABLE ON FACTS. HE ITA 804/JP/2012 & ITA 951-952/JP/2013 34 ACCORDINGLY, UPHELD THE ACTION OF THE ASSESSING OFF ICER IN TAKING THE SALE CONSIDERATION AT RS. 8,38,69,000/- FOR COMPUTATION OF THE LONG TERM CAPITAL GAIN. NOW THE ASSESSEE IS IN APPEAL. 10. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT IN PAR A 2.3 OF ARTICLE 2 READ WITH SCHEDULE-6 TO SHARES PURCHASE AGREEMENT (SPA), THE CONSIDERATION FOR TRANSFER OF SHARES WAS MUTUALLY AGREED BETWEEN THE PARTIES IN T ERMS OF A FORMULAE, ACCORDING TO WHICH, THE CONSIDERATION FOR PURCHASE /SALE OF SHARES WAS DETERMINED TO BE THE AMOUNT DERIVED BY REDUCING THE QUALIFYING ADJUSTMENTS AS PER SCHEDULE-6 OF THE SPA FROM THE GROSS VALUATION OF RS. 8,38,69,000/- (ARTICLE-2 OF THE SPA) AND THE CONSIDERATION WAS FI NALLY COMPUTABLE IN ABSOLUTE TERMS ONLY AFTER DETERMINATION OF THE AMOUNT OF ADJ USTMENTS AS PER SCHEDULE-6 OF THE SPA. HOWEVER, THE ASSESSING OFFICER DID NOT TAKE THE SAME INTO ACCOUNT AND ERRONEOUSLY HELD THAT THE FULL VALUE OF CONSIDE RATION WAS AT RS. RS.8,38,69,000/- IN STEAD OF FINALLY COMPUTED CONSI DERATION IN ABSOLUTE TERMS AS PER FORMULAE AGREED IN THE SPA AT RS.7,14,69,000 /- WHICH WAS ACTUALLY RECEIVED BY THE ASSESSEE AS THE FINAL CONSIDERATION FOR TRANSFER OF TOTAL SHARES OF NTPL. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATT ENTION TOWARDS PARA 2.2 OF ARTICLE-2 OF SPA AND STATED THA T THAT IN THE SAID PARA, IT WAS AMPLY CLEAR THAT RS. 8,38,69,000/- WAS NEVER F IXED AS THE ACTUAL CONSIDERATION FOR TRANSFER OF SHARES OF NTPL BY ITS SHARE HOLDERS TO M/S ITA 804/JP/2012 & ITA 951-952/JP/2013 35 HCL INFOSYSTEMS LTD. AND IT WAS MERELY A STATIC FIG URE TO THE FORMULAE FOR COMPUTATION OF CONSIDERATION OF SHARES SUBJECT TO A DJUSTMENT. HE FURTHER STATED THAT IN PARA 2.3 OF ARTICLE 2 OF SPA PAYMENT CYCLE HAD BEEN MENTIONED, FOLLOWING WHICH, THE CONSIDERATION FOR S HARES PURCHASED WAS TO BE PAID BY THE PURCHASER TO THE SELLERS AND THER EIN, THE WHOLE AMOUNT OF RS.8,38,69,000/- WAS DIVIDED INTO MANY INSTALLMENTS AND EACH INSTALLMENT WAS TAGGED WITH A CONDITION, ON TH E FULFILLMENT OF WHICH, THAT INSTALLMENT WAS TO BE PAID. IT WAS POINTED OUT THAT A SUM OF RS.2,36,29,000/- WAS INITIALLY PAID TO THE SELLERS ON THE CLOSING DATE MENTIONED IN THE AGREEMENT ITSELF AND REMAINING AMO UNT WAS DEPOSITED IN AN ESCROW ACCOUNT OPENED WITH THE HDFC BANK AND THE SAID AMOUNT I.E. RS. 6,02,40,000/- WAS DIVIDED INTO 7 INSTALLMENTS A TTACHED WITH 7 CONDITIONS AND EACH SUCH INSTALLMENT WAS PAYABLE UP ON FULFILLMENT OF THE CONDITION ATTACHED TO IT. IT WAS ALSO POINTED OUT THAT THE SECOND INSTALLMENT WAS OF RS.L,40,00,000/- AND THE CONDITIONS ATTACHED WITH THAT INSTALLMENT WAS AS UNDER:- 'THAT THE AMOUNT SHALL BE HELD BACK BY THE PURCHASER AS A SECURITY AGAINST GUARANTEES GIVEN BY NTPL TO FEDERA L BANK FOR HDFC ORDERS AND SHALL BE PAID TO THE SELLERS ON QUA RTERLY BASIS UPON PROPORTIONATE RELEASE OF THE SAID GUARAN TEES BY THE FEDERAL BANK EVIDENCED BY A LETTER ISSUED BY FE DERAL BANK TO BE PROCURED BY THE SELLERS. THE AMOUNT PAYA BLE ON ITA 804/JP/2012 & ITA 951-952/JP/2013 36 QUARTERLY BASIS WOULD BE EQUIVALENT TO THE AMOUNT R ECEIVED BY THE COMPANY (NTPL) FROM HDFC. THE PURCHASER SHALL D EPOSIT THE AMOUNT MENTIONED IN THIS SUB-CLAUSE IN THE ESCR OW ACCOUNT IN THE FORM OF FIXED DEPOSITS AND THE INTER EST THEREON WILL BE PAYABLE TO THE SELLERS.' IT WAS ALSO STATED THAT A SIMILAR CONDITION WAS WIT H 5 TH INSTALLMENT, WHICH WAS AS UNDER:- SIMILARLY, THE FIFTH INSTALLMENT OF RS. 18,10,000/- WAS ATTACHED WITH THE CONDITION THAT IT 'SHALL BE PAID BY THE PU RCHASER TO THE SELLERS UPON FINAL DISPOSAL IN FAVOUR OF THE COMPAN Y (NTPL) OF THE APPELLANT PERTAINING TO DISPUTED INCOME TAX LIA BILITY OF THE COMPANY FOR THE FINANCIAL YEAR 2005-06. THE PURCHAS ER SHALL DEPOSIT THE AMOUNT MENTIONED IN THIS SUB-CLAUSE IN THE ESCROW ACCOUNT IN THE FORM OF FIXED DEPOSIT AND THE INTERE ST EARNED THEREON WILL BE PAYABLE TO THE SELLERS.' 11. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED THAT THE SCHEDULE 6 OF SPA STATED THAT THE CONSIDERATION FOR TRANSFER O F SHARES HAD TO BE DECIDED IN ACCORDANCE WITH THE FORMULAE WHERE THE BASE FIGU RE WAS PROVIDED IN THE SPA ITSELF AND THE CONDITIONS FOR ADJUSTMENTS WERE ALSO PROVIDED IN SCHEDULE 6 ITSELF AND SUCH ADJUSTMENTS WERE TO BE QUANTIFIED AT A LATER STAGE. IT WAS STATED THAT AS PER THE PROVISIONS OF SCHEDULE 6 OF SPA, THE PURCHASER COMPANY QUANTIFIED THE ADJUST MENTS WHICH CAME TO RS.1,24,00,000/, AND ACCORDINGLY, THE ACTUA L CONSIDERATION WAS ITA 804/JP/2012 & ITA 951-952/JP/2013 37 ARRIVED AT RS.7,14,69,000/- AND THE PURCHASER COMPA NY I.E. HCL INFOSYSTEMS LTD. EVEN GAVE A CERTIFICATE TO THE EFF ECT THAT THEY HAVE ADJUSTED RS.1,24,00,000/- FROM THE PURCHASE PRICE O F 484856 SHARES IN TERMS OF SCHEDULE 6 OF SPA. A COPY OF SAID CERTIFIC ATE IS PLACED AT PAGE NO. 124 OF THE ASSESSEES PAPER BOOK. IT WAS ALSO P OINTED OUT THAT THE SELLERS GAVE A LETTER TO THE HDFC BANK STATING THAT RS.1,24,00,000/- DEPOSITED IN THE ESCROW ACCOUNT BE GIVEN TO HCL INFOSYSTEMS LTD. AND THE BALANCE AMOUNT BE PAID TO THE SELLERS AND THE ACCOUNT MAY BE CLOSED THEREAFTER. REFERENCE WAS M ADE TO PAGE NO. 125 OF THE ASSESSEES PAPER BOOK, WHICH IS THE COPY OF THE SAID LETTER. ACCORDINGLY, IT WAS SUBMITTED THAT THE SEL LERS RECEIVED ONLY AN AMOUNT OF RS. 7,14,69,000/- FOR SALE OF THEIR WH OLE SHARES HOLDINGS OF 484856 SHARES, AS SUCH, THE PER SHARE PRICE WAS CALCULATED AT RS. 147.40 APPROX. AND THE SELLERS INCLUDING THE ASSESSEE ACCORDINGLY CALCULATED THEIR RESPECTIVE CAPITAL GAINS. IT WAS C ONTENDED THAT NEITHER THE ASSESSING OFFICER NOR THE LD. CIT(A) DISPUTED T HE CALCULATION/ QUANTIFICATION OF ADJUSTMENTS AS PER SCHEDULE 6 OF SPA, BUT AT THE SAME TIME, TOOK THE VALUE OF SHARE TRANSFER AT RS.8,38 ,69,000/- WHICH WAS A BASE FIGURE ONLY FOR CALCULATING THE ACTUAL C ONSIDERATION AND THIS WAS EVIDENT FROM THE FACT THAT IT WAS SPECIFICALLY MENT IONED IN ARTICLE 2 SPA WHERE IN IT WAS MENTIONED THAT THE ABOVE AMOUNT WAS SUBJECT TO ITA 804/JP/2012 & ITA 951-952/JP/2013 38 ADJUSTMENTS AS PROVIDED IN SCHEDULE 6. HOWEVER, THE AO AND THE LD. CIT(A), JAIPUR ONLY READ THE INITIAL PART OF THE PA RA 2.2 OF ARTICLE 2 FOR THEIR CONVENIENCE AND DID NOT READ THEREAFTER WHERE IN IT WAS MENTIONED THAT THE ABOVE AMOUNT WAS SUBJECT TO ADJUSTMENTS AND HEN CE THE LD. CIT(A) ERRED IN UPHOLDING THE ORDER OF THE LD. AO. IT WAS ALSO STATED THAT THE EXPRESSIONS FULL VALUE OF CONSIDERATION AS USED I N SECTION 48 OF THE ACT, HAS NOT BEEN DEFINED ANY WHERE IN THE ACT. HOWEVER, TH E MEANING OF THE SAME HAS EVOLVED ROUND THE YEARS THROUGH VARIOUS JUDICIA L PRONOUNCEMENTS GIVEN BY VARIOUS COURTS AND THE ACTUAL CONSIDERATIO N FOR TRANSFER OF SHARES WAS THE ONE , WHICH WAS CALCULATED AFTER MAKING THE ADJUSTMENT MENTIONED IN SCHEDULE-6 TO THE SPA. RELIANCE WAS PLACED ON TH E FOLLOWING CASE LAWS:- (I) CIT & ANR. VS. GEORGE HENDERSON & CO. LTD. (196 7) 66 ITR 622 (SC). (II) CIT VS. GILLANDERS ARBUTHNOT & CO. (1973) 87 I TR 407 (SC). (III) CIT VS. RIKADAS DHURAJI & ANR. (1976) 103 ITR 111 (MAD). (IV) CIT VS. TEXSPIN ENGG. & MFG. WORKS (2003) 263 ITR 345 (BOM). (V) CIT VS. SMT. NILOFER I. SINGH, (2009) 309 ITR 2 33 (DELHI). (VI) RELIANCE COMMUNICATIONS INFRASTRUCTURE LTD. VS . CIT (2010) 40 DTR (MUMBAI) (TRIB) 186. (VII) ANURAG JAIN, IN RE, (2005) 277 ITR 1 (AAR). ITA 804/JP/2012 & ITA 951-952/JP/2013 39 ALTERNATIVELY IT WAS SUBMITTED THAT EVEN IF THE FUL L VALUE OF CONSIDERATION WAS TAKEN AT RS. 8,38,69,000/- AS TAK EN BY THE ASSESSING OFFICER AND UPHELD BY THE LD. CIT(A), THE N ALSO, THE SAME CANNOT BE TAKEN AS TOTAL CONSIDERATION RECEIVED FOR THE PURPOSE OF CALCULATION OF CAPITAL GAINS IN THE HANDS OF THE RE SPECTIVE SELLERS OF SHARES AS THE SAME HAS NOT BEEN ACTUALLY RECEIVED B ECAUSE THE AMOUNT ACTUALLY RECEIVED WAS RS. 7,14,69,000/-, WHICH WAS TO BE CONSIDERED FOR CALCULATION OF THE CAPITAL GAIN. IT WAS FURTHER SUBMITTED THAT THE LIABILITY OF RS. 1,24,00,000/- WAS AN ASCERTAINED L IABILITY BECAUSE IT WAS EXISTING AND THE QUANTIFICATION THEREOF WAS POS SIBLE AND A CERTIFICATE TO THIS EFFECT WAS ISSUED BY THE PURCHA SER HCL INFOSYSTEMS LTD., WHO CONFIRMED THAT THE PURCHASE P RICE OF SHARES OF NTPL STOOD REDUCED BY RS. 1,24,00,000/- IN TERMS OF SCHEDULE-6 OF THE SPA. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: (I) CIT VS. GEORGE HENDERSON & CO. LTD. (1967) 66 ITR 6 22 (SC). (II) ANURAG JAIN, IN RE, (2005) 277 ITR 1 (AAR). (III) RAJKOT DISTRICT COPALAK CO. OP. MILK PRODUCE RS UNION LTD. VS CIT (1993) 204 ITR 590 (GUJ.) (IV) CIT VS. SHOORJI VALLABHDAS & CO. (1962) 46 ITR 144 (SC). IT WAS ACCORDINGLY, SUBMITTED THAT THE LD. CIT(A) W AS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER FOR TAKING THE SALE ITA 804/JP/2012 & ITA 951-952/JP/2013 40 CONSIDERATION AT RS. 8,38,69,000/- INSTEAD OF RS. 7 ,14,69,000/- FOR WORKING OUT THE LONG TERM CAPITAL GAIN AND SHORT TE RM CAPITAL LOSS. 12. IN HIS RIVAL SUBMISSIONS, THE LD. D.R. STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND REITERATED THE OBSERVATIONS M ADE BY THEM IN THEIR RESPECTIVE ORDERS. 13. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN T HE PRESENT CASE, THE CONTROVERSY REVOLVES AROUND THE ADJUSTMENT OF RS. 1 ,24,00,000/- TO BE MADE AS CLAIMED BY THE ASSESSEE OR NOT TO BE MADE AS HELD B Y THE ASSESSING OFFICER AND THE LD. CIT(A). IN THE INSTANT CASE, IT IS AN ADMIT TED FACT THAT THE ASSESSEE ALONGWITH OTHER SHARE HOLDERS SOLD THE ENTIRE SHARE HOLDINGS OF NTPL HELD BY THEM TO HCL INFOSYSTEMS LTD. BY WAY OF SPA. COPY OF WHICH IS PLACED AT PAGE NOS. 9 TO 90 OF THE ASSESSEES PAPER BOOK. IN THE S AID AGREEMENT, ARTICLE-2 DETERMINED THE SALE PRICE, WHICH WAS AT RS. 8,38,69 ,000/-. THE SAID AMOUNT WAS TO BE PAID IN ACCORDANCE WITH CLAUSE 2.3, WHICH PRO VIDES THAT A SUM OF RS. 2,36,29,000/- TO BE PAID FROM THE CLOSING DATE AND THE REMAINING AMOUNT WAS TO BE PAID IN 7 INSTALLMENTS OF DIFFERENT AMOUNTS MENT IONED IN CLAUSE 2.3 (B) OF ARTICLE 2 OF THE SPA. SCHEDULE-6 OF THE SAID AGREEM ENT, COPY OF WHICH IS PLACED AT PAGE NO. 90 OF THE ASSEESEES PAPER BOOK PROVIDE S FOR FOLLOWING ADJUSTMENTS TO BE MADE IN THE PURCHASE PRICE :- ITA 804/JP/2012 & ITA 951-952/JP/2013 41 I) THE AMOUNT OF LIABILITY ARISING ON ACCOUNT OF A NY GUARANTEE GIVEN BY THE COMPANY TO FEDERAL BANK, (II) ANY SHORTAGE IN REALIZATION BY 31 DECEMBER, 20 08 OF RECEIVABLES (INCLUDING UNBILLED REVENUE AS ON 31 MARCH, 2008) S PECIFIED IN EXHIBIT 6A AND 6B TO THIS SCHEDULE-6 PERTAINING TO TRANSACTIONS OF PERIOD PRIOR TO CLOSING DATE. (III) THE AMOUNT OF ANY LIABILITY AND CLAIMS PERTAI NING TO PERIOD PRIOR TO CLOSING DATE AND NOT ACCOUNTED IN THE BOOKS OF ACCO UNTS OF THE COMPANY. (IV) THE AMOUNTS OF ALL CONTINGENT LIABILITIES WHET HER OR NOT DISCLOSED IN THE FINANCIAL STATEMENTS WHICH ARISE ON THE COMPANY . THE FINAL AMOUNT OF SUCH LIABILITIES WILL BE DETERMINED ON FI NAL DISPOSAL OF THE RELEVANT CASE(S). (V) ANY LIABILITY RELATING TO THE PERIOD PRIOR TO C LOSING DATE WHICH MAY ARISE OVER AND ABOVE THE AMOUNTS OF PROVISIONS MADE IN THE BOOKS OF ACCOUNT AS ON 31 ST MARCH, 2008. (VI) ANY AMOUNT OF SHORTAGE IN REALIZATION BY 31 DE CEMBER, 2008 OF DOUBTFUL DEBTS SPECIFIED IN EXHIBIT 6 C TO THIS SCH EDULE 6. (VII) THE AMOUNT OF ANY REDUCTION IN NET PROFIT AFT ER TAX BETWEEN THE UNAUDITED FINANCIAL STATEMENT FOR THE PERIOD ENDIN G AS ON 31 MARCH 2008 AS CERTIFIED BY THE SELLERS AND ANNEXED AS EXHIBIT 6C TO THIS SCHEDULE 6 AND FINAL AUDITED ACCOUNTS OF TH E COMPANY FOR THE PERIOD ENDING 31 MARCH 2008 AND FOR THE PERIOD ENDING CLOSING DATE, BOTH ACCOUNTS BEING PREPARED ON SAME ACCOUNTING PRINCIPLES. 14. THE ABOVE SAID CLAUSE (II) OF SCHEDULE-6 PROVID ES FOR ADJUSTMENT OF ANY SHORTAGE IN REALISATION BY 31 ST DECEMBER, 2008 OF DOUBTFUL DEBTS. IN THIS PRESENT CASE, THE PURCHASER INFORMED THAT THE FINAL PURCHAS E PRICE OF 484856 FULLY PAID UP EQUITY SHARES OF NTPL STANDS REDUCED BY RS. 1,24 ,00,000/- IN TERMS OF SCHEDULE-6 OF THE SPA. COPY OF THE SAID CERTIFICATE IS PLACED AT PAGE NO. 124 OF THE ASSESSEES PAPER BOOK AND READS AS UNDER:- WITH REFERENCE TO THE SALE PURCHASE AGREEMENT (SPA ) DATED 01.05.2008 BETWEEN HCL INFOSYSTEMS LTD. AND THE EX-SHARE HOLDE RS OF NATURAL ITA 804/JP/2012 & ITA 951-952/JP/2013 42 TECHNOLOGIES PRIVATE LTD. (NTPL) AND IN ACCORDANCE WITH THE TERMS & CONDITIONS THEREOF, IT IS CONFIRMED THAT THE FINAL PURCHASE PRICE OF THE 484856 FULLY PAID UP EQUITY SHARES OF NTPL STANDS R EDUCED BY RS. 1,24,00,000/- (RUPEES ONE CRORE & TWENTY FOUR LACS) IN TERMS OF SCHEDULE 6 OF SPA. FOR HCL INFOSYSTEMS LTD. SUSHIL KUMAR JAIN COMPANY SECRETARY. 15. THE PURCHASES I.E. HCL INFRSYSTEM LTD. ALSO IN FORMED THEIR BANK FOR THE ABOVE ADJUSTMENTS AND DIRECTED THAT THE AMOUNT OF R S. 1,24,00,000/- TO BE PAID TO THEM AND REMAINING AMOUNT TO THE BENEFICIARY TO THE ESCROW ACCOUNT IN THE PRESCRIBED PROPORTION COPY OF THE LETTER IS PLACED AT PAGE NO. 125 OF THE ASSESSEES PAPER BOOK, WHICH READ AS UNDER:- THE MANAGER HDFC BANK NOIDA. REG: RELEASE OF AMOUNT FROM THE ESCROW A/C WITH Y OU . PLEASE REFER TO THE ESCROW ACCOUNT NAMED HCL SELLER S ESCROW ACCOUNT WITH YOU WHEREIN A SUBSTANTIAL AMOUNT IS LYING. WE REQUEST YOU TO RELEASE THE AMOUNT AS UNDER:- 1. PLEASE PAY AN AMOUNT OF RS. 1,24,00,000/- (RUPEE S ONE CRORE TWENTY FOUR LACS ONLY) TO HCL INFOSYSTEMS LTD. 2. PLEASE PAY THE REMAINING AMOUNT, WITH UPTO DATE INTEREST, TO THE BENEFICIARIES OF THE ESCROW ACCOUNT IN THE PRESCRIB ED PROPORTION. THIS ESCROW ACCOUNT MAY BE TREATED AS CLOSED AFTER TRANSFER OF THIS MONEY. THANKING YOU YOURS TRULY. ITA 804/JP/2012 & ITA 951-952/JP/2013 43 16. FROM THE ABOVE SAID LETTER, IT IS CRYSTAL CLEAR THAT THE ASSESSEE ALONGWITH OTHER SHARE HOLDERS RECEIVED TOTAL CONSIDERATION OF RS. 7,14,69,000/- (RS. 8,38,89,000 RS. 1,24,00,000) ON ACCOUNT OF THE SA LE OF 484856 EQUITY SHARES OF NTPL. THE SAID AMOUNT WAS FINALLY RECEIVED AFTER TH E ADJUSTMENTS AS PROVIDED IN SCHEDULE-6 OF THE SPA. THEREFORE, THE ASSESSEE A LONGWITH OTHER SHARE HOLDERS RIGHTLY CONSIDERED THE ACTUAL SALE CONSIDERATION AT RS. 7,14,69,000/- AND THE ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING THE SAME AT RS. 8,38,69,000/-. THE AFORESAID ADJUSTMENT AMOUNTING TO RS. 1,24,00,000/- CANNOT BE SAID TO BE A CONTINGENT LIABILITY BECAUSE IT WAS ASCERTAINED AND QUANTIFIED BY THE PURCHASER. IT IS WELL SETTLED THAT IF THE LIABILITY IS EXISTING AND THE QUANTIFICATION THEREOF IS POSSIBLE SUBSEQUENTLY, THE SAME WOULD NOT POSTPONE THE ACCRUAL OF LIABILITY. IN THE PRESENT CASE, THE LIABILITY WAS CERTAIN, CAPABL E OF BEING ESTIMATED THROUGH THE ACTUAL QUANTIFICATION AND THE BUYER ISSUED A CERTIF ICATE TO THIS EFFECT AND ALSO INFORMED THEIR BANK THAT A SUM OF RS. 1,24,00,000/- TO BE REDUCED FROM RS. 8,38,69,000/- IN ACCORDANCE WITH THE PROVISIONS CON TAINED IN SCHEDULE-6 OF THE SPA ON ACCOUNT OF ADJUSTMENT TO PURCHASE PRICE. 17. IN VIEW OF THE ABOVE DISCUSSION AND BY CONSIDER ING THE TOTALITY OF THE FACTS AS DISCUSSED HEREINABOVE, WE ARE OF THE VIEW THAT T HE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER FOR TAKING THE SALE PRICE OF 484856 SHARES AT RS. 8,38,69,000/- INSTEAD OF RS. 7,14,69,000/-. WE, ITA 804/JP/2012 & ITA 951-952/JP/2013 44 THEREFORE, SET ASIDE THE IMPUGNED ORDER ON THIS ISS UE AND DIRECT THE ASSESSING OFFICER TO CONSIDER THE FULL CONSIDERATION FOR THE PURPOSES OF SALE PRICE OF 484856 SHARES AT RS. 7,14,69,000/- AND ACCORDINGLY WORK OUT THE LONG TERM CAPITAL GAIN OR THE SHORT TERM CAPITAL LOSS AS THE CASE MAY BE. IN VIEW OF THE ABOVE, GROUNDS NO. 1 TO 4 ARE DECIDED IN ASSESSEES FAVOUR. 18. VIDE GROUND NO. 5, THE GRIEVANCE OF THE ASSESSE E RELATES TO THE CREDIT OF THE TDS AMOUNTING TO RS. 9,34,324/-. 19. THE FACTS RELATED TO THIS ISSUE AS EMERGING OUT OF THE ORDERS OF AUTHORITIES BELOW, IN BRIEF ARE THAT THE ASSESSEE CLAIMED CRED IT OF TAXES ALREADY PAID ON THE BASIS OF TDS CERTIFICATE (FORM NO. 16) FOR A SUM OF RS. 9,34,324/-. HOWEVER, THE ASSESSING OFFICER ALLOWED THE CLAIM OF RS. 6,34,190 /- AS SUCH, SHORT CREDIT WAS GIVEN FOR TDS AMOUNTING TO RS. 3,00,123/-. THE ASSE SSEE CHALLENGED THE ACTION OF THE ASSESSING OFFICER BEFORE THE LD. CIT(A) AND PRAYED TO ALLOW THE CORRECT CREDIT OF TAXES ALREADY PAID. 20. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE, OBSERVED THAT THE ASSESSING OFFICER WAS NOT ABLE TO GIVE CREDIT FOR TDS OF RS. 3,00,134/- AS IT WAS NOT VERIFIABLE FROM OLTAS. THE MISMATCH HAD OCCURRED DUE TO WRONG INFORMATION GIVEN BY THE DEDUCTORS. TH E LD. CIT(A) WAS OF THE VIEW THAT THE RECTIFICATION IN THIS REGARD HAS TO B E CARRIED OUT BY THE DEDUCTORS AND THE ASSESSEE WAS DUTY BOUND TO FIND OUT THE REA SONS FOR MISMATCH AND SAME COULD BE CORRECTED BY THE ASSESSING OFFICER ON RECE IPT OF CORRECT INFORMATION ITA 804/JP/2012 & ITA 951-952/JP/2013 45 FROM THE DEDUCTORS. THE LD. CIT(A), ACCORDINGLY, DI RECTED THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSING OFFICER AFTER RECEIPTS OF THE INFORMATION. NOW THE ASSESSEE IS IN APPEAL. 21. THE LD. COUNSEL FOR THE ASSESSEE REITERATED TH E SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND FURTHER SUBMITTED THAT IN THE AS SESSMENT PROCEEDINGS, THE ASSESSING OFFICER WHILE CALCULATING THE TAX PAYABLE IN ITNS-150 HAD GIVEN THE CREDIT OF TAXES ALREADY PAID UP TO RS. 6,34,190/- O NLY WHEREAS AS PER THE TDS CERTIFICATE, THE ACTUAL TAXES ALREADY PAID AND DEPO SITED IN THE NAME OF THE ASSESSEE WERE AT RS. 9,34,324/-, THEREFORE, THE CRE DIT OF TAXES AMOUNTING TO RS. 3,00,134/- WAS NOT GIVEN. IT WAS PRAYED THAT DIRECT ION MAY BE GIVEN TO THE ASSESSING OFFICER FOR ALLOWING THE CREDIT FOR A SUM OF RS. 3,00,134/-. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON'BLE BOMBAY HI GH COURT IN THE CASE OF YASHPAL SAHNI VS. ACIT (2007) 293 ITR 539 (BOM). 22. IN HIS RIVAL SUBMISSIONS, THE LD. D.R. SUPPORTE D THE ORDER OF THE LD. CIT(A). 23. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON THE RECORD. IN THE PRESENT CASE, IT APP EARS THAT THE FULL CREDIT FOR TDS WAS NOT GIVEN BY THE ASSESSING OFFICER DUE TO MISMA TCH, WHICH OCCURRED ON ACCOUNT OF WRONG INFORMATION GIVEN BY THE DEDUCTOR. IN SUCH TYPE OF CASES, IT IS AN ADMITTED FACT THAT THE ASSESSEES SOME TIMES FACE PROBLEMS DUE TO CONFUSION IN THE RELEVANT PROVISIONS OF THE LAW. IN OUR OPINION, THE LD. CIT(A) RIGHTLY ITA 804/JP/2012 & ITA 951-952/JP/2013 46 DIRECTED THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE AFTER RECEIPT OF THE INFORMATION AND IF THE ASSESSEE IS ABLE TO SATI SFY BY WAY OF RECTIFICATION IN THIS REGARD, DUE BENEFIT OF TAX DEDUCTED AT SOURC E IS TO BE GIVEN TO THE ASSESSEE. ACCORDINGLY, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 24. LAST ISSUE VIDE GROUND NO. 6 RELATES TO THE CHA RGING OF INTEREST U/S 234A 234B AND 234C OF THE ACT. 25. AS REGARDS TO THIS ISSUE, IT WAS A COMMON CONTE NTION OF BOTH THE PARTIES THAT IT IS CONSEQUENTIAL IN NATURE. WE ORDER ACCORD INGLY. 26. IN THE REMAINING APPEALS I.E. ITA NO. 951/JP/20 13 AND ITA NO. 952/JP/2013, COMMON ISSUES RELATING TO THE CAPITAL GAIN AND CHARGING OF INTEREST U/S 234A 234B AND 234C OF THE ACT ARE INVOLVED, TH EREFORE, OUR FINDINGS GIVEN IN THE FORMER PART OF THIS ORDER WHILE ADJUDICATING THE APPEAL IN ITA NO. 804/JP/2012 SHALL APPLY MUTATIS MUTANDIS. ONE ANOTH ER ISSUE IN ITA NO. 952/JP/2013 VIDE GROUND NO. 1 AND 2 RELATES TO THE REOPENING U/S 148/143(3) OF THE ACT. THIS ISSUE WAS NOT ARGUED, THEREFORE, NO F INDING IS GIVEN FOR THE SAME. 19. IN THE RESULT, ITA NO. 804/JP/2012 IS PARTLY AL LOWED AND PARTLY FOR STATISTICAL PURPOSES ONLY. ITA NO. 951/JP/2013 IS A LLOWED AND ITA NO. 952/JP/2013 IS PARTLY ALLOWED. ITA 804/JP/2012 & ITA 951-952/JP/2013 47 (ORDER PRONOUNCED IN THE OPEN COURT ON 26/02/2014 .) SD/- SD/- (HARI OM MARATHA) (N.K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 26/02/2014 * RANJAN COPY FORWARDED TO :- 1. APPELLANTRIPU DAMAN MAGON/KRISHAN LAL MAGON/MAH ENDRA R SARAF,JAIPUR. 2. RESPONDENT- THE DCIT/ACIT, CIRCLE-6 & ITO 6(1), JAIPUR, 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 804/JP/2012, 951 & 952/JP/20 13) BY ORDER, AR ITAT JAIPUR.