1) Adjustment whether possible under
MAT provisions in a subsequent year in a case where limitation was lost for
revenue for having missed to carry out the MAT adjustment in an earlier year
2) Disallowance of long term capital loss citing
tax evasion with transfer to related party without controverting evidences
Facts:
1) Assessee was a private limited investment company.
They had gifted in FY 2011-12 (assessment year 2012-13) 750,000
shares of one Super Religare Laboratories Ltd. (SRLL) to the employees
of SRDL (a subsidiary of SRLL). These gifted shares were held as non-current
investment in the books of the assessee company. Part of the gifted shares
(615000 shares) were redacted and taken back in assessment year 2015-16 by
crediting the amount to Reserves and surplus for Rs. 21.23 crores from certain
people to whom it was originally gifted due to non-compliance of certain
employment/service conditions. Assessee was liable to tax under MAT provisions under
section 115JB for the year under appeal. The AO and CIT(A) added the amount
credited to Reserves and suplus in the computation of MAT. Assessee's plea was
that during assessment year 2012-13 the year when the shares were gifted in
that year, the gifted amount of the shares which was a capital expenditure was
debited to in the Profit and loss account. The same was disallowed and added
back under normal computation sections (in that year MAT was not applicable) in
the tax computation statement. However, while doing MAT computation the same
was not added back in the year of gifting erroneously by the revenue. This
error was hit by limitation for the revenue besides the fact that AO cannot
tinker with audited accounts for MAT as held in Apollo Tyres Ltd.
reported in (2002) 255 ITR 273 (SC) : 2002 TaxPub(DT) 1371 (SC).
2) On another issue, assessee claimed Long term capital
loss of Rs. 61.55 crores by selling shares of Religare Enterprises Ltd. in an
off-market deal to its group company RHC Holding Pvt. Ltd. on
13th March 2015 and on 30th March 2015 (fag end of the year).
(28,73,306 + 12,09,000) shares were sold at Rs. 335 per
share = Rs. 136.76 crores
Indexed cost of acquisition = Rs. 198.31 crores
Long term loss thus was Rs. 61.55 crores
Revenue disallowed part of the long term capital loss for
the second transaction dated 30th March 2015 citing that the on going
market price of Religare Enterprises Ltd. was Rs. 337 on 30th March
2015 and since the off-market deal was with a related party thus a planned
transaction to claim capital loss.
Market price was Rs. 372.60 on 15.03.2015 is to be noted so
the larger quantum of the loss on sale was not disallowed as it was possibly
not closer to 31st March 2015 in the opinion of the revenue.
On higher appeal to the ITAT -
Held in favour of the assessee -
1. The revenue has lost its limitation and thus they cannot
find a respite under MAT provisions now to add the redacted amounts credited to
reserves and surplus under MAT provisions.
2. The long term capital loss claimed was allowable as
revenue either should have disallowed the entire loss by bringing forward
evidences. When the sale price was within the last 12 month average market
prices, the same cannot be disallowed simply because of an off-market deal with
a related party.
Case: Shivi
Holdings (P) Ltd. v. ACIT 2024 TaxPub(DT) 1218 (Del-Trib)