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Tax Publishers ACIT v. Reindeer Software Solutions (P) Ltd. [ITA No. 1354/Bang/2017, dt. 9-9-2020] : 2020 TaxPub(DT) 3622 (Bang.-Trib.) Additions sustained on newspaper reports *Facts:* Based on a newspaper report it was alleged that the assessee was in receipt of consideration of USD 30 mio. and addition was sustained under the head capital gains for Rs. 152 crores arising out of the business sale of their entity when factually all they got was only INR 300,000 as consideration for the brand portal sale. The plea of the assessee was when there was no such evidence of monies received or consideration which happened the same could not be brought to tax merely based on a newspaper report without an actual transaction being thus. On higher appeal - Held in favour of the assessee that no addition can be sustained based on newspaper report which under the evidence act does not constitute reliable evidence in tax matters. Laxmi Raj Shetty & Anr. v. State of Tamil Nadu 1988 AIR 1274 applied *Editorial Note:* The share capital of the original company when formed was Rs. 100,000. Due to two tranches of private equity funding it swelled to 20.34 crores. These 20.34 crores were sold to an entity called Goldsquare sales India Pvt. Ltd. for a consideration of Rs. 12.23 crores (at a loss as the assessee was having accumulated losses). These shares of Goldsquare were then sold to another individual for Rs. 148,233. Since the net-worth was negative the shares were sold at Re.1 per share also supported by a CA's certificate. The company actually received Rs. 300,000 for divestment of its brand name www.urbantouch.com to Gold Square Sales India Pvt. Ltd., which was offered to tax. The news paper reports said that for an undisclosed sum the business of urban touch were offered for sale on which the revenue latched onto for making the addition. The interesting piece of the puzzle is what happened to the capital loss on the sale of these closely held entity shares? If they were held for more than 24 months they would be long-term capital loss ideally. Would it be allowed as a long-term capital loss in the hands of the private equity investors is the missing piece of the puzzle. What then prompted the entity called Gold Square to further sell it to a nominal value? What then is the reason for the entity for Gold Square to acquire shares at 12.23 crores and then divest it for a paltry Rs. 148,233 which would result in a short term capital loss of Rs. 12.22 crores did this entity have capital gains from elsewhere, this piece of the puzzle in the decision is missing but definitely worth knowing.

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ACIT v. Reindeer Software Solutions (P) Ltd. [ITA No. 1354/Bang/2017, dt. 9-9-2020] : 2020 TaxPub(DT) 3622 (Bang.-Trib.)

Additions sustained on newspaper reports

Facts:

Based on a newspaper report it was alleged that the assessee was in receipt of consideration of USD 30 mio. and addition was sustained under the head capital gains for Rs. 152 crores arising out of the business sale of their entity when factually all they got was only INR 300,000 as consideration for the brand portal sale. The plea of the assessee was when there was no such evidence of monies received or consideration which happened the same could not be brought to tax merely based on a newspaper report without an actual transaction being thus. On higher appeal -

Held in favour of the assessee that no addition can be sustained based on newspaper report which under the evidence act does not constitute reliable evidence in tax matters.

Laxmi Raj Shetty & Anr. v. State of Tamil Nadu 1988 AIR 1274 applied

Editorial Note: The share capital of the original company when formed was Rs. 100,000. Due to two tranches of private equity funding it swelled to 20.34 crores. These 20.34 crores were sold to an entity called Goldsquare sales India Pvt. Ltd. for a consideration of Rs. 12.23 crores (at a loss as the assessee was having accumulated losses). These shares of Goldsquare were then sold to another individual for Rs. 148,233. Since the net-worth was negative the shares were sold at Re.1 per share also supported by a CA's certificate. The company actually received Rs. 300,000 for divestment of its brand name www.urbantouch.com to Gold Square Sales India Pvt. Ltd., which was offered to tax. The news paper reports said that for an undisclosed sum the business of urban touch were offered for sale on which the revenue latched onto for making the addition.

The interesting piece of the puzzle is what happened to the capital loss on the sale of these closely held entity shares? If they were held for more than 24 months they would be long-term capital loss ideally. Would it be allowed as a long-term capital loss in the hands of the private equity investors is the missing piece of the puzzle. What then prompted the entity called Gold Square to further sell it to a nominal value? What then is the reason for the entity for Gold Square to acquire shares at 12.23 crores and then divest it for a paltry Rs. 148,233 which would result in a short term capital loss of Rs. 12.22 crores did this entity have capital gains from elsewhere, this piece of the puzzle in the decision is missing but definitely worth knowing.