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The Tax Publishers STCI Ltd. Formerly Known as v. DIT [ITA Nos. 2307, 2306, 2500, 2580/Mum/2013, dt. 31-3-2016] : 2016 TaxPub(DT) 2172 (Mum-Trib) Payment of indemnity whether expenditure wholly concerned with transfer of shares *Facts:* Assessee NBFC engaged in trading of shares, derivatives, mutual funds, PSU bonds was holding entire shareholding in UTISL. Arising out of a share purchase agreement it had transferred 49% of its shareholding to Standard Chartered Bank (Mauritius). One of the division of UTISL that at Pune had certain fraudulent transactions on which there was an indemnity which had to be paid amounting to 10 crores by assessee to SCB to make the share purchase deal get through. The same was claimed as an expenditure wholly arising out of the transfer. Assessing Officer disallowed the same holding that the indemnity had no relevance to the sale. Commissioner (Appeals) held that since only 49% was transferred only 4.9 crores or pro-rata will be allowable thus disallowed the rest. On further cross appeals by both parties: Held by the ITAT in favour of the assessee that the indemnity was paid exclusively to get the deal of sale through and thus was allowable in full. No apportionment need to be made as the balance 51% held by the assessee had no relevance to the deal or to the indemnity paid.

The Tax Publishers

STCI Ltd. Formerly Known as v. DIT [ITA Nos. 2307, 2306, 2500, 2580/Mum/2013, dt. 31-3-2016] : 2016 TaxPub(DT) 2172 (Mum-Trib)

Payment of indemnity whether expenditure wholly concerned with transfer of shares

Facts:

Assessee NBFC engaged in trading of shares, derivatives, mutual funds, PSU bonds was holding entire shareholding in UTISL. Arising out of a share purchase agreement it had transferred 49% of its shareholding to Standard Chartered Bank (Mauritius). One of the division of UTISL that at Pune had certain fraudulent transactions on which there was an indemnity which had to be paid amounting to 10 crores by assessee to SCB to make the share purchase deal get through. The same was claimed as an expenditure wholly arising out of the transfer. Assessing Officer disallowed the same holding that the indemnity had no relevance to the sale. Commissioner (Appeals) held that since only 49% was transferred only 4.9 crores or pro-rata will be allowable thus disallowed the rest. On further cross appeals by both parties:

Held by the ITAT in favour of the assessee that the indemnity was paid exclusively to get the deal of sale through and thus was allowable in full. No apportionment need to be made as the balance 51% held by the assessee had no relevance to the deal or to the indemnity paid.