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Tax Publishers Addition made on capital gains due to sale of shares at below market prices on off market transaction *Facts:* Assessee was slapped with an addition of capital gain for Rs.1.07 crores which had risen from transfer of Axis IT&T Ltd. (Axis) that were sold for Rs. 13.50 per share in an off market sale at below market prices which was Rs. 20.50 per share. Because it was a bulk deal wherein 61% shareholders of the said Company Axis had come together, besides there being a limit in the stock exchange to sell beyond 5% holdings on a single day this was an off-market off market price transaction. AO did not concur with this and made additions of the difference between 20.50 minus 13.50 per share for the sold quantity of 1538460 shares. CIT(A) upheld the same. On further appeal - Held in favour of the assessee that in the absence of any malafide intent the actual consideration ought to be taken as the sale consideration. The addition was uncalled for. *Applied:* Full value of consideration used in section 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. i. Commissioner of Income tax v. Gillanders Arbuthnot & Co. (1973) 87 ITR 407 (SC) : 1973 TaxPub(DT) 0342 (SC) ii. Commissioner of Income tax v. George Henderson and Co. Ltd. (1967) 66 ITR 622 (SC) : 1967 TaxPub(DT) 0360 (SC) iii. K.P. Varghese v. Income Tax Officer (1981) 131 ITR 597 (SC) : 1981 TaxPub(DT) 0972 (SC) iv. Commissioner of Income tax v. Smt. Nilofer I. Singh (2009) 309 ITR 233 (Delhi) : 2009 TaxPub(DT) 0785 (Del-HC) v. Dev Kumar Jain v. Income Tax Officer (2009) 309 ITR 240 (Delhi) : 2009 TaxPub(DT) 1334 (Del-HC) vi. Arjun Malhotra v. Commissioner of Income Tax (2018) 403 ITR 354 (Del) : 2018 TaxPub(DT) 1982 (Del-HC) vii. Anurag Jain. In re (2005) 277 ITR 1 (AAR-Del) : 2005 TaxPub(DT) 1517 (AAR) viii. Principal Commissioner of Income-tax-2, Chandigarh v. Quark Media House India (P.) Ltd. (2017) 391 ITR 145 (Punjab & Haryana) : 2017 TaxPub(DT) 0294 (P&H-HC) ix. Commissioner of Income-tax v. Rikadas Dhuraj (1976) 103 ITR 111 (Madras) : 1976 TaxPub(DT) 0488 (Mad-HC) x. Commissioner of Income-tax v. P. Suryanarayana (1973) 88 ITR 321 (Mad.) : 1973 TaxPub(DT) 0211 (Mad-HC) xi. Commissioner of Income-tax v. Smt. Nandini Nopany (1998) 230 ITR 679 (Calcutta) : 1998 TaxPub(DT) 1066 (Cal-HC) xii. Commissioner of Income-tax v. Texspin Engg, & Mfg. Works (2003) 263 ITR 345 (Bombay) : 2003 TaxPub(DT) 1082 (Bom-HC) xiii. Moral Trading & Investment Ltd. v. Deputy Commissioner of Income-tax (2011) 7 ITR(T) 548 (Delhi) : 2010 TaxPub(DT) 1894 (Del-Trib) An agreement always has to be taken to be correct if assessee has acted bonafidely upon it and unless AO has brought evidence on record that it is fraudulent. i. D.S. Bist & sons v. Commissioner of Income Tax (1984) 149 ITR 276 (Delhi) : 1984 TaxPub(DT) 0812 (Del-HC) ii. Industrial Development Corpn. Of Orissa Ltd. v. Commissioner of Income tax (2004) 268 ITR 130 (Orissa) : 2004 TaxPub(DT) 1497 (Ori-HC) iii. CIT v. George Williamson (Assam) Ltd. (2004) 265 ITR 626 (Gauhati) : 2004 TaxPub(DT) 1164 (Gau-HC) iv. JCIT v. Mansurpur Sugal Mills Ltd. (2006) 8 SOT 365 (Delhi) : 2006 TaxPub(DT) 1310 (Del-Trib) v. Comecon Overseas Pvt. Ltd. v. DCIT (2006) 8 SOT 82. (Delhi) : 2006 TaxPub(DT) 1340 (Del-Trib) vi. Assistant Commissioner of Income-tax v. Vishnu Apartments (PJ Ltd. (2020) 183 ITD 63 (Delhi - Trib.) : 2020 TaxPub(DT) 0832 (Del-Trib) vii. Smt. Savita Bhasin v. Income Tax Officer, Ward-53(5) Civic Center, New Delhi (2020] 84 ITR(T) 602 (Delhi - Trib.) : 2020 TaxPub(DT) 3191 (Del-Trib) viii. Enpro India Ltd. (2000] 113 Taxman 132 (Delhi) (Mag.)[12- 07-2000] ix. Premier Housing & Industrial Enterprises (2008) 24 SOT 236 (Chennai-Trib) : 2008 TaxPub(DT) 1751 (Chen-Trib) AO cannot step in the shoes of businessman and decide as to how affairs of business were to be run and wasteful or excessive expenditure was to be curtailed. i. S.A. Builders Ltd. v. CIT (2007) 288 ITR 1 (SC) : 2007 TaxPub(DT) 0833 (SC) ii. Woollen Mfg. v. CIT (1969) 72 ITR 612 (SC) : 1969 TaxPub(DT) 0130 (SC) iii. CIT v. Dalmia Cement (P.) Ltd. (2002) 254 ITR 377 (Delhi) : 2002 TaxPub(DT) 0625 (Del-HC) iv. CIT v. Oracle India (P.) Ltd. (2011) 11 taxmann.com 139 (Del) : 2012 TaxPub(DT) 0424 (Del-HC) v. DCIT v. Manish Buildwell (P.) Ltd. (2011) 142 TTJ 749 (Delhi-Trib.) : 2012 TaxPub(DT) 0447 (Del-Trib) vi. DCIT v. Sophisticated Marbles and Granite Industries (2010) 3 ITR (T) 220 (Delhi) : 2010 TaxPub(DT) 1596 (Del-Trib) *Ed. Note:* The section pertains to a year prior to insertion of Section 50CA/50D. Section 50CA was introduced w.e.f. 01-04-2018 and Section 50D w.e.f. 01-04-2013. But whether these two sections can fasten tax in this case is still a bone to pick. *Case:* Trak Services (P) Ltd. v. ITO 2023 TaxPub(DT) 5028 (Del-Trib)

Tax Publishers

Addition made on capital gains due to sale of shares at below market prices on off market transaction

Facts:

Assessee was slapped with an addition of capital gain for Rs.1.07 crores which had risen from transfer of Axis IT&T Ltd. (Axis) that were sold for Rs. 13.50 per share in an off market sale at below market prices which was Rs. 20.50 per share. Because it was a bulk deal wherein 61% shareholders of the said Company Axis had come together, besides there being a limit in the stock exchange to sell beyond 5% holdings on a single day this was an off-market off market price transaction. AO did not concur with this and made additions of the difference between 20.50 minus 13.50 per share for the sold quantity of 1538460 shares. CIT(A) upheld the same. On further appeal -

Held in favour of the assessee that in the absence of any malafide intent the actual consideration ought to be taken as the sale consideration. The addition was uncalled for.

Applied:

Full value of consideration used in section 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.

i. Commissioner of Income tax v. Gillanders Arbuthnot & Co. (1973) 87 ITR 407 (SC) : 1973 TaxPub(DT) 0342 (SC)

ii. Commissioner of Income tax v. George Henderson and Co. Ltd. (1967) 66 ITR 622 (SC) : 1967 TaxPub(DT) 0360 (SC)

iii. K.P. Varghese v. Income Tax Officer (1981) 131 ITR 597 (SC) : 1981 TaxPub(DT) 0972 (SC)

iv. Commissioner of Income tax v. Smt. Nilofer I. Singh (2009) 309 ITR 233 (Delhi) : 2009 TaxPub(DT) 0785 (Del-HC)

v. Dev Kumar Jain v. Income Tax Officer (2009) 309 ITR 240 (Delhi) : 2009 TaxPub(DT) 1334 (Del-HC)

vi. Arjun Malhotra v. Commissioner of Income Tax (2018) 403 ITR 354 (Del) : 2018 TaxPub(DT) 1982 (Del-HC)

vii. Anurag Jain. In re (2005) 277 ITR 1 (AAR-Del) : 2005 TaxPub(DT) 1517 (AAR)

viii. Principal Commissioner of Income-tax-2, Chandigarh v. Quark Media House India (P.) Ltd. (2017) 391 ITR 145 (Punjab & Haryana) : 2017 TaxPub(DT) 0294 (P&H-HC)

ix. Commissioner of Income-tax v. Rikadas Dhuraj (1976) 103 ITR 111 (Madras) : 1976 TaxPub(DT) 0488 (Mad-HC)

x. Commissioner of Income-tax v. P. Suryanarayana (1973) 88 ITR 321 (Mad.) : 1973 TaxPub(DT) 0211 (Mad-HC)

xi. Commissioner of Income-tax v. Smt. Nandini Nopany (1998) 230 ITR 679 (Calcutta) : 1998 TaxPub(DT) 1066 (Cal-HC)

xii. Commissioner of Income-tax v. Texspin Engg, & Mfg. Works (2003) 263 ITR 345 (Bombay) : 2003 TaxPub(DT) 1082 (Bom-HC)

xiii. Moral Trading & Investment Ltd. v. Deputy Commissioner of Income-tax (2011) 7 ITR(T) 548 (Delhi) : 2010 TaxPub(DT) 1894 (Del-Trib)

An agreement always has to be taken to be correct if assessee has acted bonafidely upon it and unless AO has brought evidence on record that it is fraudulent.

i. D.S. Bist & sons v. Commissioner of Income Tax (1984) 149 ITR 276 (Delhi) : 1984 TaxPub(DT) 0812 (Del-HC)

ii. Industrial Development Corpn. Of Orissa Ltd. v. Commissioner of Income tax (2004) 268 ITR 130 (Orissa) : 2004 TaxPub(DT) 1497 (Ori-HC)

iii. CIT v. George Williamson (Assam) Ltd. (2004) 265 ITR 626 (Gauhati) : 2004 TaxPub(DT) 1164 (Gau-HC)

iv. JCIT v. Mansurpur Sugal Mills Ltd. (2006) 8 SOT 365 (Delhi) : 2006 TaxPub(DT) 1310 (Del-Trib)

v. Comecon Overseas Pvt. Ltd. v. DCIT (2006) 8 SOT 82. (Delhi) : 2006 TaxPub(DT) 1340 (Del-Trib)

vi. Assistant Commissioner of Income-tax v. Vishnu Apartments (PJ Ltd. (2020) 183 ITD 63 (Delhi - Trib.) : 2020 TaxPub(DT) 0832 (Del-Trib)

vii. Smt. Savita Bhasin v. Income Tax Officer, Ward-53(5) Civic Center, New Delhi (2020] 84 ITR(T) 602 (Delhi - Trib.) : 2020 TaxPub(DT) 3191 (Del-Trib)

viii. Enpro India Ltd. (2000] 113 Taxman 132 (Delhi) (Mag.)[12- 07-2000]

ix. Premier Housing & Industrial Enterprises (2008) 24 SOT 236 (Chennai-Trib) : 2008 TaxPub(DT) 1751 (Chen-Trib)

AO cannot step in the shoes of businessman and decide as to how affairs of business were to be run and wasteful or excessive expenditure was to be curtailed.

i. S.A. Builders Ltd. v. CIT (2007) 288 ITR 1 (SC) : 2007 TaxPub(DT) 0833 (SC)

ii. Woollen Mfg. v. CIT (1969) 72 ITR 612 (SC) : 1969 TaxPub(DT) 0130 (SC)

iii. CIT v. Dalmia Cement (P.) Ltd. (2002) 254 ITR 377 (Delhi) : 2002 TaxPub(DT) 0625 (Del-HC)

iv. CIT v. Oracle India (P.) Ltd. (2011) 11 taxmann.com 139 (Del) : 2012 TaxPub(DT) 0424 (Del-HC)

v. DCIT v. Manish Buildwell (P.) Ltd. (2011) 142 TTJ 749 (Delhi-Trib.) : 2012 TaxPub(DT) 0447 (Del-Trib)

vi. DCIT v. Sophisticated Marbles and Granite Industries (2010) 3 ITR (T) 220 (Delhi) : 2010 TaxPub(DT) 1596 (Del-Trib)

Ed. Note: The section pertains to a year prior to insertion of Section 50CA/50D. Section 50CA was introduced w.e.f. 01-04-2018 and Section 50D w.e.f. 01-04-2013. But whether these two sections can fasten tax in this case is still a bone to pick.

Case: Trak Services (P) Ltd. v. ITO 2023 TaxPub(DT) 5028 (Del-Trib)