Tribunal rules Section 50C doesn't apply to share transfer, accepts repayment of liabilities as part of sale consideration.

The Tribunal ruled in favor of the assessees, holding that Section 50C of the Income Tax Act, 1961 does not apply to the transfer of shares, deleting the addition made by the AO based on stamp duty valuation. Additionally, the Tribunal rejected the AO's addition of separate payment to the sale consideration, considering it as repayment of liabilities rather than additional consideration. The capital gains were treated as long term instead of short term, and the alternative claim for substitution of indexed cost was dismissed as moot. Ultimately, the appeals were allowed, and the assessees' positions were upheld.

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Issues Involved:
1. Applicability of Section 50C of the Income Tax Act, 1961.
2. Addition of separate payment to the sale consideration.
3. Computation of capital gains as short term or long term.
4. Alternative claim for substitution of indexed cost.

Summary:

Issue 1: Applicability of Section 50C of the Income Tax Act, 1961
The AO invoked the provisions of section 50C, treating the transfer of shares in M/s. Kamala Mension Pvt. Ltd. as a de facto transfer of immovable property (two flats) and adopted the stamp duty valuation for computation of Long Term Capital Gain. The Tribunal, following its earlier decision in similar cases, held that section 50C applies strictly to the transfer of land or building and not to shares. Therefore, the AO's decision to invoke section 50C was not upheld, and the addition was deleted.

Issue 2: Addition of Separate Payment to the Sale Consideration
The AO added Rs. 55,28,500/- to the sale consideration, considering it as additional consideration for the transfer of property. The Tribunal found that the transferees infused money into the company's accounts to repay the liabilities of the Directors, not as additional consideration to the transferors. Hence, the addition was deleted.

Issue 3: Computation of Capital Gains as Short Term or Long Term
For A.Y. 2008-09, the AO computed the capital gains as short term, citing depreciation claims. The Tribunal held that since the capital gain arises from the sale of shares and not property, it should be treated as long term capital gain as shown in the returns of income.

Issue 4: Alternative Claim for Substitution of Indexed Cost
The Tribunal dismissed the alternative claim for substitution of indexed cost as infructuous due to the decision on the main issues.

Conclusion:
The Tribunal allowed the appeals in favor of the assessees, deleting the additions made by the AO and confirming the treatment of the gains as long term capital gains. The alternative claims were dismissed as infructuous.

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