Capital gains on share sale cannot be recomputed using FEMA banking guidelines absent evidence that declared consideration is unreal.

RBI guidelines framed for FEMA compliance and addressed to authorised dealer banks could not be used by income-tax authorities to substitute the actual share sale consideration for capital gains purposes. The authorities had no basis to enhance the declared price in the absence of adverse material showing that the stated consideration was unreal or sham, particularly where RBI had granted approval and the purchaser had accepted the agreed rate. The declared sale consideration of Rs. 390 per share was therefore accepted and the addition was deleted.

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Issues: Whether, for computing capital gains on sale of shares by a non-resident, the income-tax authorities could substitute the actual sale consideration of Rs. 390 per share with Rs. 400 per share by applying RBI guidelines issued for FEMA purposes.

Analysis: The RBI guidelines relied upon by the revenue were addressed to authorised dealer banks and were framed for FEMA compliance. The duty to examine compliance with those guidelines lay with the banking and FEMA machinery, not with the income-tax authorities. The record also showed that the RBI had granted approval and had raised no objection to the transaction price, while the purchaser had accepted the agreed rate in the memorandum of understanding. In the absence of any adverse material showing that the declared consideration was not the real consideration, the authorities below had no basis to enhance the sale value for capital gains purposes.

Conclusion: The substitution of Rs. 400 per share was unjustified and the assessee's declared sale consideration of Rs. 390 per share had to be accepted.

Final Conclusion: The addition made by the Assessing Officer was deleted and the assessee's appeal was allowed.

Ratio Decidendi: Guidelines issued for FEMA compliance and addressed to banks cannot, more, be used by income-tax authorities to override the actual sale consideration for capital gains computation in the absence of evidence that the stated consideration is unreal or sham.

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