Share sale consideration cannot be split and taxed as other sources without statutory basis or proof of sham arrangement

Transfer of shares under an agreed per-share price could not be split or rewritten by the revenue to tax part of the receipt as income from other sources merely because a related commercial purchase commitment was said to enhance the share value. The text states that the share sale was not shown to be sham or colourable, the purchase commitment was genuine and honoured, and actual purchases exceeded the committed volumes. In the absence of any specific statutory basis for bifurcating the agreed consideration for a capital asset, the full sale consideration could not be recharacterised on conjecture. The addition was therefore unsustainable.

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Issues: Whether a portion of the agreed sale consideration received on transfer of shares could be recharacterised as income from other sources on the footing that a related purchase commitment enhanced the share value.

Analysis: The assessee transferred shares of an Indian company to an unrelated purchaser at an agreed per-share price, while an affiliate of the assessee group had given a commercial purchase commitment to support the purchaser's confidence in future business. The record did not show that the share sale was a sham, colourable device, or make-believe arrangement. The services underlying the purchase commitment were genuine, the commitment was honoured, and the actual purchases exceeded the committed volumes. All sellers transferred at the same price per share, yet the revenue selectively recharacterised part of the assessee's receipt without any specific statutory basis. In the absence of a provision authorising such bifurcation, the agreed consideration for transfer of a capital asset could not be rewritten or split on conjectures about valuation.

Conclusion: The portion of the share sale consideration attributed by the revenue to the purchase commitment could not be assessed as income from other sources, and the addition was unsustainable.

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