TaxTMI 
TaxTMI 
2011 (12) TMI 382
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....0,57,681/- assessed by the Assessing Officer is not chargeable to tax under any provision of the I T Act." 3. During the assessment proceedings, the Assessing Officer found that the assessee has shown long term capital gain of Rs.3,16,12,208/- on buy back of shares of Colour Chem Ltd. The assessee has sold 71,233 shares @ Rs.318 shares and has also received interest @ Rs.149.62 on these shares. It was noticed that the assessee had considered interest as a part of sale consideration and worked out Long Term Capital Gain as under: Total consideration received: Rs.3,33,09,975/- Less Cost of Acquisition : Rs.16,97,767/- Long Term Capital Gain: Rs.3,16,12,208/- Taxable at 11.22% Tax: Rs.35,46,890/ 3.1 The Assessing Officer asked the assessee to explain as to why the interest of Rs.1,06,57881 received on the investment should be treated as Income from other sources and taxed as such. The assessee vide its letter dated 31.10.2008 has submitted that the said interest was paid pursuant to the order of the Supreme Court to eligible shareholders. Further Colour Chem Ltd has not deducted tax while making payment of the same under section 194A of the ....
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....rt in the case of Manubhai Bhikhabhai v. CIT reported in 205 ITR 505 (Guj). 4.2 The ld AR of the assessee has narrated the litigation history of the case of acquiring these majority share holdings of Clariant International Ltd (supra) as under: "The purpose of Supreme Court awarding interest of Rs 149.62 per share (net off dividends) is to compensate the shareholders of target company for the loss of time or delay in making the offer. Hence such interest can under no stretch of imagination be construed to be interest income accruing in the hands of the Appellant. In furtherance to the above, we would like to draw your attention to the definition of interest as per Section 2(28A) of the Act, reproduced below: "interest means interest payable in any manner in respect of any money borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised;" It is amply clear from the above mentioned definition, that to be considered as interest the amount should....
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....submitted that as per the provision of sec. 46(A), only the consideration received by the shareholder, after adjustment of the cost of the acquisition of shares is deemed as capital gain arising to such shareholder. He has relied upon the orders of the lower authorities. 7. We have considered the rival contention and perused the relevant material on record. Before discussing the relevant contention and legal proposition, we would like to reproduce the factual background giving rise to the dispute of interest payment and transfer of the shares under buy-back scheme. As narrated by the Supreme Court in the decision dt 25.8.2004, in the case of Clariant International Ltd and Anr vs SEBI. "Colour Chem Ltd. is a target company. Its shares are listed on the Bombay Stock Exchange and National Stock Exchange. Appellant No.1 (Clariant) in Civil Appeal No.3183 of 2003 is a Swiss company being subsidiary of another Swiss company, Clariant AG. Hoechst is a German company whereas. Fbito Chemiebeteiligungen AG (Fbito) is a Swiss company. In Fbito Clariant held 49% and Hoechest 51% shares. An agreement was entered into by and between Hoechst and Cliariant pursuant whereto and in furt....
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....aking 21 .1 .97 as a reference date and thus the entire offer process would have been completed latest by 2 1.3.98. Since no public announcement for acquisition of shares of the Target company has been made, which has adversely affected interest of shareholders of Target Company, it would be just and equitable to direct the Acquirer to pay interest @15% per annum on the offer price, the Acquirer is hereby accordingly directed to pay interest (15% per annum to the shareholders for the loss of interest caused to the shareho1ders from 22.3.98 till the date of actual payment of consideration for the shares to be tendered in the offer directed to be made by the Acquirer." An appeal was preferred there against by the acquirer wherein the primal question raised was the rate of interest for the del involved in making payment to the shareholders who tendered the share in the public offer required to be made in terms of the Regulations. It is not in dispute that the value of the share as on 24.2.1998 was Rs.220/- on 22.10.2002 Rs.213/- and on the date of public announcement i.e. on 7.4.2003 the value of the share was Rs.209/-, Rs.233/- Rs.203/- and Rs.220/, whereas the of....
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....irer and thus, the interest was paid to compensate the shareholder who are deprived of interest payable on difference of offer price and market price. 8.3 The main contention of the assessee is that the interest received by the assessee should be part of the sale consideration of the shares. Reliance was placed on the decision of Authority for Advance Ruling in the case of Burmah Castrol Plc. (supra) wherein it was held that the interest paid to the shareholder pursuant to the order of a statutory body should be added as cost of acquisition of shares, in our view merely by reason that the interest paid by the acquirer would be part of acquisition of shares would not ipso facto conclude that the said interest in the hand of the shareholder would be part of sale consideration. 8.4 The Hon'ble Supreme Court in the case of CIT v. Ghanshyam (HUF) (supra) after analysing the provisions of Land Acquisition Act, 1894 has given a detailed finding on the issue of interest payable u/s 23, 28 as well as section 34 of the Land Acquisition Act. The Hon'ble Supreme Court has analysed the issue whether the interest paid on enhanced compensation u/s 23,28 and interest u/s 34 wou....