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2015 (12) TMI 35
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....icon Builders Pvt. Ltd. with the value working out to Rs. 6,99,99,875; and 1,37,931 shares @ Rs. 1,450 each of M/s. Bharati Cements Pvt. Ltd., with the value working out to Rs. 19,99,99,950. During the year under consideration, the assessee company had sold all the shares at cost. The assessee was therefore questioned about the sale of shares of M/s. Silicon Builders at cost. The assessee explained that the assessee was holding 2,54,545 shares of M/s. Silicon Builders with a paid up capital of 2,57,93,406, equity shares constituting 0.99% of the company and M/s. Silicon builders was holding 1,50,00,000 equity shares in M/s. Bharati Cements. It was submitted that the assessee's group companies agreed to sell their entire equity in M/s. Bharati Cements to M/s. Parficim, France at Rs. 671.20 per share and the promoters of the cement company having taken separate consideration for transferring the controlling stakes, had also provided an exit to the investment with almost 100% appreciation on their investment. It was submitted that the assessee had sold the shares of M/s. Silicon Builders at cost considering the commercial expediency and the interest of the group. After considering the....
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....ing the capital gain by the Assessing Officer by estimating the sale consideration is that the shares of Bharati Cements have fetched a higher amount as compared to the shares of Silicon Builders, which is holding the shares of Bharati Cements. As seen from the order of the CIT(A), the Assessing Officer has worked out the net worth of Bharati Cements to arrive at the share value of Bharati Cements to estimate the share value of M/s. Silicon Builders. This, in our opinion, is fallacious. Hon'ble Supreme Court in the case of CIT V/s. George Henderson (66 ITR 622) has held that the expression "full consideration" in the main part of S.12(B)(2) of the Indian Income-tax Act, 1922 cannot be considered as having a reference to the market value of the asset transferred, but the expression only named the full value of the thing received by the transferor in exchange for the capital asset transferred by him. S.12(B)(2) of the Indian Income Tax Act, 1922 is analogous to S.48 of the Income Tax Act,1961. This fact has been taken note of by the coordinate bench of the Tribunal (Mumbai Bench) in the case of Reliance Communications Infrastructures V/s. CIT (34 SOT 245) as under- ""24. In ....
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....ot have power under the I.T. Act to substitute 'fair market value' for 'full value of consideration'. There are specific provisions for substitution of fair market value for full value of consideration like computation under section 50C and 50D in the I.T. Act at present but in the relevant assessment year, the AO has no power to adopt the 'fair market value' in place of 'full value of consideration'. The method of computation as prescribed under section 48 superficially mention that "income chargeable under the head 'Capital Gains' shall be computed, by deducting from the full value of consideration received or accruing as a result of the transfer of the capital asset the following amount, namely: - (i) expenditure incurred wholly and exclusively in connection with such transfer, and (ii) the cost of acquisition of the asset and the cost of any improvement thereto". The 'full value of consideration' is clearly different from the 'fair market value'. Section 50D inserted w.e.f. 01.04.2013 permits fair market value being the full value of consideration in certain cases where as a result of transfer of capital asset by and asses....
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....ived by the transferor in exchange for the capital asset transferred by him. The consideration for the transfer is the thing received by the transferor in exchange for the asset transferred and it is not right to say that the asset transferred and parted with is itself the consideration for the transfer. The main part of section 12B(2) provides that the amount of a capital gain shall be computed after making certain deductions from the "full value of the consideration for which the sale, exchange or transfer of the capital asset is made." In case of a sale, the full value of the consideration is the full sale price actually paid. The legislature had to use the words "full value of the consideration" because it was dealing not merely with sale but with other types of transfer, such as exchange, where the consideration would be other than money. If it is therefore held in the present case that the actual price received by the respondent was at the rate of Rs. 136 per share the full value of the consideration must be taken at the rate of Rs. 136 per share. The view that we have expressed as to the interpretation of the main part of section 12B(2) is borne out by the fact that in the f....
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.... of the shares and securities was only rupees seventy-five lakhs. The facts of this case squarely fall within the rule laid down by this court in Commissioner of Income-tax vs. George Henderson & Co. Ltd. Therein this Court observed:- "In case of a sale, the full value of the consideration is the full sale price actually paid. The legislature had to use the words "full value of the consideration" because it was dealing not merely with sale but with other types of transfer, such as exchange, where the consideration would be other than money. If it is therefore held in the present case that the actual price received by the respondent was at the rate of Rs. 136 per share the full value of the consideration must be taken at the rate of Rs. 136 per share. The view that we have expressed as to the interpretation of the main part of section 12B(2) is borne out by the fact that in the first proviso to section 12B(2) the expression "full value of the consideration" is used in contradistinction with "fair market value of the capital asset" and there is an express power granted to the Income-tax Officer to "take the fair market value of the capital asset transferred" as "the full val....
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....ovides a statutory measure of the consideration received in respect of the transfer. It does not create any fictional receipt. It does not deem as receipt something which is not in fact received. It merely provides a statutory best judgment assessment of the consideration actually received by the assessee and brings to tax capital gains on the footing that the fair market value of the capital asset represents the actual consideration untruly declared or disclosed by him. This approach in construction of sub-section (2) falls in line with the scheme of the provisions relating to tax on capital gains. It may be noted that section 52 is not a charging section but is a computation section. It has to be read along with section 48 which provides the mode of computation and under which the starting point of computation is "the full value of the consideration received or accruing". What in fact never accrued or was never received cannot be computed as capital gains under section 48. Therefore, sub-section (2) cannot be construed as bringing within the computation of capital gains an amount which, by no stretch of imagination, can be said to have accrued to the assessee or been received by ....
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....wn at a lesser figure than that which is actually received by the assessee. It further laid down that the burden of proving such understatement of consideration is on the revenue and that the sub-section has no application in the case of a bona fide transaction, where the true consideration received by the assessee has been declared or disclosed by him. Section 50C, has come into the statute only with effect from 1.4.2003 by Finance Act, 2002 and is not applicable to the impugned assessment years. Hence, for the period prior to the insertion of section 50C no addition can be made by invoking the ratio of this section. The first appellate authority at page 21 of his order has rightly observed that, what in fact never accrued or was never received cannot be computed as capital gain. He relied on the decision of the Calcutta High Court in the case of CIT vs. Smt. Nandini Nopani (1998) 230 ITR 679. He rightly held that it is manifest that the consideration for the transfer of capital asset is what the transferor receives, in lieu of assets he parts with, i.e. money or monies worth and that the expression 'full consideration' cannot be construed as having reference to the market....