TaxTMI 
TaxTMI 
2016 (1) TMI 1081
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....m the records are: The assessee is an individual and is a cable operator. The assessee is carrying its business under the name and style of M/s. Manoranjan Video and Cable Services. The assessee filed her return of income for the assessment year under appeal on 31-10-2008 declaring total income of Rs. 5,88,90,700/-. The case of the assessee was selected for scrutiny and accordingly notice u/s. 143(2) was issued to the assessee on 22-06-2010. In the return of income, the assessee had declared Long Term Capital Gain of Rs. 5,80,27,549/- on account of slump sale of her proprietary business M/s. Manoranjan Video and Cable Services. The Assessing Officer computed the Long Term Capital Gain at Rs. 6,25,49,232/- and thus, made addition of Rs. 45,21,683/- under the head Long Term Capital Gain. Apart from the above addition, the Assessing Officer made disallowance in respect of depreciation u/s. 40(a)(ia) claimed on Car and addition on account of net profit margin. The Assessing Officer computed the total income of the assessee as Rs. 6,48,62,782/-. Aggrieved by the assessment order dated 27-12-2010, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Co....
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.... 9 lacs of proprietary business M/s. Manoranjan Video and Cable Services, and iii. For the undertakings/assurances of the performance of the joint venture business valid up to 28-12-2010. Thus, the sale consideration has to bifurcated towards the above three components. 4.1 The Commissioner of Income Tax (Appeals) has erred in not accepting the above bifurcation of the total consideration received by the assessee. The Commissioner of Income Tax (Appeals) has erred in holding that the amount of Rs. 6,26,23,763/- is towards the sale consideration of 253 equity shares of M/s. Manoranjan Satellite Pvt. Ltd. It would be evident from the records that the shares of M/s. Manoranjan Satellite Pvt. Ltd. would not have so much of value for the reason that the said company is a Private Limited Company and its shares are not listed. Moreover, right from the beginning the company was not doing well, therefore, it had not declared any dividend. The sale consideration of 253 shares has to be worked out by taking into consideration the intrinsic value of shares as on 01-03-2008 i.e. the date of transfer of shares. The intrinsic value of shares of M/s. Manoranjan Satellite Pvt. ....
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.... Income Tax (Appeals). The ld. DR submitted that the contentions of the ld. AR that sum of Rs. 6,09,70,835/- is towards performance guarantee is erroneous and afterthought. The ld. DR referred to clause (2) of the joint venture agreement at page 9 to show that the total consideration of Rs. 12,75,00,000/- is paid towards transfer of shares. The ld. DR further submitted that even if the contention of the assessee is accepted that the liability of the assessee comes to an end on 28-12-2010, the Commissioner of Income Tax (Appeals) passed the impugned order on 01-08-2012, the assessee in her return of income should have offered the aforesaid amount in her return of income for the assessment year 2011-12. There is nothing on record to show that the assessee had offered the said amount in the return of income for assessment year 2011-12. The assessee has artificially bifurcated the sale consideration to suppress the income and thereby reducing the tax incidence. The ld. DR strongly defended the findings on the Commissioner of Income Tax (Appeals) on this issue and prayed for dismissing the appeal of the assessee. 6. We have heard the submissions made by the representatives of rival s....
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....e taxes), and with the sole intent of carrying out the Existing Firm A's business under the Existing Company. The list of such assets of the Existing Firm A is listed out in Annexure A attached to this Agreement. In this regard, the Existing Shareholder A, Existing Firm A, and the Existing Company shall execute an Asset Transfer Agreement. The Asset Transfer Agreement must be executed and the assets must be transferred on the 30th day from the Effective Date. ii. xxxxxxxxxx xxxxxxxxx 2. Consideration Based on the representation and warranties given by the Existing Shareholders/Existing Company in Clause 4 of this Agreement, DEN has agreed to pay a consideration of Rs. 12,75,00,000/- (Rupees Twelve Crores Seventy Five Lacs Only) ("Consideration") to the Existing Company/Existing Shareholders In the following manner. (a) Upon execution of the Agreement: * Rs. 25 lacs to the Existing Shareholder A Upon execution of the Agreement. DEN has paid an amount of Rs. 25 lacs (Rupees Twenty Five Lacs Only) vide cheque no. 399998 dated December 27th, 2007 to the Existing Shareholder A, through the Existing Firm A, the receipt of which is ack....
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....00/- (Approx) per share and a consideration of Rs. 12,50,00,000/- (Rupees Twelve Crores Fifty Lacs Only) to the Existing Shareholders for acquiring 503 equity shares of the Existing Company. (Details Below): (a) Consideration for Share Subscription (i) Rs. 25,00,000/- (Rupees Twenty Five Lacs Only) to the Existing Company payable on the execution of this Agreement. Upon execution of this Agreement. DEN has already paid an amount of Rs. 25 lacs (Rupees Twenty Five Lacs Only) vide cheque no. 401312 dated February 26, 2008 drawn on Syndicate Bank, Hauz Khas, New Delhi to the Existing Company, the receipt of which is acknowledged by the Existing Shareholder A and the Existing Shareholder B on behalf of the Existing Company. This amount of Rs. 25 lacs shall be utilized by the Existing Company for immediate settlement of dues accruing on account the Existing Shareholder A transferring the assets of his proprietorship firm, Manoranjan Satellite Cable Network (Existing Firm A). In favor of the Existing Company under the Asset Transfer Agreement dated February....., 2008, and The Existing Shareholder B transferring the assets of his proprietorship firm, Manoranjan....
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....isting Shareholder are less than such numbers as mentioned above within 12 months of the Effective Date, the Performance Bonus shall be adjusted and paid proportionately." 8. The ld. AR has also placed on record Asset Transfer Agreement between M/s. Manoranjan Satellite Pvt. Ltd. and M/s. Manoranjan Video and Cable Services a proprietorship firm of the assessee. A perusal of the said agreement would show that the company M/s. Manoranjan Satellite Cable Network purchased assets of the proprietorship firm from the assessee for a consideration of Rs. 9 lacs. 9. The assessee in its return of income admitted slump sale of its proprietary business for a consideration of Rs. 6,25,00,000/- i.e. one half of Rs. 12,50,00,000/- i.e. total consideration received from M/s. DEN Network and after reducing the cost of selling and cost of acquisition of shares, has returned Long Term Capital Gain of Rs. 5,80,27,549/-. The Assessing Officer made addition of Rs. 45,21,683/- by reworking the Long Term Capital Gain as under: "Full value consideration received for Sale of 273 shares M/s. Manoranjan Satellite Pvt. Ltd. Rs.6,25,86,282/- Less : Cost of selling Rs. Nil Cost of Acquistio....
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....ed to such refund of the amount paid, capital gain was liable to be taxed in A.Y. 2011-12, is bereft of any merit Warranty clause and performance clauses are made part of standard agreement by parties in order to protect their interest. Just because warranty clause exists in respect of sales agreement for 3 years, it cannot be said that sales will materialize after 3 years and not on the invoice date. Therefore, I do not find any merit in the additional ground of appeal filed by the appellant. The appellant has also cited certain case laws which are distinguishable on facts and no support can be seen to the appellant's case on account of these case laws." We concur with the findings of the First Appellate Authority. 12. A perusal of the agreements would show that nowhere in the agreement it has been stated that the consideration paid by M/s. DEN Network is in respect of the three components as stated by assessee, and no such bifurcation has been given in any of the agreements placed on record by the assessee. On the contrary a perusal of Share Purchase Agreement would show that M/s. DEN Network has purchased 10 equity shares of M/s. Manoranjan Satellite Pvt. Ltd. at a premium....