TaxTMI 
TaxTMI 
2016 (4) TMI 1082
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....e respondent-assessee had also shown the long term capital gain of Rs. 42,38,674/- arising out of the sale of 75,000 shares of M/s. Unisol Infraservices Ltd. (M/s. Unisol) to one M/s.Radha Krishna Hospitality Services (P) Ltd. ("RKHS") in terms of agreement dated 25th January, 2006. The Assessing Officer on perusal of the agreement dated 25th January, 2006 was of the view that under the agreement, the respondent-assessee as well as other co-owners (Shete family) of M/s. Unisol were to receive in aggregate a sum of Rs. 20 crores and proceeded to tax entire amount of Rs. 20 crores in the subject assessment year in the hands of all co-owners of shares. This resulted in the respondent-assessee being taxed on her share of capital gains at Rs. 4.48 crores after availing exemption under Section54EC of the Act. In the result the Assessing Officer by order dated 30th December, 2008 assessed the respondent to an income of Rs. 4.60 crores. 4. Being aggrieved, the respondent-assessee preferred an appeal to the Commissioner of Income-Tax (Appeals). By order dated 24th December, 2009 the Commissioner of Income-Tax (Appeals) deleted the addition of Rs. 4.48 crores made by the Assessing Officer o....
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....held that what amount has to be brought to tax is the amount which has been received and/or accrued to the respondent-assessee and not any notional or hypothetical income as the revenue is seeking to tax the respondent-assessee in the subject assessment year 2006-07. 6. Before considering the rival submissions it would be appropriate to extract the relevant clauses of agreement dated 20th January, 2006 : "7.6 Initial consideration is the initial sum of Rs. 2,70,00,000/- (India Rupees Twenty Seven million) less debt as on completion date plus cash as an completion date to be paid to Shete Group by RKHS in consideration for the shares in accordance with the provisions of clause 3.3. 7.7 Purchase price (for the transferee sale consideration for the transferor) the aggregate of initial consideration and deferred consideration under clause 3. Clause 2 Agreement to sell and purchase "Shete Group shall on the completion date sell and transfer as legal and benefical owner, the shares together with all rights attaching thereto to RKHS and RKHS shall purchase the shares free from all claims, charges, liens, encumbrances equities and adverse rights of any description. Nothing i....
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.... The amount payable in respect of B shall be capped at Rs. 20,00,00,00 (Indian rupee two hundred million) minus initial consideration payment of such sum shall be in full settlement of any sum due in respect of B notwithstanding the circumstances where the calculation of B would otherwise result in a figure in excess of Rs. 17,30,00,000/-(i.e India Rupees One hundred and seventy three million) Clause 3.4.4 In the event only that the amount payable in respect of B did not exceed Rs. 20,00,00,000 minus initial consideration the second deferred shall subject to clause 3.4.5 be calculated as follows: E=(D X 5.5) - Debt + Cash - (A+B) D = Unisols net profit for the year ended 31st March 2008 and for the year ended 31st March 2009 divided by two B = the first deferred consideration under clause 3.4.2 (if any) A = Initial consideration Cash = Cash as at March 31, 2009 Debt = Debt as at March 31, 2009 On 31th May, 2009, RKHS shall submit the calculation of the second deferred consideration to Shete Group for review. The parties shall agree within 30 days the amount of the second deferred consideration which shall then be made and payable on June 30, 2009 Clause 3....
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....its co-owners from M/s. RKHS. 8. In the present case, from the reading of the above clauses of the agreement the deferred consideration is payable over a period of four years i.e. 2006-07, 2007-08, 2008-09 and 2009-10. Further the formula prescribed in the agreement itself makes it clear that the deferred consideration to be received by the respondent-assessee in the four years would be dependent upon the profits made by M/s. Unisol in each of the years. Thus in case M/s. Unisol does not make net profit in terms of the formula for the year under consideration for payment of deferred consideration then no amount would be payable to the respondent-assessee as deferred consideration. The consideration of Rs. 20 crores is not an assured consideration to be received by the Shete family. It is only the maximum that could be received. Therefore it is not a case where any consideration out of Rs. 20 crores or part thereof (after reducing Rs. 2.70 crores) has been received or has accrued to the respondentassessee. As observed by the Apex Court in Morvi Industries Ltd. vs. CIT (1971) 82 ITR 835. "The income can be said to accrue when it becomes due.... The moment the income accrues, the ass....