TaxTMI 
TaxTMI 
TaxTMI 
2016 (8) TMI 900
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....s Rs. 2 crores only and the vendee had to bear the statutory liability of gratuity of employees. However in this case as per agreement sale consideration itself included repayment of loan." 3. The facts and circumstances giving raise to Gr.No.1 & 2 raised by the Revenue are as follows: (1) There was a company by name M/S.Avinash Organics Private Limited. It acquired on 9.7.1997 property being 4th and 5th Floor measuring 1921 Sq.ft. each of premises known as Meher Chambers, situated at R.K.Marg, Ballard Estate, Mumbai-400 001 together with proportionate undivided right, title and interest in the land over which the above premises were constructed. (2) On and from 31.10.2001 the name of M/S.Avinash Organics Private Limited was changed to M/S.Khaitan & Co. Consulting Private Limited. On and from 12.4.2002, M/S.Khaitan & Co., Consulting Private Limited was changed to M/S.Khaitan & Co., Consulting Ltd. (3) On 23.12.2009, M/S.Khaitan & Co., Consulting Ltd., acquired by a registered document the 3rd Floor measuring 1921 Sq.ft. of the premises known as Meher Chambers, situated at R.K.Marg, Ballard Estate, Mumbai-400 001 together with proportionate undivided right, title and inter....
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....r a lump sum consideration of Rs. 15,37,35,633. Clause 2, 2.1 & 2.2 of the Agreement dated 29.1.2010 is very vital for a decision of the dispute in the present case and it reads as follows: "2. Sale and Purchase of Sale Shares 2.1 The Seller shall sell and transfer to the Purchasers and the Purchasers shall purchase and acquire from the Seller as a spot delivery contract all the Sale Shares for a lump sum consideration of Rs. 15,37,35,633/- (Rupees Fifteen Crores thirty seven lakhs thirty five thousand six hundred and thirty three only) (hereinafter referred to as "Sale Consideration"), free from all encumbrance and charges, lien or demand whatsoever -but with the benefit of all rights, title and interest attached thereto. 2.2 On the Effective Date, the Purchasers shall pay the Sale Consideration to the Seller in the following manner: 2.2.1 a sum Of Rs. 1,60,00,000 (Rupees One crore sixty lacs) has already been paid by the Purchasers to the Seller on or before the execution hereof, as Earnest Money towards the purchase of the Sale Shares in the Company vide Pay Order No. 516321 dated 3 September 2009 drawn on the Bank of Baroda, Nariman Point Branch, Mumbai in favour of....
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.... of their outstanding from M/S.Khaitan &Co.Consulting Ltd. The Assessee submitted that the Agreement dated 29.1.2010 was a composite Agreement by which the Assessee wanted to sell shares and also secure repayment of the loan due by it from M/s.Khaitan & Co.Consulting Ltd. Therefore the sale consideration mentioned in the agreement was a composite sale consideration. Only a sum of Rs. 10,40,09,705 was relatable to sale of shares and the remaining sum was nothing but realization of loans due to it which cannot be regarded as full value of consideration received on transfer of shares. The Assessee thus claimed that its computation of LTCG was correct. The Assessee placed reliance on the decision of the ITAT Mumbai Bench in the case of Voltas Ltd. Vs. ACIT (2010) 4 ITR (Trib.)(Mumbai). In the aforesaid decision the facts were that Voltas Limited (VL) along with Voltas International Ltd. (VIL) had promoted a company named Premium Granite Ltd. (PGL). Investments were made by VL and VIL in the said company, PGL from time to time. They had also advanced loans to the said company, PGL on various occasions. Due to continued loss suffered by PGL, VL and VIL decided to sell all the shares of P....
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.... from the matter in hand. In Voltas Ltd. (Supra) the issue in hand dealt with the genuineness of investment in shares on rights basis and there was specific clause for repayment of loan due as part of one time settlement. There was pre-requisite to seek approval of financial institution for transfer of shares and for seeking such approval, loan repayment was made. Such loan amount was treated by the AO as sale consideration although there was no such clause in the agreement and the and the sale consideration was fixed at Rs. I/- although the purchase price was very high. In the instant case it is specifically mentioned in the sale agreement that lump sum sale consideration of share is Rs. 15,37,3S,633/- 1.15. In view of the above, the contention of the assessee is rejected and I recompute the capital gains with sale consideration at Rs. 15,37,3S,633.00. Hence an amount of R.4,97,2S,928/- is added back being difference of Rs. 15,37,3S,633/- (-) Rs. 10,40,09,705/- 6. On appeal by the Assessee, the CIT(A) agreed with the stand taken by the Assessee and held that the full value of consideration received on transfer should be adopted only at Rs. 10,40,09,705. The following were ....
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....rice of the shares should be paid but the loan receivable from the subsidiary should also be repaid. 2.6. Merely because the two transactions are rolled in one lump sum consideration in a transaction of outright transfer of an undertaking, no different adverse conclusion can be drawn as the AO has sought to do. It is well established that the agreement has to be read in its entirety and cannot be dissected and applied piece- meal. In this behalf reliance can be placed on the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Hooghly Mills Co. Ltd. reported in 287 ITR 333 wherein at page 335 it was held as follows:- "Thus in the same agreement of sale of the undertaking it was not only mentioned that the vendee will pay to the vendor the sum of Rs. 2 crores as a consideration but in addition to this it will also take over the accrued and future gratuity liability of the employees. It is well-settled that an agreement has to be read as a whole. Hence the consideration for the sale was not only Rs. 2 crores but in addition the gratuity liability of the vendor as well." The Mumbai Tribunal decision in the case of Voltas (Supra) also support....
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....he revenue in this appeal is that the ratio in the case of Hooghly mills case (supra) had been wrongly applied, it is necessary for us to see the facts of the case in Hooghly mills case (supra). The assessee in the case of Hooghly Mills Co. Ltd.(supra) had by an agreement with the vendor, purchased an Undertaking for Rs. 2 crores. In addition to the said amount the assessee also took up the accrued and future gratuity liability of the vendor which amounted to Rs. 3.5 crores. By the virtue of the said agreement, the amount was apportioned among the heads of three larger heads of land, buildings and plant and machinery. The assessee claimed that since this amount of Rs. 3.5 crores towards gratuity was capital expenditure it was entitled to depreciation on the sum under section 32 of the Incometax Act. The Commissioner of Appeal, Tribunal held that accrued gratuity was a part of consideration and allowed its distribution to the cost of acquisition for different assets and depreciation on reworked amount which was upheld by the High Court of Calcutta. On further appeal by the Revenue, the Hon'ble Supreme Court held that claim for depreciation was not to be allowed. Referring to the agr....
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....lly raised for sale of premises which is in the name of subsidiary company. " 11. The facts in so far as Gr.No.3 raised by the Revenue is concerned are that the Assessee while computing LTCG on sale of shares of M/S.Khaitan & Co.Consulting Ltd., the Assessee had claimed as a deduction towards expenditure in connection with transfer a sum of Rs. 12,13,300/- being brokerage paid to Mr.Manish B.Thakkar. On perusal of the bill dated 3.2.2010 raised by the broker based on which the Assessee made the aforesaid payment of commission, the AO noticed that the bill contained the following service rendered for which brokerage was paid by the Assessee: " Being your premise at Meher Chambers.3rd & 5th Floor, R.KMarg, Bellard Estate, sold to our client Mr. Gulabsi Ratansi Khimji & Mrs. Devyani gulabsi Bhatia. Our remuneration charges are lump sum". 12. The AO was of the view that the brokerage in question was paid in connection with services rendered for sale of property and not for sale of shares. The Assessee submitted before AO the Brokerage Bill by mistake mentioned that it is for sale of premises but in fact it was with reference to the transaction of sale of shares by the Assessee. ....