AI Drafter 
TaxTMI 
TaxTMI 
2016 (9) TMI 993
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...."2. The Commissioner of Income tax (Appeals) erred in confirming the disallowance of Rs. 56,64,493/- u/s.14A of the Income tax Act. The Commissioner of Income tax (Appeals) ought to have appreciated that only the investments which earned the exempt income alone is to be considered for working out the disallowance and ought to have restricted the disallowance to Rs. 6,46,250 which is worked out on that basis." 3. The facts of the case are that the assessee has earned Dividend Income of Rs. 13,73,026/- which is exempt from Income tax. The assessee had voluntarily disallowed a sum of Rs. 27,461/- representing 2% of dividend income as expenditure u/s 14A. During the course of assessment, the assessee voluntarily offered for disallowance u/s.14A a sum of Rs. 56,64,493/- after taking into consideration a reasonable portion of salary of the persons who were dealing with the investment activities and a portion of conveyance, postage, telephone and bank charges towards expenditure. However, while completing the assessment, the AO invoked Rule 8D and disallowed a sum of Rs. 15,89,52,574/- u/s. 14A. 3.1 The AO has made the aforesaid disallowance with the following observations:- ....
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....o restrict the disallowance u/s. 14A to 56,64,493 - in place of Rs. 1,59,52,574 as admitted by the AO in the assessment order. This ground is partly allowed. 4.1 Against this, the Revenue is in appeal before us. 5. The ld. DR submitted that the CIT(Appelas) cannot remit the issue back to the file of the AO for fresh consideration. It is taken away from w.e.f. 1.6.2001. 5.1 Coming to the cross objection, the ld. AR submitted that the disallowance u/s.14A shall be only Rs. 6,46,250/- which earned the exempted income and the disallowance should be restricted to that extent. 6. We have heard both the parties and perused the material on record. The main plea of the ld. A.R is that investment is in a sister concern and associated companies and subsidiaries and interest pertained to borrowings used for earning exempt income from the investments only to be considered and he drew our attention to the paper book showing that the investments are in equity shares of sister concerns and these investments are made on account of commercial expediency. He placed reliance on the judgment of Delhi High Court in the case of CIT Vs. Bharti Overseas Pvt. Ltd., dated 17th December, 2015 wher....
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....0/- and (3) interest on other accounts: Rs. 1,29,43,000/-. If loans have been sanctioned for specific projects/expansion and have been utilized towards the same, then obviously they could not have been utilized for making any investments having tax-free incomes. From the copy of the sanction letters from State Bank of Bikaner & Jaipur it can be seen that the loan was granted with a specific requirement that the loan shall be utilized for purchase of imported machinery while in the case of loan from Federal Bank, it is seen that the loan was to be utilized for expansion of projects. Sanction of both these loans prohibit utilization of funds for purposes other than for the utilization for which they are sanctioned. From the ledger extract for the year ended 31.03.2008 for both loan accounts, it is seen that no amount has been utilized for investment in subsidiaries which earns tax-free income. The loan amounts were fully disbursed and utilized in the year ended 31.03.2008 (A.Y. 2008-09) itself. Taking into all the facts as stated above, I am of the considered opinion that if loans/borrowed amounts are granted for specific projects/expansion and no amount from the same has been direct....
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....rule 8D(2)(ii) what is sought to be allocated is "expenditure by way of interest...........which is not directly attributable to any particular income or receipt" and the only categories of income and receipt, so far as scheme of rule 8 D is concerned, are mutually exclusive categories of 'tax exempt income and receipt' and 'taxable income and receipt'. No other classification is germane to the context in which rule 8 D is set out, nor does the scheme of Section 14 A leave any ambiguity about it. 12. Ironically, however, the definition of variable 'A' embedded in formula under rule 8D(2)(ii) is clearly incongruous inasmuch while it specifically excludes interest expenditure directly related to tax exempt income, it does not exclude interest expenditure directly related to taxable income. Resultantly, while rule 8D(2)(ii) admittedly seeks to allocate "expenditure by way of interest, which is not directly attributable to any particular income or receipt" it ends up allocating "expenditure by way of interest, which is not directly attributable to any particular income or receipt, plus interest which is directly attributable to taxable income" (emphasis by underlining supplied....
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.... receipt (for example-any aspect of the assessee's business such as plant/machinery etc.)". Therefore, it is not only the interest directly attributable to tax exempt income, i.e. under rule 6D(2)(i), but also interest directly relatable to taxable income, which is to be excluded from the definition of variable 'A' in formula as per rule 6D(2)(ii), and rightly so, because it is only then that common interest expenses, which are to be allocated as indirectly relatable to taxable income and tax exempt income, can be computed. This is clear from the following observations made by Their Lordships of Hon'ble Bombay High Court in the case of Godrej & Boyce (supra): 60. In the affidavit-in-reply that has been filed on behalf of the Revenue an explanation has been provided of the rationale underlying r. 8D. In the written submissions which have been filed by the Addl. Solicitor General it has been stated, with reference to r. 8D(2)(ii) that since funds are fungible, it would be difficult to allocate the actual quantum of borrowed funds that have been used for making tax-free investments. It is only the interest on borrowed funds that would be apportioned and the amount of expe....
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....in our humble understanding, revenue authorities cannot take one stand when demonstrating lack of 'perversity, caprice or irrationality' in rule 8D before Hon'ble High Court, and take another stand when it comes to actual implementation of the rule in real life situations. Therefore, even as we are alive to the fact that the stand of the learned Departmental Representative is in accordance with the strict wording of rule 8D(2)(ii), we have to hold that, for the reasons set out above, this rigid stand cannot be applied in practice." 13. In view of the decision of the Calcutta Bench of this Tribunal cited above, we uphold the order of the Commissioner of Income Tax (Appeals) in excluding the interest on bank loan and term loans for the purpose of computing disallowance under Rule 8D(2)(ii). The grounds raised by the Revenue are rejected on this issue. " 6.1 In view of the above decision, we are of the opinion that the interest on borrowing which are made for specific purpose of business cannot be considered for the purpose of Rule 8D of the Income Tax Rules. Further, investments in sister concerns or subsidiaries with which the assessee is having business transactions, th....
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.... "6.1. Ground No.3 - Disallowance of expenditure by invoking the provisions of section 14A of the Act for Rs. 3,11,34,630/- since the assessee had made investments of Rs. 71,55,33,570/- for earning exempt income. At the outset, we find that there is no merit for the Revenue to make addition of Rs. 3,11,34,630/- invoking the provisions of section 14A of the Act because the investment made of Rs. 71,55,33,570/-, bears no cost in the form of interest or whatsoever, since the funds by which the investment is made is assessee's own funds. Further, these investments are made only with sister companies of the assessee and no cost can be attributed for the management of such funds. Therefore, we hereby delete the addition of Rs. 3,11,34,630/- made by the Ld. Assessing Officer invoking the provisions of section 14A of the Act. This ground raised by the assessee is allowed in its favour. " 6.3 In view of the above judgments, the AO has to consider the assessee's own fund i.e. capital and reserves as available on the date of investment which yields exempted income and thereafter he shall apply the Formula in Rule 8D and also exclude investments in subsidiaries as held by the abov....
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....es was only an advance paid towards purchase of shares of TESL, then the same need not have been classified as `Inter corporate deposit" in the financials of TVS Investments Ltd and more further, there is no need to receive interest on such sum. Moreover, the agreement is set to have been entered to provide the assessee company, to further business opportunities by way of credit support to its customers. However, as seen from the financials of the assessee company for the financial year 2009- 10, the company has disposed the shares purchased, immediately i.e on 03.03.2010 for a paltry sum of Rs. 0.01(ie one paisa) per share. 9.2 According to the AO, it is evident that the averment of the assessee that they purchased the shares of TFSL for furthering its business is devoid of any rational or business prudence as they would not have sold the shares of TFSL immediately if it is true intention was to have business interest in TFSL. Further, no prudent businessmen would buy a share whose net worth is negative and which was sold to one of its related companies at a paltry rate of 1 paisa per share for a huge consideration @ 31.19 per share. In other words, the assessee had purchased t....
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....of TFSL. This is only a colourable device and a design adopted by the assessee company to evade payment of tax consistently over a period of years. 9.6 The AO placed reliance on the judgment of the Supreme Court in the case of Mc Dowell vs CTO (154 ITR 148) SC, on the issue of whether a colourable device can be used to evade tax, has held as under: "Tax planning may be legitimate provided it is within the framework of l aw. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges. It is neither fair nor desirable to expect the legislature to intervene and take care of every device and scheme to avoid taxation. It is up to the Court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of "emerging" techniques of interpretation was done in Ramsay. Burma oil and Dawson, to expose the devices for w....
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....- Assessee alleged that without bringing said case to notice of parties, revenue had caused prejudice to its case; all in violation of principles of natural justice and of rule 11 - whether since decision of Supreme Court in Sumati Dayal case (supra) was cited by tribunal only for purpose of reiterating well settled and established position of law, it could not be said to have caused- held yes -Whether when a transaction is sham and not genuine as-instant case , then it could not be considered to be apart of tax planning or legitimate avoidance of tax liability issues in instant case were purely - Held yes - Whether further since questions which there were concurrent findings of authorities below, it was to be there was no question of law to be considered - Held yes. (In favour of revenue)". Further their Lordships have held that : "the Supreme Court in the Vodafone International Holdings B. V vs Union of India (2012) 204 Taxman 408 / 17 Taxman. com 202 (SC) makes it very clear that a colourable device cannot be a part of tax planning. Therefore where a transaction is sham and not genuine as in the instant case then it cannot be considered to be a part of tax planning o....
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....lations. It is a usual and legal corporate procedure that as a co-promoter, TVSM had to acquire the shares from the public under the circumstances mentioned above. f. After studying the sequence of events, it is clear that most of the shares were acquired by TVSM from 2002 onwards for Rs. 10/- per share. But when the company's net worth is negative, then the purchase price has to be only one paisa per share. I concur with the appellant that the shares purchased from 2002 to 2005 had nothing to do with the price of Rs. 31.19 per share and only seven laklh shares were acquired at this price. Therefore, I do not see any justification for the AO in computing capital gains of almost Rs. 170 crores by adopting the price of Rs. 31.19 per share for all shares. g. The appellant has submitted a copy of the understanding signed by both TVSM and TVSI to substantiate that both TVSM and TVSI agreed to share the acquisition cost and related expenses of book building in the ratio in which TVSI and TVSM hold TVSF&S shares in the capital structure of TVSF&S. h. The decisions relied on by the Assessing Officer are not applicable to the appellant's case. The decision....
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....d more further, there is no need to receive interest on such sum. Moreover, the agreement is set to have been entered to provide the assessee company, to further business opportunities by way of credit support to its customers. However, as seen from the financials of the assessee company for the financial year 2009-10, the company has disposed the shares purchased, immediately, i.e. on 03.03.2010 for a paltry sum of Re. 0.01 (i.e. 1 paise) per share. 12. The ld. AR relied on the submissions made by the assessee and contended against the Assessing Officer's adoption of deemed selling price at Rs. 31.19/- per share. The ld. AR submitted his arguments as under: 1) At the outset, the assessee submits that in the entire scheme of things, viz., a. Promotion of finance arm for facilitating marketing of two wheelers manufactured by the Appellant company (TVS Motor Company Limited) (TVSM), b. necessary funds being invested in the years 2001-2005, c. facing acute melt down in the business prospects following economics lowdown d. competition in finance business institutions, between NBFC's and other banking e. inability to infus....
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....was itself an impossible strain on the promoters. So, the choice of closing down the unit was taken, though at the same time anything affecting the credibility of the promoter company and also the entire TVS group needed to be considered while taking these steps cautiously. 7) It was seriously believed by the promoters on behalf of the TVS group that the acquisition through SEBI approved route of buyback price of the shares held by the public would be in the larger interest of the company's creditors, company's shareholders, and above all, in the interests of protecting the image of TVS Group. In this background, if the whole scheme of things, that unfolded itself in the period 2008-12 is seen, it would be evident that with the sale of the entire shares initially within the group into another company adding negligible value (when the net worth of the shares was clearly a negating figure over Rs. 40 per share),the genuineness behind the closure can be appreciated. The parent company as promoter was in a most unenviable position in sustaining the huge losses for having invested nearly Rs. 100Cr in the venture at different stages and finally sustaining a huge capital ....
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....was initially engaged in providing corporate finance and made profits till the financial year 2000-01. Thereafter, it began providing finance for purchase of two-wheelers manufactured by TV SM and became an in-house finance company. TVSM invested 4,61,54,592 shares in TVSF&S @ Rs. 10/- per share in 2002-03, TVSM has acquired shares in TVSF&S from August 2002 onwards and the last major purchase was made in March 2005. The total cost of shares acquired by TVSM is Rs. 86.91 crores after indexation. These shares were sold in March, 2010 at one paisa per share resulting in a long term capital loss of almost Rs. 120 crones. TVSM had also purchased 7, 04, 349 shares of TVSF&S at Rs. 31.19 per share from TVS Investment Ltd. for a consideration of Rs. 2.19 crores on January 15, 2010. This lot was sold on March 3, 2010 (within two months) for one paisa per share to TVS e-Access India Ltd. resulting in 2.2 crores (approximately). It is necessary to understand why the shares were eventually sold for just one paisa per share. TVSM explained that TVSF&S was a non-banking finance company which was also listed in the stock exchange. After 2001 -02, TVSF&S incurred losses year after year a....
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....uspended on the other. From 2008-09 onwards, the company was faced with the Hobson's choice of closing down the business with all related consequences or continue the business by restructuring by making fresh investments. It had to opt, and it opted, for the latter choice as the closure would have not only affected the credibility of the company and the SCL / TVSM, but it could also have affected the TVS Group as a whole. Finally, TVSM had to undertake the main responsibility of restructuring TVSF&S business, as it also needed an in-house finance company. The restructure of TVSF&S was driven on account of the following: That TVSM needed an in-house finance company to effectively compete in the market. It is an indisputable position that without auto financing the growth of auto business would be limited. Declaring insolvency of TVSF&S would have far reaching adverse consequences to the TVS Group. Despite the losses and the difficulties mounting on the side of TVSF&S, TVSM could get TVSF&S to finance a total of 4.43 lakh additional vehicles sold during 2001 to November 2007 which it could not have sold otherwise, on which, it....
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....nes, only one of the promoters has to make the public offer to acquire shares in preparation for the eventual delisting. As TVSM was also the promoter of TVSF&S, it was agreed that the two promoter companies would equally split the cost incurred in the buy-back of shares from the public at Rs. 25 per share. The entire delisting expenses amounted to Rs. 6.19 per share and the resultant cost of acquisition for TVSM and for TVS Investment Ltd. was Rs. 31.19 per share. The book-building process took place in March 2008. Thus, the price at which the shares were acquired from TVS Investment Ltd., was Rs. 31.19 per share. Only 7,04,349 shares were purchased in January 15, 2010 at a price of Rs. 31.19 per share as part of TVSM's obligation to acquire the shares from the public as a co-promoter. In addition, TVSM had earlier acquired 8,67,62,192 shares of TVSF&S on various dates during the period 2002-2005 for a total consideration of Rs. 86.91 crores. TVSM had, therefore, acquired most of these shares between 2002 to 2005 at a face value of Rs. 10/- In January 2010, it acquired about 7.04 lakh shares at a price of Rs. 31.19 per share arrived at on the basis of book buildi....
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....e infusion of funds was not possible, and decision to close down the business was imposed inevitably by RBI and Stock Exchange Regulations, this ICD was used to adjust against sale proceeds of shares. The same ICD has been adjusted against the price payable by TVSM for 7,04,349 shares purchased as per understanding @ Rs. 31.19 per share. Adjustment of ICD against the price payable is a normal accounting procedure to settle the ICD by adjusting against sale price due. There is no statutory basis for AO to adopt the price of Rs. 31.19 per share as against the selling price of one paisa per share. None of the sections dealing with capital gains permit adoption of the price at which TVSM had to pay for the shares as a result of the book-building process. In calculating capital gains, Section 45 has several instances where the fair market value or some other sum is deemed to be the consideration receivable for transfer of the asset. In the absence of a statutory power, the adoption of Rs. 31.19 per share is impermissible. The AO has also completely ignored the factual background that required TVSM to pay Rs. 31.19 per share. The AO has simply assumed that TVSM had "ado....
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....ber of shares bought from TVSI as part of the book building process was about 7, 04,349 shares only @ Rs. 31.19 per share. Please refer to Annexure 2. To treat the entire purchase made by TVSM @ various prices of Rs. 10, etc., per share, as shares acquired at Rs. 31.19 per share is grossly incorrect and is against factual position. Para 11.7 in Assessment Order dated 3.3.2014 Now let us analyse the reasons behind such an arbitrary transactions between the assssee and its related group concerns i.e. TVS investments Ltd and TVS e-Access India Ltd. It is pertinent to note at this point that the TVS investments Ltd, TFSL and TVS e-Access India Ltd are group concerns managed by common Chairman whereas the Assessee company TVS Motors Ltd is managed by a different Chairman. Hence, for this precise reason, the assessee has sold the shares of TFSL to TVS e- Access India Ltd. for a paltry rate of 1 Paisa per share whereas purchased the same shares at a huge rate of Rs. 31.19 per share from M/s.TVS Investment Ltd, so taht its twin objectives can be achieved i.e. shares of TFSL could be retained within the group itself and on the other hand book huge capital loss. It....
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....er than Retail Invest or', the sale price would be @ 1paisa only. If this specific contentio n is to be admitted, then the assessee which is a listed company, sh ould have also bought the shares of TFSL @ 1 paisa only which is not the case. Assessee's TVSM Rebuttal o AO's contention (a) Comparing Mrs. Mallika Srinivasan's offer, her holding in TVSF&S @ Rs. 25 per share is also illogical and has no substance. This is because she is a shareholder, under the public category, holding a few hundred shares, which was offered by her in the exit route provided to the public under the book building process associated with the delisting of shares. (b)Any public shareholder as a retail investor, who surrender the shares, would have got the same Rs. 25 per share which was the exit price' derided as per the SEBI Regulations under the book building process. Hence it is not correct to say that they fixed retail investor price @ Rs. 25 per share and other than retail investor price at 1 paisa per share. (c) Regulations of SEBI for delisting and price ought to be offered to the public shareholder on the basis of book building process should be....
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....& Co. vs CIT (2001) (118 Taxman 544) (MP), on the issue of whether the taxing authority has the power to probe such colourable devices, has held as under: "planning or legitimate avoidance of tax liability - Held. Yes Whether further since issues in instant case were purely questions of facts on which there were concurrent findings of authorities below, it was to be held that there was no question of law to be considered - held, yes (in favour of revenue)" Further, their Lordships have held that "The Supreme Court in the Vodafone International Holdings BV v. Union of India (2012) 204 Taxman 408/17 taxmann.com 202 (SC) makes it very clear that a colourable device cannot be a part of tax planning. Therefore, where a transaction is sham and not genuine as in the instant case then it cannot be considered to be a part of tax planning or legitimate avoidance of tax liability. In the instant case, the purchase and sale of shares so as to take long-term and short-term capital loss, was found as a matter of fact by all the three authorities to be a sham" 7. Para 11.11 in Assessment Order dated 3.3.2014 Thus considering the authoritative precedenc....
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....sparency or bona fides. The AO has not given any. finding that the purchase price or selling price was not correct. There is also no explanation as to how the purchase price of a share based on SEBI regulations can be deemed to be the selling price. The Bombay High Court decision in Killick Nixon Ltd. v DCIT 20 Ta..xmann.com 703: [2012]208 Taxman 4,5, dealt with a transaction which was found to be sham and bogus. In the present case, there is no such finding. The AO has no power to ignore the price which was arrived at on the basis of SEBI regulations. It is also not disputed that TVSF&S had a negative net worth, was delisted and its shares could not be sold to any third party. To put it bluntly, the shares of TVSF&S were worthless. 12.2 He also placed reliance on the following judgments: (1) CIT vs Biraj Investments Pvt Ltd. (2012) 24 Taxmann.com 273 (Guj) : (2) CIT vs Oberoi Hotels (P) Ltd. 334 ITR 293(Kolkata) (3) CIT vs S S Sankaralingam 176 CTR 520 (Madras) 13. We have heard both the parties and perused the material on record. In this case, the assessee had sold the shares of TVS Finance and Services Ltd. (TVSF&S), both long term and short term, f....
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.... the group. It was not adopted any tax planning in selling the shares of TVSF&S at a nominal price of one paise per share. It was only to safeguard the public image of "TVS Group". When there was a negative net worth of the assessee company, it is not practicable to keep such shares in the hands of the assessee company, otherwise it cause huge damage on public image, which cannot be rectified by any means. Hence, the selling of shares of one paisa per share was the conscious decision which was cautiously taken so as to safeguard the image of the company. It was the belief of the company that the acquisition through SEBI approved route of buyback price of the share held by the public would be in the larger interest of the company creditors, company shareholders and above all, in the interests of protecting the public image of TVS Group. In this background, if the whole scheme of things, that unfolded itself in the period 2008-12 is seen, it would be evident that if the sale of entire shares initially within the group into another company adding negligible value (when the net worth of the shares was clearly a negative figure of over Rs. 40 per share), genuineness behind the closure c....
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....n away by any judgment of the Court. This right has to be considered and in fairness, it should be appreciated that all transactions, which resulted in deduction of tax liability, cannot be considered as a device or subterfuge or colourable transaction. 13.2 Section 48 of IT Act provides for mode of computation of capital gains. The starting point of computation is the full value of consideration received or accruing. What in fact never accrued or was never received cannot be computed as capital gains u/s 48. In the case of KP Vargheese vs ITO Ernakulam 131 ITR 597, the Supreme Court has held as under : "The onus of establishing that the conditions of taxability are fulfilled is always on the Revenue and the burden lies on the Revenue to show that there is an understatement of consideration. Moreover, to throw the burden showing that there is no understatement of consideration on the assessee would be to cast an almost impossible burden upon him to establish a negative, viz., that he did not receive any consideration beyond what is declared by him. Once it is established by the Revenue that the consideration has been understated or to put differently the consideration a....
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.... consideration had further held that in the absence of any provision in the Act preventing sale of shares to a company within the same group, it cannot be treated as colorable device. HC further held that it was always open to the taxpayer either to hold on the shares or sell the same to avoid any further loss if it is felt that the market value was diminishing. It is open to sell the same or some other share for profit during the same period. HC also observed that it was not even the case of the dept that the shares were .sold at a price lower than the market price. 13.4 The ld. DR placed heavy reliance on the decision in the case of McDowell & Co. Ltd. (supra) to contend that transaction itself should be ignored as being a colourable device to avoid tax. Counsel drew our attention to some of the observations made in a recent decision in the case of Vodafone reported in 341 ITR, 1, wherein the ratio of the decision in the case of McDowell & Co Ltd., (supra) came up for consideration and it was held by the Apex Court in the case of Union of India v Azadi Bachao Andolan, 263 ITR 706 as follows : "...assessee contended that this is not a case of colourable device. The ass....
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....se of Azadi Bachao Andolan (supra) and the observations made in the later decision in the case of Vodafone (supra), we do not find that this a case which would fall within the parameters of the decision in the case of McDowell & Company Ltd. (supra). 13.6 In the case of CIT vs Oberoi Hotels (P) Ltd. 334 ITR 293(Kolkata) ; it was held as follows: "We also appreciate the reason of the Assessing Officer that the assessee company could have easily waited for a reasonable period of time for watching the market and could also have invested a further amount of Rs. 9 to 10 Crore to revive the business of M/s SKB. It is not within the province of the Assessing Officer to ignore an otherwise genuine transaction and to brand it as a colourable one on the ground that it was the duty of the company to invest further amount or it should have waited for a reasonable period." 13.7 In the case of CIT vs S S Sankaralingam 176 CTR 520 (Madras), it was observed as under : "It is also found that there was no material to indicate that the assessee had received anything more than the stipulated sale consideration. The Tribunal has proceeded further to hold, and rightly, that though i....
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....osition of law that if there is conflict of opinions between the two Benches of the Supreme Court on a question of law, the one declared by the Larger Bench would prevail over the one pronounced by the other Bench. But if a Bench consisting of a smaller number of Judges interprets a decision of a Larger Bench of the Supreme Court in a different way which may be apparently opposed to the one taken by the Larger Bench, a subsequent Co-ordinate Bench of the Supreme Court may refuse to follow the interpretation of the latter one on the ground that it proposed to follow the earlier view expressed by a Larger Bench. But if the subsequent decision of the smaller Bench explaining the Larger Bench is placed before a High Court, the latter is bound to follow the subsequent one by the smaller one which interprets the decisions of the Larger Bench because that is the interpretation of the Larger Bench by a Bench of the Supreme Court and the High Court cannot make a different interpretation than the one made by the subsequent decision of the Supreme Court which is binding upon it. The position, however, would be different if the subsequent smaller Bench of the Supreme Court in ignorance of the ....
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....ld the shares to the sister concern, TVS e-Access Pvt. Ltd. at a cost of Rs. one paise per share, whereas the same shares were sold to one of the Directors, Smt. Mallika Srinivasan at the rate Rs. 25 per share. However, none of the judicial pronouncements support this plea of the AO, specifically, the judgment of the Gujarat High Court in the case of Biraj Investment Pvt. Ltd. (supra). While making this kind of addition by the AO, the burden on the AO is very heavy to establish that the assessee has actually received the excess consideration than disclosed by the assessee. 14.1 It is pertinent to mention here that the order of the Tribunal in the case of ITO v. Smt. Kusumlata reported in (2006) 105 TTJ (Jd.) 265,the Jodhpur Bench has held as under: "The assessee having adduced all the requisite evidence to establish that the assessee held shares in a company and sold the same through a broker to a genuine purchaser and received payments through cheque, the transaction could not be treated as bogus." 14.2 Moreover, when purchases have not been doubted or disputed by the Revenue in this case, the decision of Hon'ble Punjab & Haryana Court relied by learned A.R. in the ....
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....een that some shares increased even by more than 100 times." 14.4 The Tribunal, Delhi 'C' Bench in the case of ITO vs. Naveen Gupta (5 SOT 94), has observed as under :- "Nevertheless, it is also noteworthy that the A.O. has failed to establish that in lieu of the aforesaid sale proceeds, the assessee has surreptitiously introduced his unaccounted money in the bank account. After having perused the entire material that is available on record, there is no averment, much less any evidence, with the Revenue in this regard. While there may be enough grounds with the AO to carry out the impugned verification exercise to test the efficacy of the transactions resulting in long term material gains in the hand of the assessee but there is no cogent material or evidence to indicate that the impugned sale proceeds reflected unaccounted income of the assessee." 14.5 In the case of Umacharan Shaw & Bros vs. CIT (37 ITR 271), the Supreme Court has held that suspicion howsoever strong cannot take place of proof. From the entire appreciation of evidence, the AO has failed to establish that the assessee has sold the shares at higer price. 14.6 The Supreme Court in the case of Kisha....
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....government policies and nobody shall be blamed. In our opinion, when the prices will go up and down, that may result in gain or loss, it cannot be said that it is colourable device adopted by the assessee. We have to see the ground realities, one who deals in shares in the open market, knows the depth of the same and not the AO. In our opinion, the reason advanced by the ld. DR to hold that it is not colourable device holds no water. 16.1 Further, ccomparing Mrs. Mallika Srinivasan's sale of shares of her holding in TVSF&S @ Rs. 25 per share is also illogical and has no substance. This is because she is a shareholder, under the public category, holding a few hundred shares, which was offered by her in the exit route provided to the public under the book building process associated with the delisting of shares. Any public shareholder as a retail investor, who surrender the shares, would have got the same Rs. 25 per share which was the 'exit price' derided as per the SEBI Regulations under the book building process. Hence, it is not correct to say that they fixed retail investor price @ Rs. 25 per share and other than retail investor price at 1 paisa per share. 16.2 Fur....