TaxTMI 
TaxTMI 
2011 (10) TMI 703
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....in June 2002 is not correct." FOR ASSESSMENT YEAR 2005-06: i) The ld CIT(A) erred in law and on facts in deleting the addition of Rs. 40,45,80,000/- made by the Assessing Officer on account of long term capital gain on transfer of shares to M/s Reliance Infocom Ltd by the assessee company without appreciating the fact that since the share were not listed in the BSE or NSE on the date of sale, the value of shares as on 14.4.,05 has been determined on the basis of its rate of increase in the value from 16.9.02 to 16.3.06 on which date the shares were first listed in the stock exchange. ii) The CIT(A) has erred on facts in holding that Shri Ashish P Deora was appointed as director on 3.5.2005 and the observation of the AO that Shri Ashish P Deora was a director in June 2002 is not correct." 3. We have heard the ld DR as well as ld AR of the assessee and considered the relevant material on record. The facts are common as in the case of Shri Ashish P Deoro in ITA No.442/Mum/2007 and reproduced as under: 4. During the course of assessment proceedings, the Assessing Officer came to know that 1 crore shares of M/s Reliance Infocomm Ltd (RIC) were allotted @ Rs. 1/- per share) to t....
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....elevant point of time was at face value. It was submitted that the assessee had no business connection with GICF who had transferred the shares of RIC to the three companies. Finally, it was stated that the shares are to be transferred to the companies only on completion of the project and since the project could not be completed; therefore, the shares were returned to the transferor and no benefit accrued or received by the assessee or his nominee. 4.3 The Assessing Officer did not accept the contention of the assessee and treated the difference of Rs. 52.71 per share as the benefit arising on transfer of these 1 crore shares at par and taxed on substantive basis in the hands of the assessee. At the same time, the Assessing Officer was of the view that it will be taxed on protective basis in the hands of the three recipients companies. 4.4 On appeal, the CIT(A) deleted the addition after taking the note of the fact that transfer of 1 crore shares of RIC by Ganesh Trust were subsequently retransferred on non-fulfilment of the conditions by the assessee to the Ganesh Trust. 5. Vide even date order in the case of Shri Ashish P Deoro in ITA No.442/Mum/2007 we have held that transac....
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....the basic telephone services on 20.7.2001. Thus, it is clear that the directors' report refers to the events consequent to the allotment of the shares on 2.4.2001 and particularly the developments of the grant of license of 16 telephone circles. Undisputedly, once the license for operating the basic telephone service in 16 circles was granted which cover the majority of the states of the country; hence, was an important development and certainly it has a positive effect on the value of the shares of RICL. Therefore, reference of grant of license in the directors' report cannot support the action of the Assessing Officer to presume the value of the share of RCIL at Rs. 15/- per share on the date of allotment i.e. 2.4.2001. 6.1 As pointed out by the Sr counsel for the assessee that prior to 2.4.2001, RCIL have already issued the shares through allotment at par i.e. Rs. 1/- each in the month of Jan and Feb 2001. On both these occasions, the shares were allotted at Rs. 1/- per share. Similarly on 2.4.2001, 65 crores shares were again allotted by RCIL to seven allottes as per the details of the allotment reproduced by the Assessing Officer at page 2 of his order as under: Name ....
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....lly create any business or professional relationship between the assessee and RCIL. Therefore, provisions of section 28(iv) cannot be applied in the case of the assessee. 7 In view of the above discussion, we hold that the value estimated by the Assessing Officer of the shares of RCIL on 2.4.2001 @ Rs. 15/- per share is highly unrealistic, arbitrary and without any acceptable basis but on the basis of some future events, which could not influence the value of the shares prior to the date of such development. Accordingly, we do not find any error or illegality in the order of the ld CIT(A)." 7. We further note that the Tribunal in the case of n Rupee Finance & Management P Ltd (supra), has also taken similar view in paras 8.1 to 8,05 as under: "8.1 The first issue is whether the MoU in question can be considered as family arrangement or not. The second issue is whether the family arrangement is a make-belief and sham transaction. The third issue is whether the difference between the market value of the shares and the purchase price can be brought to tax in the hands of the assessee company under s. 69. The fourth issue is as to whether the difference in question referred to ab....
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....xplaining the provisions of new s. 28(iv) at cl. 82 states as follows : "Assessment of the value of any benefit or perquisite arising from business or exercise of a profession, as income from business or profession. 82. A new cl. (iv) has been inserted in s. 28, w.e.f. 1st April, 1964, by s. 7 of the Finance Act, 1964, under which the value of any benefit or perquisite (whether convertible in money or not) arising from business or the exercise of a profession will be chargeable to tax under the head 'Profits and gains of business or profession'. A corresponding amendment has been made to s. 2 (24), including the value of such benefit or perquisite in the definition of the term 'income' vide new sub-cl. (va) inserted in s. 2(24) by s. 4(c)(i) of the Finance Act, 1964. 83. The effect of the above-mentioned amendment is that in respect of an assessment for the asst. yr. 1964-65 and subsequent years, the value of any benefit or amenity, in cash or kind, arising to an assessee from his business or the exercise of his profession, e.g., the value of rent free residential accommodation secured by an assessee from a company in consideration of the professional services....
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....uld be generally construed as income in the ordinary sense. But the fact remains that all the receipts mentioned in s. 28 are inherently of income nature except in case of receipt under a given amount of insurance policy. It also states that s. 28(iv) refers to any benefit or perquisite and this means that such benefit or perquisite should be in the nature of income from the very beginning or it must have characteristics of income before it becomes chargeable at a later stage if the original transaction is completed as designed. The Bench further observed that the words 'benefit' or 'perquisite' have been used in the said section and have to be read together and would draw colour from each other. Normally the term 'perquisites' denotes meeting out of an obligation of one person by another person either directly or indirectly or provision of some facility or amenity by one person to another person or from the very beginning the person providing such facility or concession knows that whatever is being done is irretrievable to him, as it has been granted to a person as a privilege or right of that person. Thus, it was concluded that the word 'benefit' h....
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....rchase of shares, as an investment, with the lock-in-period of holding, for a consideration which is less than the market value, cannot be brought to tax, as a benefit or perquisite under s. 28(iv) of the Act. The assessee has not in this case, secured any benefit or perquisite in consideration of a business transaction undertaken with the sellers of the shares. Thus this issue is decided in favour of the Revenue and against the assessee." 8. In view of the above discussion and the order of the coordinate Bench of the Tribunal, we do not find any merit in the appeal of the revenue and accordingly uphold the order of the CIT(A)." As viewed by us in the connected case (supra) that no addition can be made under section 28(iv) then the addition made on protected basis in the hand of the assesee is not sustainable and accordingly we uphold the order of the CIT(A). 6. For A.Y. 2005-06 the AO worked out the capital gain on notional basis because in view of the AO the assesse should have re-transferred the share at the Market value. While deciding the appeal for the Assessment Year 2003-04, we have already held that transfer of shares in the name of the company was not completed and ....