TaxTMI 
TaxTMI 
2018 (8) TMI 1760
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....mbai has erred in confirming the additions made by the Assessing Officer on account of expenditure amounting to Rs. 43,47,723/- incurred in connection with the sale of shares of M/s LIC Mutual Fund Asset Management Co. Limited and M/s LIC Mutual Fund Trustee Co. Limited, without appreciating the facts of the case and the submissions made during the course of the assessment /remand/appeal proceedings. 2) On the facts and circumstances of the case and in law, the learned Commissioner of Income -tax - (Appeal) -4, Mumbai erred in not giving direction to the Assessing Officer to set off and adjust the unabsorbed carry forward long term capital loss for assessment year 2009-10 against the long term capital gains earned on the sale of shares of LIC Asset Management Company Ltd., and LIC Mutual Fund Trustee Company Limited. 3) The appellant craves leave to add to, modify or delete the above grounds of appeal each of which are independent of the other." 3. The brief facts of the case are that the assessee derives income from housing finance business. The assessee is a listed company having its shares listed on Stock Exchanges. During the course of assessment proceedings conducted by t....
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....ed the claim of expenses of Rs. 96,73,108/- as the same cannot be allowed as deduction u/s 48 of the 1961 Act being not incurred wholly and exclusively in connection with transfer of shares of LICMF-AMC, which was consequently added by the AO to the income of assessee , vide assessment order dated 22.10.2013 passed by the AO u/s 143(3) of the 1961 Act. 4. Aggrieved by the assessment order dated 22.10.2013 passed by the AO u/s 143(3) of the 1961 Act , the assessee filed first appeal with Ld. CIT(A) . The assessee made detailed submissions before Ld. CIT(A). The assessee submitted additional evidences before learned CIT(A) vide submissions dated 30.08.2014(pb/page 235) and prayed for its admission vide Rule 46A(1)(d) of Income-tax Rules, 1962 as these additional evidences in the opinion of the assessee goes to the root of the matter. The Ld. CIT(A) admitted these additional evidences and called for remand report from AO . The AO submitted remand report dated 24.07.2015 and relevant extracts thereof are reproduced as under:- "14.1. Legal Consultant (Amarchand Mangalds Suresh A Shroff & CO.)- Rs. 1,91,49,387/- a. The assessee has submitted letter of the party Amarchand Mangaldas d....
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....stake or issuance of fresh shares in LIC AMC. b. The invoices/bills enclosed as additional evidence are as under: Thus as is clear from the above discussion, that the bills /invoices do not specify the purpose for which the said professional fee payment was made, and as such it cannot be held that the said expenditure was incurred by the assessee wholly and exclusively towards earning of income shown under the head long term capital gain by it. d. It can also be seen that the total invoices submitted amount to Rs. 1,42,04,260 whereas the claim of the expense is only Rs. 1,36,42,460/-. A careful examination reveals SNo Reference Amount Remarks 1 Letter of PwC dt 31,3.2008 addressed to LIC AMC regarding invoices raised 11,23,600 The said letter has a general remark that the said payment is towards professional fees. No details as to the purpose for which the said services were rendered is given. In the sub it is merely mentioned that the project is 'Project Cash I' 2 Letter of PwC of 2008( dt is not clear in the Xerox) 5,61,800 -As Above-. In the subject line the project name is mentioned as Project addressed to L/C AMC regarding invoices raised Cash 1 185421 3 Letter o....
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....e of Chaturvedi and Co dt 24,7.2010 of shares of LIC AMC as on 31.3.2010. The same specifies that the purpose of valuation is to determine the fair value of shares of LIC AMC for the proposed acquisition of shares by Nomura in LIC AMC. b. The invoices/bills enclosed as additional evidence are as under: SNo Reference Amount Remarks 1 Letter of Chaturvedi & Co dt 25.8.2009 addressed to LIC AMC regarding invoices raised 2,758 The said letter mentions that the payment is towards ascertaining the net worth for FY 2008-09 and is clearly not relatable to the transaction under consideration 2 Letter of Chaturvedi & Co dt 5.9.2009 addressed to LIC AMC regarding invoices raised 22,060 The said letter mentions that the payment is towards valuation of shares as on 31.3.2009 and is clearly not relatable to the transaction under consideration which involved valuation of shares as on 31.3.2010 as stated in Para 11.4(aj above. 3 Letter of Chaturvedi & Co dt 30.7.2010 addressed to LIC AMC regarding invoices raised 22,060 The said letter mentions that the payment is towards valuation of shares as on 31.3.2010. 14.5. Valuation Trustee co(Shah Gupta & Co.)Rs57.9....
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.... The assessee in rejoinder submitted following reply which is reproduced hereunder:- " On the basis of the remand report received and subsequent to the examination of the additional evidence submitted, the Appellant requests you to consider the claim of Rs. 96,73,108/- being expenses included by the Appellant on sale of shares, the break up of which is as under:- A detailed response pertaining to the genuineness of the claim of each item of expenditure specified Legal ConsulA detailed response pertaining to the genuineness of the claim of each item of expenditure specified in (i-vi) above is made hereunder: i) Legal Consultant (Amarchand Mangaldas Suresh A Shroff & Co)-R$, 1,91.49,387 (out of which an amont of Rs. 8,42,700 is disallowed): Sr No. Assessing Officer's Finding Appellant's Response 1. Amount of Rs. 8,42,700 for invoice 1 towards advance payment not allowed as it cannot be established that the same was payment related to relevant transaction of long term capital gain. Also details of service rendered has not been specified It may be noted that a mandate was given by the parties(named as 'Project Life')to the transaction {for sale of shares ....
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....ces were only in adherence to the terms of engagement. It may be noted that, the Assessing officer has not raised any question as to the authenticity or genuineness of payment to Price Waterhouse Coopers Private Limited. However, the conclusion drawn by Assessing Officer questioning the nature of services rendered by Price Waterhouse Cooper Private Limited is based on the fact that the services are not clarified nor are the invoices in any way linked to the mandate given for the said transaction. Accordingly, the Appellant confirms that the said expenditure was incurred wholly and exclusively towards earning of income shown under the head long term capital gain by it. iii) Scrutinizer to the postal ballot from unit holders (Rathi & Associates)- Rs. 2,821996_ Sr No. Assessing Officer's Finding Appellant's Response 1. The expenses incurred in relation to the capital gain transaction pertains to the amendment of trust deed dated 20.04.1989, along with deed of modification dated 25.03.2004 and 06.10.2003 entered between LIC and LIC Mutual Fund Trustee Company. Accordingly it was contended that it is unrelated to the transaction The Appellant states that the A....
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.... namely:- i) Expenditure incurred wholly and exclusively in connection with such transfer ii) ...... Thus, the word "expenditure" used in section mandates it should be distinctly related and integrally connected with the transfer of shares. It does not specify that the expenditure incurred will be eligible for deduction if it is made during the year in which the sale of shares is carried out. Also, the Bombay High Court in the case of CIT vs. ShakuntalaKantilal (190 ITR 56,59), has held that the expression 'in connection with such transfer' is wider and more liberal in meaning than the phraseology 'for the transfer.' By reason of employing such a wide expression i.e. 'in connection with', something more than what is attributable to the final act of transfer of shares is also admissible for deduction provided the intimate connection between the expenditure and the act of transferring shares is established. For instance, if the services of legal or other professional services extended to the process of valuation of shares or the participation in the deliberations that led to the settlement concerning the transfer of shares, the legal charges on t....
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....tered Chartered Accountant as per the Reserve Bank of India guidelines. Thus the opinion formed by the Assessing Officer that the expenditure is not wholly and exclusively for carrying out the sale transaction is incorrect.. vi) Authorised Dealer (ICICI) charges for EC TRS documentation as per RBI requirement for AMC and Trustee CO. Rs. 33,090/- Sr No. Assessing Officer's Findings Appellant's Response 1. Assesse has only furnished no objection certificate from Reserve Bank of India dated 24.05 2010 No proof of payment has been submitted by the assesse in this regard. The Appellant states that the Reserve Bank of India is the statutory authority responsible for management of foreign exchange transactions in India. The Appellant has furnished the no objection certificate received from Reserve Bank of India for which it had appointed ICICI Bank for carrying out the FC-TRS documentation. Thus, merely rejecting the claim of assesse on account of not furnishing the proof of payment would be prejudicial to the Appellant since the expenditure is wholly and exclusively related to the capital gain transaction. vii) Other Evidences:- The Appellant has furnished the lette....
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....wed entire expenditure claimed by the appellant. During the course of appellate proceedings, appellant has submitted various details and evidences, hence matter was remanded to the Assessing Officer by letter dated 08.09.2014. In compliance the Assessing Officer has submitted a Remand Report dated 24.07.2015 which has been reproduced earlier. The copy of Remand Report was given to the appellant and appellant has given rejoinder by letter dated 08.09.2015. A careful perusal of Remand Report as well as counter representation reveals that findings of the Assessing Officer in the Assessment Order is not fully approvable. The Ld. Assessing Officer has mentioned in Remand Report para 14.1. d that SI.No.2 to 5 appear to be in order which means an amount of Rs. 8,42,700/- out of Rs. 1,91,49,387/- is not at all related to transaction. As regards receipt of the expenditure shown in the name of "Price Waterhouse Coopers P. Ltd. & Other Expenditure", the stand of the Assessing Officer is found to be convincing one. It can be seen from the rejoinder that Ld. Authorised Representative has objected the disallowable expenditure but it is very evident from the report of Ld. Assessing Officer that t....
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....ssed hereinabove, disallowable expenditure has to be worked out. The working of disallowable expenditure is as under:- Head Amount (Rs.) Expenditure to be borne by GIG HFL Legal Consultant (Amarchand Mangaldas Suresh A. Shroff & Co.) 1,91,49,387 96,21,417 Consultant and Advisor (Price Waterhouse Coopers P. Ltd.) 1,36,42,460 Scrutinizer to the postal ballot obtained from unit holders (Rathi & Associates) 2,82,996 Valuation AMC (Chaturvedi & Co.) 46,878 13,637 Valuation Trustee Co. (Shah Gupta & Co.) 57,908 4,964 Authorised dealer (ICICI) charges for FC-TRS Documentation as per RBI requirement for AMC and Trustee Co. --- 33,090 TOTAL 3,31,79,629 96,73,108 Total Sale Consideration (A) = 3,08,01,61,151 Assessee's share of sale &....
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....ty bound to allow set off of said loss against long term capital gains earned by the assessee during this year. It was observed by learned CIT(A) in his appellate orders dated 21.01.2015 that no plain administrative directions can be given to the AO under these circumstances unless there is a denial of genuine claim. 7. The Ld. Counsel for the assessee opened argument before the Bench by submitting that there was sale of shares of LICMF-AMC by assessee to Nomura Assets Management Strategic Investment Pte. Limited, Singapore( in short „Nomura‟) ( „Nomura‟ is wholly owned subsidiary of Nomura Asset Management Co., Ltd which in turn is wholly owned subsidiary of Nomura Holding Inc.), on which long capital gains were earned by the assessee and the dispute has arisen between rival parties as to the incurring of certain costs in connection with the transfer/sale of said shares of LICMF-AMC to Nomura. It was submitted that shares of LICMF-AMC were also held by other entities such as LIC Housing Finance Limited(in short "LICHFL") and LICHFL Care Homes Limited , who were also simultaneously selling the shares in LICMF-AMC in consortium with assessee to Nomura as des....
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....LICMF-AMC. Our attention was also drawn to letter dated 13.04.2011 written by LIC Nomura Mutual Fund Asset Management Co. Limited to assessee relating to sharing of costs with selling shareholders, wherein total sale consideration of the entire transaction of sale of shares of LICMF-AMC by all three consortium parties of their respective shares sold is stated to be Rs. 308.01 crores and the total assessee‟s share of cost incurred towards legal/professional fees/expenses was stated to be Rs. 96,73,108/- based on ratio of sale proceeds received by assessee vis-a-vis total sale consideration. The said letter dated 13.04.2011 is placed in paper book/page 171-173 . The other letter dated 28.04.2011 written by LIC Nomura Mutual Fund Asset Management Co. Limited to assessee is also placed in paper book/page174-175 wherein details of billing done by these professionals is mentioned and invoices of these professionals are enclosed . The itemised invoices issued by Amarchand & Mangaldas & Suresh A. Shroff & Co., Price Watehouse Coopers Private Limited(hereinafter called "PWC") , Rathi & Associates, Chaturvedi & Co.and Shah Gupta & Co. are all placed in paper book / page 176-192. The sa....
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....val/clearances in connection with the sale of shares by consortium parties in favour of Nomura. Our attention was drawn to various invoices raised by these professional w.r.t. agreements entered into in connection with induction of strategic investor in LICMF-AMC, valuation of shares of LICMF-AMC and for obtaining regulatory approval/clearances in connection with the sale of shares of LICMF-AMC by consortium parties in favour of Nomura. The said agreements and invoices are placed in paper book filed by assessee with tribunal. It was submitted that all the consortium parties who transferred/sold their shares in LICMF-AMC to Nomura specified in SATA and SPA decided to jointly appoint professionals to do necessary job in order to induct strategic investor namely Nomura in LICMF-AMC by divesting of their shareholding as specified in SATA and SPA in order to successfully conclude transfer/sale of shares held by them in LICMF-AMC to Nomura in compliance with various applicable laws , rules and regulations and to get best valuation for the shares which they proposed to sell instead of appointing separate professionals to avoid duplication of work and increased costs. The learned counsel f....
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....y stood disallowed by learned CIT(A) on the grounds that these are not expenses incurred wholly and exclusively in connection with transfer of shares. Our attention was drawn to two RBI approvals both dated 24-05-2010 vide approval number FE.CO.FID.CO.No. 29155/10.21.176(Vol.II)/2009-10 and approval number FE.CO.FID.CO.No.29169/ 10.21.176 (Vol.II)/2009-10 which were obtained in connection with the transaction of sale of shares of LICMF-AMC held by the assessee as well by consortium parties as specified in SATA and SPA in favour of Nomura. Both the aforesaid RBI approvals dayed 24-05-2010 are placed in paper book/page 233-234. It was also submitted that shareholder approvals through postal ballots were obtained from shareholders of selling companies as required under the provisions of The Companies Act, 1956 and compliances of other securities laws were also undertaken. Our attention was also drawn to valuation report dated 24-07-2010 (pb /page 227-232) issued by Chaturvedu & Co. Chartered Accountants, Mumbai valuing shares if LICMF-AMC which is placed in paper book filed by the assessee with the tribunal. Our attention was also drawn to assessment order dated 29-01-2014 passed by A....
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....ly and exclusively in connection with transfer of shares of LICMF-AMC by the assessee. Our attention was drawn to page no. 210 of the paper book wherein letter dated 06.08.2008 written by „Amarchand & Mangadas and Suresh A Shroff‟ is placed which is in favour of LIC Mutual Fund Asset Management Company wherein they have referred to work related to some „Project Life‟ and there is reference to proposed investment by Nomura in LIC MF. The learned DR relied upon the appellate order passed by learned CIT(A). 8. We have considered rival contentions and perused the material on record including cited case laws. We have observed that the assessee derives income from Housing Finance business. It is pertinent to mention that the assessee is a listed company having its shares listed on Stock Exchanges. It all happened that the assessee was holding shares as investments in LICMF-AMC. The assessee sold its shareholding in LICMF-AMC to Nomura and earned long term capital gains on sale of such shares . The assessee took complete exit by selling entire shareholding held by it in LICMF-AMC to Nomura. The assessee has shown long term capital gains of Rs. 85,79,09,196/- on ac....
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....ction of strategic partner in LICMF-AMC and consequently divestment of shares of LICMF-AMC by existing shareholders including assessee in favour of Nomura complies with various applicable laws, rules and regulations concerning securities law, taxation law, foreign exchange regulations, company law etc. and assist in obtaining all necessary regulatory and legal clearances/approvals in connection with the aforesaid transaction of induction of new strategic investor in LICMF-AMC and consequential sale of shares of LICMF-AMC by selling shareholders including assessee to Nomura. It was decided by all the selling shareholders of LICMF-AMC to jointly appoint these legal and financial professionals/advisors in connection with induction of new strategic investor to hold minority stake by divestment or by way of issue of fresh shares in LICMF-AMC , to conclude the aforesaid transaction through a synchronised collective decision and action amongst existing shareholders of LICMF-AMC and also in order to avoid duplication of work and costs . All the selling shareholders entered into share acquisition terms agreement(SATA) as well share purchase agreement(SPA) , both dated 11-07-2009 along with ....
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....cial professionals/advisors on behalf of consortium parties and thereafter costs were allocated by „LIC Mutual Fund Asset Management Company Limited‟ amongst selling shareholding in proportion to their ratio of sale proceeds received by them from selling shares of LICMF-AMC to Nomura in accordance with the terms of contract entered into with consortium parties. These ratio of distribution of expenses amongst various selling shareholders in the ratio of sale proceeds of shares received by them is not in dispute as learned CIT(A) accepted this ratio of distribution adopted by the assessee and the Revenue has not come in appeal before the tribunal challenging said ratio of distribution as is adopted by the consortium parties nor any Cross Objections are filed by Revenue before the tribunal. Total expenses which were incurred by way of fees/expenses paid to these legal and other professionals/advisors which were claimed to be incurred in connection with the sale of shares of LICMF-AMC by these selling shareholders to Nomura was Rs. 3,31,79,629/- and the assessee share came to be Rs. 96,73,108/- which was duly reimbursed by assessee vide banking channel through cheque. The d....
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....ing as to the purposes for which services were rendered as invoices could not be co-related to this assignment of induction of strategic investment in LICMF-AMC and consequently sale of shares by selling shareholders in favour of Nomura. It is also alleged by Revenue that the invoices raised by these professionals do not bore the details of services rendered by these professionals. Before we proceed further, it is important to understand the background and highlight here that the assessee is a listed company wherein shares of the assessee company are listed on recognised stock exchanges. Since, the assessee is a listed company wherein several compliances as well approvals/clearances under SEBI Act, 1992, Stock Exchange Rules and Regulations , Securities Laws, The Companies Act , 1956 etc are required to be obtained wrt to these type of transaction envisaging divestment of existing stake . It is also pertinent to mention that Nomura is a non resident entity who acquired minority stake as strategic investor in LICMF-AMC through divestment by assessee , LICHFL and LICHFL Home Care Limited. Since the stake is acquired by non resident entity, various compliances and approvals/clearances....
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....tentions before the authorities below but to no avail. Now it is time for us to see what all documents/evidences did the assessee produced before the authorities below to support its contentions and are they sufficient to discharge onus caste on the assessee by an Act of 1961 to take it out of liability which was sought to be fastened by Revenue within provisions of the 1961 Act , which are as under: a) The assessee vide page 42 to 105/paper book has filed Share Acquisition Terms Agreement (SATA) dated 11-07-2009 entered into between LICHFL , the asssssee , Nomura and LIC Mutual Fund Asset Management Company Limited. This SATA provides for acquisition of 3850 equity shares of Rs. 10,000/- each of LIC Mutual Fund Asset Management Company Limited by Nomura at a price of Rs. 8,00,000/- per equity share firstly by acquiring 1120 equity shares of LIC Mutual Fund Asset Management Company Limited from the assessee , secondly by acquiring 1730 equity shares of LIC Mutual Fund Asset Management Company Limited from LICHFL and rest by fresh issue of 1000 equity shares of LIC Mutual Fund Asset Management Company Limited . LIC along with its 7 nominee shareholders will continue to hold 4,950 e....
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....utual Fund Asset Management Company Limited and selling shareholders being delivered to Nomura. Similarly, it speaks of Nomura having delivered relevant Resolutions authorising this transaction. It also speaks of first business plan being approved by Nomura. It also speaks of due diligence investigations being undertaken by Nomura of LIC Mutual Fund Asset Management Company Limited. It also laid down road map and time plan for executing and concluding the transaction successfully including transfer of shares in dematerialised form in the account of Nomura and transfer of consideration to the bank accounts of selling shareholders. There is a requirement of issuing a certificate from selling shareholders and LIC Mutual Fund Asset Management Company Limited jointly to Nomura confirming that the representation and warranties provided in SATA are true and correct as on closing date. Similar certificate on the same lines is required to be issued by Nomura to LIC Mutual Fund Asset Management Company Limited and selling shareholders. It also provided for execution of FC-TRS form duly stamped by authorised dealer to make compliances under FEMA with RBI and seek RBI approvals/clearances unde....
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....ers under consortium agreement to the tune of Rs. 308.02 crores and the total costs incurred towards professional fees/expenses which was paid by LIC Mutual Fund Asset Management Company Private Limited to the tune of Rs. 3.31 crores to these legal and financial professionas and the assessee share in accordance with clause 10.3 of SATA and SPA was worked out at Rs. 96,73,108/- and finally request was made to reimburse the cost to LIC Nomura Mutual Fund Asset Management Company Private Limited as per terms of contract i.e. SATA and SPA. d) At page 174-175/paper book is letter dated 28.04.2011 written by LIC Nomura Mutual Fund Asset Management Company Private Limited to assessee in reply to letter dated 13.04.2011 written by the assessee . In this letter dated 28.04.2011 written by LIC Nomura Mutual Fund Asset Management Company Private Limited to the assessee, itemised billing by these professionals are specified and copy of invoices raised by the assessee are enclosed for reference and record of the assessee(page 176-192/pb ). In this letter dated 28.04.2011 written by LIC Nomura Mutual Fund Asset Management Company Private Limited to assessee , again request is made to the assess....
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....e of work included arriving at a fair valuation of shares of LICMF-AMC which will entail reviewing management projections , reviewing audited financial statements and then arriving at a fair valuation of the business. The scope of work also included planning and communication with investor which will include assisting LICMF-AMC in preparing Information Memorandum and also assisting in communication and discussions with the investor , assisting LICMF-AMC in due diligence review, recommendation/advise in connection of structuring of the deal in the capacity as financial advisors , assistance in review of transaction documentation etc.. The said offer letter provided for fees payable to PWC and personnel to be deployed etc by PWC for successfully rendering the services. This agreement also provided for confidentiality clauses about PWC maintaining strict confidentiality . At page 209/pb is the letter dated 21.07.2008 written by PWC to LIC Mutual Fund Asset Management Company Limited extending the tenure of their engagement to act as lead advisor to proposed disinvestment process by another six months. f) At page 210-212/pb is a letter dated 06-06-2008 written by „Amarchand & Ma....
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.... their shares to Nomura. h) At page 227-232/pb is placed valuation report dated 24-7-2010 issued by „Chaturvedi and Company‟ valuing shares of LIC Mutual Fund Asset Management Company Limited as on 31st March 2010. i) At page 233-234/pb are placed two RBI approvals both dated 24-05-2010 approving the proposed transaction for acquisition by Nomura Asset Management Strategic Investment Pte. Ltd. , a non-resident entity of the fully paid up equity shares of face value of Rs. 10,000 each of LIC Mutual Fund Asset Management Company Limited at a price of Rs. 8,00,000/- per share from (a) 1120 equity shares from GIC Housing Finance Limited(the assessee) (b) 1730 equity shares from LIC Housing Finance Limited. The second RBI approval dated 24-05-2010 is with respect to approving the proposed transaction for acquisition by Nomura Asset Management Strategic Investment Pte. Ltd. , a non-resident entity of the fully paid up equity shares of face value of Rs. 10 each of LIC Mutual Fund Trustee Company Private Limited at a price of Rs. 46.04 per share from (a) 300 equity shares from GIC Housing Finance Limited(the assessee) (b) 2000 equity shares from LIC Housing Finance Limited a....
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....ands, controlling premium etc.. The process of identifying a strategic investor who has synergies with the investee company and who can add significant value in the growth of investee company in itself is a highly complex task which need professional skills and experience apart from discovering the true value of shares which itself is a complex task. The regulatory authorities such as SEBI has placed several conditions and restrictions on professionals/advisors including mandatory registrations with SEBI through web of regulations to ensure that only well qualified, experienced and registered intermediaries are only allowed to render such services. The LICMF-AMC was an unlisted company and its valuation is to be undertaken by professionals who are independent and are legally qualified and experienced to handle valuation . The regulatory requirements also requires valuation as per prescribed methods such as discounted cash flows which are to be certified by qualified independent professionals. The engagement of these independent qualified and experienced professionals to undertake these assignments not only ensures that the well versed experienced personnels are deputed to conclude ....
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....tion under factual matrix of the case could possibly required several laws to be complied with such as Securities Laws, SCRA, SEBI Act etc, , Compliances under Companies Act, 1956, compliances of regulations and rules of stock exchanges, compliances and approvals from Reserve Bank of India under FEMA and applicable regulations for selling shares to Non Resident entity, clearances from Foreign Investment Promotion Board, clearances under CCI Act , compliances of various tax laws such as Income-tax Act, 1961, TDS compliances, GST compliances , stamp duty compliances and registration requirements etc. , which all aspects are to be properly analysed and documented well in advance by these professionals/advisors on behalf of consortium parties in context of transaction proposed to be undertaken by tax-payer and then advise their clients as to the applicable legal compliances to be undertaken and approvals/clearances required to be obtained from regulatory authorities. These independent qualified and experienced professionals who are well versed in executing these transactions in context of documentations, legal and regulatory compliances play a very crucial role for successfully conclud....
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....ssessee as well for these professionals. What is relevant to be seen is that whether these expenses towards professional fees / expenses paid to these professionals by consortium parties are in connection with the assignment of induction of strategic investor in LICMF-AMC and consequently sale of shares by the selling shareholders including assessee whether or not the project name was coded by these professionals or the exact details of services are not mentioned in the invoices. The Revenue cannot operate in a vacuum dehors the factual realities of present day‟s complex business and legal environment wherein both domestic and international laws have application to complex financial transaction because of participation of cross border entities. The assessee on its part has brought sufficient material/evidence on record to evidence that the project codenamed as „Project Life‟ and „Project Cash 1‟ by these professionals are nothing but the assignment awarded by consortium parties to these professionals in connection with induction of strategic investor in LICMF-AMC and consequent exit of assessee from LICMF-AMC, which assignments were coded by these prof....
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....e is built on suspicion . The parties to sale of shares to Nomura acted as consortium parties and they have vide SATA and SPA agreements both dated 11-07-2009 , clause 10.3 in both these agreements agreed to share the cost of these professionals which falls within arena of their contractual obligation. There is no dispute as to the inter-se agreement between consortium parties to share these costs of professionals as well to distribution ratio of share of assessee to bear these cost. The learned CIT(A) has accepted the share distribution ratio adopted by consortium parties and Revenue is not in appeal before us with accepting of share distribution ratio by learned CIT(A) nor any cross objections are filed by Revenue. Now , after analysing the whole spectrum of services rendered by these independent , qualified and experienced professionals , we are of considered view that these services are inextricably linked to the transaction of sale of shares of LICMF-AMC by assessee to Nomura based on material on record and these services were rendered wholly and exclusively in connection with transfer/sale of shares by the assessee within mandate of Section 48 of the 1961 Act as without avail....
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....ed to aforesaid sale of shares by assessee to Nomura and these expenses are wholly and exclusively incurred in relation to transfer/sale of shares by assessee to Nomura which satisfied the mandate of Section 48 of the 1961 Act as transfer/sale of shares of LICMF-AMC by assessee to Nomura which is compliant with all applicable laws, rules and regulations could not have been possible without these services rendered by qualified , experienced and independent professionals and hence these costs are allowable as cost within provisions of Section 48 while computing long term capital gains earned by the assessee. The assessee succeeds in this appeal . We order accordingly. 9. With respect to the Second issue related to non allowability of long term capital loss suffered by assessee of Rs. 75,83,082/- in earlier years which was not allowed to be set off by AO against long term capital gains earned by the assessee during the previous year under consideration and wherein Ld. CIT(A) has refused to give administrative directions to the AO to allow the said loss and rather held that if the loss is genuine, the AO is duty bound to allow set off of the said long term capital loss of the earlier ....