2020 (1) TMI 250

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....726/- made by the Assessing Officer. The CIT(A)'s detailed discussion to this effect reads as under: "5. Ground of Appeal No. 2 pertains to taxation of retention money not accrued during the year amounting to Rs. 71,46,55,726/-. Ms. Ruchira Lakhotia, F.C.A., appeared. 6. Ground of Appeal No. 2, the ld. A.O. in her order has stated that retention money has been shown as non-taxable in the computation by the assessee. Learned A.O. argued that the assessee has raised the bills upon completion of certain percentage of the work. Therefore, the assessee was required to show it as taxable income on the basis of percentage completion method of the agreed contract amount. She was also of the view that retention money was forming part of sale which had to be included in the Return of Income. She further proceeded to disallow the claim u/s. 115JB of the Income-tax Act, 1961. 7. The ld. A.R. of the assessee stated that the ld. A.O. has erred in making the addition. She stated that this aspect has been decided by the Calcutta High Court and Tribunal, She explained that retention money is not priced till the final execution of the work. Relia....

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....ntive ground is rejected therefore. 6. Next comes the capital gains addition issue of Rs. 23,73,49,836/- made by the Assessing Officer holding the same to have accrued in assessee's heads on accrual of transfer of plant and machinery of "product" division. The CIT(A)'s detailed discussion deleting the impugned addition reads as follows: "9. Ground of appeal no.3 pertains to the stand of the A.O in levying capital gain amounting to Rs. 23,73,49,836/- on the transfer of product division. 10. The ld. A.O. was of the view that the company was incorrect in not adding the said amount. In the written submission a valid transfer of capital asset for which the company had received a consideration value and the transfer of asset had been to a subsidiary. 11. The ld. A.R. of the assessee vehemently stated that the plants of the Product Division (Kumardhubi), Asansol, Bangalore, etc. were hived of. In exchange, the assessee got equity shares of M/s. Mcnally Sayaji Engineering Ltd. This had been decided by the Hon'ble Calcutta High Court (Administered). In exchange, the assessee received equity shares of group company. She said that the ld. A.O. was wrong in co....

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.... the sole purpose of payment of stamp duty, registration fees or other similar taxes or fees shall not be regarded as assignment of values to individual assets or liabilities." 15 This definition together with the explanations, has been referred by the Tribunal in paragraph 37 of its order. Thereafter the Tribunal analyzed the transaction/transfer in the present case in the backdrop of the legal principles. The Tribunal referred to the judgment of the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Andhra Pradesh v/s Motors & General Stores (P) Ltd., reported in (1967) Vol.66 ITR 692. The Hon'ble Supreme Court referred to Section 10(2)(vii) of the Indian Income Tax Act, 1922. It. also referred to a transaction dated 21st February, 1956 which was the subject matter of the appeal. It also posed the question as to whether such a transaction as was subject matter of "exchange deed" could be termed as a sale and alternatively whether the consideration of the sale is not the market value of the shares as on the date of the transaction, namely, Rs. 95/- per share but the face value of the shares. 16 In answering this question, the Hon'ble Sup....

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....ent of the language used in accordance with the ordinary rules of construction. In Bank of Chettinad Ltd. v/s Commissioner of Income Tax it was pointed out by the Judicial Committee that the doctrine that in revenue cases the "substance of the matter" may be regarded as distinguished from the strict legal position, is erroneous. If a person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax cannot bring the subject within the letter of the law, the subject is free, however, apparently within the spirit of the law the case might otherwise appear to be. In Duke of Westminister's case deeds of covenant had been executed by the Duke in favour of the employees in such amounts that the receive respectively sums equivalent to their wages and salaries. If they left the service of the Duke the payments covenantees, if remaining in the Duke's service, would still have been due, but it was in nearly all instances explained to the employee that so long as the service continued, while the deed did not prevent his claiming ordinary wages. in ad....

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....t of the principles laid down in the above referred decision, the Tribunal concluded in paragraph 40 that the Scheme of Arrangement approved by this Court in the present case, cannot be said to be a sale of the Lift Division or undertaking by the assessee. The Tribunal referred to Clause 3.1 of the Scheme. It then referred to Clause 1.36 in its entirety. Then, it referred to Clause 14.1 of the scheme. 18. The Tribunal then held that, a reading of the clauses in the Scheme of Arrangement shows that the transfer of the undertaking has took place in exchange for issue of preference shares and bonds. It held that, merely because there was quantification when bonds/preference shares were issued, would not mean that the monetary consideration was determined and its discharge was only by way of issue of bonds/preference shares. In other words, the Tribunal held and as a fact that this is not a case where the consideration was determined and decided by parties in terms of money but its disbursement was to be in terms of allotment or issue of bonds/preference shares. In fact, all the clauses read together and the entire Scheme of Arrangement envisages transfer of the Lift ....

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....dgment of the Delhi High Court would apply provided the transfer is by way of a sale. Before the Delhi High Court, facts were that the petitioner Company was engaged in project financing through term loans and leasing in specified sectors. For the assessment year 2009-20010, the petitioner had disclosed loss of more than Rs. 76 crores in their return. No return was filed for the assessment year 2010-2011. The book loss was more than Rs. 72 crores. An application was filed before the Settlement Commission for the two assessment years and disclosing additional income. The Settlement Commission passed an order and which is termed as final order in paragraph 4 of the judgment of the Delhi High Court, determining and deciding various questions which are raised in the writ petition. In the writ petition, the only aspect was that of taxability of Rs. 375 lacs under Section 5OB of the Income Tax Act as capital gains on 'slump sale' paid under the Scheme of Arrangement to the petitioner by its subsidiary. The Settlement Commission held that the amount of Rs. 375 lacs received by the petitioner from its subsidiary on transfer of its project finance business and assets based on financ....