TaxTMI 
TaxTMI 
2020 (12) TMI 160
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....se of the appellant and ought to have deleted the additions made by the learned assessing officer under section 50C of the Act and instead he directed the learned assessing officer to adopt the valuation of the properties made by the DVO vis-á-vis the value of the shares transferred for the purpose of computation of Long Term Capital Gains on the facts and circumstances of the case. 4. The learned CIT(A) failed to appreciate that the reference made by the learned assessing officer to DVO itself is not proper and ought not to have directed the learned assessing officer to adopt the value arrived at by the DVO for the purposes of sale of shares under the facts and circumstances of the case. 5. The CIT (A) failed to appreciate that the reference to the District Valuation Officer with regard to the valuation of the commercial complex is not justified in taw under the facts and circumstances of the case. 6. The lower authorities failed to appreciate that there is transfer of shares held by the Appellant during the impugned assessment year and not capital assets being land or buildings or both as held by the lower authorities on the facts and circumstanc....
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....n the value attracted under section 50C of the Act. Accordingly assessee was called upon to explain liability under section 50C with guidance value adopted by stamp valuation authorities. Assessee in response submitted that the said properties did not attract stamp duty as assessee only sold shares in the company M/s Esteem Arcade Pvt.Ltd. 3. Ld. AO, accordingly worked out capital gain arising from sale of 4 shops at Rs. 53,39,040/-as against Rs. 11,64,598/-adopted by assessee. The capital gain on sale of 4 shops was worked out pending receipt of DVO report. 4. Aggrieved by addition made by Ld.AO, assessee preferred appeal before Ld. CIT (A). 5. It was submitted that, as appeal was pending before Ld.CIT (A), DVO report was received. 6. Based on submissions of assessee, Ld.CIT (A) observed as under: "7.2 Section 50C of the Act provides that if the consideration received or accruing is less than the value adopted or assessed or assessable by the stamp valuation authority of the State Government for such transfer then the value so adopted or assessed or assessable shall be deemed to be the full value of consideration and the capital gains will be computed accordin....
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.... or building or both. Assessee did not have full ownership on the flats which were owned by the company. The transfer of shares was never a part of the assessment of the Stamp duty Authorities of the State Government. The company was deriving income, taxable under the head income from property for more than a to decade. The expression 'assessable" is inserted in section 50C (1) of the Act is not relevant for the impugned assessment years. In such circumstances, the Assessing Officer's decision to invoke the provisions of section 500 to the tax planning adopted by the assessee was not proper and it did not have the sanction of the provisions of IT Act." 7. Further Ld.CIT(A), referring to DVO report, came to the conclusion that, real intention of assessee was to adopt a colourable device to avoid tax in guise of transfer of shares. Ld.CIT(A) relied upon decisions of Hon'ble Supreme Court in case of McDowell & Co Ltd vs CTO reported in 154 ITR 148 and Union of India vs Azadi the Bachao Andolan reported in (2003) 132 taxman 373. Ld.CIT (A), thus, based on DVO report upheld capital gains computed in accordance with value adopted by DVO. 8. Aggrieved by order of Ld.CIT(A....
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....y would be constructing superstructure and the same would be utilised in accordance with the scheme of the Company, and that, the Company had no rights to sell the superstructure. It is also been noted that, certain portions of area would belong to the said company until the expiry of lease period, and hence, there could not be any absolute transfer of properties. Assessee placed lease agreement entered into by Company with Indian Red Cross Society, dated 11/07/2001 at page 12 to 30 of paper book. Assessee also entered into agreement with the Company, wherein, she is a partner in respect of 4 units allotted to her under the scheme of company, based holding of specific No. of shares and also specific amount of deposit with the company. 13. Subsequently, assessee sold her shares to 4 different buyers. Copies of the agreements have been placed at page 109 -130 of paper book. The details of sale of shares and deposit are as under: Name of the Buyer Unit Allotted SaIe Value for Shares Receipt for Deposits Total Receipt Surplus M.Bhavana S-4 3,45,000 16,56,000 20,01,000 2,07,000 Bhatia Et Others G- 10 4,72,050 12,58,800 17,30,85....
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....oid payment of tax. The assessee by resorting to such a tax planning, has taken advantage of the benefit of the law or the loopholes in the law, which had enured to his benefit. After seeing how this loophole has been exploited within four corners of the law, it is open to the Parliament to amend the law plugging the loophole. However, by any judicial interpretation we cannot read into the Section, which was not intended to, by the Parliament at the time of enacting this provision. The language employed in Section 10(38) of the Act is simple and unambiguous and it makes no distinction between the transfer of share of company with an immovable asset and movable asset, instead of executing a sale deed in respect of the immovable property by the company, which is owning the land. If the shareholder chooses to transfer the lands and part with the land to the purchaser of the shares, it would be a valid legal transaction in law and merely because they were able to avoid payment of tax, it cannot be said to be a colourable device or a sham transaction or an unreal transaction." 18. In the present facts, of the case we note that Company had no rights to sell superstructure. Co....
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....al to Twelve times the face value of - the share as security deposit in order to get the entitlement of the enjoyment of the unit to be allotted to him/her. The same is payable on demand by the company. c. The total value of the shares & deposit to be held by the member for each unit is found in the annexure enclosed herewith. d. The Board shall have discretion in varying the above deposit amount. The above deposit amount shall be paid in such instalments as may be specified by the Board. The Board shall have full discretion in the above matter and may specify different instalments for different members. e. The deposit shall be adjusted against the assets of the Company at the expiry of lease period of 85 years. The Company can modify the scheme of adjustment of deposits only if so resolved by the members in the general meting by 2/3rd majority to take advantage of fiscal laws of the country from time to time. f. In the event of any member ceasing to be a member of the company other than by way of death, insolvency, transfer or operation of law then and in that event the Company shall refund the proportionate deposit to the extent of the....
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....n the interest of the share holder/members of the company. 17. The member shall also have such rights in respect of his units as may be specified by the company from time to time. 18. The member shall not be entitled to alter the structure of the unit allotted to him. However, he shall be entitled to fix movable fixtures and partitions, Air conditioner etc., within his unit. 19. Each Member shall join the execution of deed and documents required by the company and shall bear stamp duty and other expenditure involved in granting allotment of the unit. 20. A unit/commercial space allotted shall absolutely belong to the Member for his/her enjoyment and such right is heritable, provided the legal heirs continue to hold the shares and deposit. 21. The shares and relevant deposit shall always go with a specific unit/commercial space and the transfer thereof shall be done simultaneously to the same person in whom the right of enjoyment of that unit is vested. No transfer of Deposit without the shares being transferred in favour of any person is possible under article No.7 of Articles of Association of the Company. 22. The Municipal tax....