TaxTMI 
TaxTMI 
2023 (6) TMI 814
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.... Year 2015-16, the case of the assessee was selected for limited scrutiny and a notice u/s 143(2) of the Act was issued. Assessment order came to be passed on 29/12/2017 by making an addition of Rs. 24,01,57,001/- by invoking the provisions of Section 56(2)(viia) of the Act and further made addition of Rs. 8,50,046/- u/s 14A of the Act read with Rule 8D of the Income Tax Rules 1962 in respect of shares and CCPS of Ansal Township Infrastructure Ltd. 4. Aggrieved by the assessment order dated 29/12/2107, the assessee had preferred an appeal before the CIT(A) and the CIT(A) vide order dated 30/11/2018 allowed the Appeal by deleting the additions made by the A.O. 5. Aggrieved by the order of the Ld.CIT (A), the Department preferred the present appeal on the grounds mentioned above. The sole ground of appeal of the Revenue is that the CIT(A) erred in deleting the addition of Rs. 24,01,57,001/- u/s 56(2)(viia) of the Act on account of different in valuation of shares as per book value and the value adopted as per DCF Method. 6. The Ld. DR relying on the order of the assessment order submitted that any Company buying share/CCCPS from a foreign entity has to obtain permission from....
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....ing the year under consideration purchased equity shares and Compulsory Convertible Cumulative Preference Shares (CCCPS) of Ansal Township Infrastructure Ltd. From foreign institutional investors i.e. M/s IIRF India Reality II Ltd. And IFIN Realty Trust for total consideration of Rs. 34,00,18,657/- the details are here under:- Seller Equity Shares CCC Preference Shares M/s IIRF India Reality II Ltd. 5576 shares @Rs. 2777each = 1,54,84,552 112908 shares @ Rs. 2777 each =Rs. 31,35,45,516/- IFIM Realty Trust 190 shares @ Rs. 2777 each =Rs. 5,27,630/- 3767 shares @Rs. 2777 each= Rs. 1,04,60,959/- Total 1,60,12,182/- 32,40,06,475/- 10. The Assessing Officer made addition of Rs. 24,01,57,001/- u/s 56(2)(viia) of the Act on the ground that the FMV of the shares so purchased is Rs. 815.59 per share as against Rs. 2,777/- per share paid by the assessee in following manners:- The provision of Section 56(2) (viia) Rs. as under:- "Income from other sources. 56. (1).. (2) In -particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under ....
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....ship in India. 6.4.2. The Ld. A.R. has further submitted that in terms of Investment cum Shareholder Agreement dated 2.4.2008, Foreign & Indian investors together acquired 9,80,000 Compulsory Convertible Cumulative Preference Shares (CCCPS) of Rs. 10/- each at a premium of Rs. 795.62. Thus, against CCCPS, investment of Rs. 78,95,10,000/- was made. Besides CCCPS, Investors were allotted 49,000 equity shares at par for total consideration of Rs. 4,90,000/-. Accordingly, total investment of Rs. 79,00,00,000/- (78,95,10,000 + 4,90,000) was made by the Investors. Pursuant to the investment, shareholding of Ansal API (promoter) and Investors in Ansal Township stood at 51% and 49% respectively. 6.4.3. The Ld. A.R. has also submitted that clause 13 of Investment cum Shareholder Agreement dated 2.4.2008 provided for 'exit to the investor'. In terms of clause 13.1, Ansal API as Promoter and Ansal Township as the Company in which the investment was made undertook to provide exit to the investor at minimum cumulative annual return or IRR of SBMTLR (State Bank Medium Term Lending Rate) plus 875 basis points on the investment. The Ld. A.R. has stated that in the meantime pursua....
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....The Ld. A.R. has also submitted that by virtue of purchase of shares and CCCPS from the Investor, not only net worth of the promoter i.e. Ansal API but even Ansal Township would derive benefit inasmuch as, the price at which shares and CCCPS have been purchased are less than what was agreed by the agreement dated 2.4.2008 and 20.5.2010. The Ld. A.R. has further submitted that in the transaction of purchase of shares and CCCPS by the appellant company, the commercial expediency of the business cannot be doubted. 6.4.5. Section 56(2)(viia) reads as under:- "56(2)(viia) where a firm or a company not being a company in which the public are substantially interested, receives, in any previous year, from any person or persons, on or after the 1st day of June, 2010 but before the 1st day of April, 2017, any property, being shares of a company not being a company in which the public are substantially interested,- (i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property; (ii) for a consideration which is less than the aggregate fair market value of the p....
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....terested). Section 2(18) provides the definition of a company in which the public are substantially interested. It is also proposed to exclude the transactions undertaken for business reorganization, amalgamation and demerger which are not regarded as transfer under clauses (via), (vic), (vicb), (vid) and (vii) of section 47 of the Act. Consequential amendments are proposed in- (i) section 2(24), to include the value of such shares in the definition of income; (ii) section 49, to provide that the cost of acquisition of such shares will be the value which has been taken into account and has been subjected to tax under the provisions of section 56(2). These amendments are proposed to take effect from 1st June 2010 and will, accordingly, apply in relation to the assessment year 2011- 12 and subsequent years. From the Memorandum explaining the insertion of section 56(2)(viia) and amendment of section 56(2)(vii) of the Act, it is evident that both the provisions are to counter evasion of tax - by way of transfer of property either without consideration or inadequate consideration. A combined reading of the provisions of section 56(2)....