TaxTMI 
TaxTMI 
2024 (6) TMI 421
X X X X Extracts X X X X
X X X X Extracts X X X X
....685/- and during the year these shares were sold to M/s Sundaram Industries Pvt. Ltd. who already held 49% shareholding in Firestone TVS Pvt. Ltd. for a consideration of Rs. 14,09,04,140/- thereby earning a Long Term Capital Gain which is subject of the disputed taxable income. As the case of the assessee was selected for scrutiny on account of large tax refund. AO after examining the matter concluded that the transfer of shares was not simpliciter transfer of unlisted shares. The assessee has transferred the entire business with assets, goodwill etc. therefore, the capital income is taxable arising out of the capital asset u/s. 112(1)(ii) of the Act @ 20% plus surcharge and cess, while the Assessee had claimed the tax liability @ 10% plus surcharge and cess as per section 112(1)(c)(iii) of the Act. 2.1 In appeal before the Ld. CIT(A), assessee had taken a plea that the company is a separate entity from its share holders/members and, with transfer of shares, assets of the company are not transferred, and the same continues to be held by the company. It was also explained that since the assessee did not have PAN at the time of sale of shares, buyer M/s Sundaram Industries Pvt. Ltd.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in confirming the action of AO and ignoring the various judicial pronouncements relied upon by the assessee wherein it has been held that sale of shares cannot be equated with the sale of any other capital assets. 6. (i) On the facts and circumstances of the case, the learned law in confirming the action of AO in solely relying on the material/ information collected from Sundaram Industries Pvt. Ltd. (SIPL) under section 133(6) of the Act at the back of the assessee without confronting and providing the opportunity to cross examine those information/documents and thus violating the principles of natural justice. (ii) That the learned CIT(A) has erred both on facts and in law in confirming the action of AO in relying upon Form 15CA/15CB filed by SIPL under section 133(6) of the Act and holding that the long term capital gain be taxed @21.63 (including surcharge and cess) without appreciating the fact that Form 15CA/15CB filed by the payer cannot determine the final liability of the payee. (iii) That the learned CIT(A) has erred both on facts and in law in confirming the action of AO in relying upon Form 15CA/15CB and holding that repatriation of foreign direct investment" mad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'ble Supreme Court of India in the case of Vodafone International Holdings BV. Vs. UOI & Anr. (Supra) as under:- "74. Control, in our view, is an interest arising from holding a particular number of shares and the same cannot be separately acquired or transferred. Each share represents a vote in the management of the company and such a vote can be utilized to control the company. Controlling interest, therefore, is not an identifiable or distinct capital asset independent of holding of shares and the nature of the transaction has to be ascertained from the terms of the contract and the surrounding circumstances. Controlling interest is inherently contractual right and not property right and cannot be considered as transfer of property and hence a capital asset unless the Statute stipulates otherwise. Acquisition of shares may carry the acquisition of controlling interest, which is purely a commercial concept and tax is levied on the transaction, not on its effect. 88. We have to view the subject matter of the transaction, in this case, from a commercial and realistic perspective. The present case concerns an offshore transaction involving a structured investment. This case conc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ancy support, customer base, brand licences, operating licences etc. were all an integral part of the Holding Subsidiary Structure which existed for almost 13 years, generating huge revenues, as indicated above. Merely because at the time of exit capital gains tax becomes not payable or exigible to tax would not make the entire "share sale" (investment) a sham or a tax avoidant. The High Court has failed to appreciate that the payment of USS 11.08 bn was for purchase of the entire investment made by HTIL in India. The payment was for the entire package. The parties to the transaction have not agreed upon a separate price for the CGP share and for what the High Court calls as "other rights and entitlements" (including options, right to non-compete, control premium, customer base etc.). Thus, it was not open to the Revenue to split the payment and consider a part of such payments for each of the above items. The essential character of the transaction as an alienation cannot be altered by the form of the consideration, the payment of the consideration in installments or on the basis that the payment is related to a contingency ('options', in this case), particularly when the transacti....