TaxTMI 
TaxTMI 
2024 (9) TMI 1441
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....owing the captioned appeal filed by the applicant against order passed by CIT(A) vide order dated 07.07.2017 for the assessment year 2014-15. Certain errors apparent from record have inadvertently crept in the aforesaid order which have vitiated the final conclusion arrived by the Tribunal with respect to ground of appeal no 2 and 2.1. Accordingly, rectification of such mistakes apparent from record are prayed for through this application. Brief facts of the case with respect to Ground of Appeal no. 2 and 2.1 are as under: Brief Facts During the relevant previous year ending March 31, 2014, the applicant had sold 15,67,68,789 shares of Scorpio Beverage Private Limited (hereinafter referred as "Scorpio") to a foreign company, i.e., CGP Investment Ltd. ('CGP) [an affiliate of Vodafone International Holdings B.V.] for total lump sum consideration of Rs. 997,92,44,200 and resultant long term capital gains of Rs. 782,92,66,249 was offered to tax in accordance with the provisions of section 45 read with section 48 of the Act. Scorpio was incorporated under Companies Act, 1956 on 02.02.2006 with entire share capital being divided into 10,00....
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....discounted cash free flow method, i.e., DCF but here the valuer seems to have adopted NAV method and he has reduced even those liabilities which are not permissible under 11UA. Accordingly, we hold that the valuation done by the Kotak Mahindra Capital and the value of SBPL's shares is not in accordance with Rules as given in Rule 11UA which is specific for valuing the unquoted shares, The reason for not following the value of Kotak for SBPL shares is that, the Valuer has adopted NAV for valuing the intermediary companies; and if NAV method is to be adopted, then he can reduced liabilities as envisaged under Rule 11UA and not any other liabilities suggested by the companies without being authenticated by the companies or independently examined by the Valuer. Only liability which can be excluded while examining the book value is the liability shown in the balance sheet." In the aforesaid Para, it has been held that for the purposes determining fair market value of unquoted shares as per NAV method, resort has to be made to the provisions of Rule 11UA of the Rules and only the liabilities prescribed therein can be reduced to arrive at the NAV/FMV of the unquoted shares. ....
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....ion; (iv) any amount representing provision for taxation, other than amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto; (v) any amount representing provisions made for meeting liabilities, other than ascertained liabilities; any amount representing contingent liabilities other than arrears of (vi) dividends payable in respect of cumulative preference shares; PE= total amount of pald up equity share capital as shown in the balance-sheet; PV the paid up value of such equity shares." On perusal of the aforesaid Rule, it would be appreciated that the same provides for computation of the value of net assets of the company by reducing book value of liabilities from the book value of assets. Clauses (i) to (vi) of the aforesaid Rule prescribe certain liabilitics that need to be excluded from the amount of book value of liabilities, which is to be further reduced from the book value of assets. Clause (i) provides for red....
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....evenue as per Rule 11UA, is attached herewith. In view of the above, it would be appreciated that the computation of FMV of Scorpio at Rs. 131.86 per share suffers with mistakes apparent from record. Accordingly, the Hon'ble Tribunal erred in directing the assessing officer vide paras 63 to 65 of the impugned order to compute long term capital gains adopting that value. C. Wrong finding that working furnished by Respondent Revenue was not disputed by the applicant The finding recorded by the Hon'ble Tribunal in para 64 of the impugned order that the aforesaid figure was not disputed by the Applicant is also not correct for the following reasons: The applicant had principally disputed the substitution of the actual declared consideration by the alleged FMV, Without prejudice to the aforesaid principal submission, the applicant had submitted that the FMV of shares of Scorpio, as per the valuation report of Kotak, calculated to Rs. 5.40 per share only; on the basis of which the sale consideration receivable would calculate to an amount lower than the amount actually received. Responding to the aforesaid alternate submission of the a....
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....d by Kotak regarding the valuation methodology followed for valuing different downstream companies. "Background CGP, as a shareholder of SBP, has requested Kotak Mahindra Capital Company lad. ('KMCC") to carry out an equity valuation of SBP as of February 28, 2014 ("Valuation Date") and provide the price per share of SBP, in relation to the proposed acquisition of shares of SBP that CGP does not already own from the Sellers. SBP, through a series of companies in the HoldCo Chain, is an indirect shareholder of VIL.. We have carried out the equity valuation of VII. using a Sum of the Parts Approach, which involves valuation of VIL Group (which is involved in providing telecom services across all telecom circles in India) and the value of VIL's 42% equity stake in Indus. The valuation of both VII. Group and Indus has been done using the Discounted Cash Flow methodology ("DCF") primarily based on the information and representations received from CGP and VIL. The valuation of VIL. so arrived at has been factored in while valuing each of the companies in the HoldCo Chain and SBP, considering the net value of other assets and liabilities in the respective compani....
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.... share of Rs. 5.40. B. Valuation methodology adopted by Kotak justified Attention of the Hon'ble Bench is invited to the structure chart on page 6 of Kotak's Valuation Report, which was also separately annexed to the Chart of Dates, submitted by the appellant. On perusal of the same, it would be noted that Scorpio was not directly holding shares in VIL, but held economic interest therein through several intermediate companies, which had independent assets and liabilities. Although, the said companies were mainly investment companies, having shareholding in subsidiary companies, such investments were financed through third party borrowings, which in our respectful submission ought to be considered while computing the value of holding companies including Scorpio. Accordingly, since Scorpio had no direct shareholding in VIL, which was held through several intermediate companies, the valuation of Scorpio was to necessarily factor the net assets (i.c. assets less debts) position of all such intermediate companies, as rightly carried out by the Valuation Expert, viz., Kotak in its Valuation Report. It is respectfully submitted that the aforesai....
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....id calculation was not furnished by the Respondent Revenue as the alternate FMV of the shares that could form the basis for sale consideration alleged to have "accrued" to the applicant, which can be corroborated from the following extracts at page 34-35 of the Written Synopsis filed by the applicant after the conclusion of the hearing, wherein it is clearly stated that the Revenue had not at any stage pointed out the precise consideration which "accrued" to the applicant under the various agreements: "The submission made by the respondent Revenue, namely accrual of some unquantified higher consideration (in place of the declared/ actual consideration) is based purely on conjectures and surmises and not backed by any relevant material / evidence on record. The Revenue could not point out the precise consideration, which according to the Revenue had "accrued" to the appellant so as to be taken as "full value of consideration" in terms of section 48 of the Act. The entire attempt of the Revenue seems to be to embark on a fishing/roving expedition to somehow discard the actual / declared consideration, which actually changed hands between the parties, which was disclosed and ....
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....value of SBPL at Rs. 131.86 per share," needs to be replaced by "Lastly, the value of the SBPL shares as per FMV of VIL would be calculated as Rule 11UA as directed above, and accordingly, AO is directed to compute the capital gain taking the sale value of SBPL so arrived at." The applicant trusts that its prayer will merit sympathetic consideration. An opportunity of being heard is prayed for. 3. The assessee's miscellaneous application was disposed of by this Tribunal in MA No. 742/Del/2017 dated 19.03.2018 rejecting the miscellaneous application. Aggrieved, the assessee preferred a writ petition before the Hon'ble Jurisdictional High court. The Hon'ble Jurisdictional High Court disposed of the Writ Petition vide WP (C ) 3121/2018 dated 18.09.2023 by observing as under:- 4. The record shows that the petitioner/assessee approached this court to assail the order dated 19.03.2018 passed vis-а-vis its Miscellaneous Application i.e., M.A. No.742/Del/2017 by the Income Tax Appellate Tribunal [in short, "the Tribunal"]. 5. The central issue around which the dispute veers is the price at which the shares of Scorpio Beverages Pvt. Ltd.....
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.... The revenue has filed the following written submissions dated 19.7.2024:- 1. The primary issue in the above-mentioned appeal namely the value of consideration received or accruing on transfer of shares of Scorpio Beverages Pvt. Ltd. ("SBPL"), was decided in favour of the Revenue, except to the extent of a minor variation arising largely due to the fact that the extent of shareholding of the Assessee in the company was found to be 3.6512% and not 3.95% as taken by the A.O. 2. Though the discussion in the order of the Hon'ble Income Tax Appellate Tribunal, New Delhi ("Hon'ble ITAT") spread over a range of issues, but the final findings regarding the full value of consideration were recorded at the end of Para 63 in a 'blocked space' which reads as under. - "AO had taken the value at Rs. 142.7 per share in the assessment order. But after taking the correct share of the assessee on SBPL as directed by us, the value will come to Rs. 131.86 per share by taking the 3.6512% share of assessee in VIL." 3. This finding was based on the fact that the value of consideration of transferred shares had to be taken with reference to the value of ....
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....the said M.A, and restored the same to the original position and number observing as under: - "14. The impugned order dated 19.03.2018 is set aside. The miscellaneous application is restored to its original number and position." It is submitted that the effect of such a direction is that the proceedings before the Hon'ble ITAT vis-à-vis the M.A., go back to 27.12.2017, when the said M.A. was filed- (its original number and position). 9. Section 254(2) of the Act prescribes a time limit of six-months from the end of the month in which an order under Section 254(1) of the Act is passed to rectify any mistake apparent from record. Section 254(2) of the Act reads as under - "(2) The Appellate Tribunal at any time within six months from the end of the month in which the order was passed, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer," A bare reading of the said provision makes it apparent that there is no limitation of time either on the Assessee or Reve....
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....y or incidental powers as are necessary to discharge its functions effectively for the purpose of doing justice between the parties. In a case of this nature, we are of the view that the Tribunal should be considered as invested with such incidental or ancillary powers unless there is any indication in the statute to the contrary. We do not find any such statutory prohibition." Reliance is also placed on the decision of the Hon'ble High Court of Bombay in the case of Supreme Industries Ltd. v. ACIT, [2015] 54 taxmann.com 82 (Bombay) wherein it was held that: - "12. It is a settled position in law that every authority exercising quasi judicial powers has inherent/incidental power in discharging of its functions to ensure that justice is done between parties ie. no prejudice is caused to any of the parties. This power has not to be traced to any provision of the Act but inheres in every quasi judicial authority. This has been so held by the Supreme Court in Grindlays Bank Ltd. v. Central Government Industrial Tribunal AIR 1981 SC 606. Therefore, the aforesaid principle of law should have been adopted by the Tribunal. It is expected from the Tribunal to adopt a j....
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.... in exercise of the power conferred on the Appellate Tribunal under section 255(5) cannot curtail the sweep of the powers of the Tribunal under section 254(2). Therefore, the exercise of power under section 254(2) is not dependent upon the validity of the application submitted by the party concerned. If the jurisdictional pre-conditions contemplated under section 254(2) are present, the Tribunal is bound to exercise the said power which is conferred as an enabling power. It is a power coupled with a duty to act when circumstances warranting the exercise of that power are shown to exist. So, even assuming that the application filed by the authorised representative is defective, still if the same discloses the matters relevant under section 254(2), the Tribunal is bound to exercise the power under the said sub- section. It is declared so. In the result, the order of the Tribunal was to be quashed and the matter was to be remitted to the Tribunal for a fresh decision in the matter as to whether it should exercise its power under section 254(2) or not, in accordance with law without any further delay." 17. The Revenue would urge the Hon'ble ITAT to invoke its inherent powe....
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....om record? 19. It is submitted that Rule 11UA has a very limited applicability. While sub-Rule (1) of Rule 11UA is applicable 'for the purposes of Section 56 of the Act' and for determining 'the fair market value of a property, the issue before the Hon'ble Bench was the determination of 'Full Value of Consideration received or accruing as a consequence of transfer of unquoted equity shares of SBPL', 20. The determination of Fair Market Value of the transferred share was not the subject matter for adjudication before the Hon'ble Bench. Issue was limited to the determination of full value of consideration received or accrued in terms of the contractual agreement entered into by the Assessee with the buying entities. The Hon'ble ITAT had discussed this legal issue in great detail from Para 50 onwards and comes to observe in Para 56 that 'Thus, so far as this proposition as canvassed by Mr. Ajay Vohra is concerned, we are in complete agreement with him that firstly, the term "Full Value of Consideration" cannot be reckoned as a fair market value and secondly, such deeming fiction of taxing the difference on the basis of fair market ....
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.... j. In fact, even the Assessee in its appeal to the Hon'ble High Court of Delhi [filed prior and after the original dismissal of Miscellaneous Application] in ITA Nos. 284/2018 & 380/2018 in Analjit Singh v. PCIT-6, New Delhi has challenged the applicability of Rule 11UA for computing FMV of the shares of SBPL and determining capital gains in its hands. This is evident from the following contentions raised by the Assessee in its appeal in ITA No. 284/2018 at Page 75 filed prior to the dismissal of the MA: - "m) That the Tribunal erred on facts and in law in computing the fair market value of the shares of Scorpio as per the valuation method prescribed in Rule 11UA of the Rules, without appreciating that the same was not applicable for computing capital gains under Section 45 read with Section 48 of the Act." As well as ITA No. 380/2018 at Page 49 filed after the dismissal of MA: "53. Without prejudice to the above, the Tribunal even otherwise erred in applying the provision of Rule 11UA of the Rules for computing FMV of the shares of Scorpio and capital gains in the hands of Appellant. The Tribunal completely failed to appreciate that Ru....
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.... valuer and adopted by the AO. The Assessee is seeking rectification of the value determined by the Hon'ble ITAT by invoking certain provisions of Rule 11UA which is based on two assumptions: - k. That, the ITAT has determined the value under Rule 11UA; and l. That, the ITAT has committed the error of not applying applicable provisions of Rule 11UA. It is submitted that the second assumption cannot survive without the first being true. However, the first assumption, if taken as correct, immediately gives rise to an apparent mistake of law that Rule 11UA has limited application for section 56 and has, in fact, been applied to Section 48. The acceptance of the submissions of the assessee would lead to acceptance of the existence of the apparent mistake of law in the order of the Hon'ble ITAT to the effect that the value of transferred shares was determined by the Hon'ble ITAT under Rule 11UA of the Act. The Revenue would urge that any suggestion to correct any hypothetical or assumed mistake should not further compound the matter by giving rise to another vital mistake and that too an apparent mistake of law. xiv. The mistakes apparent ....
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....ngh, his wife, the Hon'ble ITAT preferred not to follow the decision of the Coordinate Bench in the case of the Assessee and applied Rule 11UA to grant relief. It is also not disclosed to the Hon'ble High Court that a substantial question of law had already been admitted on the illegality of the Hon'ble ITAT applying Rule 11UA. The question of law was admitted with the consent of the Parties in the following words:- "With consent of parties, the following questions of law are framed:- A. Whether on the facts and circumstances of the case and also on the prevailing law, did the ITAT fall into error in characterising the receipt of consideration on sale of shares of Scorpio Beverages Pvt. Ltd. ('SBPL') as Long-Term Capital Gains ('LTCG'), despite the unambiguous provision contained in Section 2(42A) of the Act? B. Whether on the facts and circumstances of the case and also on the prevailing law, did the ITAT fall into error in making recourse to the provisions of Rule 11UA of the Income Tax Rules, 1961 considering that Section 56 of the Act has no application in the present case?" 5. Instead, an impression was sought to ....
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....f VIL would be Rs. 131.86 per share as determined c above and accordingly, the A.O. be directed to compute the capital gain taking the sale value of SBPL at Rs. 131.86 per share. Para 65- Lastly the value of SBPL shares as per FMV of VIL would be calculated as per Rule 11UA as directed above and accordingly, the A.O. be directed to compute the capital gain taking the sale value of SBPL so arrived at. The underlined portion represents changes suggested by way of rectification under Section 254(2) of the Act. 8. From the above, it transpires that the Applicant seeks the insertion of the provisions of Rule 11UA in the final findings of the Hon'ble Tribunal. In other words, while the finding of the Hon'ble Tribunal has not been rendered in the context of Rule 11UA [the passing reference in earlier paragraphs being merely an obiter). In other words, the Applicant is seeking rectification to the effect that such findings determining the full value of consideration of Impugned Shares at Rs. 131.86 be changed to only a direction for the application of Rule 11UA. 9. Reliance has been placed on certain observations of Hon'ble ITAT in Para 62 of the order o....
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....arket value of issued share capital of HEL for determining the value of SBPL shares. * Even if we agree with the contention of the Ld. Sr. Counsel, Mr. Ajay Vohra that the agreement of 05.07.2007 alone is to be reckoned, then we find that in 'Framework Agreement of 2007' also, not only the similar clause of call/put option has been enshrined but also the determination of transfer price is by and large based on fair market value of equity share of HEL. * In the agreement of 2007, the SBPL value of US $ 266.25 million was based on fair market value of HEL. In terms of INR, the value of SBPL shares in the year 2007 aggregated to Rs. 1088 crores. (when the indirect holding in HEL/VIL was only 0.23 as against 3.6512% at the time of transfer) * So far as the option fee is concerned, there is no dispute and the assessee has been offering the same as return of income and same has been taxed as revenue receipt year after year." 13. It is quite apparent that the Hon'ble Tribunal was very conscious to omit any reference to Rule 11UA in Paras 64 and 65 while drawing the final conclusions / findings which read as under: - "64. Based on th....
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....dingly, AO is directed to compute the capital gain taking the sale value of SBPL at Rs. 131.86 per share" 14. It needs to be pointed out at this stage that 50C, 50CA and 50D are the only provisions where AO is empowered to adopt Fair Market Value of shares which could at all give rise to application of Rule 11UA. Once these provisions were held to be not applicable there was no way the Hon'ble ITAT could have applied Rule 11UA. The entire hypothesis in MA falls to the ground. 15. Unlike in the case of Neelu Analjit Singh, the Wife, the Hon'ble Tribunal never gave any direction to compute the value in accordance with Rule 11UA, but categorically recorded a finding that the value of consideration be taken at Rs. 131.86 per share. The Hon'ble ITAT took upon itself the task of determining the "value of consideration accruing" to the Applicant on the transfer of shares of SBPL. Neither the guidelines issued by the Hon'ble Tribunal at Para 63 under which the working sheet determining the value of Rs. 131.86 was prepared nor the actual working of the Revenue was based on Rule 11UA 16. In fact, even the A.O. determined the value by taking proporti....
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....on, consideration has to be the proportionate share of Applicant in the value of HEL/VIL based on the Framework Agreements of 2006 and 2007. 20. In fact, the Framework Agreement of 2007 also provided some guidance for arriving at the per share price of SBPL and the allowance of liabilities, particularly, liabilities with respect to preference shares. It was in this context [upon examination of the terms of this Agreement), that the A.O. was directed to take the 'correct' amount of liabilities. The expression correct amount of liabilities does not amount to prescription of allowance of liabilities under any of rules but it only refers to prescription of allowance of liabilities under contractual agreements. 21. It needs to be kept in mind that the Hon'ble ITAT was not called upon to determine the Fair Market Value of SBPL but to determine the "full value of consideration" accruing to the Applicant on transfer of SBPL shares which can be arrived at only by reference to either: - a. The deeming fiction appearing in the statute; [like Section 50C, 50CA or 50D] or b. The contractual agreements between the parties that determine their right....
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....relevant to the issues raised in this appeal. The assumption drawn by the Applicant that merely because Rule 11UA was referred to with a view to dispel valuation done by a merchant banker should form the basis to hold the Hon'ble ITAT had determined the value of per share price of SBPL under Rule 11UA is fallacious. 28. It has been contended by both the Applicant as also the Revenue that Rule 11UA cannot traverse beyond Section 56 and be applied in the context of Section 48. In the statutory appeal filed by the Applicant before the Hon'ble High Court against the order of the Hon'ble Tribunal, the following question of law was raised by the Applicant himself. "3) Without prejudice, whether the Tribunal erred in law in relying in the provisions of Rule 11UA of the Rules when such Rule exclusively operates in the realm of Section 56 of the Act (Income from Other Sources) and which provision firstly does not apply to a transferor, and secondly does not apply to "Incomes" referred in Part A to E in Chapter IV of the Act?" 29. However, when the questions came to be admitted, the said question was not admitted by the Hon'ble High Court as it did ....
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.... 34. While making a wholesome reading of the order, it is not possible to ignore the observations in following paras: - a. Para 45- Rule 11UA did not figure in the list of issued framed for adjudication. b. Para 47- Reference to Framework Agreement of 2006 where it was agreed that the liability of intermediary companies was not to be recognised for working out the transfer price. c. Paras 48, 49- Where Framework Agreement of 2007 is discussed in detail. d. Para 50- Certain conclusions drawn referred to hereinabove. e. Para 56- Where Hon'ble ITAT holds that full value of consideration is not the fair market value of shares. f. Para 59- Where the Hon'ble ITAT holds that what accrued to the Appellant under Section 48 is the value determinable on the basis of the fair market value of VIL. g. Para 61- The Hon'ble ITAT rejects the valuation of Kotak Mahindra and in doing so, refers to Rule 11UA as well. h. Para 62- Hon'ble ITAT further rejects the methodology of Kotak Mahindra and in that process makes certain observations about what liabilities can be allowed under Rule 11UA. i. Par....
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.... 40. The Coordinate Bench has committed grave error of law in applying Rule 11UA in the context of Section 48 (particularly three exceptions carved out in 50C, 50CA and 50D were not applicable in this case). 41. It is submitted that the decision of the Coordinate Bench suffers from law and is not a binding precedent. Besides, there are decisions of other Coordinate Bench which clearly hold that Rule 11UA will not apply in the context of Section 48 of the Act. In the case of Swiss Reinsurance Co. Ltd. v. DCIT-(IT)-Range4 (2) (2). Mumbai, ITA 6531/Mum/2017 dated 20.07.2021 the Hon'ble ITAT, Mumbai Bench held in Para 21 as under: - "21. In the facts of the present case, undisputedly, after applying the computational provisions of sections 48 and 49 of the Act to the sale transaction of shares of TTK, long term capital loss arises. Therefore, the assessee is entitled to claim such long term capital loss. As regards the allegation of the assessing officer that assessee had not valued the shares under rule 11UA, we fully agree with the submissions of learned counsel for the assessee that rule 11UA is application for valuation of assets specified under section 56(2)....
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....stablished by arguments and a long-drawn process of reasoning on points on which there may conceivably be two opinions. 46. In light of the above, MA deserves to be dismissed. Dated: 23.07.2024 (G.C. Srivastava, Adv.) Place: New Delhi Special Counsel for Revenue" 6. The assessee had filed his rebuttal to the aforesaid two written submissions of the revenue as under:- SUB: REBUTTAL OF THE SUBMISSIONS OF THE DEPARTMENT PUT FORTH DURING THE COURSE OF THE HEARING CONDUCTED ON 23.07.2024 1. The captioned Miscellaneous Application was heard and reserved for orders on 23.07.2024. That during the course of the hearing, written submissions were filed by the Ld. Special Counsel before the Hon'ble Bench to oppose the Miscellaneous Application. By way of the present submissions, the Assessee seeks leave to counter thos....
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....equently Rule 11UA of the Rules were applicable. However, at the behest of the then Bench, resort was had to the methodology prescribed under Rule 11UA of the Rules to arrive at the valuation while considering all the intervening companies balance sheets. 4. From the Written Submissions filed by the Revenue, the following theme can be detected:- a. Whether the Hon'ble Tribunal at all invoked Rule 11UA of the Rules? b. Whether Rule 11UA of the Rules could at all be applied? c. Whether inferences regarding final finding can be drawn from selective reference to certain sentences and paragraphs? d. Is the decision rendered in the case of Mrs. Singh in respect of the balance shares be a binding precedent? e. Whether the mistake inferred by a process of reasoning and where two views are possible, can be considered as a mistake apparent from record? 5. Each of the above issues would now be addressed in seriatim. 6. That the overwhelming theme of the Revenue's contentions is that the Tribunal while adjudicating the appeal on merits in the Assessee's case did not invoke Rule 11UA and a mis-statement has been....
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....nd this table shows the value of consideration adopted by the AO is in tune with the value as may be finally determined after accounting for such liabilities. This contention is without prejudice to the primary contention that the liabilities of intermediary companies have not to be taken into account. Mr. Srivastava has filed separately a chart providing a working of the liabilities of the intermediary companies. As regard the submission on behalf of the Assessee that difference arises primarily on account of the amount set apart for payment of dividends to preference shareholders, he submitted that such claim is clearly inadmissible in view of sub-rule 2(ii) of Rule 11UA of the IT Rules. Even otherwise, such liabilities cannot be taken into account in arriving at the value of shares of a company under NAV method. The valuation done as per the rule works out to Rs. 136 per share and the AO has taken the value at Rs. 132 per share only (initially it was 142.70, which was arrived at after taking the appellant's stake in VIL at 3.9% instead of the correct stake at 3.65%. Thus, the valuation adopted by the AO in is conformity with the Framework Agreements, value of HEL shares as d....
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....us Application of the Assessee in the first round. 13. This Hon'ble Tribunal in its order dated 19.03.2018 (Please refer page no. 66 and 67 of the present submission) has specifically recorded as under:- "12. We have carefully considered the rival submissions and also points and issues which have been brought to our notice in the impugned miscellaneous application. The Tribunal in the impugned order after detailed discussion has held as under:- ....... Thirdly, the Tribunal further held that the liability of intermediary companies which can be reduced for the purpose of valuation of unquoted shares of SBPL has to be strictly worked out in accordance with Rule 11UA(2); and 14. Hence, the Tribunal itself acknowledged that the directions given to the Department in Para 62/63 of the Tribunal order dated 01.12.2017 to calculate the "correct value" of the shares of SBPL was to be done in accordance with Rule 11UA(2) of the Rules. Further in the subsequent paras (Please refer to page no. 67 to 70 of the present submission), the Tribunal endorses its direction on the applicability of Rule 11UA of the Rules whilst observing as under:- ....
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.... the order dated 19.03.2018 on the grounds that this order cannot be placed reliance upon, since it was set aside by the Hon'ble High Court in WP(c) No. 3121/2018. Desperate as this argument is to prevent the truth from unfolding, it also lacks merit because nowhere has the High Court in its order dated 18.09.2023 directed the Tribunal to pass a fresh order uninfluenced by the observations contained in the order dated 19.03.2018, All that the High Court did was to note that the Tribunal had rejected the Miscellaneous Application on the ground that the same would tantamount to a "review" and whilst appreciating the arguments and subsequent events as transpired in Mrs. Singh's case, had set aside such finding of the Tribunal and directed this Hon'ble Tribunal to reconsider the merits of the application. 18. Therefore, in the absence of any order sheet or any covering letter by the Department, it is this order and the submissions made by the Ld. Special Counsel at the time of the original hearing, which clearly brings out the fact that the direction of the Hon'ble Tribunal was specific that the valuation must comply with the methodology as prescribed under Rul....
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.... order of the Tribunal in Mrs. Singh's case would reveal that the Tribunal has not departed from Mr Singh's case and has followed the decision on all fours, except for noting the contention qua the errors in the valuation and directing the Assessing Officer to independently apply his mind and determine the value per share of the SBPL shares. To state that this determination has no evidentiary value is again a misnomer as the Assessing Officer has independently applied his mind and while following the same methodology, as directed by the Tribunal in the Applicant Assessee's case and followed in Mrs. Singh's case, has arrived at the valuation of INR 70.59 per share. 23. Lastly, in para 43 to 45 in the written submission filed by Revenue, it has alleged that whether the mistake inferred by a process of reasoning and where two views are possible, can be considered as a mistake apparent from record. To this effect, the revenue's submission is twofold i.e. a) that the question regarding the applicability of Rule 11UA being admitted by the Hon'ble High Court renders its applicability a debatable issue, beyond the scope of Section 254(2) of the Act and b) t....
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....ibunal while exercising powers under Section 254 of the Act. Reliance is also placed on the full bench decision of the Hon'ble Delhi High Court in the case of Lachman Dass Bhatia Hingwala Pvt. Ltd. v ACIT, [2011] 330 ITR 243 (DHC)(FB) where the Hon'ble High Court has held that to correct the error, the Tribunal is empowered to even recall its order in its entirety, if need be. 27. In view of the above, the limited prayer of the applicant is that the Tribunal may rectify the error to the extent of determining the per share price of SBPL as determined in paragraphs 64 and 65 of the order dated 01.12.2017 and consequently direct the AO to adopt the price per share at INR 70.59. 7. We have heard the rival submissions and perused the materials available on record. As stated supra, this miscellaneous application proceedings attained its life pursuant to the direction of the Hon'ble Jurisdictional High Court while disposing of the writ petition of the assessee in WP(C) No. 3121/18 dated 18.09.2023. As it could be seen that this Tribunal in assessee's case, had determined the fair market value per share at Rs. 131.86 based on the workings provided by the department at t....
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.... Value of VIL; * Secondly, the Tribunal thereafter proceeded to determine the valuation of the SBPL shares; and while examining the assessee's alternative contention that the value adopted by the independent valuer Kotak Mahindra, who has valued shares of SBPL at Rs. 5.40 per shares has been categorically rejected as per the finding given in paragraph 61 of the said order; * Thirdly, the Tribunal further held that the liability of the intermediary companies which can be reduced for the purpose of valuation of the unquoted shares of SBPL has to be strictly worked out in accordance with Rule 11UA(2); and * Lastly, the indirect stake of SBPL in VIL through various intermediary companies on pass through basis will come to 3.6512% being 41% of 8.905% and not 3.95% as considered by AO by taking the indirect stake of SBPL in VIL at 9.65%. 13. After holding in the aforesaid manner, the Tribunal had directed the Department to file the calculation in accordance with Rule 11UA so that the correct share value/price of the unquoted shares could be worked out. As per the working given, the value of the SBPL was worked out at Rs. 136.76 per share and since ....
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....ls within scope of rectification application u/s 254(2) or not; or whether it amounts to review of the decision which is beyond the power of the Tribunal. As held above, at the time of hearing the working submitted by the department was confronted to the assessee and opportunity to rebut was specifically given. But at that time no defect was pointed out. The working now given has neither been examined by the department nor can it be verified at this stage, therefore we find it difficult to accept or rectify the figures. Not only is that, the liabilities which has been sought to be reduced from the book value of the assets, itself can be a debatable issue. For instance whether preference share is a liability which should be reduced from the asset or not, is neither borne out from the Rule 11UA; nor has any provision or judicial precedent has been cited or referred to before us that the preference share payable will be reckoned as an allowable liability while working the share value. Thus, at the stage of rectification application it would be very difficult to rake up a new point which was not raised at the time of hearing. Secondly, assessee itself has given three sets of working of....
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.... Rules. This is mentioned in para 61 of the original Tribunal Order dated 01.12.2017. Again in para 62 of the order dated 01.12.2017, the Tribunal does make a mention that Kotak Mahindra valuation of shares was not in accordance with Rule 11UA of the Rules. At the same time, the Tribunal had also observed in very same para 62 that Rule 11UA of the Rules, is the specific rule for valuing the unquoted shares. Hence, the observations made by this Tribunal in original appellate order dated 01.12.2017 in paras 61 and 62 does indicate its mind that fair market value should be determined in accordance with Rule 11UA of the Rules. Hence the reliance placed by us on the observations of the Tribunal in MA Order dated 19.03.2018 is further strengthened as it only provides more clarity that the Tribunal indeed had sought workings for determination of FMV only as per Rule 11UA of the Rules. Hence, the elaborate arguments advanced by the ld Special Counsel for the revenue which are reproduced herein supra are devoid of merit and deserves to be dismissed. 9. From the above observations, it becomes crystal clear that Tribunal always intended adoption of Rule 11UA of the Rules for determination ....
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....ways pleaded both in original appellate proceedings as well as in the First MA proceedings and also in the present MA proceedings, that only the actual consideration received on sale of shares should be adopted for computing the capital gains; and that on without prejudice basis, the fair market value of shares is to be determined in accordance with Rule 11UA of the Rules. We find that this Tribunal vide its original order dated 01.12.2017 had already dismissed the plea of the assessee to consider the actual consideration received by the assessee for computing the capital gains and had directed the Department to furnish the fair market value workings as per Rule 11UA of the Rules. As stated above, certain fallacies had crept in the said workings given by the Department which alone is sought to be rectified in the present MA proceedings. Hence, this miscellaneous application proceedings is effectively meant only to modify the order passed by this Tribunal on 01.12.2017 and not to recall the same. On careful reading of the original appellate order dated 01.12.2017 of the Tribunal, we find that the Tribunal had ultimately sought to determine the fair market value of shares by using NA....