AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 178
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....ete scrutiny in CASS and therefore, the Assessing Officer issued a notice dated 29th June, 2021 under section 143(2) of the Act to the Assessee, in response to which the Assessee filed part reply. Thereafter various statutory notices were issued to the Assessee, in response to which the Assessee filed relevant replies. 3. On perusing the replies filed by the Assessee and material available on record, the Assessing Officer observed that the Assessee during the A.Y. under consideration has sold the shares of M/s. Mind Tree Ltd. and earned profit of Rs. 968,03,05,115/- and claimed the same as "revenue" in the financial statements, details of which are as under: No. of shares Rs. 99,94,244 Price per share Rs.980 Gross consideration Rs.79,43,59,120 Total deduction (STT, Stamp duty, Ex. Transaction Charges, SEBI Turnover Cess, IGST, Brokerage, Others etc.) Rs.1,32,95,255 Net consideration Rs.978,10,62,865 Cost of Mindtree shares Rs.10,07,58,750 Profit on Investments Rs.968,03,05,115 4. The Assessing Officer further noticed that the Assessee company has also claimed the expenses of Rs. 5,89,57,582/- in respect of transfer of shares of M/s. M....
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....see being aggrieved challenged the said additions by filing first appeal before the Ld. Commissioner and claimed as under: "That KMCCL provides investment banking and clearing services, mergers and acquisition advices, equity debit management, equity and derivative and professional clearing services. Further, KMCCL serves customers worldwide being leading company in the market providing financial advice in connection with shares transactions. The Assessee held around 20% of the shares of M/s. Mind Tree Ltd. The number of shares held by the group, including the promoter of group Late Shri V.G. Siddhartha are as under: The name of company No. of shares M/s. Coffee Day Enterprises Ltd. 1,74,61,768 M/s. Coffee Day Trading Ltd. 105,94,244 Mr. V.G. Siddhartha 53,04,217 Total 3,33,60,229 The shares were independently placed by group entities and also by late shri V.G. Siddharthat chairman of Coffee Day Group to raise huge loans. The group was in financial crisis and was not in position to repay the principal amount and the interest expenses and therefore in the distress circumstances, the group decided to dispose of the shares and clear the ....
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....the clients. The Assessee company group identified an expert as well as negotiator who would identify the customer and negotiate the price of the shares as expected by the client. It is in these circumstances above, that services of M/s. Kotak Mahindra Capital Co., Ltd was utilized and hence professional charges as agreed were to be paid. The professional charges are solely in connection with the transfer of M/s. Mind Tree Ltd shares by identifying the buyers and negotiating a deal as huge as Rs. 979.43 crores by the company. But for their services it would not have been possible to undertake bulk sale yielding a proceeds of Rs. 979.4 crores and would not have been possible to realize such huge revenue. This has resulted in substantial capital gains to the assessee. Hence, the services of M/s.Kotak Mahindra Capital Co., Ltd is directly in relation to the transfer. This is an expenditure incurred directly in connection with the transfer of share of M/s. Mindtree Ltd and allowable under the provisions section 48(1) of the act. The professional charges so paid to M/s Kotak Mahindra Capital Co., Ltd was Rs. 5.34.77.600/-, This professional charges is over a gross proceeds of R....
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....ransaction tax, brokerage, exchange transaction fee, SEBI and others taxes like GST. All the allowable direct expenses incurred wholly and exclusively in connection with the transfer of the shares are mentioned in the said receipt. Consequently, it can reasonably be concluded that the payments made to KMCCL cannot be treated as expenses wholly and exclusively in connection with the transfer of the impugned shares. 13. The ld. Commissioner also considered the claim of the Assessee that M/s KMCCL was engaged to ensure a fair price, identify a single buyer, safeguard the valuation of share and facilitate the transfer of controlling share to the buyer, however, these services are not entirely and exclusively in connection with transfer of share but rather aimed at achieving broader business objectives. Consequently, the payments made to KMCCL fall outside the scope of allowable expenses, under the provisions of section 48 of the Act. 14. The ld. Commissioner thus on the aforesaid reasons, ultimately affirmed the addition of Rs. 5,34,77,600/- on account of disallowance of expenditure incurred being fees paid for rendering services to M/s. KMCCL by observing and holding as under: ....
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....ate its claim was not found justified. 6.2.4 Appellant argued that it undertook significant efforts to find a buyer for the shares of M/s. Mind Tree Ltd. on its own. However, company could not sell the shares in possession on NSE/BSE through broker. In such situation, appellant was forced to go through one agency to sell the shares to single party, thus appointed Kotak Mahindra Capital Private limited. Appellant provided reasoning for making arrangement with Kotak Mahindra Capital Private limited in order to sell the shares. AO specifically asked for the agreement based on which transactions were accomplished. However, appellant failed to file such agreement before the AO. 6.2.5 In this regard, it is pertinent to mention here that AO specified reasons for disallowing the claimed expenses under the Income Tax Act, 1961. AO did not find the reasoning given by the appellant to prove expenses incurred wholly and exclusively in connection with transfer of shares justified as no formal agreement was furnished by the appellant. At the instant appellate stage, appellant filed a communication from the Kotak Mahindra Capital Private limited wherein writer states its role of....
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...., the Assessee before both the authorities below failed to file the substantive documents such as agreement executed by the Assessee with M/s KMCCL, relevant communications etc., which resulted into doubting the transaction and making the addition under consideration. Though, the Assessee filed a letter dated 18.01.2019 along with Annexure- A before us, claiming that the same pertains to arrangement made between M/s KMCCL and the Assessee company, in connection with sale / exit of a portion or all its share of 'Mind Tree Ltd.', however, the same prima facie seems to be an arrangement made by the Assessee and Mr. V.G. Siddhartha and KMCCL but not in the appropriate form of enforceable agreement, as per the provisions of Indian Contract Act and Indian Registration Act. The Assessee also provided the invoice for professional services. However, from the index filed by the Assessee, it is clear that no such documents were made available before the Authorities below and therefore the same remain to be examined by the Authorities below. In our considered view, the onus is upon the Assessee to establish its prima facie case and to discharge its onus cast by submitting the relevant document....
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....ee and Mr. V.G. Siddhartha. Admittedly in the invoice dated 22nd March, 2019, the name of the shares sold i.e., Mind Tree Ltd. is nowhere appearing. Even otherwise the bifurcation of the total amount of Rs. 62,80,486/- is also not there and the details of Rs. 19,94,244/- as involved in this case is also not there in the aforesaid invoice dated 22nd March, 2019 issued by M/s. CAM. The Assessee before us has also failed to produce such relevant details including any Agreement /assignment note and correspondences held between the Assessee and M/s CAM and the relevant agreements qua transactions carried out by the Assessee and the buyer of shares as allegedly drafted by M/s CAM and therefore in our considered view, the instant claim of Rs. 19,94,244/- which is under consideration before us, requires to be verified by relevant documents and substantiation by the Assessee. Thus, we are inclined to remand the instant issue as well to file of the ld. Commissioner for decision afresh, suffice to say by affording a reasonable opportunity of being heard. The Assessee is also directed to file the relevant documents and communications in support of it claim qua fees paid to M/s CAM. We clarify ....