Re-computation of Capital Gains on Sale of Shares of Subsidiary Company by Revising Genuine Sale Consideration : ITAT dismisses Appeal

The Mumbai bench of Income Tax Appellate Tribunal (ITAT), while dismissing the appeal filed by the revenue held that re computation of capital gains on sale of shares of subsidiary company by revising sale considerations that are genuine is invalid. Assessee Indiabulls Real Estate Ltd. is a company engaged in the business of real estate projects, advisory, construction, and development of real estate projects. The assessee filed its return of income on 29/09/2009, declaring total income at Rs. 22,98,44,928. In its return of income, the assessee also offered the capital gains on the transfer of shares of its wholly-owned subsidiary, i.e. Shivalik Land Development Ltd, considering the full value of consideration at Rs.10 crore. The return of income filed by the assessee was selected for scrutiny. Therfater passed assessment order and determined income after making disallowance under Section 14A of the Income Tax Act, 1961. Aggrievd assessee filed appeal before the CIT(A). In appeal before the CIT(A), the assessee raised an additional ground of appeal relating to a recomputation of capital gains on the sale of shares of its wholly-owned subsidiary by revising the sale consideration from Rs.10 crore to Rs.25 lakh, on the basis that the parties have entered into Settlement Deed and Supplementary Share Purchase Agreement, whereby the total consideration of the sale of shares of the wholly-owned subsidiary company was reduced to Rs.25 lakh. The CIT(A) rejected the request of the assessee to admit the additional ground of appeal. In further appeal, the Co–ordinate Bench of the Tribunal set aside the matter on this issue to the file of the Assessing Officer to verify the genuineness of the claim of the assessee that sale consideration has been reduced from Rs. 10 crore to Rs. 25 lakh and decide this issue de novo. Pursuant to the directions of the Tribunal, the AO did not agree with the submissions of the assessee that the sale consideration of shares of the subsidiary company has been reduced from Rs.10 crore to Rs.25 lakh.Thereafter the assessee again filed appeal before CIT(A). The CIT(A) allowed assessee's appeal. Against the order, revenue filed further appeal before the tribunal. Ajay Soneji, counsel for the revenue submitted that CIT(A) has not examined how the sales consideration of Rs.10 crore was reduced to Rs.25 lakh. K. Gopal, counsel for the assessee submitted that parties mutually agreed to resolve and settle various legal and criminal disputes, which started after the parties came to know certain facts after the execution of the initial Share Purchase Agreement. Parties also mutually agreed to revise the sale consideration of shares from Rs.10 crore to Rs.25 lakh. The two member bench of M. Balaganesh, (Accountant Member) And Sandeep Singh Karhail, (Judicial Member) observed that “assessee with the support of the aforesaid documents has duly explained as to how the sale consideration of shares was reduced from Rs.10 crore to Rs.25 lakh.” Moreover, the tribunal pointed out that “Nothing has been brought on record by the Revenue to show that the valuation of shares of Shivalik Land Development Ltd. is Rs.10 crore and therefore the computation of capital gains in the hands of the assessee should be done accordingly.” Therefore, the bench confirmed the Genuineness of Revised Sale Consideration of assesse’s Sale of Shares of subsidiary Company. Keywords: ITAT, CIT (E), Sale of Shares, subsidiary Company, Sale Consideration, Capital Gains Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates