Income Tax Appellate Tribunal - Mumbai
Acit 26 (3), Mumbai vs Sangeeta Dilip Patil, Mumbai on 23 February, 2023
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "E" MUMBAI
BEFORE SHRI ABY T VARKEY (JUDICIAL MEMBER)
AND
SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER)
ITA No. 6557/MUM/2019
Assessment Year: 2015-16
ACIT-26(3), Sangeeta Dilip Patil,
R. No. 332, 3rd floor, Kautilya 1204, Park Royale, Madan
Bhavan, Bandra Kurla Complex, Vs. Mohan Malviye Road,
Bandra East, Mulund (W),
Mumbai-400051. Mumbai-400080.
PAN No. AATPP 1470 C
Appellant Respondent
Assessee by : Mr. Madhur Agrawal, AR
Revenue by : Smt. Nilu Jaggi, CIT-DR
Date of Hearing : 25/01/2023
Date of pronouncement : 23/02/2023
ORDER
PER OM PRAKASH KANT, AM
This appeal by the Revenue has been preferred against order dated 22.07.2019 passed by the Ld. Commissioner of Income-tax- 40, Mumbai [in short 'the Ld. CIT(A)'] for assessment year 2015-16, raising following grounds:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the consideration received on sale of shares of M/s.
Sangeeta Dilip Patil 2 ITA N. 6557/M/2019 AY 2015-16 Trivector Origio Scientific Pvt. Ltd. amounting to Rs.
16,883/ is capital gains only and not 16,42, 16,883/-
business income as per provisions of Section 28(11)(a) off the Act holding that the income received only for sale of shares without appreciating the fact that when the assessee sold the entire shares held by herself, the managerial control itself terminated and the assessee no more part of the management of the said company.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the assessee has not received any income for termination of her management control in the ongoing company without appreciating the fact that the consideration received includes the income received on termination of her management control as she has sold all the shares held by her.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the CBDT Cir Circular cular No.225/12/2016/ ITA/Il dated 02.05.2016.
2. Briefly stated, facts of the case are that the assessee filed return of income on 26.08.2015 declaring total income of Rs.7,62,53,270/-.. The return of income filed by the assessee was selected for scrutiny and statutory notices under the Income-tax Income Act, 1961 (in short 'the Act') were issued and complied with. During the scrutiny proceedings, the Assessing Officer noted that assessee had sold 2200 shares of unlisted company M/s Trivector Origio India Pvt. Ltd.. for a consideration of Rs.16,67,24,306/-
Rs.16,67,24,306/ and shown long term capital gain of Rs.15,91,93,555/ Rs.15,91,93,555/- after claiming Rs.50,00,000/ for investment in exemption u/s 54EC of the Act at Rs.50,00,000/- bonds. This company was promoted by the assessee along with her Sangeeta Dilip Patil 3 ITA N. 6557/M/2019 AY 2015-16 husband Shri Dilip 2005 both having 50% shares ilip Patil in the year 2005, of the company. In the year 2012 2012-13, 13, the assessee along with her husband sold 51% shares of the company to M/s Origio A/S vide share purchase agreement dated 28.03.2013. The balance share have been sold to o the same company in the financial year 2014-15 2014 corresponding to the assessment year under consideration vide purchase agreement dated 13.02.2015. The husband of the assessee sold 2700 shares of this company to M/s Origio A/S in the consideration along with sale of 2200 shares by the year under considerati assessee.. The Assessing Officer, Officer however held the sale of shares as business income in terms of section 28 of the Act as according to him the consideration received on sale of shares is actually rom termination of her management of compensation received ffrom Indian Co., which she was substantially managing.
3. On further appeal, the Ld. CIT(A) deleted the addition observing as under:
9.8 The AR of the appellant has also placed reliance on a "9.8 number of court decisions which have held that control and management itself is a capital asset u/s. 2(14) of IT. Act. The term capital asset is defined u/s.2(14) of I.T. Act which, inter alia, means property of any kind held by an appellant and capital gain. This has disposal of property would result into capital been held by Delhi High Court in the case of CIT vs. Shiv Raj Gupta (2014) 52 taxmann.com 425 (Dell and CIT vs. Sangeeta Wig (2014) 42 taxmann.com 146 (Del.)."
(Del.).
Sangeeta Dilip Patil 4 ITA N. 6557/M/2019 AY 2015-16
4. At the outset, before us, the Ld. Counsel of the assessee submitted that identical issue of sale of shares in the hand o of her husband Shri Dilip Patil has been held as capital gain by the Tribunal in ITA No. 875/Mum/2020 and ITA No. 6587/M/2019 for assessment year 2013 2013-14 and 2015-16 16 respectively.
5. The Ld. Departmental Representative Representative (DR) could not controvert position of decision in favour of the assessee on issue-in- dispute.
6. We have heard rival submission of the parties and perused the relevant material on record. The issue before us, is whether the gain le of shares of M/s Trivector Origio India Pvt. Ltd. is arising from sale taxable under the head 'capital gain' or under the head 'profit and business u/s 28(2)(a) of the Act. The Tribunal (supra) gains of the business' in the case of the husband of the assessee on identical issue h has held as under:
9. We have analysed the nature of transaction to determine the character of the receipts to be assessed under the head business under section 28(ii)(a) of the Act.
10. This is established position of law that any such receipt scribed in section 28(i)(a) is duly covered as capital which is described asset as defined in sec 2(14). On such type of receipt being asset first charge on assessee will be under the head capital gain only. If assessee is not offering such receipt under the gains, then only it is chargeable to tax under sec head capital gains, 28()(a). Chargeability of such type of receipt under sec. 28(i)(a) was introduced with a motive to cover the loopholes where income is neither chargeable to tax under the head capital Sangeeta Dilip Patil 5 ITA N. 6557/M/2019 AY 2015-16 gains nor in any other head. head. Whereas such type of transactions categorically covered by the finance act 1997 i.e., with effect from A Y 1998-99 1998 99 through sec, 55(2)(a).
11. From the transactions and covenants of agreement observed, it clearly emanates that the business was being rried out by M/s. TOPL and assessee was simply a carried shareholder and not directly into the business so it can be affirmed that the transactions of assessee with M/s. Ori M/s Origio A/S Denmark was transfer of shares and not of we relied upon the decisions of business itself. In this regard we Granialowing Hon'ble High Court/Apex Court.
i. CIT Vs New India Assurance Company Ltd 122 IT 633 (Mum.) ii. SIN) CIT Vs F.X. Periera and Sons (Travancore) Pvt Ltd.
184 ITR 461 (Ker.) iii. CIT Vs West Coast Chemicals and Industries Ltd 46 ITR 135 (S.C) iv. CIT Vs Mugni Ram Bangur and Co 57 ITR 299 (S.C) v. West Coast Electric Supply Corporation Ltd Vs CIT 107 ITR 483 (Mad.) vi. Syndicate Bank Ltd Vs CIT 155 [TR 681 (Kar.) vii. Indian Bank Ltd Vs CIT 153 ITR 282 (Mad.) viii. ACIT vs. Savita N. Mandhana & Ors., ITA No. 3900/Mum/2010 ix. Rohitasava Chand Vs. CIT 306 ITR 242 (Del.) x. CIT Vs. Saroj Kumar Poddar 279 ITR 573 (Cal.) xi. CIT Vs. Shiv Raj Gupta 372 ITR 337 (Del.)
12. The jurisdictional ITAT in the case of similar facts, held in the case of Hami Aspi Balsara Vs ACI T 126 ITD 100, held as ACIT under "Admittedly, in the share purchase agreement no non compete fees and consideration was assigned towards non-compete the parties had entered into the share purchase agreement after mutually settling the price of shares. This clause clearly shows that in the purchase price of shares, consideration towards Restraint Clause was embedded. Admittedly, assessee on her own was not carrying on business and it was the company in which she was shareholder was carrying on the business, ... Thus, sectio n 28 would be attracted where section the assessee was carrying on business and not where Sangeeta Dilip Patil 6 ITA N. 6557/M/2019 AY 2015-16 assessee only had right to carry on business in the form of capital asset."
13. In view of the above facts, pronouncement of Hon'ble High are of the considered view Court and jurisdictional ITAT, we are thatt the assessee had rightly declared income under the head Capital gains. No portion of considerations can be attributated for the purposes of sec. 28 hence we confirm the findings of ld. CIT(A) and dismissed the grounds of appeal appeal raised by the Revenue."
6.1 As identical issue of the sale of the shares of the same company is involved in the case of the assessee, therefore, respectfully following the finding of the Tribunal (supra) the grounds of appeal of the Revenue are dismissed.
dismissed
7. In the result, the appeal of the Revenue is dismissed.
Order pronounced under Rule 34(4) of the ITAT Rules, 1963 on 23/02/2023.
02/2023.
Sd/- Sd/--
(ABY
ABY T VARKEY)
VARKEY OM PRAKASH KANT)
(OM KANT
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai;
Dated: 23/02/2023
Rahul Sharma, Sr. P.S.
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A)-
4. CIT
5. DR, ITAT, Mumbai
Sangeeta Dilip Patil 7
ITA N. 6557/M/2019
AY 2015-16
6. Guard file.
BY ORDER,
//True Copy//
(Assistant Registrar)
ITAT, Mumbai