Income Tax Appellate Tribunal - Chennai
Tvs Investments Lrd.,, Chennai vs Dcit, Chennai on 2 April, 2024
आयकर अपीलीय अिधकरण, 'बी' यायपीठ, चे ई।
IN THE INCOME TAX APPELLATE TRIBUNAL
'B' BENCH: CHENNAI
ी मंजूनाथा. जी, लेखा सद एवं
ी मनोमोहन दास, ाियक सद के सम
BEFORE SHRI MANJUNATHA. G, ACCOUNTANT MEMBER
AND SHRI MANOMOHAN DAS,JUDICIAL MEMBER
Miscellaneous Application No.13/Chny/2024
(in ITA No.262/Chny/2017)
िनधारण वष/Assessment Year: 2010-11
M/s.TVS Investments Ltd., v. The Dy. Commissioner-
(Presently known as M/s.TVS Capital of Income Tax,
Funds Pvt. Ltd.), Corporate Circle-3(1),
119 Greenways Towers, Chennai.
2nd Floor, St.Marys Road,
Abhiramapuram, Chennai-600 018.
[PAN: AAACT 1154 H]
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ क ओर से/ Appellant by : Shri R. Vijayaraghavan, Adv.
यथ क ओर से /Respondent by : Shri ARV Sreenivasan,
Addl.CIT
सुनवाई क तारीख/Date of Hearing : 22.03.2024
घोषणा क तारीख /Date of Pronouncement : 02.04.2024
आदेश / O R D E R
PER MANJUNATHA. G, AM:
The assessee has filed present Miscellaneous Application u/s.254(2) of the Income Tax Act, 1961, against the order of the Tribunal in ITA No.262/Chny/2017 dated 22.11.2023, and relevant assessment year 2010-11.
MA No.13/Chny/2024(in ITA No.262/Chny/2017) :: 2 ::
2. The assessee has narrated the facts of its case and mistakes stated to be apparent on record from the order of the Tribunal dated 22.11.2023 and relevant contents of Miscellaneous Application filed by the assessee for the AY 2010-11 in ITA No.262/Chny/2017 are reproduced as under:
1. The Applicant refers to an order dated 22.11.2023 of the Hon'ble Income Ta? App"e11ate Tribunal (ITAT) in respect of the Department's appeal in ITA No 262/Chny/2017 for the assessment year 2010-11.
2.The brief facts of the case are that the Applicant is a Limited Company engaged in the business of investment and providing management consultancy services. For the subjected year, its return was filed on 4.10.2010 declaring a loss of Rs.2,84,10,249 under normal provisions of the Act and book profit of Rs.20,55,23,364 u/s 115JB of the Act. The Applicant's case has been selected for scrutiny assessment which has been completed vide order dated 28.3.2013 passed u/s 143(3) of the Income Tax Act, 1961 (Act) assessing the income at Rs.75,97,44,330/-
under normal provisions of the Act. The difference between returned income and assessed income was inter alia on account of determining the capital gain at Rs. 29,43,26,189/- on sale of shares of M/s. TVS Finance and Services Limited to TVS e-Access India Limited [TAIL]. Being aggrieved by the assessment order, the Applicant filed an appeal before CIT(A) who deleted the addition vide order dated 18.10.2016. Being aggrieved, the department filed appeal before Your Honours which has been disposed off vide order dated 22.11.2023 confirming the action of the AO and setting aside the decision of the CIT(A).
3.Brief facts of the case, as explained in the assessment proceeding as well as during appellate proceeding including before Your Honours are as under:
3.1 The Applicant company and M/s. TVS Motor Company Limited (TML) were the promoters of a company named as M/s. TVS Finance and Services Limited being a listed company [TFSL]. For the detailed reason stated at paragraphs 17 and 18 of the impugned order, the promoters decided to delist the shares of TFSL whereby the first requirement was to buy the shares from the public. It was agreed between the Applicant and TML that the Applicant will buy entire shares from the public and thereafter recover the proportionate amount or cost from TML and transfer the proportionate shares to TML which is bought from the public.
Accordingly, following the regulatory guidelines for acquiring the shares from public, the Applicant paid Rs. 31.19/- per shares for buying shares from the public. As agreed, the Applicant transferred 7,04,349 of shares of TFSL to TML for Rs. 31.19 per shares. In the same year, the Applicant sold remaining shares of TFSL to TAIL for Rs. 0.01 per share. The AO recomputed the capital gain on sale of Shares to TAIL by substituting the selling price at Rs. 31.19 as against the sales price of Rs. 0.01 per share considered by the Applicant. The AO held that the transaction of selling MA No.13/Chny/2024 (in ITA No.262/Chny/2017) :: 3 ::
the shares at Rs. 0.01 per shares is to avoid the taxes as the Applicant has sold land in the subjected year on which it has earned huge capital gain. The addition has been deleted by the CIT(A). However, Your Honours have confirmed the action of the AO in holding that the transaction is sham and entered to avoid the tax. While holding so, few facts have been stated in the order which are factually incorrect and constitute apparent mistake from record within the meaning of section 254(2) of the Act. These apparent mistakes are narrated in following paragraphs:
3.1.1 At paragraph 23 on page 36 of the order, it is stated that ".....Since, the valuer has adopted book value for immovable properties for determining value of equity shares, in our considered view the method adopted by the valuer while arriving net assets is contrary and not in accordance with rule 11UA of the Income Tax Rules, 1962. But, the valuer and the appellant could not explain as to why they have not followed prescribed method for valuation of shares. Therefore, we are of the considered view that, the valuation report filed by the assessee to justify negative net worth and negative value of equity shares sold by the appellant is not in accordance with prescribed method for valuation of shares and thus, cannot be considered as supporting evidence. "
The Applicant submits that Rule 11UA of the Income Tax Rules, 1962 (Rules) was not there in the statute when the transaction took place; hence, the said Rule is not applied while doing the valuation of shares of TFSL. Rule 11UA has been introduced vide Notification No. 23/2010 dated 8.4.2010 by CBDT which falls in assessment year 2011 -12 and not in the subjected year. Further, even after insertion of Rule 11UA, it required to consider only the book value of immovable property for valuing the shares. Rule 11UA has been amended in 2017 to consider the Fair Market Value of immovable properties for valuation of shares vide CBDT Notification dt.12.4.2017. Thus, the fair market value of unlisted equity shares have to be valued only at book value between 8.4.2010 and 12.4.2017. Thus, for the Asst Year under consideration there is no requirement for valuing at Fair market value of immovable property and hence it was valued at Book value. The copy of CBDT Notification No. 23/2010 is enclosed as Annexure-1 (Page 5 to 8). Therefore once the sale price of the shares of TVSF was at the Fair Market value even as per the method of valuation accepted by CBDT fromS.4.2010 (Prior to introduction of Rule 11UA, the sale consideration was to be accepted and there was no provision for assessing sale of shares at any deemed Fair Market Value) sale of shares at Fair Market Value cannot be considered as a Tax avoidance measure.
Neither the Assessing Officer has determined the Fair Market Value of the shares sold but has adopted the sale of shares between promoters at the price arrived by Book building Process for the purpose of delisting of shares as Fair Market Value. Price at which shares are purchased by Promoters for delisting of shares as per the method prescribed by SEB1 is the value for delisting purpose only and cannot be considered as Fair Market Value once the shares are delisted. Prices based on Book Building process is in respect of listed shares but once the shares are delisted such price cannot be considered as Fair market Value of the delisted shares.
MA No.13/Chny/2024(in ITA No.262/Chny/2017) :: 4 ::
3.1.2 During the course of hearing, the Applicant relied upon decision in case of TML to substantiate that identical addition on identical facts has been made in the hand of TML which has been deleted by the Hon'ble ITAT in ITA No 329/Mds/2016. At paragraphs 29 on page 43 of the order, it is stated that the "We have gone through the decision relied upon by the Ld. Counsel for the assessee in light of facts brought on record and we find that, although the Tribunal has considered similar transfer of equity shares by M/s. TVS Motors Company Ltd to M/'s. TVS e-Access India Ltd, but fact remains that said decision has been rendered by incorrect appraisal of facts and law and therefore, the same is not binding in nature and thus, not followed while deciding the issue. "
The Applicant submits that the facts in the case of TML and facts in its own case are identical. Kindly appreciate that TML is also a co-promoter of TFSL. Facts of TML is given at paragraphs 8 to 9.5 of its order which are identical to that of the Applicant. The copy of order of Hon'ble ITAT in the case of M/s. TVS Motors Company Ltd. in IT A No. 329/Mds/2016 dated 11.08.2016 is enclosed as Annexure-2 (Page 9 to 77). 3.1.3 At paragraph 21, it is further stated that " ....From the above, it is undoubtedly clear that the transaction of sale of shares between the appellant company and other two group companies is not a genuine transfer of shares so as to avoid future losses as claimed by the appellant, but only as a tool of colorable device to evade payment of tax payable by the assessee on account of long term capital gains derived from transfer of land"
The Applicant submits that from the details of capital gain submitted in the hearing before the AO and CIT(A) as well as before Your Honours, it is apparent that the Applicant has first incurred loss in the month of January (15.1.2010) and March (2.3.2010) and thereafter it has sold the land on 31.3.2010. Thus, the basis of making the addition and confirming the same is on incorrect premise of facts.
3.1.4 Furthermore, the Applicant relied upon the decision of Hon'ble Supreme Court in the case of CIT vs Walfort Shares & Stock Brokers (P) Ltd [326 ITR 1] during hearing to support its submission that transactions entered into by it is not a colourable device to evade the tax as alleged by the department. However, the said judgment of Hon'ble Supreme Court is not dealt in the impugned decision. The copy of Judicial pronouncement in the case of CIT Vs. Walfort Share & Stock Brokers (P.) Ltd (2010) - 326 ITR 1 (SC) is enclosed as Annexure-3 (page 78 to 94).
4. The Applicant submits that the finding of the Hon'ble Bench in the order is not based on the facts on record and explained in the hearing; hence, the same constitute mistakes apparent from record. The Applicant therefore prays:
a) That the Hon'ble Tribunal may be pleased to recall its order dated 22nd November, 2023 and pass fresh order on merits after giving an opportunity and thus render justice.
b) For such other relief as this Hon'ble Tribunal thinks fit in the circumstances of the case.MA No.13/Chny/2024
(in ITA No.262/Chny/2017) :: 5 ::
3. The Ld.Counsel for the assessee, Shri R.Vijayaraghavan, Advocate, referring to petition filed by the assessee submitted that in Para No.23 on Page No.36 of the Tribunal order, it was stated that the assessee has not followed Rule 11UA of the Income Tax Rules, 1962, for the purpose of valuation of shares, even though, said Rules are not applicable for the impugned assessment year and said findings of the Tribunal constitute a mistake apparent on record, which needs to be rectified. The Ld.Counsel for the assessee further referring to Para No.3.1.2 of the petition filed by the assessee submitted that the Tribunal in Para No.29 of their order not followed decision of the co-ordinate Bench of the ITAT in the case of M/s.TVS Motors Co. Ltd., in ITA No.329/Chny/2016, even though, the facts of the present case is similar to the facts considered by the Tribunal in ITA No.329/Chny/2016 and said findings constitute a mistake apparent on record. The Ld.Counsel for the assessee further submitted that the assessee has relied upon the decision of the Hon'ble Supreme Court in the case of CIT v. Walfort Share & Stock Brokers (P) Ltd., reported in [2010] 326 ITR 1 (SC). However, the said judgment of the Hon'ble Supreme Court was not dealt in the order of the Tribunal. Non-consideration of the decision of the co-ordinate Bench and non-consideration of decision of the Hon'ble Supreme Court, constitute a mistake apparent on record, and thus, order of the Tribunal in ITA No.262/Chny/2017 dated 22.11.2023, should be recalled.MA No.13/Chny/2024
(in ITA No.262/Chny/2017) :: 6 ::
4. The Ld.DR, Shri ARV Sreenivasan, Addl.CIT, submitted that there is no merit in MA filed by the assessee, to recall the order of the Tribunal dated 22.11.2023, because, the assessee has failed to make out a case prima facie mistake apparent on record from the order of the Tribunal, which can be rectified u/s.254(2) of the Act. The Ld.DR further submitted that the Tribunal has considered the judgments relied upon by the Ld.CIT(A) and given categorical findings that said judgments are not applicable to the facts and circumstances of the present case. He further submitted that although, the judgment of the Hon'ble Supreme Court in the case of CIT v. Walfort Share & Stock Brokers (P) Ltd. (supra) was not specifically referred to in the order, but the Tribunal has considered all relevant facts in the judgments relied upon by the assessee and rendered decision to arrive at a conclusion that the transactions of sale of shares by the assessee company to another group company is a colourable device, and thus, it cannot be said that findings constitute a mistake apparent on record which can be rectified u/s.254(2) of the Act.
5. We have heard both the parties and considered relevant contents of MA filed by the assessee against the order of the Tribunal in ITA No.262/Chny/2017 dated 22.11.2023. We find that the assessee has taken several objections with regard to findings recorded by the Tribunal on the issue of computation of Long Term Capital Gains derived from transfer of equity shares of a company to another group company and MA No.13/Chny/2024 (in ITA No.262/Chny/2017) :: 7 ::
argued that non-consideration of decision of the co-ordinate Bench and non-consideration of decision of the Hon'ble Supreme Court, constitute a mistake apparent on record, which needs to be rectified u/s.254(2) of the Act. We find that although, the Tribunal has considered the decision relied upon by the Ld.Counsel for the assessee and followed by the Ld.CIT(A) while allowing relief to the assessee in the case of ACIT v. TVS Motors Co. Ltd., in ITA No.329/Chny/2016, but said judgment has been distinguished with a cryptic findings without assigning proper reason 'as to why' the judgment followed by the Ld.CIT(A) in their order is not applicable to the facts of the present case. Further, the assessee has taken support from the decision of the Hon'ble Supreme Court in the case of CIT v. Walfort Share & Stock Brokers (P) Ltd. (supra) in support of their arguments and argued that if the arrangement between the assessee and other party are within four corners of the law, then, even if said arrangement results in reduction of payment of taxes, but said arrangement cannot be held as colourable device. We find that the assessee has specifically referred to the decision of the Hon'ble Supreme Court in the case of CIT v. Walfort Share & Stock Brokers (P) Ltd. (supra) but the Tribunal did not consider the decision of the Hon'ble Supreme Court in the above case while adjudicating the issues. It is a well settled principles of law by the decision of the Hon'ble Supreme Court in the case of ACIT v. Saurashtra Kutch Stock Exchange Ltd., reported in [2008] 305 ITR 227 (SC), wherein held that non-consideration of decision of the co- MA No.13/Chny/2024
(in ITA No.262/Chny/2017) :: 8 ::
ordinate Bench and non-consideration of decision of the High Court/Supreme Court, is a mistake apparent on record, which can be rectified u/s.254(2) of the Act. Further, the Hon'ble Supreme Court in the case of CIT v. Honda Siel Products Ltd., reported in [2007] 295 ITR 466 (SC), held that non-consideration of decision of co-ordinate Bench of the Tribunal is a mistake apparent from the record. Therefore, we are of the considered view that the order of the Tribunal in ITA No.262/Chny/2017 dated 22.11.2023 without considering the binding precedent of the Hon'ble Supreme Court in the case of CIT v. Walfort Share & Stock Brokers (P) Ltd. constitute a mistake apparent on record, and thus, we re-called the order of the Tribunal in ITA No.262/Chny/2017 dated 22.11.2023. The Registry is directed to post the appeal for hearing in due course and intimate both the parties.
6. In the result, the Miscellaneous Application filed by the assessee is allowed.
Order pronounced on the 02nd day of April, 2024, in Chennai.
Sd/- Sd/-
(मनोमोहन दास) (मंजूनाथा. जी)
(MANOMOHAN DAS) (MANJUNATHA.G)
ाियक सद /JUDICIAL MEMBER लेखा सद /ACCOUNTANT MEMBER
चे ई/Chennai,
दनांक/Dated: 02nd April, 2024.
TLN
MA No.13/Chny/2024
(in ITA No.262/Chny/2017)
:: 9 ::
आदेश क ितिलिप अ ेिषत/Copy to:
1. अपीलाथ /Appellant
2. यथ /Respondent
3. आयकरआयु /CIT
4.िवभागीय ितिनिध/DR
5. गाड$फाईल/GF