DCIT CEN CIR 45, MUMBAI v. PUSHPA K AVARSEKAR, MUMBAI

ITA 446/MUM/2013 | 2007-2008
Pronouncement Date: 25-04-2014 | Result: Dismissed

Appeal Details

RSA Number 44619914 RSA 2013
Assessee PAN AACPA1273F
Bench Mumbai
Appeal Number ITA 446/MUM/2013
Duration Of Justice 1 year(s) 3 month(s) 9 day(s)
Appellant DCIT CEN CIR 45, MUMBAI
Respondent PUSHPA K AVARSEKAR, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 25-04-2014
Assessment Year 2007-2008
Appeal Filed On 15-01-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN JUDICIAL MEMBER ITA NO. 446/MUM/2013 ASSESSMENT YEAR: 2007-08 DCIT CEN CIR -45 AAYAKAR BHAVAN MUMBAI- 400 020 VS. MRS. PUSHPA AVARSEKAR 1252 PUSHPANJALI APARTMENTS OLD PRABHADEVI ROAD PRABHADEVI MUMBAI-400 025 (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :AACPA 1273 F ITA NO. 7114/MUM/2012 ASSESSMENT YEAR: 2007-08 MRS. PUSHPA AVARSEKAR 1252 PUSHPANJALI APARTMENTS OLD PRABHADEVI ROAD PRABHADEVI MUMBAI-400 025 VS. DCIT CEN CIR -45 AAYAKAR BHAVAN MUMBAI- 400 020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VIJAY MEHTA REVENUE BY : SHRI A.C. TEJPAL DATE OF HEARING : 10.04.2014 DATE OF PRONOUNCEMENT : 25.04.2014 O R D E R PER DR. S.T.M. PAVALAN JM: THESE CROSS APPEALS FILED BY THE REVENUE AND THE A SSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LD.CIT(A)-38 MUMBAI DATED 31.10.2012 FOR THE ASSESSMENT YEAR 2007-08. BOTH THE APPEALS ARE HEARD TOGETHER A ND DISPOSED OFF BY THIS COMMON ORDER. 2. THE REVENUE IN ITS APPEAL HAS AGITATED THE ACT ION OF THE LD.CIT(A) IN ALLOWING THE EXPENSES INCURRED FOR THE ISSUE OF IPO OF RS.1 14 00 000/- CLAIMED BY THE ASSESSEE WHILE COMPUTING LONG TERM CAPITAL GAIN S ON SALE OF SHARES. ITA NO. 7114/MUM/2012 ITA NO. 446/MUM/2013 MRS. PUSHPA AVARSEKAR ASSESSMENT YEAR: 2007-08 2 2.1 BRIEFLY STATED WHILE COMPUTING THE INCOME UNDE R THE HEAD CAPITAL GAINS THE ASSESSEE REDUCED AN AMOUNT OF RS.1 14 00 000/- ON A CCOUNT OF LISTING FEES FROM SALE CONSIDERATION OF RS.1 90 000/- SHARES OF M/S. UNITY INFRAPROJECTS LTD. HOWEVER ACCORDING TO THE AO THE LISTING FEES WAS IN FACT I N THE FORM OF EXPENSES INCURRED FOR ISSUE OF IPO FOR M/S. UNITY INFRAPROJECTS LTD AND S INCE IPO ISSUE EXPENSES WERE THE LIABILITY OF THE COMPANY WHOSE SHARES WERE LISTED I N STOCK EXCHANGE THE LIABILITY OF THE SAME WAS WITH M/S. UNITY INFRAPROJECTS LTD. FUR THER THE INCURRING OF IPO EXPENSES WAS NOT THE LIABILITY OF THE SHAREHOLDERS BECAUSE BY LISTING THE SHARES IN STOCK EXCHANGE SHARE CAPITAL OF M/S. UNITY INFRAPR OJECTS LTD WOULD INCREASE AND THE SAID COMPANY HAD BEEN LISTED ON PREMIUM. THUS THE AO HELD THAT LISTING FEES IN THE HANDS OF THE SHAREHOLDER WERE NOT WHOLLY AND EXCLUS IVELY IN CONNECTION WITH THE TRANSFER OF SHARES AND THE SAME COULD NOT BE TREATE D AS AN ADMISSIBLE DEDUCTION IN THE HANDS OF SHAREHOLDERS. ACCORDINGLY AN AMOUNT O F RS.1 14 00 000/- WAS ADDED TO THE RETURNED INCOME OF THE ASSESSEE. ON APPEAL THE LD.CIT(A) BY RELYING ON THE DECISION OF THE TRIBUNAL IN THE CASE OF MRS. USHARANI RAGHUNATHAN VS. CIT [2012] 53 SOT 84 DELETED THE IMPUGNED DISALLOWANCE/ADDITION MADE B Y THE AO. ACCORDING TO THE LD.CIT(A) ONLY ON ACCOUNT OF THE IPO THE PROM OTER-SHAREHOLDERS WERE ABLE TO UNLOCK THE VALUE OF EQUITY SHARES HELD BY THEM AND THE CAPITAL GAIN ARISING THEREOF WERE ALSO OFFERED TO TAX. THE EXPENDITURE INCURRED IN CONNECTION WITH THE TRANSFER IS AN ALLOWABLE EXPENDITURE IN TERMS OF SECTION 48(I) OF THE ACT. AGGRIEVED BY THE IMPUGNED DECISION THE REVENUE IS IN APPEAL BEFORE US. 2.2 HAVING HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD IT IS PERTINENT TO MENTION THAT M/S. UNITY INFRAPROJECTS LTD. HAS COME UP WITH A PUBLIC ISSUE VIDE PROSPECTUS DATED 26.05.2006 AND THE ASSE SSEE IS ONE OF THE PROMOTERS OF THE SAID COMPANY. THE COMPANY ISSUED 34 43 000 EQUI TY SHARES OF RS.10/- EACH AT A BAND PRICE OF RS.651/- TO 732/- PER EQUITY SHARE T HE DETAILS OF WHICH ARE AS UNDER:- FRESH ISSUE BY THE COMPANY 27 68 000 EQUITY SHARES OFFER FOR SALE BY THE SELLING SHAREHOLDERS 6 75 000 EQUITY SHARES TOTAL 34 43 000 EQUITY SHARES ITA NO. 7114/MUM/2012 ITA NO. 446/MUM/2013 MRS. PUSHPA AVARSEKAR ASSESSMENT YEAR: 2007-08 3 SOME OF THE EXISTING SHARE HOLDERS HAVE ALSO DIVEST ED THEIR SHARE HOLDING THROUGH THE IPO. THE DETAILS OF THE DIVESTMENT OF EQUITY SH ARES OF THE PROMOTER SHAREHOLDERS OF THE COMPANY ARE AS UNDER:- SR. NO. NAME OF SELLING SHAREHOLDERS NO. OF EQUITY SHARES 1 KISHORE K. AVARSEKAR 3 35 000 2 ABHIJIT K. AVARSEKAR 75 000 3 ASHISH K. AVARSEKAR 75 000 4 PUSHPA K. AVARSEKAR 1 90 000 TOTAL 6 75 000 THE OBJECTS OF THE ISSUE AS PER THE PROSPECTUS ARE AS UNDER:- OBJECTS OF THE ISSUE: THE ISSUE COMPRISES THE FRESH ISSUE AND THE OFFER F OR SALE. THE OBJECT OF THE OFFER SALE IS TO CARRY OUT THE DISINVESTMENT OF 6 75 000 EQUITY SHARES BY THE SELLING SHAREHOLDERS. THE COMPANY WILL NOT RECE IVE ANY PROCEEDS OF THE OFFER FOR SALE BY THE SELLING SHAREHOLDERS. OTHER THAN THE LISTING FEES WHICH WILL BE PAID BY THE COMPANY ALL EXPENSES WITH RESPECT TO THE ISSUE WILL BE SHARED B ETWEEN US AND THE SELLING SHAREHOLDERS ON A PROPORTIONATE BASIS IN THE RATIO OF EQUITY SHARES ISSUED BY US IN THE FRESH ISSUE AND THE EQUITY SHARES SOLD BY TH E SELLING SHAREHOLDERS IN THE OFFER FOR SALE. WITH THE ABOVE MENTIONED DETAILS THE LD.CIT(A) HAS NOTED THAT OUT OF 34 43 000 EQUITY SHARES OFFERED TO PUBLIC 6 75 000 EQUITY SH ARES HAVE BEEN DIVESTED OUT OF THE SHAREHOLDING HELD BY THE PROMOTER SHAREHOLDERS AND THE FRESH EQUITY SHARES ISSUED BY THE COMPANY TO THE PUBLIC IN THE IPO WER E 27 68 000 EQUITY SHARES. AS INDICATED THE TOTAL IPO EXPENSES WERE OF THE ORDER OF RS.19 63 28 547/- AND THE NUMBER OF SHARES ISSUED TO PUBLIC INCLUSIVE OF DI VESTMENT OF SHARES HELD BY THE PROMOTER SHAREHOLDERS WAS 34 43 000 EQUITY SHARES. ACCORDINGLY THE IPO EXPENSES PER SHARE WORKED OUT TO RS.57/- WHICH WAS ROUNDED O F TO RS.60/- BY THE ASSESSEE. THE ASSESSEE HAS PAID HER SHARE OF IPO EXPENSES AMO UNTING TO RS.1 14 00 000/- (1 90 000 EQUITY SHARES @ RS.60/- PER SHARE). IN TH IS CONNECTION IT IS PERTINENT TO MENTION THAT THE TRIBUNAL IN THE CASE OF USHARANI RAGHUNATHAN VS. CIT-VI (I.T. APPEAL NO. 493 TO 495 (MDS) OF 2012) HAS HELD AS UNDER:- AS PER SECTION 48 FROM THE FULL VALUE OF CONSIDER ATION RECEIVED EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER HAS TO BE DEDUCTED. THE TERMINOLOGY USED IS IN CONNECTION WI TH SUCH TRANSFER. THERE IS ITA NO. 7114/MUM/2012 ITA NO. 446/MUM/2013 MRS. PUSHPA AVARSEKAR ASSESSMENT YEAR: 2007-08 4 NO DISPUTE THAT THE EXPENDITURE CLAIMED BY THE ASSE SSEE WAS FOR EFFECTING THE SALE OF THEIR SHARES. IT IS CLEARLY MENTIONED IN TH E PROSPECTUS OF R THAT THE ISSUE EXPENSES WERE TO BE BORNE PROPORTIONATELY BY THE R AND SELLING SHAREHOLDERS. THE ASSESSING OFFICER HIMSELF HAS ACK NOWLEDGED THAT THE IPO WAS FOR 35 68 250 EQUITY SHARES WHICH CONSISTED OF FRESH ISSUE OF 22 70 700 EQUITY SHARES AND OFFER FOR SALE OF 12 97 550 EQUIT Y SHARES BY THE ASSESSEE. NO DOUBT AS NOTED BY THE COMMISSIONER (APPEALS) A CO MPANY WHILE MAKING AND IPO HAD TO ABIDE BY THE STRICT NORMS LAID DOWN UNDE R THE COMPANIES ACT AND FOR COMPLYING WITH SUCH NORMS IT MIGHT BE NECESSARY TO INCUR MORE EXPENDITURE THAN AN ORDINARY SHAREHOLDER EFFECTING SALE OF HIS/HER SHARES. BUT ASSESSEE HERE HAD AN OPPORTUNITY TO SELL THEIR HOLD ING IN ONE BLOCK THROUGH THE IPO. THIS CONVENIENCE RECEIVED BY THE ASSESSEE IF W EIGHED AGAINST THE EXTRA EXPENDITURE INCURRED FOR IPO GETS MORE OR LESS BAL ANCED. THERE IS NO DISPUTE THAT PRO RATA EXPENDITURE ALONE WAS CLAIMED BY THE ASSESSEE UNDER SECTION 48. THERE IS ALSO NO DISPUTE THAT SUCH EXPENDITURE WAS WHOLLY INCURRED FOR THE PURPOSE OF IPO. A LOOK AT THE ESCROW ACCOUNT CLEARLY SHOWS THAT CONCERNED ASSESSEES WERE TRANSFERRED FUNDS ONLY TO THE EXTENT OF NET AMOUNTS AFTER MEETING EXPENSES. THE COMMISSIONER (APPEALS) ANALYS ED THE EXPENSES INCURRED AND CAME TO OPINION THAT THE LEGAL OBLIGAT ION FOR INCURRING SUCH EXPENSES WAS WITH R. NO DOUBT THIS MIGHT BE TRUE . JUST BECAUSE THE EXPENDITURE WAS INCURRED BASED ON A LEGAL OBLIGATIO N WOULD NOT RENDER SUCH EXPENDITURE AS SOMETHING NOT INCURRED WHOLLY AND EX CLUSIVELY IN CONNECTION WITH THE SALE OF SHARES. EXPENSES HAVING BEEN INCUR RED FOR THE IPO THROUGH WHICH ASSESSEE WERE ALSO ABLE TO SELL THEIR SHARES THE EXPENSES NECESSARILY WERE IN CONNECTION WITH SALE OF SUCH SHARES. THE AS SESSEE COULD TAKE ADVANTAGE OF CLAUSE (1) OF SECTION 48. THE ASSESSEE S HAD PRODUCED EVIDENCE IN THE FORM OF ESCROW ACCOUNT TO SHOW THAT THEY HAD RE CEIVED ONLY NET AMOUNT AFTER INCURRING THE EXPENSES. THE ASSESSEES ALSO PR ODUCED PROSPECTUS OF IPO WHICH CLEARLY SHOWS THAT THEY WERE OBLIGED TO MEET PRO RATA SHARE OF IPO EXPENSES. THERE IS NO USE FOR THE REVENUE THAT ANY OF THE ASSESSEES CLAIMED MORE THAN HIS SHARE OF EXPENSES BASED ON THE RATIO OF SHARES SOLD. THEREFORE THE DEDUCTION CLAIMED BY THE ASSESSEE FOR EXPENSES INCURRED WAS UNJUSTLY DISALLOWED. THIS DISALLOWED IS DELETED. IN VIEW OF THE FACT THAT THE LD.CIT(A) HAS CORRECTL Y APPRECIATED THE FACTS IN THE LIGHT OF THE ABOVE MENTIONED DECISION OF THE TRIBUNAL FOR DELETING THE IMPUGNED DISALLOWANCE/ADDITION WE DO NOT FIND ANY JUSTIFIAB LE REASON TO INTERFERE WITH THE SAME. THUS THE DECISION OF THE LD.CIT(A) IS UPHELD ON THIS COUNT. 3. THE ASSESSEE IN HER CROSS APPEAL HAS AGITATED THE DECISION OF THE LD.CIT(A) IN CONFIRMING THE VALIDITY OF THE REASSESSMENT PROC EEDING/REOPENING OF ASSESSMENT MADE BY THE AO U/S 147 OF THE ACT. 3.1 AS THE ADDITION/DISALLOWANCE MADE BY THE AO IN THE REASSESSMENT PROCEEDINGS HAS BEEN DELETED BY THE LD.CIT(A) AND T HE SAID DECISION HAS BEEN UPHELD BY US WHILE ADJUDICATING THE REVENUES APPEA L IN THE PROCEEDING PARAGRAPHS WE ARE OF THE VIEW THAT THE ADJUDICATION ON THE VAL IDITY OF THE REOPENING/REASSESSMENT PROCEEDINGS IS NOT REQUIRED. ITA NO. 7114/MUM/2012 ITA NO. 446/MUM/2013 MRS. PUSHPA AVARSEKAR ASSESSMENT YEAR: 2007-08 5 4. IN THE RESULT THE CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 5 TH DAY OF APRIL 2014. SD/- SD/- (P.M. JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 25.04.2014. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR C BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.