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31-10-2019, Sahara India Prime City, Section 47(iv), 45, Tribunal Delhi
Aggrieved by the order dated 31.03.2011 in appeal No. 266/10-11 passed by the Learned Commissioner of Income Tax (Appeals)-I, New Delhi("Ld. CIT(A)") for the Assessment Year 2008-09, the Revenue preferred this appeal on the following grounds:
“1. The CIT(A) is not correct in law and facts.
2. On the facts and circumstances of the case, the ld CIT(A) has erred in deleting the addition of Rs.97,38,26,400/- on account of long term capital gain.
3. On the facts and circumstances of the case, the Ld CIT(A) has erred in deleting the addition of Rs.1,13,90,550/- on account of unverifiable expenses.
4. On the facts and circumstances of the case, the ld CIT(A) has erred in deleting the addition of Rs.5,83,650/- on account of inadmissible expenses.
5. On the facts and circumstances of the case, the ld CIT(A) has erred in allowing the claim of expenses of Rs.34,90,243/- in respect of expenses relating to year.
6. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
2. Briefly stated facts of the case are that the assessee is a company. It has filed its return of income for A.Y. 2008-09 on 25.06.2009 declaring a total income of Rs.124,73,07,436/-. The Learned AO, however, assessed the income at Rs.223,25,82,750/-, by making addition of Rs.97,38,26,400/- on account of long term capital gain on sale of shares of M/s. SICCL, Rs.1,13,90,550/- on account of unverifiable expenses and Rs.58,365/- on account of inadmissible expenses u/s 14A of the Income Tax Act, 1961 (for sho t “the Act”).
3. Assessee preferred appeal before the Learned CIT(A) challenging those three additions and also the action of the Learned AO in not entertaining the claim of the assessee in respect of the expenses relating to the assessee amounting to Rs.34,90,243/-. Learned CIT(A) after considering the contentions on either side, in the light of the material available on record, accepted the assessee’s contentions and deleted the additions. Hence, the Revenue is before us challenging all the four deletions.
4. In so far as the first addition of Rs.97,38,26,400/- is concerned, the facts are that during the year, the assessee company earned LTCG of Rs. 97.38 Crores by selling shares of M/s Sahara India Commercial Corporation Ltd (M/sSICCL) and M/sSahara Airlines. These shares were held by assessee company in its books at Rs. 485 Crores prox), and were sold at Rs. 668 Crores (Approx.). All these shares were sold to the three new companies, e.g. Sahara green realtors P. Ltd., Sahara Flagship Real Estates P. Ltd. and Sahara Property Construction P. Ltd., claimed to be the subsidiary companies of assessee company. These TCG were claimed by the assessee company as exempt from Income Tax, claiming that these, transactions were not to be treated as transfer in view of provisions of s. 47(iv) of the Act.
5. All three subsidiary companies, Sahara green realtors P. Ltd., Sahara Flagship Real Estates P. Ltd and Sahara Property Construction P. Ltd,to whom the shares were sold by the assessee company, were incorporated during the F.Y 2007-08 itself, which is the F.Y. under consideration, that too just in a span of three days i.e. on 9th , 11thand 12thOct. 2007.
6. Initially the shares of all these three companies Sahara green realtors P.Ltd., Sahara Flagship Real Estates P. Ltd. and Sahara Property Construction P. Ltd. were held by Sh. Subrata Roy, and other three individuals. The total paid up capital of three companies was just Rs. 15L. Subsequently the assessee company Sahara India Prime City,purchased total shareholding of 3newly incorporated companies, e.g. Sahara green realtors P. Ltd., SaharaFlagship Real Estates P. Ltd. and Sahara Property Construction P. Ltd., and as a result all these companies became subsidiary company of assesseecompany.
7. Subsequently the shares of M/s Sahara India Commercial Corporation Ltd (M/s SICCL) and M/s Sahara Airlines, held by the assessee company were sold to these three newly incorporated companies (Sahara green realtors P. Ltd., Sahara Flagship Real Estates P. Ltd. and Sahara Property Construction P. Ltd), companies at a whooping price of Rs. 668 Cr. as a result of which, assessee company earned LTCG of Rs. 97.38 Cr., which were claimed as exempt u/s 47(iv).
8. The Learned Assessing Officer in his order recorded that because three companies to whom the shares were trans erred were formed simultaneously on 9 th , 11thand 12 October 2007;that initially the shares of these three companies were held by Shri Subrata Roy, Smt. Swapna Roy, Shri Om Prakash Srivastava and Shri J.B. Roy and two companies M/s.Sahara India Infrastructure &Housing Limited &M/s.Sahara India Commercial Corporation Limited.; that after the formation of the three companies all these shares of the share holders were transferred in the name of M/s.Sahara Prime City Limited, i.e. the appellant company and the shares held by M/s.Sahara Prime City Limited were transferred in joint name of assessee company and one individual each mentioned in sub para (b) above; and that in the month of January, 2008 the shares of M/s.SICCL which were held by the appellant company have been sold to these three newly formed companies which has resulted in long term capital gain at Rs.97,38,26,400/- after indexation which has been claimed as exempted under section 47(iv) of the Income tax Act. On this premise, the Learned Assessing Officer concluded that the entire transaction was arise in such a way so that on sale of shares capital gain is not subjected