ACIT v. Reindeer Software Solutions (P) Ltd. [ITA
No. 1354/Bang/2017, dt. 9-9-2020] : 2020 TaxPub(DT) 3622 (Bang.-Trib.)
Additions sustained on newspaper reports
Facts:
Based on a newspaper report it was alleged that the
assessee was in receipt of consideration of USD 30 mio. and addition was
sustained under the head capital gains for Rs. 152 crores arising out of the
business sale of their entity when factually all they got was only INR 300,000
as consideration for the brand portal sale. The plea of the assessee was when
there was no such evidence of monies received or consideration which happened
the same could not be brought to tax merely based on a newspaper report without
an actual transaction being thus. On higher appeal -
Held in favour of the assessee that no addition can be
sustained based on newspaper report which under the evidence act does not
constitute reliable evidence in tax matters.
Laxmi Raj Shetty & Anr. v. State of Tamil Nadu 1988
AIR 1274 applied
Editorial Note: The
share capital of the original company when formed was Rs. 100,000. Due to two
tranches of private equity funding it swelled to 20.34 crores. These 20.34
crores were sold to an entity called Goldsquare sales India Pvt. Ltd. for a
consideration of Rs. 12.23 crores (at a loss as the assessee was having
accumulated losses). These shares of Goldsquare were then sold to another
individual for Rs. 148,233. Since the net-worth was negative the shares were
sold at Re.1 per share also supported by a CA's certificate. The company
actually received Rs. 300,000 for divestment of its brand name
www.urbantouch.com to Gold Square Sales India Pvt. Ltd., which was offered to
tax. The news paper reports said that for an undisclosed sum the business of
urban touch were offered for sale on which the revenue latched onto for making
the addition.
The interesting piece of the puzzle is what happened to the
capital loss on the sale of these closely held entity shares? If they were held
for more than 24 months they would be long-term capital loss ideally. Would it
be allowed as a long-term capital loss in the hands of the private equity
investors is the missing piece of the puzzle. What then prompted the entity
called Gold Square to further sell it to a nominal value? What then is the
reason for the entity for Gold Square to acquire shares at 12.23 crores and
then divest it for a paltry Rs. 148,233 which would result in a short term
capital loss of Rs. 12.22 crores did this entity have capital gains from
elsewhere, this piece of the puzzle in the decision is missing but definitely
worth knowing.