The Tax Publishers2021 TaxPub(DT) 0167 (Bang-Trib)


Section 48

Where the assessee Individual, had sold his entire share holdings (shares and debentures) in a private limited company to another company through a share purchase agreement in which sale consideration was disclosed, the AO was not empowered to substitute the sale consideration for the purpose of calculating long-term capital gains on shares as there was no provision under the IT Act for valuation of shares.

Capital gains - Transfer of shares - Computation of long-term capital gains - Substitution of FMV/NAV by AO, whether justified

Assessee along with certain others had sold his shares and debentures of a private company to one Ambuja Housing & Urban Infrastructure Company Limited through a share purchase agreement and the resultant capital loss was offered as carry forward. It was the case of the AO that the consideration received for the said transfer was incorrect as mentioned in the share purchase agreement and he decided to reassess the said consideration by applying the Net Assets Valuation (NAV) method of the underlying shares which was the FMV and subjected the balance to capital gains. On appeal, the Commissioner (Appeals) held the plea of the assessee that there was no provision under the IT Act to substitute the FMV by the AO. The action of AO was annulled by CIT(A). Held: Substitution of FMV/NAV by the AO was incorrect as held by the CIT(A) as there was no provision in the statute for valuation of shares. In view of the order of the co-ordinate Bench of the Tribunal in the case of Sri. Raj Arjun Menda, the Commissioner (Appeals) was justified in holding that the sale consideration disclosed in the share purchase agreement ought to be adopted for calculating the long-term capital gains in the case of transfer of shares.

Applied:George Henderson & Co. Ltd. (1967) 66 ITR 622 (SC) : 1967 TaxPub(DT) 0360 (SC) and Arjun Menda in ITA No. 1720/Bang/2016 (Order, dated 20-2-2020) (Bang-ITAT)


FAVOUR : In assessee's favour

A.Y. : 2012-2013 & 2013-2014



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