IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 19/04/2004
Coram
The Honourable Mr.Justice A.S.VENKATACHALAMOORTHY
and
The Honourable Mr.Justice P.K.MISRA
T.C.No.402 of 2001
Sri.AR.Alagappa Chettiar ... Appellant
-Vs-
The Income Tax Officer,
Ward I(1),
Karaikudi ... Respondent
This appeal has been filed under Section 260A of the Income Tax Act,
1961, against the order of the Income Tax Appellate Tribunal "A" Bench, dated
9.9.2001 in ITA No.2203/Mds/95.
!For Appellant : Mr.C.V.Rajan
^For Respondent : Mr.T.Ravikumar
Junior Standing Counsel
:J U D G M E N T
A.S.VENKATACHALAMOORTHY, J.
This appeal is directed against the order of the Income-Tax
Appellate Tribunal, upholding the orders of the authorities below and it
pertains to the assessment year 1991-1992. The dispute relates to the
computation of long term capital gains arising out of the transfer of 4 198
shares held by the appellant in M/s Consolidated Coffee Limited (hereinafter
referred to as ‘CCL’) to M/s Tata Tea Limited ( hereinafter referred to as
‘TTL’).
2. The appellant was holding 4198 shares in CCL. The TTL
desired to acquire the majority shares in CCL and this prompted TTL to make an
open offer to the shareholders of the CCL. The offer was to the effect that
for transfer of every two shares of CCL to TTL, the latter would give a
consideration in cash of Rs.100/- and one equity share of face value of
Rs.10/- out of the fresh issue of TTL. This offer was made by TTL on
20.10.1989 and the same was accepted by the appellant. Following this, TTL
formalised the contract by sending the transfer deed for the transfer of
shares in CCL, on 31.10.1990. The appellant received the consideration as
stipulated in the offer i.e, Rs.100 /- in cash and a fresh issue of one equity
share in TTL of the face value of Rs.10/- for every two shares in CCL. The
appellant while submitting his return for 1991-1992, apparently worked out the
capital gains pertaining to 4198 shares of CCL by taking the sale
consideration of Rs.55/- per share, which figure he arrived at by calculating
as follows,
Rs.100/- + Rs.10/-
2
The Assessing Officer, however took note of the fact that by a letter dated
8.10.1990, the TTL informed the appellant that the market price of each share
of TTL has gone up to Rs.450/- and proceeded to find out the value of the
shares of TTL as on 31.10.1990 as per the daily official listing of Bombay
Stock Exchange. The Assessing Officer found, the Stock Exchange mentioned
Rs.400.25 as value of one share of TTL and adopting that, computed the full
value of the consideration received by the appellant at Rs.10,50,025/- (2099
TTL shares at Rs.400.25 + Rs.2,09,900 (2099 x 100)).
3. The appellant filed an appeal before the Commissioner of
Income Tax contending that the Assessing Officer ought to have taken only the
face value of the equity share of TTL at Rs.10/- and not the market value at
Rs.400.25. However, this contention was not accepted by the appellate
authority, which prompted the appellant to file an Income Tax Appeal before
the Income Tax Appellate Tribunal, Madras. By an order dated 4.9.2001, the
Tribunal dismissed the appeal upholding the orders of the authorities below.
Being aggrieved by the orders referred above, the appellant has filed this
appeal before this Court.
4. The question is, for the purpose of computing the
consideration received for transfer of shares in CCL, whether the market value
of the shares of TTL allotted to the assessee should be adopted or the value
of the said allotted shares shown as paid up in the books of accounts of TTL ?
5. This Court is inclined to consider the entire matter in
the way indicated hereunder. Just like the appellant/assessee, number of
other shareholders in CCL transferred their shares in CCL and in exchange, got
shares in TTL and also Rs.100/- for each share in TTL. One such person was
Smt.AL.VE.Muthayee Achi. The Tribunal considered her case in ITA No.2452 of
1995 and fixed the value of one TTL Share at Rs.147/-. In fact that order of
the Tribunal has been extensively quoted in the present order passed by the
Tribunal. After so quoting, the Tribunal has observed as follows,
“… Because the shares of Tata Tea Ltd., were marketable and had a market
value of Rs.147 on 31.12.1990, the Assessing Officer took the sale
consideration at Rs.247, that is Rs.147 being market value plus Rs.100 as
total sale consideration. This is what has been applied by the Tribunal in
the case referred to earlier. …”
After so pointing out, the Tribunal proceeded to observe as follows,
“… There being no other material difference in the facts of the case before
us, the issue having been examined on all fours by the Tribunal supra,
following the earlier order of the Tribunal, we uphold the orders of the
authorities below and dismiss the appeal of the assessee.”
If the Tribunal is following the earlier order passed in Tmt.AL.VE. Muthayee
Achi’s case referred by us supra, then the Tribunal should have fixed the
value of TTL at Rs.147/-. In that event, the Tribunal cannot dismiss the
appeal filed by the assessee. The reading of the order of the Tribunal as a
whole would only show that the Tribunal came to the conclusion that one share
of TTL has to be fixed at Rs.147/-.
6. That apart, even on the ground of equity, fairness and
reasonableness, the revenue, having accepted the value of one share at Rs.147
/- with reference to another assessee identically placed, cannot be permitted
to fix a higher value for a share in TTL at the relevant time.
A.S.VENKATACHALAMOORTHY, J.
& P.K.MISRA, J.
7. In this view of the matter, we allow the appeal in part
and hold that the revenue shall proceed to calculate on the basis of the value
of one share of TTL at Rs.147/- and claim on that basis, the tax due from the
assessee.
vr
To
1. The Registrar, Income Tax Appellate Tribunal ‘A’ Bench,
Madras.
2. The Income Tax Officer, Ward I(1), Karaikudi