- (1.) THIS income tax appeal under Section 260A of the Income Tax Act, 1961 (for short, the Act) filed by the assessee appellant arise out of the order dated 30.11.2004 passed by the Income Tax Appellate Tribunal (in short, the Tribunal) relating to assessment year 1997-98 by which the appeal filed by the Joint Commissioner of Income Tax, Special Range, Muzaffarnagar was partly allowed and while setting aside the order of the CIT (A), Muzaffarnagar dated 20.5.2000 deleting the capital gain of Rs.4,77,14,279/- from the total income of the assessee-appellant, as computed by the A.O. The A.O. was made free to tax it, in the order in which the transfer of shares took place in accordance with law.
(2.) THIS appeal was admitted by the Court on 17.1.2005 on the questions of law as follows:- "A. Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that capital gains on transfer of shares were liable to tax during the previous year relevant to assessment year 1997-98? C. Whether the Tribunal was legally correct in holding that the capital gains was assessable in the assessment year 1997-98 even when there was no transfer of shares as provided for and contemplated under the Companies Act? F. Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the agreement was one for transfer of immovable property? I. Whether the Tribunal misinterpreted the deed of agreement dated 19.8.1996 and erroneously took the view that the proprietary right in the shares vested in the buyer on the payment of the first installment. The Tribunal failed to take into consideration that no transfer deed transferring the certificate was ever issued by the appellant in the relevant assessment year 1997-98 nor was he recorded as a shareholder in the records of the company? K. Whether on the facts and in the circumstances of the case, the Tribunal erred in law in taking into account irrelevant material and ignoring essential material and evidences on record? L. Whether on the facts and in the circumstances of the case, the conclusion arrived at by the Tribunal is perverse in as much as no reasonable person correctly informed of the position in law would come to?" We have heard Shri V.B. Upadhya, Sr. Advocate assisted by Shri Ritvik Upadhya for the assessee appellant. Shri Shambhu Chopra appears for the income tax department. Briefly stated the facts giving rise to this appeal are that the assessee-appellant were assessed to income tax in the capacity of an individual. He owned 7784 shares of M/s Rajendra Lal Shadhi Lal & Company (P) Ltd., New Delhi (out of 8000 equity shares of Rs.100/- each). The balance 216 shares were held by his wife Smt. Poonam Lal. The company owned two flats Nos.407 and 412 in Olympus Apartment, Altamount Road, Cumballa Hill, Mumbai. The company also held 10 shares of Rs.50 each in Olympus Cooperative Housing Society ltd., Mumbai of which it is a member. These flats were let out by the company to SRF Ltd. of Delhi at Rs.20,000/- per month for a period of 32 months from 1.8.1994 to 31.3.1997 under an agreement executed on 28.10.1994.
(3.) ON 19.8.1996, the assessee and his wife jointly entered into an agreement to sell the entire share capital of M/s Rajendra Lal Shadi Lal & Co. Pvt. Ltd. for a sale consideration of Rs.5,00,00,000/- @ Rs.6,250/- per share. As per this agreement the total purchase price of 8,000 fully paid up equity shares of the company was agreed to be Rs.5,00,00,000/-, including the earnest money of Rs.1,25,00,000/-. The balance amount of Rs.3,75,00,000/- was paid in three subsequent installments, as under:- "Installment Value Payable on First Rs.1,25,00,000/- 31/10/1996 Second Rs.1,25,00,000/- 01/01/1997 Third Rs.1,25,00,000/- 30/04/1997" As per the agreement, on payment of the first installment, the seller was to execute transfer deed and to take all the necessary steps to get the said 8,000 shares transferred in the name of the buyer in the records of the company. After the transfer of shares in the name of SRF Ltd. the said shares were kept in the custody of solicitor till the remaining installments is paid by the buyer. The shares were to be released by the solicitors only after being furnished the evidence of payment by the buyer to the seller to the complete satisfaction of the solicitors. Since the transfer of the shares in the company also involved transfer of immovable properties situated in Mumbai in the from of two flats, the concerned parties also agreed to seek permission under Section 269 UL (3) of the I.T. Act from the Appropriate Authority at Mumbai, which was duly granted on 8/11/1996.;