The assessee is engaged in the business of television news broadcasting through its three different channels namely NDTV 24 x 7, NDTV profit, and NDTV India. The assessee sold shares that were purchased by it before 13 months of a company and subsequently sold at a substantially higher price to the associate concern of the assessee and disclosed the same as a capital gain. It is the shares of an unlisted company which were transferred by the assessee.
The Tribunal observed that these shares were shown as a capital asset by the company. The Tribunal relied on the CBDT circular dated 2/5/2006 wherein the Board characterized the income from the transaction in listed securities as well as unlisted securities.
The Tribunal observed that “as per para number two of that circular it is provided that for determining the tax treatment of income arising from the transfer of unlisted shares for which no formal market exists for trading, need has been felt to have a consistent view in assessments pertaining to such income. Therefore, it was decided that the income arising from the transfer of unlisted shares would be considered under the head capital gain irrespective of the period of holding with a view to avoid dispute/litigation and to maintain a uniform approach. The para number three clarified that the above would not be necessarily applied in the situation where the genuineness of the transaction in unlisted shares itself is questionable, the transfer of unlisted shares is related to an issue pertaining to the lifting of the corporate veil and the transfer of unlisted share is made along with the control and management of the underlying business.”
“In the present case before us, the learned assessing officer could not prove that any of the three conditions mentioned in that circular applies. In fact, the sale price of the shares is supported by the valuation report and also conform with provisions of FEMA. The learned assessing officer as well as the learned CIT – A merely proceeded on the basis of an allegation that assessee wanted to show the higher profit in its books of account. It is not denied that the assessee was the owner of the shares, it held it for 13 months, there is no allegation that the price paid by the buyer was unfounded. In fact, it was supported by the valuation report which was not controverted, except for the conjectures and surmises. In view of this circular, we hold that the excess of consideration realized by the assessee on sale of the above shares is chargeable to tax as capital gain and not as income from other sources. In view of this ground number nine of the appeal of the assessee is allowed,” the Tribunal said.Subscribe Taxscan AdFree to view the Judgment