Delhi High Court
Commissioner Of Income Tax vs Ranbaxy Holdings Company on 12 May, 2010
Author: Badar Durrez Ahmed
THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 12.05.2010
+ ITA 675/2010
COMMISSIONER OF INCOME TAX ..... Appellant
- versus -
RANBAXY HOLDINGS COMPANY ..... Respondent
Advocates who appeared in this case:-
For the Appellant : Ms Rashmi Chopra
For the Respondent : Mr Ajay Vohra with Ms Kavita Jha
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE V.K. JAIN
1. Whether Reporters of local papers may be allowed to
see the judgment ?
2. To be referred to the Reporter or not ?
3. Whether the judgment should be reported in Digest ?
BADAR DURREZ AHMED, J (ORAL)
1. The order dated 15.05.2009 passed by the Income Tax Appellate
Tribunal in ITA 2062/Del/2002 relating to the assessment year 1998-1999 is
assailed by the revenue before us by way of this appeal.
2. The facts of the case are that the assessee had filed a return of
income wherein it was shown that in the year in question the assessee
company had disposed of 75,600 equity shares of Ranbaxy Laboratories
Limited (RLL). The actual cost of the shares sold was Rs 1,10,57,400/- and
this figure was used for the purposes of computing capital gains under
Section 48 of the Income Tax Act, 1961 (hereinafter referred to as „the said
Act‟). However, in the books of accounts, the assessee company followed
Accounting Standard-13 and took the average cost of Rs 40,78,693/- as the
cost price of these shares. The Assessing Officer issued a notice under
Section 154 proposing to rectify the purported mistake in the intimation
issued under Section 143(1)(a) of the said Act. The so-called mistake,
which was sought to be rectified, was that as per the balance sheet, the value
of the shares was shown at Rs 40,78,693/- whereas the cost price of the
shares of RLL was taken at Rs 1,10,57,400/- for the purposes of
computation of capital gains. According to the Assessing Officer, the value
of the shares was overstated in the balance sheet by Rs 69,78,707/- and the
Assessing Officer required the assessee to indicate as to why the said
amount should not be added to the returned income. Thereafter, in the order
passed under Section 154/143(1)(a) of the said Act, the Assessing Officer
made the aforesaid addition which was confirmed by the Commissioner of
Income Tax (Appeals).
3. The question before the Tribunal was whether the adjustment
made by the Assessing Officer in the returned income was a debatable issue
relating to the computation of capital gains and cost of the shares sold by
the assessee as indicated in the return of the income filed by the assessee.
The Tribunal came to the following conclusion with regard to the question
of rectification of the intimation under Section 143(1)(a):-
"19. For the purpose of determining the cost of
acquisition of shares sold for the purpose of computing
capital gain, and cost of remaining shares to be carried
forward, whether the average cost of total shares held by the
assessee or actual cost of the shares sold should be taken
into the account is a matter which can be decided only after
due deliberations, and after examining the facts and
circumstances of each case. This issue cannot, by any
stretch of imagination, be made a subject matter of prima
facie adjustment within the meaning of Section 143(1)(a) of
the Act. In case of the A.O. proposed to make any addition
on account of value of shares as per in the balance sheet, the
A. O. should have issued a notice to the assessee giving him
an opportunity to have its say and then to decide the matter
in accordance with the provisions of law contained in that
behalf instead of making the addition by way of rectification
order made u/S 154 of the Act rectifying the intimation
issued u/S 143(1)(a) of the Act."
4. We agree with the conclusions arrived at by the Tribunal that this
was a matter which could not have been adjusted under Section 143(1)(a)
and certainly not a matter which could have been rectified under Section
154 of the said Act. We also note that the Assessing Officer as well as the
Commissioner of Income Tax (Appeals) were confused by the two systems
which were in operation. One was the manner in which the assessee was
keeping his books in accordance with Accounting Standard-13 and other
was the manner of computation of capital gains under the income tax
regime. Insofar as the assessee following the Accounting Standard-13 is
concerned, the learned counsel for the revenue could not point out any
deficiency in the following of such standard as reflected from the books of
the assessee company. The learned counsel for the revenue could not also
point out any deficiency in the computation of the capital gains under the
said Act. What the assessee has done is to identify the 75,600 shares sold in
the year in question and has taken the actual cost of these shares as Rs
1,10,57,400/- and indexed it and thereafter reduced the indexed cost from
the actual sale price of the shares to arrive at the capital gains of Rs
3,40,11,091/-. This has been correctly computed in terms of the said Act
and, therefore, there can be no grievance on the part of the revenue
inasmuch as the capital gains has been correctly computed and tax thereon
has been paid.
5. We see no reason to interfere with the order passed by the
Income Tax Appellate Tribunal in deleting the addition made by the
Assessing Officer and the Commissioner of Income Tax (Appeals). The
appeal is dismissed.
BADAR DURREZ AHMED, J
V.K. JAIN, J
May 12, 2010
SR
