C/TAXAP/90/2020 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 90 of 2020 PRINCIPAL COMMISSIONER INCOME TAX, SURAT 2 Versus SYAMAPRAKASH NANOO VAIDYAN Appearance: MRS KALPANAK RAVAL(1046) for Appellant(s) No. 1 for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 17/02/2020 ORAL ORDER (PER : HONOURABLE MR.JUSTICE BHARGAV D. KARIA) 1. This appeal filed under Section 260A of Income Tax Act, 1961 (for short Act, 1961) at instance of Revenue is directed against order dated 2nd August, 2019, passed by Income Tax Appellate Tribunal, Surat Bench, Surat in ITA No.32/SRT/2017 for assessment year 2012-13. 2. Revenue has proposed following questions as substantial questions of law, for consideration of this Court: (i) Whether on facts and in circumstances of case and in law, Hon ble ITAT is correct in not setting aside matter to file of Assessing Officer instead of deleting addition in relation to reduction in sales consideration to extent of Rs.8,85,60,312/- despite itself observing that issue at point would also need appropriate verification by lower Page 1 of 6 Downloaded on : Thu Feb 27 14:44:33 IST 2020 C/TAXAP/90/2020 ORDER authorities and confirmation from Neo Structo Construction Ltd. and Speetch Equipment Pvt. Ltd? (ii) Whether on facts and circumstances of case and in law, Hon ble ITAT is correct in accepting additional evidences without appreciating fact that same were not produced before Assessing Officer and have been rejeted by CIT (A) as evidences relied upon was executed on 25/04/2015 i.e. after finalization of assessement proceedings under consideration. 3. short controversy which arises from impugned order of Tribunal is whether Tribunal ought to have remanded matter to Assessing Officer to consider issue fresh de- novo with regard to reduction in sales consideration? 4. brief facts of case, as stated by Tribunal in impugned order, are as under: Briefly stated, facts of case are that assessee along with his family members sold shares of Neo Structo Construction Ltd. and Speetech Plant Equipment Pvt. Ltd. during financial year relevant to impugned assessment year. These shares were sold to M/s Bilfinger Berger Industrial Services GmbH, in terms of share purchase agreement dated 23.11.2011. In original return of income filed on 26/09/2012, assessee has shown gross sale consideration amounting to Rs.99,92,36,247/- from sales of shares of New Structo Construction Ltd and Rs.10,80,99,343/- in respect of sale of shares fo Spetech Plant Equipment P. Ltd. Subsequently, assessee revised his return of income on 22.03.2013 wherein he reduced gross sale consideration in respect of New Structo Construction Ltd. by amount of Rs.8,70,84,315/- and in respect of Speteech Plant Equipment Pvt. Page 2 of 6 Downloaded on : Thu Feb 27 14:44:33 IST 2020 C/TAXAP/90/2020 ORDER Ltd. by amount of Rs.14,75,997/-. Therefore, as against original gross sale consideration of Rs.110,73,35,590/- in respect of both transactions, total sale consideration has been revised and shown at Rs.101,87,75,278/- in revised return of income wherein assessee has reduced sale consideration by amount of Rs.8,85,60,312/- which is presently in dispute before us. reason for reduction in sale consideration has been stated by assessee as amount not recoverable from debtors of both companies totaling to Rs.22,08,91,206/- (the assessee s share comes to Rs.8,85,60,312/-) which assessee, along with his family members, were required to pay in terms of Non- Compete, Non-Solicitation and Indemnification Agreement (NCNSIA) signed along with share purchase agreement and which they have actually paid/have been adjusted against original sale consideration and details thereof as submitted before lower authorities are as under: Sr.No. Description Neo Structo Speetech Total 1 Short Recovery of 13,74,74,271/- - 13,74,74,271/- Nafto Gas (Net of Discount) 2 Write off of Debtors not 8,99,72,823/- 36,81,709/- 9,36,54,532/- recoverable Rs.7,20,38,896/- and payment of various liabilities on behalf of seller Rs.1,79,33,927/- 3 Less: Subsequent recovery from 1,02,37,597/- 1,02,37,597/- NAFTO Gas 4 Total 21,72,09,497/- 36,81,709/- 22,08,91,206/- 5. Assessing Officer on reading of paragraph No.3.3.1 of Non-compete, Non-Solicitation and Indemnification agreement, rejected claim of assessee to reduce gross sale consideration by amount of Rs.8,85,60,312/-. Page 3 of 6 Downloaded on : Thu Feb 27 14:44:33 IST 2020 C/TAXAP/90/2020 ORDER 6. assessee, being aggrieved by addition made in assessment order, preferred appeal before CIT (A), who rejected appeal of assessee. 7. assessee therefore, went in appeal before Tribunal. Tribunal after considering submissions made by assessee held as under: 40. above settlement agreement dated 15.05.2012 talks about fact that amount of Rs.148,631,838.56 is outstanding for significant period from Naftogaz India Pvt. Ltd. and parties wishes to settle recovery of this receivable earlier than as stipulated in SPA and NCNSIA which is subsequent stated to be 13.02.2013. In other words, in normal course, parties would have waited for period ending as on 13.02.2013 for recovery of said amount, however, they have mutually agreed to prepone settlement as on 15.05.2012 with appropriate discounting factor and net account receivable (after discounting) from Neftogaz India Private Limited has been determined at Rs.137,474,270.41 which assessee has sought to reduce (to extent of his shareholding) from sale consideration from sale of his shareholding in company. Apparently, in this context, Id CIT (A) wishes to examine correspondence exchanged with purchaser company and same has now bee submitted by assessee by way of additional evidence. At same time, assessee in his submission before lower authorities have submitted that there is subsequent recovery of Rs.1,02,37,597/- from Netfogas and same has been offered to tax by adjusting and increasing sale consideration corresponding to his shareholding. Again, this fact of subsequent recovery and quantum of subsequent recovery is not emerging from settlement agreement and same would need appropriate verification by lower authorities and Page 4 of 6 Downloaded on : Thu Feb 27 14:44:33 IST 2020 C/TAXAP/90/2020 ORDER confirming from Neo Structo Construction Limited. 41. Besides short recovery from Netfogaz, assessee has also claimed write off of Debtors not recoverable amounting to Rs.7,20,38,896/- and payment of various liabilities on behalf of sellers amounting to Rs.1,79,33,927/-. Similar is position regarding Rs.36,81,709 in respect of Speetch Equipment Pvt ltd. In light of aforesaid discussion, same would also need appropriate verification by lower authorities and confirming from Neo Structo Construction Limited and Speetch Equipment Pvt. Ltd. 42. In light of above discussion and in entirety of facts and circumstances of case, we hereby direct Assessing Officer to allow claim of asseessee towards account receivables (net of recoveries) and other recoveries which asseessee has finally indemnified to extent of his shareholding subject to necessary verification and examination. In result, ground no.2 of assessee s appeal so far as it relates to reduction in sale consideration to extent of Rs.8,85,60,312 is allowed in light of aforesaid direction. 8. Learned advocate Ms.Kalpana K. Raval for appellant submitted that Tribunal in paragraph No.42 of order has held that ground No.2 of assessee s appeal is allowed in light of directions given in order mis-construed by Assessing Officer by allowing claim of appellant without considering direction issued by Tribunal in impugned order. 9. It is hereby clarified that Tribunal has allowed ground No.2 of assesse s appeal so far as it relates to reduction in sales consideration Page 5 of 6 Downloaded on : Thu Feb 27 14:44:33 IST 2020 C/TAXAP/90/2020 ORDER subject to directions issued in same paragraph for necessary verification or examination of claim of assessee. Thus, Tribunal has remanded matter back to Assessing Officer, directing him to consider in detail and verify claim of assessee. 10. In view of such facts, there is no infirmity in impugned order passed by Tribunal which calls for any interference by this Court. None of question of law proposed by revenue can be termed as substantial question of law. Hence, this appeal fails and is accordingly dismissed. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) PALAK Page 6 of 6 Downloaded on : Thu Feb 27 14:44:33 IST 2020 Principal Commissioner of Income-tax, Surat-2 v. Syamaprakash Nanoo Vaidyan