Ravi Shroff Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that transaction of sale of shares is not business income since assessee was never involved in the business affairs of the company. Further, consideration is treated as capital gain inspite of non-compete fee since no specific amount assigned towards non-compete fee in share purchase agreement.
Facts- During assessment, the assessing officer (AO) noted that the assessee has claimed long term capital gain on sale of shares of Hyderabad Chemicals Limited (HCL). AO recorded that out of total sale proceed of Rs. 15.64 Crore on shares of HCL the assessee offered net capital gain at Rs. 2.74 crore and also claimed exemption under section 54F of Rs. 6.69 crore. was claimed. As per sale purchase agreement share price was fixed at Rs. 15401/- and sale receipt should be of Rs. 19.08 crore but as per bank statement the assessee has received only Rs. 18.45 crore. As per computation of capital gain the assessee officer Rs. 15.64 crore as full value of consideration. As per share purchase agreement remaining block amount and indemnity escrow account will be paid after completion of 100% share transfer. AO held that the assessee has sold share of 12389 shares at the rate of 15401 of Rs. 19.180 crore treating such receipt as business receipt under section 28(va).
