BITO-Lagertechnik Bittmann GmbH Vs ACIT (ITAT Delhi)
The appeal concerns the tax treatment of income arising from the sale of shares by a German company, a tax resident of Germany, which held 50% stake in a joint venture with Nilkamal Limited. The assessee sold its entire holding in Nilkamal Bito Storage Systems Pvt. Ltd. for Rs. 51,73,35,000 at Rs. 233 per share. Against a cost of acquisition of Rs. 22,15,50,000, it offered the resulting long-term capital gains to tax.
For the transaction, the assessee obtained a lower deduction certificate and two separate valuation reports: one under RBI/FEMA guidelines applying the Comparable Companies Multiple Method valuing shares at Rs. 242.21 per share, and another under Rule 11UA/11UAA based on the NAV method valuing shares at Rs. 178.12 per share.
The Assessing Officer held that the fair market value (FMV) under Rule 11UAA (Rs. 178.12 per share) must be treated as the sale price for computing capital gains. The difference between this value and the actual negotiated price of Rs. 233 per share was treated as income from other sources taxable at 40%, while capital gains were computed only up to the NAV-based value taxable at 10%. The AO further held that a share could not have multiple values on the same date.
