CIT Vs Naresh K Trehan (Delhi High Court)
Delhi High Court has dismissed an appeal filed by the Income Tax Department, ruling that the difference in share value acquired in exchange for a non-profit interest cannot be treated as a taxable perquisite. The court found no substantial question of law in the Revenue’s challenge to an Income Tax Appellate Tribunal (ITAT) order concerning Assessment Year 2001-02 for assessee Naresh K Trehan. The appeal, filed with a significant delay of 1563 days, was nonetheless briefly examined by the court due to its long pendency.
The case originated from reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961, after the Assessing Officer (AO) noted that the assessee acquired 10% shares of M/s Escorts Heart Institute & Research Centre Limited (EHIRCL) for Rs. 20,00,000. The AO determined the intrinsic value of these shares to be significantly higher, at Rs. 11,01,41,293, based on EHIRCL’s book value. Consequently, the AO added Rs. 10,80,00,000 to the assessee’s income, treating the difference as an unexplained perquisite.
Upon appeal, the Commissioner of Income Tax (Appeals) not only upheld the AO’s addition but further enhanced it by Rs. 3,90,00,000, calculating the share’s book value at an even higher rate. This led the assessee to appeal to the ITAT.
