RBS AA Holdings (Netherlands) B.V. Vs DCIT (ITAT Delhi)
AO Applied Wrong Rule, Wrong Date & Wrong FMV—Section 50CA Not Attracted; Cost Must Be Actual ₹13.02/Share; Long-Term Capital Loss Allowed
The Assessee, a Netherlands tax-resident, acquired 23.10 crore shares of its Indian subsidiary RBS Prime Services (India) Pvt. Ltd. in FY 2013-14 through a secondary purchase @ ₹13.02/share. In FY 2017-18, 14.67 crore shares were cancelled/reduced pursuant to an NCLT-approved capital-reduction scheme effective 20.11.2017, for a consideration of ₹10.09/share based on a valuation compliant with FEMA & filed before NCLT.
Assessee computed long-term capital loss of ₹43.06 crore, applying:
- Actual cost: ₹13.02/share, as per share-purchase agreement;
- Full value of consideration: ₹10.09/share, higher than FMV of ₹10.00 determined under Rule 11UAA r.w. 11UA on the date of transfer → hence Section 50CA not triggered.
AO rejected the computation alleging “tax avoidance” and made the following errors:
- Adopted face value ₹10 as cost, ignoring actual payment & SPA;
- Computed FMV on 31.03.2017 instead of valuation date 20.11.2017 mandated under Rule 11UAA;
- Incorrectly applied the formula of Rule 11UA meant for Section 56(2)(viib), which is irrelevant to capital-gain computation;
- Treated the transaction as colourable even though shares were held since 2013 and reduction was legally sanctioned by NCLT.
DRP upheld AO’s view without appreciating valuation evidence and additional materials showing cost & FMV.
