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[2008] 166 Taxman 24 (Delhi)/[2009] 311 ITR 311 (Delhi)/[2007] 213 CTR 138 (Delhi) [2008] 166 TAXMAN 24 (DELHI) HIGH COURT OF DELHI Commissioner of Income-tax Central-III, New Delhi * v. J.S. Electronics (P.) Ltd. MADAN B. LOKUR AND DR. S. MURALIDHAR, JJ. IT APPEAL NO. 1315 OF 2006 SEPTEMBER 21, 2007 Section 40A(2) of the Income-tax Act, 1961 - Business disallowance - Excessive or unreasonable payments - Assessment year 1992-93 - Assessee-company was dealing in shares - Pursuant to an information that there was a joint venture agreement between erstwhile HCL and HP and that in terms thereof shares of erstwhile HCL were to be effectively transferred to HCL Ltd. and HCL HP Ltd., assessee purchased shares of erstwhile HCL at a high price - For payment of such a high price, assessee explained that it had purchased a large number of shares in large blocks from Delhi Stock Exchange; that transaction was confirmed by brokers and payments made to them were through account-payee cheques - However, Assessing Officer rejected assessee's explanation and made addition to income of assessee on account of such high price paid by assessee - Commissioner (Appeals) as well as Tribunal examined explanation of assessee and accepting same concluded that transaction was not sham transaction and that section 40A(2) was not applicable - Whether explanation given by assessee was a plausible explanation and could not be termed as perverse - Held, yes - Whether, therefore, orders of Commissioner (Appeals) as well as Tribunal were justified - Held, yes Section 49 of the Income-tax Act, 1961 - Capital gains - Cost with reference to certain modes of acquisition - Assessment year 1992-93 - Pursuant to an information that erstwhile HCL had entered into a joint venture agreement with HP and that in terms thereof, shares of erstwhile HCL were to be effectively transferred to HCL Ltd. and HCL HP Ltd., assessee purchased certain shares of erstwhile HCL - In terms of said joint venture agreement, assessee was allotted certain shares of HCL HP Ltd. and certain shares of HCL Ltd. - Assessee worked out average cost of shares of HCL HP Ltd. at Rs. 55.82 per share - However, Assessing Officer held that…

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