JAYASIMHA BABU, J.

Though the assessees are different, the assessment year is also the substantial question referred to us at the instance of the assessees and being common these references are being disposed of by a common order. The assessment year is 1983-84 and the question referred to us is as to whether any part of the sale consideration received by them for the sale of their shares in Anglo French Textiles Ltd. and Best & Co. (Pondicherry) (P) Ltd. is to be excluded from the computation of long-term capital gains on the ground that part of the consideration does not represent the value of the shares sold but constitutes the consideration, for the sale of right to control the company with the aid of the shares sold.

The shares held in these two companies by one or the other of these assessees who are all members of the family of one C. R. Rajendran were agreed to be sold by them and others with the said Rajendra acting on their behalf to one Ganesh Narayan Jattiya under an agreement dt. 6th July, 1981. By that agreement, the shares held by the vendors in Anglo French Textiles Ltd. were agreed to be sold at the rate of Rs. 601 per share and the shares held by them in Best & Co. (Pondicherry) (P) Ltd. were agreed to be sold at Rs. 935 per share, according to the assessees. The then prevailing market value of those shares as on the date of sale was Rs. 219 per share in Anglo French Textiles Ltd., and Rs. 185 per share of Best & Co. (Pondicherry) (P) Ltd.

The ITO computed the difference between the value of the shares received by the assessees at the agreed sale price, and the cost of acquisition of those shares and treated the same as long-term capital gains and, accordingly, assessed that sum to tax.

The assessee had unsuccessfully contended before the ITO that the sale price did not wholly pertain to the value of the shares held by them and part of the amount received by them was the consideration for the transfer of the controlling interest of those companies to the vendees as it had been agreed that the directors from Rajendran's group would resign from the boards of two companies and before doing so, induce the nominees of the vendees. That argument was rejected by the AO. In appeal, the same argument was repeated before the CIT and the Tribunal by the assessees with the same resultThe assessees thereafter sought these references and the same point which had been urged before the authorities below has been urged before us by the learned counsel for the assessee. It was submitted by the counsel that the price received by the assessees for their shares was very much above the prevailing market price for those shares, and the difference between the market price then prevailing and the amounts actually received could not properly be regarded as part of the price for the shares that were sold, as had those shares been sold in the open market, the shares would have fetched only the market price then prevailing and no more. The amount received by the assessees in excess of the market price, it was contended by the counsel, represented the consideration for the transfer of the controlling interest for which there was no cost of acquisition and that amount, therefore, could not be subjected to levy of tax.

The learned counsel relied upon the decision of the Patna High Court in the case of Raghubar Narain Singh vs. CIT, wherein the Court held that the price received by the vendor who happened to be the managing director and who had agreed under the agreement of sale to delegate his power to the vendee was not the consideration for the sale of the shares alone and that part of the consideration was the price for the delegation of powers and, therefore, that price was not to be taken into account while computing the capital gains on the shares. With great respect, we are unable to subscribe to the view that the powers of the managing director of a company could be sold in that manner, and that such illegal sale would entitl