TMI Blog2014 (4) TMI 480X X X X Extracts X X X X X X X X Extracts X X X X ..... f the equity shares of UPL & UEL respectively - After the transfer the assessee holds 21.35% and 47.88% of the equity shares in UPL & UEL respectively - A refusal to grant a stay would in all probability entail a sale of the shares to meet the demand – thus, partial stay granted to the assessee. - Writ Petition No.11911 of 2013 - - - Dated:- 25-3-2014 - S. J. Vazifdar And B. P. Colabawalia,JJ. For the Appellants : Mr. Percy Pardiwalla For the Respondents : Mr. Vimal Gupta, Senior Counsel with Ms. Padma Divakar JUDGMENT (Per S. J. Vazifdar, J. ) 1. Respondent Nos.2 to 6 are the Chief Commissioner of Income Tax, the Commissioner of Income Tax, the Additional Commissioner of Income Tax, the Assistant Commissioner of Income Tax and the Commissioner of Income Tax (Appeals). The petitioner has sought a writ of certiorari to quash and set aside an order dated 10.12.2013 passed by respondent No.6 - CIT (A), a writ of prohibition restraining the respondents from taking any coercive steps to recover the disputed tax and a writ of mandamus directing CIT (A) / respondent No.6 to expeditiously dispose of the appeal filed by the petitioner against the assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in UPL and UEL to the petitioner by way of a gift. As a result of the transfers, the petitioner's shareholding in UPL rose from 5.1% to 21.35% and in UEL from 1.44% to 43.88%. (b) The petitioner filed its return of income under section 139 for the assessment year (AY) 2010-2011 on 22.09.2010. The petitioner filed a revised return on 28.03.2012, declaring an income of Rs.1,54,41,530/-. The case was selected for scrutiny. (c) Respondent No.5 - Asstt. CIT passed an assessment order under section 143(3) on the basis of the original return filed on 22.09.2010 and without taking into consideration the revised return filed on 28.03.2012. Respondent No.5 inter-alia taxed, under the head income from other sources , a sum of Rs.1464,54,53,232/- (Rs.1,464.54 Crores approx) representing the market value of 8,73,01,770 shares of UPL and 1,08,11,620 shares of UEL transferred by the Shroff group to the petitioner by way of a gift. On 09.04.2013, the petitioner filed an appeal before respondent No.6 / CIT (A), against the assessment order dated 30.03.2013. (d) In the meantime on 30.03.2013, Respondent No.5 (the Asstt. CIT) served a notice of demand under section 156 of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondents shall not adopt any coercive proceedings. (g) Respondent No.6 after hearing the petitioner, disposed of the stay application by the impugned order dated 10.12.2013. The petitioner was directed to pay 25% of the demand viz. about Rs.169.00 crores in four equal monthly installments commencing from December, 2013. Respondent No.6 directed the stay of the recovery of the balance amount till 31.03.2014 or till disposal of the appeal, whichever was earlier. He expedited the hearing of the appeal subject to the payment of the first installment. It was ordered that if the petitioner defaults in paying any of the installments, it would be deemed to be in default in respect of the entire demand and would entail coercive measures being adopted by the AO. 4. Sections 2(18)(b), 28(iv) 56(1) and 56(2)(viia) of the Act read as under :- Definitions. 2. In this Act, unless the context otherwise requires, - (18) company in which the public are substantially interested - a company is said to be a company in which the public are substantially interested - (a) ................................................................ (b) if it is a company which is not a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income from other sources , namely : - ...................................................................... (viia) where a firm or a company not being a company in which the public are substantially interested, receives, in any previous year, from any person or persons, on or after the 1st day of June, 2010, any property, being shares of a company not being a company in which the public are substantially interested,- (i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property; (ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration: Provided that this clause shall not apply to any such property received by way of a transaction not regarded as transfer under clause (via) or clause (vic) or clause (vicb) or clause (vid) or clause (vii) of section 47. Explanation.-For the purposes of this clause, fair market value of a property, being shares of a company not being a company in which the public are substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PL) by relinquishing their shares to the petitioner. The petitioner acquiring the shares from them gave each other benefit of exercising good control and influence over the group companies . Thus the so called benefit of exercising good control and influence over the group companies is alleged to be the consideration. 10. There are serious issues to be considered in this regard. The shares that were transferred belonged to the Shroff group. These shares have been transferred to the petitioner, which also belongs to the Shroff group. Prima-facie at least therefore, the control and influence of UPL and UEL qua such shares remains with the Shroff group. Prima-facie again, assuming it is a benefit for the petitioner, it is not a benefit from the petitioner's business. Consolidation of shares in a single entity by a group is not unknown. 11. The above only indicates that there are serious issues to be tried which is one of the relevant factors while considering an application for stay. There are other two factors of crucial importance, one legal and the other practical, which persuade us to grant the stay albeit on certain conditions. 12. Firstly, the petitioner's case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the provisions. Let us first examine the provisions of sec.28[iv] of the Act relied upon by the CIT [A]. 28. Profits and gains of business or profession.-- The following income shall be chargeable to income-tax under the head Profits and gains of business or profession ,-- .. (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession ; In our humble opinion, the transaction is of a gift which is a capital receipt in the hands of the assessee and therefore it cannot be said to be a case of any benefit or perquisite arising from business. The contention of the Ld. Departmental Representative that by the said transaction the assessee has derived benefit and such benefit has arisen from the business connection of the donor and the donee, cannot be accepted as no direct nexus has been established by any tangible material brought on record by the Ld.CIT [A]. Simply because both the donor and the donee happened to belong to the same group cannot ipso facto establish that they have any business dealings. As we have held that it is a case of a valid gift which is to be treated as capital rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. 15. Balance of convenience and the question of irreparable injury are relevant factors while considering an application for stay even in proceedings under the Income Tax Act. 16. Despite the above finding, we are inclined to protect the respondents to a limited extent. This would be by restraining the petitioner from parting with possession of, selling, disposing of or in any manner whatsoever encumbering its shareholdings in UPL UEL to an extent of Rs.1000.00 crores pending the appeal before the CIT (A). Further as the petitioner had offered to deposit Rs.10.00 crores, we intend directing it to do so. 17. The CIT (A) by the impugned order dated 10.12.2013 held that the onus was on the assessee to establish a primafacie case for grant of interim relief. He further held that the issue that arises in the present case is a new one having arisen for the first time in this case in the assessment year under consideration. Although the issue may have arisen in this case for the first time, it is not a new one for the department. It had arisen for consideration and was decided by the Tribunal in D.P. World (P) Limited. It is pertinent to note that the CIT (A) excluded the dem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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