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2020 (10) TMI 25 - AT - Income TaxLong term capital gain - re-alignment of shareholding pursuant to family settlement arrangement - indexation of assets (shares received as gift) from the date of ownership by the previous owner or from the first year in which the assessee became owner - Whether A.O./CIT(A) erred in not holding that the amount received on re-alignment of shareholding pursuant to family settlement arrangement was not liable to capital gains tax u/s 45? - Whether amount received by the appellant was not towards equalization of family interests and was thus, not in the nature of owelty, but was consideration received for ‘transfer’ of shares, being personal property? HELD THAT:- Assessee did not produce any evidence of prior, present or likelihood of any future family dispute on record to justify the execution of the Memorandum of Family Settlement. The clauses of the Memorandum of Family Settlement clearly establish that it was a simple transaction of sale and purchase of shares, subject to consideration received by the assessee from Shri Golu L. Mirchandani. Shri Golu L. Mirchandani have been described as purchaser of the shares and assessee as seller in the Memorandum of Family Settlement which could never be regarded as Family Settlement Deed. The assessee did not have any antecedent, title of any family property because whatever shares/asset assessee has possessed as owner have been sold subject to consideration because the assessee has acquired the shares of two Companies by way of gift from her father and sons. Thus, it was not a family property which could have been divided between the assessee and Shri Golu L. Mirchandani. The assessee did not receive any share from the family of her husband. The facts also clearly established that there is no equitable partition or distribution of family shares/ assets. The chart reproduced above shows that it was merely sale transaction of shares which could not be considered as Family Settlement. Thus, it cannot be said that the impugned amount was given to assessee for equalisation of interest in the family property and thus, it was not an owelty as is claimed by the assessee. Since shares were the personal property of the assessee, therefore, when same were transferred to Shri Golu L. Mirchandani, it would amount to sale. It is an admitted fact that assessee initially admitted the transactions to be sale and purchase transaction subject to consideration. Assessee was not able to prove by any evidence to justify retraction from the earlier admission on disclosing the sale transaction in the original return of income disclosing capital gains - assessee by claiming now it to be Family Settlement tried to defruad the Revenue to reduce the taxable returned income. Assessee has received this amount for relinquishing her rights to manage the two companies i.e., the consideration for her asset. She has not received this amount as owelty as there were no division of assets. She had to forego her assets for a consideration and she did not receive any asset/right in reciprocation nor was the money paid for equalisation of the interest. Thus, the money received by her though indirectly were the sale consideration of transfer of her rights and not owelty. ₹ 45 lakhs was paid in settling the liability of the assessee in the matter of Excise prosecution which would amount to transfer. Thus, it is clear that assessee received the impugned amount on sale of the shares. Therefore, it would be transfer of capital asset within the meaning of Section 2(47) of the I.T. Act, 1961, so as to attract the provisions of capital gains which assessee has rightly disclosed in the return of income and paid the tax thereon - Decided against assessee. Indexed cost of acquisition of shares in question - This issue has already been decided by the Ld. CIT(A) in the first round of proceedings and deleted the addition. The Departmental Appeal have been dismissed by the Tribunal [2014 (10) TMI 698 - ITAT DELHI]. Thus, this issue should not have been taken-up by the authorities below in this second round of appellate proceedings because this issue was not the remanded matter. Orders of the authorities below are set aside and the A.O. is directed to follow the first round order of the Ld. CIT(A) and the Tribunal (supra). Ground No.4 of the appeal of the Assessee is allowed. Further, charging of interest is mandatory and consequential.
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