TMI Blog2010 (4) TMI 791X X X X Extracts X X X X X X X X Extracts X X X X ..... V. C., TATED K. K. JJ. JUDGMENT V. C. Daga J.- 1. The Income-tax Appellate Tribunal, Bombay Bench, Bombay ("the Tribunal" for short) in exercise of power under section 26(1) of the Gift-tax Act, 1958 ("Act" for short), vide its order dated June 11, 1994 has referred the following questions arising out of its order dated October 30, 1992, for the opinion of this court : "1. Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in rejecting the applicant's contention to the effect that as there was a 'family arrangement', there was no 'transfer' and consequently no gift ? 2. Without prejudice to question No. 1, whether, on the facts and in the circumstances of the case and in law, the Tribunal erred in holding that there was no consideration for the alleged transfer by the applicant ? 3. Without prejudice to questions Nos. 1 and 2, whether, on the facts and in the circumstances of the case, the Tribunal ought, in any event, to have held that even if there was a gift by the applicant, such gift was exempt under section 5(1)(xiv) of the Gift-tax Act, 1958 ?" Statement of case 2. The aforesaid questions of law giving ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 3, 1991. (c) Before the Tribunal in appeal, it was urged by the applicant that there was no liability to gift-tax as, inter alia, there was no transfer at all as the settlement was a family arrangement and, hence, there was no gift. That in any event, even if there was consideration for the alleged transfer and, therefore, no gift. That in any event, even if it was a gift, it was exempt under section 5(1)(xiv) of the Gift-tax Act. That the applicant could not be charged to gift-tax as the members of the Kantilal group had been charged to capital gains tax in respect of the same transaction. (d) The Tribunal in appeal, held that a family arrangement was an agreement among the members of the same family, intended to be generally and reasonably for the benefit of the family, either by comprising doubtful or disputed rights or by preserving the family property or the peace and security of the family by avoiding litigation or by saving its honour. According to the Tribunal, no cogent material was placed to show that the arrangement or agreement was arrived at with the object of com-promising disputable rights or for preserving the family property. The Tribunal observed that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or vocation. According to the Tribunal, the burden was on the assessee who claimed exemption under section 5(1)(xiv) of the Act to prove that the gift was for the profitable carrying on of the business. The Tribunal held that the assessee failed to discharge its burden as nothing was produced to show that the transfer of shares was made in the interest of business of the company. That the fact that the assessee got its due amount of Rs. 80 lakhs was not sufficient to prove the aspect of onus as this amount was received in the normal course of business. According to the Tribunal, one can always pursue the rightful and legal claims and not required to make such a heavy amount of gift for that. The Tribunal upheld the finding of the Commissioner of Gift-tax (Appeals) that the assessee's inherent right to receive Rs. 80 lakhs under the agreement with M/s. Sheth and Mehta Associates was not influenced by the settlement arrived at with the Kantilal group. That the entire settlement was apparently entered into with a view to benefiting certain shareholders and that the benefit to the shareholders could not be equated with the benefit to the company. (g) It is stated that the essent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is assumed that the subject transaction was gift, such gift being exempt under section 5(1)(xiv) of the Act is not taxable. The provision reads thus : "Gifts made in the course of carrying on a business, profession or vocation, to the extent to which the gift is proved to the satisfaction of the Gift-tax Officer to have been made bona fide for the purpose of such business, profession or vocation." 6. According to Mr. Irani, the Tribunal by rejecting this argument has misdirected itself and failed to apply the law laid down by the apex court as well by this court in CIT v. Dhanrajgirji Raja Narasingirji [1973] 91 ITR 544 (SC) ; F. E. Dinshaw Ltd. v. CIT [1959] 36 ITR 114 (Bom), CIT v. Birla Cotton Spinning and Weaving Mills Ltd. [1971] 82 ITR 166 (SC) and CIT v. Nainital Bank Ltd. [1966] 62 ITR 638 (SC). 7. Without prejudice to the aforesaid contentions, Mr. Irani went on to urge that having assessed the Kantilal group to capital gains in respect of the same transaction, the same transaction cannot again be levied with gift tax. In support of his submission he placed reliance on the judgment of the Supreme Court in the case of K. P. Varghese v. ITO [1981] 131 ITR 597. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnexure C annexed thereto. It is, thus, clear that the Kantilal group relinquished and waived their right, title and interest in the property described in annexures A and B and also the consideration which the company was to receive out of the land transaction and in lieu thereof they got properties shown in annexure C free from all liabilities on ownership basis. Nature of consideration is the transfer of property shown in annexure C in favour of the Kantilal group and in consideration thereof the Kantilal group relinquished their rights over the properties shown in annexures A and B. This consideration for the trans- action in question can conveniently be spelt out from the arbitration award of the arbitrator. If that be so, the Tribunal was not justified in dismissing submission in this behalf by one line finding that the aspect of consideration is totally lacking in the transaction. 11. In the above view of the matter, for the reasons recorded herein, question No. 2 referred for the opinion of this court will have to be answered in favour of the applicant. The view of the Tribunal on this count cannot be said to be correct view. 12. In the result, question No. 2 is answer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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