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TMI Blog2012 (10) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... on disallowance of expenses amounting to Rs. 6,11,173/. Revenue is aggrieved by the finding of the Ld. CIT(A) who deleted the addition made by the AO on account of undisclosed consultancy fees. 3. Briefly stated the facts of the case are that during course of the assessment proceedings for the year under consideration, the Assessing Officer observed that the assessee has received three residential flats at Hill Park from its sister concern M/s. British India Steam Navigation Co. (BISNCL) which was capitalized in the schedule of fixed assets at Rs. 79,03,460/-. The AO sought explanation from the assessee company to which the assessee replied that it has received shares of Hill Park as gift from M/s. BISNCL as per the gift deed executed in this respect. Both assessee and M/s. BISNCL are 100% subsidy of Peninsular & Oriental Steam Navigation Co., a U.K. based entity which in its turn is 100% subsidy of DP World Ltd., a Dubai based entity. The market value of the gifted property as per registration of the Deed of gift amounted to Rs. 6,98,54,000/-. In the light of the above fact, the AO asked the assessee to explain why the receipt of the flats at Hill park should not be treated as in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of gift which is exhibited as under: 7. The fact of the matter is that M/s. BISNCL which is a UK based company was holding shares of M/s. Hill Park Ltd., which entitled it for use and occupation of 3 flats. M/s. BISNCL decided to gift the shares to M/s. DP World Pvt. Ltd. (assessee) by which the assessee became entitled for use and occupation of three flats at M/s. Hill Park. This transaction , in the eyes of the AO was a colorable device who taxed the value adopted for WT purpose as income from other sources. However the same, in the eyes of the CIT[A], was nothing but a benefit derived by the donee out of its business relations with the donor company and therefore should be taxed as profit and gains of business & profession. All that we have to decide is whether such transaction can be termed as a 'Gift' or Income in the hands of the Donee. We have heard the rival submissions at length and perused the orders of the lower authorities and the paper book submitted by the appellant. 8. It is not uncommon that transfer of shares between corporate groups takes place for internal reorganization. Such a transfer may trigger capital gains ramifications in India s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPA, dealing with gift, defines the same as transfer of certain existing movable or immovable property, made voluntarily and without consideration, by one person, called the donor, to another called the donee and accepted by or on behalf of the donee. 13. A perusal of the aforesaid provisions of the TPA indicate that there do not seem to be any restriction on the corporate transfer of shares by way of gift provided it is made voluntarily and without consideration. In other words, there is no requirement in the TPA that a 'gift' can be made only between natural persons out of natural love and affection which means that as long as a donor company is permitted by its Articles of Association to make a 'gift', it can do so. Sec 82 of the Companies Act, 1956 also provide that shares in a company constitute movable property transferable in the manner provided by its Articles of Association. 14. Now the question arises whether the meaning of 'gift' as per Gift Tax Act could be imported for the purpose of Sec. 47(iii) of the Act. In the case of CIT v. Shyam Narain Mehrotra [1981] 122 ITR 313 (Cal), the High Court inter alia observed that the expressions similar to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrary. This gift of shares is duly supported by a registered Deed of Gift executed between the donor company British India Steam Navigation Co. Ltd., and DP World Pvt. Ltd. on 27.12.2007 wherein the donor has unconditionally gift, transfer and assign to the donee the shares and all its rights, title and interest attaching thereon including all rights, title and interest in the flats along with benefits of all the amounts standing to the credit of the Donor in the books of the company. 19. The AO has applied the provisions of Sec. 56 and treated the value of the flats as income under the head 'Income from other sources' and the Ld. CIT(A) has made the addition u/s. 28(iv) of the Act by treating the Stamp Duty value as income from profit and gains from business and profession. 20. We have carefully considered both 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. The legislature further brought amendments as under : (vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,- (a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum ; (b) any immovable property,- (i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property ; (ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration ; (c) any property, other than immovable property,- (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 consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares : Provided that this clause shall not apply where the consideration for issue of shares is received- (i) by a venture capital undertaking from a venture capital company or a venture capital fund ; or (ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf. Explanation.- For the purposes of this clause,- (a) the fair market value of the shares shall be the value- (i) as may be determined in accordance with such method as may be prescribed ; or (ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature , whichever is higher ; However this amendment has no direct bearing on the facts of the case in hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that ALV has to be taxed for the year under consideration, the assessee will get the statutory deduction of 30% from the ALV, therefore no separate deduction of maintenance charges is to be allowed. Similarly, as we have already held that the assessee has failed to establish the flats have been used for the purposes of business for the year under consideration, the depreciation claimed cannot be allowed. This ground of the assessee is dismissed. 28. Ground No. 10 is premature and accordingly dismissed. 29. Coming back to the Revenue's appeal, the only grievance remains to be decided relates to the deletion of the addition made by the AO on account of undisclosed consultancy fees. 30. During the course of the assessment proceedings, the AO observed that the assessee has credited an amount of Rs. 5,35,92,500/- under the head "consultancy fees". The assessee was asked to file the details. From the details submitted by the assessee, it is seen that the consultancy fees were received from two parties (i) P&O Steam Navigation Co., UK amounting to Rs. 4,60,92,500/- and (ii) JAFZA amounting to Rs. 75 lakhs. The AO further observed that as per the agreement of P&O Steam Navigati ..... 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