TMI Blog2010 (2) TMI 1185X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. 2. The assessee is an individual and we are concerned with the year ended 31st March 2007. He held 55700 shares of M/s Dimexon Diamonds Limited, which he sold to a company by name M/s Pankaj K Mehta Investment Private Limited at the rate of ₹ 148/- per share. The price was stated to be the agreed price. The Assessing Officer was of the view that the price declared by the assessee as the agreed price was too low and hence not acceptable. He noted that on the basis of the net assets method, the net asset value per share came to ₹ 541.80 as per the valuation report prepared by M/s Chaitanya C Dalal Company and that on the basis of the profit earning capacity, the value per share came to ₹ 195/-. The Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961, which came into effect from 01.04.2003 and observed that though this section related to immovable property; it affords a sound analogy also in cases of movable properties such as shares. For all these reasons, he computed the capital gains on the basis of the fair value of the share, which he took at ₹ 414/-, which resulted in an addition of ₹ 1,48,16,200/- to the capital gains declared by the assessee. 3. On appeal, the CIT(A) considered the matter elaborately and endorsed the decision of the Assessing Officer that the actual price of ₹ 148/- per share cannot form the basis of the computation of the capital gains as there was no material or evidence to prove that it was honestly done in good faith and bona fid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputed only by taking the full value of the consideration received or accruing as a result of the transfer of the capital asset and nothing more. There is no material or evidence referred to in the assessment order to show that there was any suppression of the sale price of ₹ 148/- per share. In such circumstances, whatever be the surrounding circumstances, the sale price declared by the assessee cannot be disturbed. Further, it has been held in a series of judgments of the Supreme Court that while computing capital gains, in the absence of any evidence to show understatement of consideration, only the actual price received by the assessee can be treated as full value of the consideration and nothing more; please see CIT vs. George H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stance, according to the Income Tax authorities, is that the assessee as well as the company to which he sold the shares are part of the same group and, therefore, it is meaningless to say that the price of ₹ 148/- per share was an agreed price. A little background has to be given here as to why the assessee parted with the shares. It would appear that there was an oral family arrangement between the various persons constituting the family, the terms of which were recorded in a Memorandum of Family Arrangement. The circumstances which resulted in the family arrangement are that on 19.12.2003, Smt Maniben Mehta passed away leaving a Will dated 30.10.1981. She had 4 sons, of which the assessee was one, and one daughter. There arose disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mily assets and businesses amongst the 8 or 9 family members under the family arrangement need not detain us, but suffice to say that the assessee had to sell the shares held by him in M/s Dimexon Diamonds Limited to the company called M/s Pankaj K Mehta Investment Private Limited, which was also a family concern. The genuineness or the bona fide of the family arrangement has not been called in question by the Departmental authorities. Courts give effect to a family settlement upon the broad and general ground that the object is to settle existing and future disputes regarding property amongst the members of the family. The consideration for the settlement is the expectation that it will result in establishing amity and goodwill amongst per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at our instance. The capital gains as declared in the return of the company was accepted in the assessment order passed in the company s case under section 143(3) on 17.11.2009. A copy of the assessment order is placed at pages 167 to 169 of the paper book which shows that the total income declared by the company in the return including the capital gains, has been accepted, the only adjustment made being a disallowance of ₹ 4,47,496/- under section 14A. The same position holds good in the case of another company by name M/s.Paresh K.Mehta Investment Pvt. Ltd. to whom also share of M/s.Dimexon Diamonds Ltd. were sold at the rate of ₹ 148/- per share. This company in turn sold the shares on 30.10.2006 for ₹ 150/- per shar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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