TMI Blog2016 (4) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... anish Borad, Accountant Member. These two cross appeals one by the assessee and the other by the Revenue are directed against the order of ld. CIT(A), Valsad, dated 31.03.2012 in appeal no.CIT(A).VLS/166/09-10 for Asst. Year 2007-08. Assessment was framed u/s 143(3) of the IT Act, 1961 (in short the Act) on 30/10/2009 by Addl. CIT, Vapi Range, Vapi. 2. We will take up first assessee s appeal in ITA No.1505/Ahd/2012 for Asst. Year 2007-08. Following grounds have been raised by the assessee in this appeal :- 1. The order of assessment is contrary to the facts and prejudicial to the assessee. 2. On appreciation of the facts and circumstances of the case and law, the additions made by the Learned Assessing Officer and confirmed by the Learned Commissioner of Income Tax (Appeals) are contrary to law and based on erroneous understanding of the facts. 3. On appreciation of the facts and circumstances of the case and law, the Learned Commissioner of Income Tax (Appeals) has erred in confirming the addition made by the Learned assessing Officer to the tune of ₹ 35,04,75,000/- being surplus on sale of shares received as gift to the book profit for taxation U/s. 115JB. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) against the order of ld. Assessing Officer, treating the receipt of shares as discounted purchases and not as gift and also against the action of ld. Assessing Officer of adding long term capital gain from sale of shares at ₹ 35,04,75,000/- to the book profit of assessee u/s 115JB of the Act. ld. CIT(A) allowed the first ground of assessee by treating the receipts of shares by the assessee company from Bilakhia family members as gifts and as regards the addition made by Assessing Officer of adding long term capital gain on sale of shares at ₹ 35,04,75,000/- to the book profit u/s 115JB of the Act dismissed the ground of assessee by observing as under :- 8. 1 have considered the observation of the AO in the assessment order as well as the contention raised by the AR of the appellant in the written submission. Admittedly the assessment for the year under consideration was framed by the AO solely based on the observations of his predecessor AO for Asstt. Year 2003-2004. It is seen that the AO had re-produced the observation of his predecessor AO for Asstt. Year 2003-2004 in the assessment order. It is also seen that for Asstt. Year 2003- 2004, my predecessor CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound no. 5 6 relate to adjustment to book profit u/s. 115JB of the Act. The AO during the assessment proceedings made an addition of ₹ 45,58,654/- being surplus to sale of shares to the book profit for taxation u/s. 115JB which has been confirmed by Ld.CIT(A). Before us reliance was placed on the following submission:- 1. The AO has no authority to adjust book profits once the accounts are audited and accepted by the general body, save and except such adjustment as are provided for in Explanation to section 115JB. Reliance was placed on the decision of the Supreme Court in the case of the Apollo Tyres Vs. CIT (255 ITR 273), where the Supreme Court had held that while determining the book profit under Section 115JB, the Assessing Officer could not re-compute the profit and loss account by excluding the provisions made for arrears or depreciation. The decision of the Apex Court has been followed in the following other decisions:- a. Malayala Manorama Co. Ltd vs. CIT [2008] 300 ITR 251 (SC) b. CIT vs. HCL Comnet Systems and Services Ltd [2008] 305 ITR 409 (SC), c. CIT-I Vs. Vijayashree Finance and Investment Co. Pvt. Ltd 2 DTR 38 [216 CTR (Madra) 191], d. CIT V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied in crediting the sale proceeds of the shares directly to capital reserve account without routing through profit and loss account. We are therefore of the considered opinion that AO has rightly taken these credits for the purpose of adjustment to book profit u/s. 115JB of the Act. The order passed by Ld. CIT(A) confirming the action of AO is hereby upheld. Ground No. 5 6 of assessee s appeal are also dismissed. 28. In the result, assessee s appeal is dismissed. Respectfully following the decision of the co-ordinate bench in assessee s own case and going through the facts of the case of assessee before us are similar to the issue dealt by the co-ordinate bench in the decision referred above, we are of the view that ld. Assessing Officer has rightly added the long term capital gain from sale of shares to the book profits u/s 115JB of the Act and accordingly, we dismiss the ground of assessee. 10. Now we take up ITA No.1557/Ahd/2012 for Asst. Year 2007-08 (Revenue s appeal) wherein following grounds have been raised :- 1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in the shares received by the appellant company from the Bilakh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- if her elder son did not pay any portion thereof. It is, well established that such a consideration is a good consideration which brings, about an enforceable agreement between the parties. Section 25 of the Contract Act does not hit this. It is clear from the above that Hon ble Apex Court held that family arrangement cannot be regarded as being without consideration so as to render them unenforceable. Since it is an admitted position that family arrangement in the present case is enforceable and binding, the assessee cannot take the plea that transfer of shares by the family members to the assessee in pursuance to the family arrangement was without consideration. 11. The next question arises whether this consideration can be measured in money or monies worth or not. To answer this question we will have to examine the various clauses of the family arrangement dated 16-02-2001. The main clauses of which are as under:- 5. The various business and companies of the parties hereto are under the control and joint management of the three-brothers viz. Yunus, Anjum and Zakir 6. To avoid any future disputes, differences and disagreements which may affect the peace, harm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he values of the assets held by each of the parties herein and specified in Annexure C-1 to C-4 hereto the parties will gift to BHL all the assets held by each party in the Companies specified in Annexure Cl to C-4. Emphasis provided) It is clear from the above that family arrangement was to equalize the holdings between the respective families of three brothers. Therefore, it cannot be said that consideration for transfer of shares cannot be measured in terms of money or monies worth. The equalization of wealth has only monetary connotation. It is also pertinent to mention that assessee-company in its synopsis of argument has emphasized on the fact that Bilakhia family was a closely knit family and was living in peace and to avoid any future dispute this family arrangement was signed and acted upon. To avoid disputes cannot be said to be without monetary consideration as it is common knowledge that family disputes ruin the family financially. The family disputes are being settled in monetary terms by resorting to arbitration and in case such settlements is not done, matter travels to the court and the family suffers heavily not only mentally but also financially. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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