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2016 (4) TMI 348 - ITAT AHMEDABAD

2016 (4) TMI 348 - ITAT AHMEDABAD - TMI - Addition on surplus on sale of shares received as gift to the book profit for taxation U/s. 115JB - Held that:- Respectfully following the decision of the co-ordinate bench in assessee’s own case 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.

Transfer of shares without consideration - gift - Held that:- Transfer of s .....

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. For The Appellant : Shri M. K. Patel, AR For The Respondent : Shri Sanjay Agrawal, CIT, DR ORDER PER Manish 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 .....

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rcumstances 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. The action of the Learned Commissioner of Income Tax (Appeals) is contrary to the facts and law and deserves to be deleted. 4. The appellant craves to add, amend, modify or alter the above grounds of appeal at an .....

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1.9.2008. The company is basically an investment company, holding group investments. During the Financial Year under consideration, the company has transacted in shares and securities and has shown income under the head capital gains, exempted income and income from other sources. 4. During the course of assessment proceedings Assessing Officer observed that there was a family arrangement in the Bilakhia Family of Vapi, pursuant to which various transactions took place in terms of redistribution .....

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sales were under taken during F.Y. 2000-01, 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07 etc. During assessment proceedings u/s 143(3) of the Act r.w.s. 147 of the Act for Asst. Year 2001-02 to 2004-05 these transactions of receipt of shares were treated as discounted purchase and not as gift and also ld. Assessing Officer following the decision of first appellate authority for Asst. Year 2001-02 to Asst. Year 2006-07 treated long term capital gain from sale of shares at ₹ 35,04,75 .....

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e 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 s .....

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agree with the appellant company that gifts do not constitute income and that gift cannot be treated as receipts in the profit and loss accounts as per the prevailing accounting standards. Any how the Long Term Capital Gains represent profits of the company which should have been credited to the profit and loss accounts as per the accounting principles. The decision of the Apex Court in the Apollo Tyres Ltd do not authorize the A.O. to scrutinize the net profit of the company prepared in accord .....

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the AO as regards the re-computation of book profit. This ground of appeal is accordingly dismissed. : 6. Aggrieved, the assessee is now in appeal before the Tribunal. 7. Ground No,1,2,4 & 5 are of general nature, hence need no adjudication. 8. Therefore, we will adjudicate ground no.3 which relates to confirmation of 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 .....

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of the Act was held to be correct and the co-ordinate bench in the case of Addl.CIT vs. Bilakhia Holding Pvt. Ltd. & others in ITA Nos.981 to 985/Ahd/2009 for Asst. Years 2001-02 to 2006-07 vide its order dated 30.05.2014 has held as under :- 27. Ground 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 bee .....

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ing 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 Vs. Rubamin P. Ltd [2009] 312 ITR 18 (Guj), e. CIT Vs. Kovai .....

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uated with investment, the Appellant is justify in crediting the sale proceeds of the gifted shares directly to capital account without routing through profit and loss account. He therefore submitted that the said credit should not be taken into account for purposes of calculation of profits under Section 115JB and the provisions of Section 115JB is not applicable in such situation. b. Reliance is placed on the following decisions: i. CIT Vs. Insanyat Trust (173 ITR 248) ii. 203/349 (Guj) iii. 2 .....

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ns of the Bombay High Court in the case of Commissioner of Income-tax Vs. Adbhut Trading Co. P. Ltd. [2011] 338 ITR 94 (Bom) and Commissioner of Income-tax Vs. Akshay Textiles Trading and Agencies P. Ltd [2008] 304 ITR 401 (Bom) which have held that in view of the decision of Apollo Tyres Vs. CIT (2555 ITR 273). Since in revenue s appeal we have held that shares received by the assessee-company were not gifts in the hands of assessee-company, the argument advanced on behalf of the assessee-compa .....

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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 .....

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embers constitutes a gift in the hands of the assessee. 2. It is therefore prayed that the order of the learned CIT(A) be set aside and that of the Assessing Officer be restored. 3. The appellant craves to add, alter or amend any grounds of appeal. 11. The only issue before us is to examine whether ld. CIT(A) has erred in holding the shares received by the assessee company from the Bilakhia family members constitutes a gift in the hands of the assessee. 11.1 We have heard the rival contentions a .....

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ement dated 16-02-2001 claimed to have been transferred without any monetary consideration can be held to be gift or not? 10.1 As per Transfer of Property Act 1882 section 122 gift has been defined as under:- Gift as a transfer of certain existing moving or immovable property made voluntarily and without consideration by one person, called the doner, to another, called the donee and accepted or on behalf of the donee. It is clear from the above that any transfer of any moveable or immovable prop .....

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was held as under:- 5. Taking the totality of the facts as found by the Tribunal and mentioned in the impugned judgment of the High Court it was a case of family settlement or family arrangement which is binding on the parties concerned. The assessee agreed to purchase peace for the family, and to pay to her son the amount which fell short of ₹ 50,00,000/- if her elder son did not pay any portion thereof. It is, well established that such a consideration is a good consideration which brin .....

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amily 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, diffe .....

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mited ("BHL ") Each of Yunus, Anjum and Zakir shall create a separate trust and transfer to such trust and transfer to such trust their shareholding in BHL so that the existing share capital of BHL shall be held by the individual trusts so created. 8. Pursuant to the arrangement arrived at between the parties and with a view to consolidate their respective assets, investments and interests in the family business and assets, the parties hereto have agreed that BHL shall he the main hold .....

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the holdings between the respective families of Yunus, Anjum and Zakir , it has been agreed by and between all the parties hereto that each party will gift and transfer to BHL all the shares and securities held by such party in the Companies specified in Annexure "A " hereto. 11. Yunus, Anjum, and Zakir will jointly fund separately family maintenance trusts to be created by each of Yunus, Anjum and Zakir for the maintenance and benefit of the respective families of Yunus, Anjum and Za .....

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and equalize the 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 mone .....

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putes 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. There is a proverb according to which it is said that a person who wins a case actually looses it as by the time matter is settled in his favour he is already a ruined person. Thus, in this case it cannot be said that the consideration for transfer of shares was not for monetary considera .....

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