TMI Blog2017 (5) TMI 346X X X X Extracts X X X X X X X X Extracts X X X X ..... action was a device to avoid tax in the same transaction but could not dispute that CIT(A) and Tribunal have considered each and every aspect on which the matter has been examined by A.O. in detail and concurrent findings of fact have been recorded by both appellate authorities that there was no shame transaction as presumed/assumed by A.O. and his finding was clearly incorrect and conjectured. - Decided against revenue - INCOME TAX APPEAL No. - 111 of 2005 - - - Dated:- 29-3-2017 - Hon'ble Sudhir Agarwal and Hon'ble Ravindra Nath Mishra-II, JJ. For the Appellant :- Alok Mathur For the Respondent :- D.D. Chopra,Namit Sharma JUDGEMENT 1. Heard Shri Alok Mathur and Manish Mishra learned counsel for the appellant Namit Sharma for respondent. 2. This is an appeal under Section 260-A of Income Tax Act 1961 (hereinafter referred to as Act 1961 ) arising from the judgement and order dated 28.02.05 passed by Income Tax Appellate Tribunal, Lucknow Bench, Lucknow in ITA No. 702/Alld/1994. It was admitted on the following substantial question of law. (i) Whether under the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h other business as the partners may mutually decide from time to time. That the following shares which are held as on date as investment of this partnership are transferred by way of conversion from capital asset into stock-in-trade of its business with effect from 1st day of January, 1990. 5. There was another supplementary deed dated 01.01.1990 and clause (4) was amended by adding following clause:- That with effect from 1st April, 1990 the opening balances lying on that date in the capital accounts of the partners shall be sub-divided into (1) Fixed Capital Account, (2) Partners' current Accounts. The fixed capital accounts shall be of the following amounts. 6. Assesses Firm was also a subcontractor of M/s Jai Prakash Associates Private Limited (hereinafter referred to as JPAPL ). Assesses firm held 91,970 shares of M/s JPAPL face value of ₹ 100 per share, in Assessment Year 1986-87. 7. On 31.12.1985, M/s Jaiprakash Associates (P) Ltd. issued bonus shares @ 1:1 and thus total of shares with the Assessee Firm amounted to 1,83,940. It is also the case of Assessee and non-disputed by Revenue that M/s JPAPL merged into M/s Jaypee Rewa Cement Limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent into stock-in-trade. 10. Further, Assesses also gave a trust-worthy explanation for such conversion and this was believed by CIT(A) as well as Tribunal as is evident from the findings of Tribunal as under:- Apart from it, the assessee has also given out valid reason for doing so as apparent from the copy of written submission filed before the ld CIT (A) and a perusal thereof shall show that in assessment year 1986-87, the assessee was having gross receipts worth ₹ 1.63 crores and it reduced to ₹ 9.52 lakhs in assessment year 1989-90 and these facts forced the assessee to change the main object of the business and necessary amendment in the relevant clause of partnership deed was carried out by executing supplementary deed on 01.01.1990 bringing the business of dealing in shares, securities, bonds etc as another business of the assessee to be carried out in future. Further, the assessee has given effect to this amendment of main clause of the partnership deed and the A.O. himself has admitted in the assessment order that for assessment year 1990- 91 that assessee had converted the shares of JIL as stock-in- trade by making necessary entries in the relevant ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,772/- Deduction u/s 48 @ 60% 27,58,15,063/- Taxable Income 18,38,76,079/- Tax on the above @ 20.16% (A) 3,70,69,545/- Partner`s share 14,68,07,164/- Tax on the above @ 51.75% (Siddharth) (B) 7,59,72,707/- OR Tax on the above @ 56 % (Individual) (C) 8,22,12,012/- Effective Rate Total Tax Paid (A + B) = 24.141% 11,30,42,252/- (A + C) = 25.47% 11,92,81,557/- ALTERNATIVE-II In cse shares were first converted into stocks in R.K.Singh Co. sold to Siddharth from there @ 12/- and then sold in the market. ASSUMPTIONS Number of shares 1,37,75,600/- Cost per share to R.K.Singh Co. 0.63/- Book Value per share in trade at ₹ 18.50 10/- per shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A), the whole case of Revenue falls and thus the very basis of A.O that Assessee adopted a colourable device to avoid payment of due taxes remains no more alive. 14. Tribunal also considered A.O`s view that after purchase by partners, shares were sold by respective partners at higher prices and they earned more profits. This plea was found without any basis and in para-63 of the judgment, Tribunal has said as under:- Another point raised by the A.O was that after purchase made by partners, shareholdings was sold by the respective partners at higher prices and they have earned more profits. This plea is again of without any substance. It is admitted fact that the assessee firm has converted its investment into stock-in-trade on 01.01.1990 and valued the share at the market value. The shares have been transferred on 17.04.1990 and 18.04.1990 to the partners and the amount of consideration charged from the partners was at the rate prevailing at the Stock Exchange. It was not expected from any assessee to think for future as to whether there will be decline in trend in the prices of a particular share or there may be increase in the said prices. No one can guess and if assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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