TMI Blog1997 (9) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of the case, does the case of the Supreme Court in Sunil Siddarthabhai vs. CIT (1985) 49 CTR (SC) 172 : (1985) 156 ITR 509 (SC) : TC 20R.900 have direct application to this case ? 3. Whether, on the facts and in the circumstances of the case, should not the Tribunal have pierced the veil and considered whether the transaction was a ruse or device to evade tax ?" The questions referred for opinion of this Court in IT Ref. 37/90 under s. 256(1) of the IT Act are as follows : "1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in dismissing the misc. petition filed by the Revenue ? 2. Whether, on the facts and in the circumstances of the case, should not the Tribunal have recalled its order on the misc. petition of the assessee and remitted the case to the ITO to be considered afresh in the light of the Supreme Court decision and the facts highlighted in the reference application ?" In IT Ref. No. 48/96, the questions referred for opinion of this Court under s. 256(2) are as follows : "1. Whether, on the facts and in the circumstances of the case, the Tribunal having dismissed a reference application filed at the instanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal challenging the order passed by the first appellate authority. Revenue also filed an appeal as ITA 416/Coch/1982. These appeals were heard together and disposed of by a common order dt. 18th Feb., 1984. Tribunal took the view that the CIT(A) had committed an error in deleting the entire levy of capital gains. Following the ratio of the decision of this Court in (1977) 110 ITR 595 (Ker) : TC 28R.607 Tribunal took the view that tax can be levied only on the basis of the stated consideration of Rs. 250 per share and not on the basis of the market value as determined by the ITO. Tribunal was of the view that appeal by the assessee was really incompetent as the entire levy had been set aside by the CIT(A). But, accepting the request made on behalf of the assessee, Tribunal was inclined to treat the appeal filed by the assessee as cross-objection for the purpose of enabling the assessee to agitate the question as to whether transfer of the share to the firm can attract capital gains tax. Thus, appeal filed by the Department was allowed and the appeal filed by the assessee was dismissed. 4. Assessee, thereupon, filed MP 25/Coch/86 under s. 254(2) of the IT Act, 1961 for recti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he IT authorities to behind the transaction and examine whether the transaction of creating the partnership is a genuine or a sham transaction and, even where the partnership is genuine, the transaction of transferring the personal asset to the partnership firm represents a real attempt to contribute to the share capital of the partnership firm for the purpose of carrying on the partnership business or is nothing but a device or ruse to convert the personal asset into money substantially for the benefit of the assessee while evading tax on a capital gain. The ITO will be entitled to consider all the relevant indicia in this regard, whether the partnership is formed between the assessee and his wife and children or substantially limited to them, whether the personal asset is sold by the partnership firm soon after it is transferred by the assessee to it, whether the partnership firm has no substantial or real business or the record shows that there was no real need for the partnership firm for such capital contribution from the assessee. All these and other pertinent considerations may be taken into regard when the ITO enters upon a scrutiny of the transaction, for, in the task of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by the Revenue and also in allowing the petition filed by the assessee. The mistake pointed out by the assessee in her petition was non-consideration of the decision in (1985) 49 CTR (SC) 172 : (1985) 156 ITR 509 (SC) : TC 20R.900 . While above contention was entertained. Tribunal should have considered the entire judgment of the Supreme Court. The last but one paragraph of the judgment would clearly show that an enquiry into the nature of the transaction of transferring of the personal assets to the partnership firm was necessary and that only in cases where the authorities are satisfied that the transfer by the partner of his personal assets to the partnership firm represents a genuine attempt to contribute to the share capital of the firm and that there was no unreal transaction involved, it can be held that the transfer of its shares to the partnership firm would not fall within the contemplation of s. 48 of the IT Act and such transfer can be taken outside the scope of s. 45 of the Act. In the present case, according to learned counsel, there is evidence to show that within few days of the transfer of the 4,000 shares to the firm M/s Padma Gowri, the very same shares we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue in the manner in which it was done by the Tribunal cannot be justified. 9. Learned counsel for the assessee pointed out that this Court had occasion to consider the genuine nature of the transaction relating to the transfer of the shares in the judgment in IT Ref. 180/84 and, therefore, the questions raised in the reference at the instance of the Revenue are only academic. We have gone through the judgment of this Court in IT Ref. 180/84. It arose in gift-tax assessment. The question which was referred for opinion of this Court was whether the Tribunal was right in holding that the firm, M/s Padma Gowri partnership was a separate entity and consequently contribution towards share capital in the form of shares in Nirlon Synthetic Fibres Chemicals Ltd., Bombay, amounted to a transfer and hence, attracted the provisions of the GT Act. This Court answered the question in the affirmative against the assessee and in favour of the Revenue. We do not find that the issue raised in these references were involved in IT Ref. 180/84. This Court had no occasion to consider the nature of the transactions relating to the transfer of the shares to the firm and later in favour of M/s Bhagva ..... X X X X Extracts X X X X X X X X Extracts X X X X
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