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TMI Blog1993 (9) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... t Syndicate Pvt. Ltd., Rs. 60,000 from Karamchand Premchand Pvt. Ltd., Rs. 60,000 from Sarabhai M. Chemicals Pvt. Ltd. and Rs. 30,000 from Sercon Pvt. Ltd., as one of the directors. The assessee claimed that the above remuneration should be treated as salary. The Income-tax Officer did not accede to the said claim and treated the abovereferred receipt as income from other sources in view of the assessment orders passed for the assessment year 1970-71. Since the remuneration received from the companies was not treated as salary in the hands of the assessee, the Income-tax Officer held that the assessee was not eligible for the exemption of an amount of Rs. 21,000 contributed by the companies to the provident fund and Rs. 31,500 contributed to the superannuation fund for concessional treatment in respect of those contributions under the provisions of section 80C of the Act. Similarly, interest amount of Rs. 14,281 on the contributions to the provident fund and Rs. 9,656 on the contributions to the superannuation fund were also held to be not eligible for exemption and the same were included in the total income of the assessee. Before the Income-tax Officer, the assessee claimed exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain on the transfer of shares to the partnership having accrued to the assessee, the assessee was liable to pay tax on capital gains on the amount indicated in the computation of income. The Income-tax Officer accordingly assessed the assessee and passed an order on August 24, 1976. Feeling aggrieved by the abovereferred order, the assessee preferred an appeal before the Appellate Assistant Commissioner of Income-tax who allowed the appeal partly. The Appellate Assistant Commissioner, following the view taken by the Tribunal, held that the amount received by way of remuneration was taxable as salary income and consequently the contributions made by the companies to the provident fund and superannuation fund and interest therein were exempt. Before the Appellate Assistant Commissioner, it was claimed by the Income-tax Officer that the superannuation schemes of the companies were not approved by the Commissioner of Income-tax and hence the additions were justified. The Appellate Assistant Commissioner accepted the objections and directed deletion of such additions as and when recognition was accorded to the said funds by the Commissioner of Income-tax for the assessment year 1973-7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) Whether the provisions of section 52(2) of the Income-tax Act, 1961, could not be applied in respect of sale of shares of Hansol Farm Pvt. Ltd. and Sarabhai Nursery Pvt. Ltd. in favour of Gira Sarabhai Trust No. 2 ? (6) Whether the provisions of section 52(2) of the Act could not be applied to the facts and circumstances of the case in respect of 175 shares of Sarabhai Nursery which were sold to the trust at Rs. 41 per share in October, 1972 ? (7) Whether when a partner contributes certain shares of limited companies as contribution of capital, it amounts to transfer exigible to capital gains tax under section 2(47) read with section 45 of the Act ? (8) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the transaction did not yield any capital gains to the assessee and the question of quantum of capital gains did not arise ?" Reasons : (1) So far as answer to question No. 1 is concerned, it cannot be said that, on the facts and in the circumstances of the case, the Tribunal committed any error in holding that the remuneration received by the assessee as director from the company was taxable under the head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the contributions made by the companies to the provident fund and superannuation funds under the Act. Therefore, in our view, the Tribunal rightly held that the additions were justified. The Income-tax Officer's objection was well-founded since the contribution to the unrecognised provident fund and superannuation fund did not satisfy the conditions laid down in the Fourth Schedule to the Act. In fact, this point has been answered by the Tribunal in favour of the Revenue. However, the direction given by the Appellate Assistant Commissioner and confirmed by the Tribunal to delete the additions as and when the Commissioner of Income-tax accords recognition to the funds in question for the assessment year 1973-74 is perfectly just and proper in view of the different provisions of the Act. Therefore, our answer to question No. 2 is that the Tribunal has rightly upheld the order of the Appellate Assistant Commissioner directing the Income-tax Officer to delete the additions as and when the Commissioner of Income-tax recognised the funds for the assessment year 1973-74. The said question is answered against the Revenue and in favour of the assessee. (3) Questions Nos. 3, 5 and 6 are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be drawn that the assessee has not correctly declared or disclosed the consideration and there is an understatement or concealment of the consideration in respect of the transfer. It has been also held that sub-section (2) of section 52 of the Act has no application in the case of an honest and bona fide transaction where the consideration received by the assessee has been correctly declared or disclosed by him and there is no concealment or suppression of the consideration. (4) In the facts of the present case, there is nothing on the record to indicate that while effecting the transfer, the assessee had understated the consideration or that the consideration actually received by the assessee was more than what was declared or disclosed by her. The Revenue has not discharged the burden of proof by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received by her and there is an understatement or concealment of the consideration in respect of the transfer. In this view of the matter, we are of the opinion that in the absence of any evidence to show that something more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompanies was not liable to be taxed on Rs. 6,428 received as reimbursement of medical expenses from Sarabhai Technological Development Syndicate Pvt. Ltd. and Karamchand Premchand Pvt. Ltd. Having regard to the position as obtaining above, question No. 4 is answered in the negative, i.e., in favour of the assessee and against the Revenue. (6) Questions Nos. 7 and 8 are related to each other and, therefore, a common decision is rendered therein. Question No. 7 is whether when a partner contributes certain shares of limited companies as contribution of capital to a firm in which the assessee is one of the partners, it amounts to transfer exigible to capital gains tax under section 2(47) read with section 45 of the Act ? The abovereferred point is squarely concluded by the judgment of the Supreme Court rendered in the case of Sunil Siddharthbhai v. CIT [1985] 156 ITR 509. After examining the scheme of the Income-tax Act, 1961, and the rights and liabilities of the partner of a firm, it has been held that when the partner of the firm makes over capital assets to a firm as his contribution towards capital, there is a transfer of a capital asset within the terms of section 45 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the years to come. All that lies within the womb of the future. It is impossible to conceive of evaluating the consideration acquired by the partner when he brings his personal asset into the partnership firm when neither can the date of dissolution or retirement be envisaged nor can there be any ascertainment of liabilities and prior charges which may not have even arisen yet. Therefore, the consideration which a partner acquires on making over his personal asset to the firm as his contribution to its capital cannot fall within the terms of section 48. And as that provision is fundamental to the computation machinery incorporated in the scheme relating to the determination of the charge provided in section 45, such a case must be regarded as falling outside the scope of capital gains taxation altogether." Applying the principles of law propounded by the Supreme Court of India to the facts of the present case, it is clear that the transaction by which the assessee made over certain shares of limited companies as her contribution of capital did not yield any capital gain to the assessee and, therefore, the question of quantum of capital gain could not have been considered. The App ..... X X X X Extracts X X X X X X X X Extracts X X X X
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