TMI Blog2019 (10) TMI 1395X X X X Extracts X X X X X X X X Extracts X X X X ..... pported by various decisions that were placed on record, had taken a only possible view in the matter. Hence his order by any stretch of imagination cannot be construed as erroneous so as to warrant any revision u/s 263 of the Act by the ld CIT. We find that the ld CIT at the beginning of his show cause notice stated that no enquiry was made by the ld AO in the instant case on the subject mentioned transactions of gift of shares of Dish TV India Ltd by assessee to its related concern. But in the final para of his order stated that the ld AO had concluded without making proper enquiries. This shows the complete departure by the ld CIT from his show cause notice. We find that by his version in final para of his order, the ld CIT had conceded the fact that the ld AO had indeed made enquiries on the impugned issue of transfer of shares by way of gift to another related concern. Hence once an issue which had been enquired by the ld AO and assessee having given detailed reply explaining the purpose, factual and legal position thereon and ld AO having taken a possible view thereon, it cannot be said that the order passed by the ld AO is erroneous and hence no revision proceedings u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lculation for the loss on sale of non current investment as follows: Particulars Amount Sale consideration Cost of acquisition 1,93,12,84,243 * 2,45,74,137/48,17,86,397 9,85,07,645 Loss on sale of shares (9,85,07,645) As per the annual report, the assessee has transferred 2,45,74.137 Equity Shares of Re,1 each fully paid up of Dish TV India Limited to its related party, Direct Media Solution P. Ltd at Nil consideration to consolidate onshore media assets including shares of the listed companies. The assessee has also claimed it had gifted the shares to M/s. Direct Media Solution P. Ltd and hence no capital gain was offered on these transactions. The shares of Dish TV India Ltd were acquired by the assessee during AY 2012-13, at Nil consideration from Essel Corporate Resources F. Ltd and Prajatma Trading Co. P. Ltd, The share holding of Dish TV India Ltd has been changing hands as under:- Shareholders Name 31.03.2008 31.03.2009 31.03. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... njam Trading Co.Pvt.Ltd. 1,68,76,987 4 1,68,76,987 2 11. Delgrada Ltd. 1,01,90,293 2 1,01,90,293 1 Total 22,84,05,022 53 73,87,73,425 78 57,23,84,385 63 67,23,84,385 63 In F.Y. 2013-14, the Average Market Price of Dish TV share was ₹ 54.61 per share. The claim of the assessee that it had gifted the shares of M/s Dish TV India Ltd. to M/s Direct Media Solutions P. Ltd. and no capital gains arose in this case was accepted by the AO as such and no enquiry was made in this case during the assessment proceedings. I, therefore, hold that assessment order passed by the A.O, u/s 143(3) of the Act on 27.12.2016 is erroneous and prejudicial to the interest of the revenue and take appropriate corrective measures as con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Annexure [A] . c. Authorisation by constitution documents of respective companies enabling transfer and receipt of shares as gift -: - d. The Memorandum of Association of the participating companies duly authorises corporate gifts and the extract of the same are annexed herewith vide Annexure [B] to this note for ready reference: Name of Companies Relevant clause of MOA / AOA Assessee MOA -Part in - B, Clause 26 - Subject to the provisions of any Law for the time being in force, to make, receive and accept gifts in cash or of property of any kind. DMSPL MOA - Part B -, Clause 7- to make, receive and accept gifts in cash or of property of any kind. C. Disclosures filed to SEBI under regulation of SEBI (Substantial Acquisition of Shares and Takeover) Regulation, 2011 by DMSPL for disclosing intense transfer of shares from the Appellant without any consideration DMSPL has duly informed SEBI in terms of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 that it had acquired shares of Dish TV by way of an Off market Inter-se tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gift' can be made only between natural persons out of natural love and affection which means that as long as a donor company is permitted by its Articles of Association to make a 'gift', it can do so. b. Transfer of shares cf an Indian Company by a foreign company without consideration has to be treated as gift within the meaning of Sec.47(iii) of the Act. The relevant extract of the said judgment is as under: 17. It -would not be out of place to mention that a combined reading of Sec, 82 of the Companies Act, Section 5 and Section 122 of the TPA suggest that a company can validly transfer the shares by way of gift, provided where Articles of Association of the donor company permits the same. In case of donor is a foreign company, the relevant corporate/commercial law of the jurisdiction where the donor is based needs to be considered. In the light of the above discussion, we have no hesitation to hold that a company can gift shares and such transaction may appear as 'strange' transaction but cannot be treated as non-genuine transaction. The Mumbai Tribunal in the case of DCIT Vs. KDA Enterprises (P.) (171 TTJ 1) Ltd. has held where an assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een highlighted by the Hon'ble Supreme Court in the above case as well as in the following cases: . PNB Finance Ltd. v. CIT 307 ITR 75 (SC) CIT v. Infosys Technologies Ltd. 297 ITR 167 (SC) . CIT v. Official Liquidator Palai Central Bank Ltd. 150 ITR 539 (SC) Further attention is invited to the case of Amintit Interntionl Holding Ltd.. In re (322 ITR 678) wherein the Applicant had transferred shares of one 'AFIIL', an Indian Company to its wholly owned subsidiary 'ACHL', without consideration, the AAR held that since the full value of consideration was not capable of being computed, the computation mechanism failed and therefore no capital gain arose. Relevant extract of the said judgment is as under: Viewed from any angle, no profit or gain has accrued or arisen to the applicant by virtue of the transfer of shares to its subsidiary company, it is not possible to identify or pinpoint anything which has the characteristics of profit or gain or any consideration which is capable of being valued in present. The income in the sense of profit and gain should be real but not hypothetical income. The income may be in cash or in kind and need not necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be substituted as sales consideration After having explained that the computation provisions would fail and as such, the charging section 45 would not become active, it is further submitted that the full value of consideration for the purpose of capital gains taxation should be in fact the actual consideration received by the assessee. If there is no actual consideration, it is not permissible in law to substitute with fair value/ or estimated value of the property. The Supreme Court in the case of CIT Vs. George Henderson and Co. Ltd. (66 ITR 622) has held that the full value of consideration for the purpose of computing capital gain cannot be substituted with the market value of the asset transferred on the date of transfer. Relevant extract of the said judgment is as under: The expression full value of the consideration' cannot be construed as the market value but as the price bargained for by the parties to the sale. The dictionary meaning of the word full' is whole or entire, or complete . The word full' has been used in this section in contrast to 'apart of the price'. The words full price' means 'the whole price' Clause (2) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annual report that the shares were transferred at NIL consideration to consolidate onshore media assets including the shares of the listed companies. Once the shares are gifted by the assessee company to its related party at NIL consideration, there cannot be any incidence of capital gains on the same. It is pertinent to note that the assessee had acquired the shares of Dish TV India Limited in Asst Year 2012-13 also at NIL consideration from Essel Corporate Resources P Ltd and Prajatma Trading Co. P Ltd. When the shares of Dish TV India Limited were purchased in Asst Year 2012-13 at NIL consideration by the assessee which were accepted by the revenue as genuine, then there is no reason to doubt the sale of same shares to its related party in Asst Year 2014-15 at NIL consideration pursuant to the consolidation of onshore media assets carried out by the assessee and its group. 6.1. We find that the assessee had submitted the facts before the ld AO explaining the purpose of acquisition and transfer of shares of Dish TV India Limited at Nil consideration and had explained that the arrangement was done for commercial reasons due to internal restructuring exercise and not done as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble transfer as per provisions of Section 47(iii) of the Act, Also, there is no bar in law prohibiting a company from corporate transfer of shares by way of gift. Companies are competent to make and receive gifts and natural love and affection are not necessary requirement. Only requirement for company is to make gifts as per respective memorandum and article of association, which authorize the company for the same. In the instant case, the assessee company is duly authorized by its MOA vide Clause 26 to making of such gifts and hence, the above transfer is a valid gift. Copy of MOA and AOA of the assessee enclosed for your ready reference. Further, for a receipt to be taxable under the provisions of the Act it must necessarily be in the nature of an income or its taxability should have been specifically provided by the statute. In absence of any specific provision in the legislature to tax such a receipt, same is not taxable under the Act either u/s 45 or 56 of the Act. Same is in the nature of capital receipt and hence, not liable to tax. Such transfer of shares without consideration is in the nature of gift and the gift of shares is not a taxable transfer as per provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apex Court in the case of B C Srinrvasa Shetty wherein it was held that full value of consideration received or accrued alone can be taken for computing capital gains. Hence, considering the facts of the case and the above judicial precedents, shares transferred are not regarded as taxable transfer. c) The assessee further replied vide letter dated 16.12.2016 before the ld AO as under:- Point 1 a) Working of loss on sale of non-current investment Sale Consideration NIL Less: Cost of acquisition 1931284243 * 24574137 / 481786397 9,85,07,645 Loss on sale of shares (9,85,07,645) Point 1 b) Details of Non-current investment Equity shares of Dish TV India Ltd Quantity 457212260 Amount 1832776598 6.3. We find that the ld CIT specifically mentions in his show cause notice that the assessee had submitted the calculation for loss on sale of non current investment during the course of assessment proceedings, based on which, the ld CIT tries to draw a differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detailed factual and legal reply filed by the assessee before the ld AO vide letter dated 24.11.2016 before us. 6.5. We find that the gift of shares by assessee to another related company is not considered as transfer within the meaning of section 47(iii) of the Act. We find that the ld AR also placed on record a copy of co-ordinate bench decision of this tribunal in the case of Jayneer Infrapower Multiventures (P) Ltd vs DCIT reported in 103 taxmann.com 118 (Mumbai Trib) dated 28.2.2019 in similar circumstances which was one of the group company of the assessee involved in the transfer of shares of Dish TV India Ltd by way of gift at Nil consideration to another concern , wherein the revenue had treated the entire arrangement as a colorable device and brought to tax a sum of ₹ 57,90,33,060/- by adopting market value of shares as sale consideration as against Nil consideration. In the said decision, the assessee therein had also contended in a similar way that (i) the transaction is not colorable device ; (ii) selling price of shares cannot be replaced by the market value and (iii) sale of shares without price is a gift and not transfer u/s 47(iii) of the Act. In the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear from section 123 of Transfer of Property act, there is no requirement of gift deed. It was observed that for movable property, a gift deed in writing is not necessary, an oral agreement with transfer of possession is sufficient to complete a gift of a movable property. 6.7. We find that the main argument of the ld DR before us was emphasizing the observations of the ld CIT in his order that the assessee by way of an arrangement had avoided the capital gains tax in the instant case by resorting to circular transactions of transfer of shares of Dish TV India Limited. The ld DR before us also argued that once the circular transaction by way of an arrangement in order to avoid tax loses the character of gift , then the provisions of section 47(iii) of the Act would not be applicable. We find that this aspect has been duly addressed by the co-ordinate bench decision of this tribunal in assessee s group company case in Jayneer Infrapower Multiventures (P) Ltd vs DCIT reported in 103 taxmann.com 118 (Mumbai Trib) dated 28.2.2019 supra. Moreover, the other reasoning given by the ld CIT in his order that company is not a living person and there cannot be any natural love and af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the Act dehors the provisions of section 5 of Transfer of Property Act also contain a provision of gifting of shares by a company to its employees under ESOP scheme. Hence the legislature in its wisdom is conscious of the fact that there might be situations wherein the company would also have to resort to gifting of its shares to its employees under ESOP scheme, among others. 6.10. We hold that when transfer of shares by way of gift are done at Nil consideration, we are not able to comprehend as to the existence of colourable device thereon. In the group company case referred to supra, this tribunal in para 13 of its order had held that no loss was ever claimed by that assessee on transfer of shares. In the instant case, though the assessee had claimed the long term capital loss on transfer of shares of Dish TV India Ltd in the original computation of income, the assessee had filed revised computation of income before the ld AO withdrawing the said loss vide letter dated 24.11.2016 during the course of assessment proceedings. The ld AO however ignored the revised computation filed by the assessee by not taking any cognizance of the same while completing the assessment. Sur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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