TMI Blog1992 (10) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... The matter was referred to an arbitrator, who gave an award on 18-12-1981. This award was approved by the Bombay High Court on 16-1-1982. Accordingly, Kantilal Group transferred all their 747 shares in the assessee-company for a price of Rs. 100 per share to the Panalal Group. In the annual accounts, the value of the properties alienated to Kantilal Group was shown at Rs. 35 lacs. The Assessing Officer held that the series of transactions indicated a transfer by the assessee-company to Kantilal group of properties worth Rs. 35 lacs without any consideration. 3. It was contended before the revenue authorities that " (i) the property was released to facilitate the smooth functioning of the company. Had this been not done, the company would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital gains on the basis of the value of the assessee-company's properties transferred to Kantilal group, it would be completely inconsistent for the gift-tax authorities to levy on the assessee-company gift-tax in respect of the same transaction. 5. Shri Dastur stated that there is no transfer involved as the transaction was pursuant to the family arrangement. The Apex Court has held that family arrangement does not involve any transfer inasmuch as, it does not create new rights but merely recognises exsting rights. This principle is also laid down by the Gauhati High Court in the case of Ziauddin Ahmed v. CGT [1976] 102 ITR 253. 5. 1 In any event, without prejudice to the above, even if it is held that there is a transfer, there is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The transfer of property to the Kantilal Group was made, bona fide, for the purposes of its business and in the course of its business and is, therefore, exempt under section 5(1)(xiv). It was argued that if the assessee-company had not transferre such property to Kantilal group, its business would have been seriously prejudiced as there was a distinct probability and threat and a strong likelihood of its being dragged into protracted and expensive litigation which would have ruined it, especially considering the fact that it was already in desperate need of funds to meet its comitments to its bankers and various statutory authorities. In this background, according to Shri Dastur, the assessee acted in its best interest and, bona fide by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Eswarsa Sons v. CGT [1990] 186 ITR 388 (Kar.). In regard to the applicability of section 5(1)(xiv), it was stated by the ld. D. R. that the entire settlement was apparently entered into with a view to benefiting certain shareholders. The benefit to the shareholders cannot be equated with the benefit to the company. 8. Coming to the concept of the gift, it was contended by the ld. D. R. that all the elements of gift are present, and there is a transfer without adequate consideration, therefore, the amount in question is exigible to tax under the Gift-tax Act. 9. We have heard the rival submissions in the light of material placed before us and precedents relied upon. A family arrangement is an agreement among the members of the same fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty. In this connection, it is pertinent to note that the company is a distinct legal entity. It has got its separate existence. The property of the company cannot be equated with the family property. More so, nothing is on records which could suggest the existence of a family dispute. What all we find that one group of shareholders imputed certain charges as regards the mis-management of the company. Beyond that nothing was placed before us to show the existence of a family dispute or possibility of a family dispute. In the absence of a dispute, it cannot be concluded, even if, we penetrate the corporate veil, that the arrangement was made to secure peace and harmony amongst the members as well as the properties belonging to them. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s shown that the gift was made on the ground of commercial expediency or in order to directly or indirectly facilitate the carrying on of the business, profession or vocation. The burden is on the assessee who claims exemption under section 5(1)(xiv) of the Act, to prove that the gift was for the profitable carrying on of the business. In our opinion, the assessee failed to discharge its burden. Nothing was produced before us to show that the transfer of shares were made in the interest of business of the company. The fact that the assessee got its due amount of Rs. 80 lakhs is not sufficient to prove the onus as this amount was received in the normal course of business. One can always pursue the rightful and legal claim for that one is not ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
