Family arrangement transfers are not gifts without consideration, and related share-sale surplus can enter book profit under section 115JB.

A transfer of shares under an enforceable family arrangement made to equalise holdings and consolidate family assets was not treated as a gift, because such an arrangement carried consideration and obligations rather than a voluntary transfer without consideration. The resultant surplus on sale of those shares was therefore regarded as profit and was required to be reflected in the profit and loss account for computation of book profit under section 115JB. Following its earlier view in the assessee's own case, the Tribunal upheld the adjustment and accepted the Revenue's position on both issues.

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Issues: (i) Whether the shares transferred to the assessee under the family arrangement constituted a gift received without consideration. (ii) Whether the surplus on sale of those shares was liable to be added to the book profit under section 115JB.

Issue (i): Whether the shares transferred to the assessee under the family arrangement constituted a gift received without consideration.

Analysis: A gift requires a voluntary transfer of existing property without consideration. The family arrangement in question was entered into to equalise holdings and consolidate assets among family members. Such an arrangement had enforceable obligations and monetary connotation because it adjusted family wealth and interests. The transfer therefore could not be treated as a voluntary transfer without consideration.

Conclusion: The shares did not constitute a gift in the hands of the assessee, and this issue was decided against the assessee and in favour of the Revenue.

Issue (ii): Whether the surplus on sale of those shares was liable to be added to the book profit under section 115JB.

Analysis: Once the receipts were held not to be gifts, the gains arising from sale of those shares represented profit of the company and were required to be reflected in the profit and loss account for computation of book profit. The Tribunal followed the earlier decision in the assessee's own case on the same issue and upheld the adjustment.

Conclusion: The addition to book profit under section 115JB was sustained, and this issue was decided against the assessee and in favour of the Revenue.

Final Conclusion: The assessee's appeal was dismissed and the Revenue's appeal was allowed, resulting in acceptance of the Revenue's stand on both substantive issues.

Ratio Decidendi: A transfer made under an enforceable family arrangement to equalise family holdings and assets is not a gift lacking consideration, and profits arising from sale of such shares can be included in book profit under section 115JB.

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