TaxTMI 
TaxTMI 
2011 (5) TMI 239
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....the balance 10 shares are jointly owned by the applicant and Mr. Klaus Ramsauer. 1.1 John Deere Asia (Singapore) is a Pvt. Limited company incorporated in the Republic of Singapore and owned by the applicant through John Deere Asia, Netherlands BV. This company is incorporated in Netherlands. This company serves as Deere Group's Marketing Organization for its various businesses in South-East Asia and its Regional Headquarters. 1.2 With aspirations to serve it's customers worldwide in a more efficient and effective manner it restructures the entire business organizations of the company. While boosting its global network, technology and expertise, it transferred its 99.99 per cent shares held in JDIPL to John Deere Asia, Singapore without consideration. The other share held jointly by the applicant and Mr. Klaus Ramsauer was also transferred to John Deere Asia, Singapore without consideration. It is claimed by the applicant that these shares are transferred as gift to John Deere, Asia, Singapore. According to the applicant, as these shares are transferred as a gift, it is not liable to pay any capital gain tax under section 45 of the Income-tax Act read with section 47(iii) of the ....
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....ection 45 of the Income-tax Act and as such not exigible to Capital Gains Tax. Section 45(1) is extracted below: "Section 45(1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections [...] [54,54B, [...] [[54D, [54E, [54EA, 54EB,] 54F [54G and 54H]]]] be chargeable to income-tax under the head "Capital gains", and shall be deemed to be the income of the previous year in which the transfer took place. 2.2 The learned counsel argued that these shares were transferred in 2010 as gift. The learned Counsel also brought to our attention the provisions contained in section 47(iii ) which is quoted below. "Section 47 nothing contained in section 45 shall apply to the following transfers: (i) xxx (ii) [...] (iii) Any transfer of a capital asset under a gift or will or an irrevocable trust: [Provided that this clause shall not apply to transfer under a gift or an irrevocable trust of a capital asset being shares, debentures or warrants allotted by a company directly or indirectly to its employees under [any Employees' Stock Option Plan or Scheme of the company offered....
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....nd that the legislative intent is presumed to run uniformly thorough the entire conspectus of provisions pertaining to each head of income. No doubt there is a qualitative difference between the charging provision and a computation provision. And ordinarily the operation of the charging provision cannot be affected by the construction of a particular computation provision. But the question here is whether it is possible to apply the computation provision at all if a certain interpretation is pressed on the charging provision. That pertains on the charging provision. That pertains to the fundamental integrality of the statutory scheme provided for each head." 2.5 Tax planning is legal and as argued by the Learned Counsel within the ambit of law. Law provides that transfer of shares as gift is not taxable as no profit or gain accrues from such transfer. Lord Tomlin in IRC v. Duke of Westminister 1936 AC 1 (HL) Act has observed "Everyone is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be if he succeed in ordering them so as to serve this result, however, unappreciative the Commissioner of Inland revenue o....
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....arned counsel for the applicant on the other hand has argued that there is no element of love and affection attached to the gift. According to ordinary meaning, "gift" means a thing given willingly to some one without payment. The learned counsel further brought to our notice the definition of "gift" given in section 122 of the Transfer Property Act 1882, "Gift" is the transfer of certain existing movable or immovable property made voluntarily and without consideration by one person called the donor to another called donee, and accepted by or on behalf of the donee. The meaning of gift supra reflect no element of love and affection and therefore the contention of the Departmental representative in this regard is without substance. The gift of shares by the applicant to John Deere Asia (Singapore) is made without any consideration and therefore the transfer has to be held to be a gift. 5. The learned counsel has cited decisions to buttress the applicant's stand, some of which we will deal with hereunder. This authority had occasion to deal with such cases in the past and the case of Amiantit International Holding Ltd., In re [2010] 322 ITR 678/189 Taxman 149 (AAR - New Delhi) is on....
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....ing regard to the arm's length price. He cites the following rulings of this Authority in aid of his contention. (i) Vanenburg Group B.V., In re [2007] 289 ITR 464/159 Taxman 219 (AAR - New Delhi) "Coming to the question of transfer pricing, it is seen that sections 92 to 92F are contained in Chapter-X of the Act under heading "Special Provisions Relating to Avoidance of Tax". These provisions are aimed at preventing avoidance of tax by certain well known devices, determination of arm's length price, computation of income in certain cases etc. in relation to international transactions. These are again machinery provisions which would not apply in the absence of liability to pay tax." (ii) Praxair Pacific Ltd., In re [2010] 326 ITR 276/193 Taxman 1 (AAR - New Delhi) "Regarding answer to question No. 9, the transfer of equity shares by the applicant to Praxin India would not attract the transfer pricing provisions of sections 92 to 92F of the Act in the absence of liability to pay the tax on the capital gain" (iii) Goodyear Tire & Rubber Co., In re [2011] 199 Taxman 121/11 Taxmann.com 43 (AAR - New Delhi), Goodyear Orient Co. (P.) Ltd. ....