TaxTMI 
TaxTMI 
2018 (7) TMI 1805
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.... 3. That the AO had no jurisdiction and authority to go into the issue of transfer of shares when the same was not the basis for scrutiny. 4. That the CIT(A) has grossly erred in law and on facts in upholding the addition of Rs. 489,30,83,023/- on account of alleged capital gains earned by the appellant. This addition of Rs. 489,30,83,023/- is totally illegal, bad in law and is liable to be deleted. 5. That the CIT(A) has grossly erred in upholding the addition of Rs. 489,30,83,023/- on account of alleged capital gains without properly appreciating the important aspects of the case. 6. That on the given facts and circumstances of the case, the said transaction of shares in our case is not taxable under Sec 45, Sec 2(47) or any other provision of the Income Tax Act, 1961 ('the Ace). 7. That without prejudice, the said transaction of shares is exempted from taxation and is covered by Sec 47 of the Act. 8. That the AO and CIT(A) have failed to appreciate that this transaction of shares is because of a family realignment/reorganization and hence the same is not taxable. 9. That, without prejudice, the AO has failed to a....
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....submitted that out of the total equity shares of 1,76,94,108 of Jindal Steel and Power Ltd. 1,11,59,010 equity shares were acquired before 31st of March,2008 and balance shares of 65,35,098 were allotted as bonus shares on 19/09/09. 2.3. Upon queries raised by Ld.AO, assessee submitted before Ld.AO as under: "ii. Cost of acquisition of these equities Total Cost of acquisition of these equity share is Rs. 17,29,64,655/- Break up is: Cost of Equity share of 1,11,59,010 is Rs. 17,29,64,655 and for Equity Share of 65,35,098 received as bonus share is Rs. Nil;. Thus total cost of 1,76,94,108 equity shares is Rs.l 7,29,64,655/-. iii. Fair market value of shares as on date of gift. Fair market value of share as on date of gift i.e. on 28th March, 2014 is Rs. 280.70 .Copy of NSE Statement enclosed as Annexure-2. iv. The price at which they have been booked in the accounts of M/s Giebe Trading Pvt. Ltd. has booked the above share at NIL Value. v. Whether these shares are still being held by M/s Giebe Trading Pvt. Ltd. Yes, Giebe Trading Pvt. Ltd. still hold the above share in their books of Accounts. vi. If they have be....
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....nsactions in specified circumstances only and therefore inserted sections like 47(iv) and section 47(v) specifically which covers cases of transfer of capital assets by parent company to the subsidiary company or vice versa and other clause deal with amalgamation, demerger and reorganization of business and so on. Further, it is needless to say the gift of shares held in a company by one company to another company would not fall under section 47(iii) of the Act as section 47(iii) speaks of any 'transfer of a capital asset under a gift or will or an irrevocable trust', which is possible by an individual or a Joint Hindu Family or a Human Agency and not by an artificial person. This would not be the intent behind the law. Otherwise, there is no need to insert section 47(iv) and section 47(v) in the Act. The transaction is in fact a camouflage and couched in this form only to eliminate tax . 4. Moreover, the genuineness of the transaction is also not established. The case of the assessee company is that it had transferred the shares without consideration under the authority given to them by memorandum and resolution passed by the board. The shares have been gifted and moved....
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....ransaction of transfer between two separate commercial legal entities in order to evade the legitimate taxes which would have been otherwise payable. If the transaction is effected by way of simple transfer, it will attract Capital Gains Tax under the provisions of Income Tax Act, 1961. Thus by way of the said arrangement taxes are sought to be evaded, which are against interest of revenue. By transferring the said assets for Nil consideration the assessee company is trying to evade capital gain, which otherwise would be payable at the market value. The hidden agenda and the motive behind the scheme appears to evade tax liabilities which will arise if the shares is transferred on market value. Instead the assessee is camouflaging it under the proposed gift scheme and getting it legalized, by misrepresenting the facts." 2.5. Ld. AO held that provisions of Sec.47 (iii) do not apply to facts of present case. Instead he held that the transfer of shares amounting to Rs. 4,89,30,83,023/- to Giebe Trading Pvt.Ltd., was a transfer within the meaning of section 2 (47) of the Act, and taxed it under section 45. He computed the value of shares transferred to Giebe Trading....
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....e not been argued by Ld.Counsel before us, and hence the same are dismissed. 7. Ground No. 3-8 are in respect of addition made on account of alleged transfer of shares without consideration. 7.1. Ld. Counsel submitted that Assessing Officer made a notional addition on account of alleged income arising on transfer of shares without consideration. He submitted that assessee is a part of Sh. O.P. Jindal group and Jindal Steel and Power Ltd is a flagship operating company of the group. Ld.Counsel submitted that pursuant to internal family realignment of Sh.O.P Jindal group, assessee transferred 1,76,94,108 equity shares of Jindal steel and Power Ltd to Giebi Trading Pvt. Ltd as gift, without any consideration. 7.2. Ld.Counsel submitted that there is no bar or any prohibition in making such gift by assessee. He submitted that the shares were gifted by assessee pursuant to board resolution dated 18/03/14 and a special resolution passed by the members in extraordinary general meeting held on 28/03/14 and therefore it cannot be doubted. He further submitted that these general meetings and the board resolution has not been disputed by Ld.AO. Ld.Counsel submitted that ad....
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....nce Ltd vs CIT reported in (2008) 307 ITR 75 and Decision of AAR in case of Goodyear Tire & Rubber Co reported in (2011) 11 Taxmann.com 43 to submit that section 45 must be read with Section 48 and if the computation provision cannot be given effect to for any reason, the charge under section 45 fails. By saying so he placed reliance upon the decision of Hon'ble Supreme Court in the case of CIT vs B.C.Srinivasan Shetty reported in (1981) 128 ITR 294. He also submitted that Decision of AAR has been upheld by Hon'ble Delhi High Court in the case of DDIT vs. Goodyear Tire & Rubber Co reported in (2013) 30 Taxmann.com 400. According to Ld.Counsel, the present transaction under consideration, cannot be said to have generated any taxable income to assessee as shares transferred to Giebe Trading Pvt.Ltd was by way of gift. Since no consideration has been passed for the transfer, the transaction could not be taxed under section 45 of the Act read with Section 48 of the Act. It is submitted that section 45 of the Act has to be read with section 48 of the Act and nothing could be computed in terms of section 48 of the Act due to the absence of sale consideration. He placed rel....
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....Ld.CIT(A) that family of Late O.P Jindal includes his 4 sons, being Sh.Naveen Jindal, Sh.Prithviraj Jindal, Sh.Ratan Jindal and Sh.Sajan Jindal. She submitted that assessee has not established in what way Giebe Trading Pvt.Ltd. is a part of OP Jindal group. By placing reliance upon the audited accounts placed at page 81-101 of paper book, she submitted that nowhere there is mention of Giebe Trading Pvt.Ltd., in the list of associate company, or in the list of other companies, or where assessee is having common control the details of which are placed at page 97-100 of paper book. The contention of revenue is that, transfer of alleged shares would definitely lead to some advantage to assessee and therefore cannot fall within the ambit of 'gift'. 7.9. She placed reliance upon observations of Ld.AO and submitted that admittedly as on date of alleged gift, these shares were carrying fair market value of Rs. 280.70/- per share as per NSE statement filed by assessee as per Sec.50D of the Act. She submitted that alleged transfer of shares (held as investment by assessee), to another company without any consideration has lead to 'Nil' investment in Jindal Steel & Power Ltd., and ha....
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....uted in respect of assets that was received by assessee therein, from its sister concern, whereas in the case of present assessee there is no gift deed that has been executed by parties assessee failed to establish its relations with Gibie Trading Pvt.Ltd. Merely by executing board resolution, the alleged transfer has been effectuated. * In the case of Redington India Ltd vs. JCIT (supra) it was a voluntary transfer of shares without consideration to the stepdown subsidiary and the issue therein was whether the transfer of shares as a gift could be made by a company to another company. It is also observed on perusal of the said decision that DRP therein reconfirmed regarding the transfer of shares as voluntary and without any consideration which is absent in the facts of the present case. Here the Ld. AO himself has disputed the transaction to be a gift, and has instead computed consideration as fair market value of shares as on date of alleged transfer. Also it is not known whether Giebe Trading Pvt. Ltd. is a subsidiary or a group concern. Nothing is brought on record to establish if any gift deed was executed. * In case of Redington India Ltd vs. DCIT (supra), ....
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....ecided by Hon'ble Supreme Court filed by the revenue against the decision of Hon'ble Madras High Court in the case of CIT vs R.Jayanti (HUF) (supra) it was held that transfer of shares by way of family arrangement would not attract capital gains tax as the arrangement was to avoid possible litigation amongst family members and was made voluntarily and was not induced by fraud or coercion. In the decision of Hon'ble Karnataka High Court in the case of CGT versus K. N. Madhusudan (supra), it was held that word 'transfer" in section 45 does not include partition or family settlement as defined in the Act and the facts recorded in the family settlement are akin to a partition and hence the transaction cannot be taxed. Hon'ble Court observed that family members under the scheme of arrangement have an anterior title to the property which is a subject matter of partition or a family arrangement. Whereas on facts of present case, assessee has failed to establish its relation with Giebe Trading Pvt.Ltd., as well as has admittedly not executed any documents/gift deed/family settlement, in order to establish the genuineness of the transfer. Merely by stating that the transfe....
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.... without there being any consideration. * While dealing with the decision in the case of PNB finance Ltd vs CIT (supra) by Hon'ble Supreme Court, the question considered was whether transfer of banking undertaking on nationalisation the amount received as compensation gave rise to taxable capital gains under section 45 of the Act or not. Hon'ble Supreme Court observed that PNB bank was transferred as a going concern, which consists of not only tangible items but also intangible items like Goodwill, manpower, tenancy rights and value of banking licence for which cost is not determinable. It was around this background that Hon'ble Court by placing reliance upon the decision of Hon'ble Supreme Court in the case of CIT vs. B. C. Srinivasan Setty (supra), held that earmarking item wise cost was not possible and therefore even though section 45 was applicable to the facts of the case, the computation provision could not be applied. The above ratio is not applicable to the facts of the present case since here only the shares held by assessee as an investment has been transferred to Giebe Trading Pvt.Ltd., cost of which is determined double as on the date of transfer beca....