TaxTMI 
TaxTMI 
2018 (7) TMI 1805
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.... 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 appreciate that the deemed sale consideration cannot be assessed as capital gain. 10. That the additions/....
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....hares 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 been sold off furnish details of capita! gains arising thereon. As, Giebe Trading Pvt. Ltd. has not sold the share of Jindal Steel & Power Ltd., therefore question of capital gain does not arises. 2.4. Ld. AO after considerin....
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....mation, 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 out of demat account of company on oral understanding, even without a written gift deed or memorandum of understanding. It may be noted that the shares allegedly gifted are the shares in an Indian Listed Company. Under section 82 of companies Act, the shares....
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....x 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 Pvt. Ltd. by taking market value of each share transferred at Rs. 280.70/-. 3. Aggrieved by the order of Ld. AO, assessee preferred appeal before Ld.CIT(A). Ld.CIT(A) decided this issue by observing as under: "I have gone through the assessment order and considered the o....
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....f 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 admittedly there is no other document that has been executed for the gifting of shares by assessee to Giebe Trading Pvt. Ltd., except the board resolutions. 7.3. Ld.Counsel further submitted that assessee as per the Memorandum of Association, was authorised to make and receive gifts, vide Clause 29. Ld.Counsel vehemently argued that,....
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....e 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 reliance on the decision of Hon'ble Supreme Court in the case of CIT vs. B. C. Srinivasa Setty (supra). Ld.Counsel has also placed reliance upon following decisions: S. NO. Name of the Case Citation . DP World (P.) Ltd. vs. DCIT [2012] 26 taxmann.com 163 (Mumbai -Trib) 2. Redington (India) Ltd. vs. JCIT [2014] 49 taxmann.com 146 (Chennai- Trib.) 3. Dan....
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....t 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 has given rise to loss of Rs. 17,29,64,655/-, which has been adjusted out of reserves of assessee. 7.10. On behalf of revenue Ld.CIT DR raised serious question regarding the genuineness of the transaction. She adverted that the purpose of the transaction is also questioned. She submitted that by merely resolution passed by the Board of Directors of the assessee resolving assessee to voluntarily gift shares held by it in another Public Limited Company was deliberate act to couch the transaction for eliminating tax implications. She submitted that genuineness ....
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....sal 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), issue under consideration before coordinate bench of this Tribunal was of a "gift" by assessee therein of shares of its wholly-owned subsidiary to another group company with an objective of raising funds for expansion of business as a part of corporate restructuring. It was observed by coordinate bench of this tribunal that the transfer of shareholding in wholly-owned subsidiary to another group company without any consideration was with the intention that post transfer, the transferee company would also be an wholly owned subsidiary. The issue raised by assessing officer therein was that such transfer could not be termed as gif....
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....kin 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 transfer was effectuated in lieu of a family realignment is not acceptable without supportive documents in the eyes of law. * Hon'ble Delhi High Court in the case of CIT vs Goodyear Tire and Rubber Company (supra) has dealt with a case where revenue contended treaty shopping as according to revenue transfer was designed to evade tax. The facts of this case are that assessee therein was an American company was a promoter holding 74% shares of Indian company. Assessee also had a wholly owned subsidiary company in Singapore. In order to expand the role of Singapore-based company for the benefit of group entities within Asia Pacific region share contribution deed was executed ....
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....t 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 because the shares that were transferred worth of listed company and NSE. 8.3. Further, other decisions relied on by Ld.Counsel are factually distinguishable and not applicable to the facts of present case. Thus entire list of decisions relied upon by Ld. counsel cannot rescue assessee from tax implication as those are factually different from that of the present as has been discussed above. 8.4. Under section 82 of Companies Act 1956, as it was applicable for the relevant assessment year, shares in a company is a moveable property, transferrable in the manner provided by its Articles of Association. Assessee has not shown/established the manner in which alleged transfer that has been effectuated, was authorize....