TaxTMI 
TaxTMI 
2021 (3) TMI 599
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 158 ITR page 148) which resulted in massive tax evasion in the guise of tax planning laced with multi layered transactions?". "(ii) Whether on the facts and circumstances of the case, the Tribunal is correct in law in not considering the fact that the shares belonging to the assessee were ultimately transferred to Godrej Group as part of sale of business of the Nutrine Group to Godgrej Group, routed through a series of transactions including the reconstitution of the defunt firm M/s. B.V. Reddy enterprises to accommodate the shareholders of M/s. Nutrine confectionery Co. P. Ltd and guising the numerous transactions as genuine in quick span of time, with a sheer motive of avoidance of payment of actual capital gain?". "(iii) Whether on the facts and circumstances of the case, the Tribunal is correct in law in holding that the entire series of transactions by which the shares of NCCPL were ultimately transferred to GBFL were all valid and such an arrangement to avoid payment of taxes on account of correct quantum of capital gain that would result on transfer of shares of NCCPL to GBFL was permitted and within the framework of law?". "(iv) Whe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d their value recorded at the agreed figure on which capital gains have been returned and tax for Assessment Year 2006 07 under Section45(3) of the Act and accepted in a proceeding under Section 143(3) of the Act. The resolution was forwarded on the same date i.e., 24.03.2006 to the company secretary of NCCPL with signature of the partners showing different status in which they were partners including their dual capacity. All the 13 partners delivered share transfer forms transferring the shares so brought in as capital in favour of Sri.Madhusudhan Reddy on 24.03.2006 and name of Sri.Madhusudhan Reddy was entered as registered shareholder of NCCPL in pursuance of the resolution passed by the firm. 3. Sri.Madhusudhan Reddy filed a declaration under Section 187C of the Companies Act, 1956 on 27.03.2006 stating that beneficial owners of the shares NCCPL held by him were 13 partners of the firm viz., BVRE. Similar declaration under Section 187C of the Companies Act was given by 13 partners. The NCCPL on 29.03.2006 entered in the books the name of Sri.Madhusudhan Reddy as shareholder on behalf of various partners of BVRE as per provision of the Companies Act. On 29.03.2006, a non bin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... does not become the partner and therefore, HUF was not the partner of BVRE and therefore, the firm BVRE cannot be said to be invalid. It was further held that there was a valid transfer of shares by NCCPL held by the assessee in favour of the firm BVRE during the previous year relevant to Assessment Year 2006-07 and declaration under Section 187C of the Companies Act, 1956 clearly shows that the beneficial owner of the shares was Sri.Madhusudhan Reddy in the firm BVRE. It was further held that the course adopted by the assessee was within the framework of law and was permissible. Accordingly, the appeal preferred by the assessee was allowed. In the aforesaid factual background, the revenue has filed this appeal. 6. Learned counsel for the revenue submitted that in reality shares of NCCPL were sold by 13 partners of firm viz., BVRE to Godrej Beverages and Foods Ltd. during previous year relevant to Assessment Year 2007 08 and therefore, the conclusion of the authorities that capital gains is chargeable to tax in the hands of the assessee proportionate of their share holding in NCCPL is correct. It is pointed out that MoU dated 29.03.2006 reflects the real intention of the partie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....odrej Beverages and Foods Ltd. on 29.03.2006 as mentioned in share purchase agreement between NCCPL and Godrej Beverages and Foods Ltd. Dated 10.06.2006. The family members signed the share purchase agreement as confirming parties but para 11.11 contains non compete clause. It is also urged that the tribunal without appreciating the facts of the case has deleted addition of a sum of Rs. 1,77,778/- and the Assessing Authority and the Commissioner of Income Tax (Appeals) have rightly held that the assessee had failed to appreciate the advance received from Nestle was returned and as such, it was income of the assessee. In support of aforesaid submissions, reliance has been placed on decisions in SUNIL SIDDHARTHBHAI VS. CIT, 156 ITR 509 (SC), WORKMEN OF ASSOCIATED RUBBER INDSUTRY LTD. VS. ASSOCIATED RUBBER INDSUTRY LTD AND ANOTHER, 157 ITR 77 (SC) AND KILLICK NIXON LTD VS. DCIT, (2012) 81 CCH 0066 MUM HC. 8. On the other hand, learned counsel for the assessee submitted that transfer of shares by the assessee in favour of the firm viz., BVRE during the previous year relevant to Assessment Year 2006-07 is accepted by the revenue and is assessed to tax which is not disputed by the rev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tinguishment of any rights therein ; or 45 Capital Gains. (3) The profits or gains arising from the transfer of a capital asset by a person to a firm or other association of persons or body of individuals (not being a company or a co operative society) in which he is or becomes a partner or member, by way of capital contribution or otherwise, shall be chargeable to tax as his income of the previous year in which such transfer takes place and, for the purposes of section 48, the amount recorded in the books of account of the firm, association or body as the value of the capital asset shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. 47. Nothing contained in section 45 shall apply to the following transfers :- (xiii) any transfer of a capital asset or intangible asset by a firm to a company as a result of succession of the firm by a company in the business carried on by the firm, or any transfer of a capital asset to a company in the course of demutualisation or corporatisation of a recognised stock exchange in India as a result of which an association of persons or body....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for the Assessment Year 2006-07, which has been accepted on 30.10.2006 and the Assessing Officer while assessing the assessee for Assessment Year 2007-08 has no jurisdiction to record a finding that the firm was not in existence or the same was defunct. It is pertinent to note that the aforesaid finding cannot be sustained in the eye of law without putting the firm BVRE to notice before recording such conclusion against the firm. Thus, the existence of the firm BVRE has been accepted as genuine, legal and valid. From the material on record as well as para 81 of the order passed by the tribunal, it is evident that there was transfer of ownership in shares from 13 individuals in favour of firm BVRE as on 24.03.2006 when the firm made necessary book entries and when the partners made their intentions clear that shares were to be treated as property of the firm in the form of resolution. There is nothing on record to suggest that real intention of the parties was to treat the assessee as owner of the shares even after transfer of the shares to the firm. The course adopted by the assessee for transfer of shares does not disclose any violation of the provision of law. There were two way....