TaxTMI 
TaxTMI 
2022 (7) TMI 1140
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.... arrangement by CLB order, although the same was included in the total taxable income calculated by the assessee in his return of income. Assessing Officer rejected the claim of the assessee during the assessment proceeding on the technical ground that the return of income of the assessee filed originally was not revised on this account u/s. 139 of the Act and therefore this plea cannot be considered. On appeal the Ld. CIT(A) vide order dated 06.03.2009 upheld the decision of the Assessing Officer with regards to payment of tax on sum of Rs..2,08,64,397/- which was voluntarily declared in the ITR filed by the assessee as long term capital gain. 3. Aggrieved by the decision, assessee preferred appeal before ITAT and the ITAT vide its order no. 1846/Mum/2009 and ITA No.2987/Mum/2009 dated 04.11.2016 restored the issue of levy of tax on LTCG of Rs..2,08,64,396.72/- to file of the Assessing Officer with the following remarks: - "9. We have considered rival contentions and found that this ground was raised before the AO, however, in view of the fact that assessee has not filed any revised return with regard to the capital gains originally offered in the return of income, the....
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....s (2008) 215 CTR (mad) 244 and held to be not taxable as capital gain. In spite of the plea of the assessee during the course of the assessment proceedings as such receipt was offered for tax wrongly under absence of knowledge of law and improper advice in the return of income for the relevant assessment year u/s 139(1) of the Act. 5. The Assessing Officer observed in para 6.1 of the assessment order that from material available on the record and the fact stated above, the transaction of selling of shares of the NPCL by the assessee cannot be termed as family arrangement and the same is exit of the large stake holder/director from the company which is taxable as LTCG. In addition to the above, the AO has raised the same issues as in original assessment order for not accepting the plea of the assessee like (i) Assessee not filed the revised return of the income for the claim applying the decision of Apex Court in the case of Goetze (India ) Ltd, and (ii) Allowing the claim would lead to assessed income less than returned income not permitted under the act relying on the decision of Apex Court in the case of Kalidas DhanjiBhai v. State of Bom bay and Absalon v. Talbot. 6. Aggri....
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.....64,396/- as long term capital gains. 6. Aggrieved with the aforementioned decision of the Ld. CIT(A). the Revenue as well as the appellant filed an appeal before the Hon'ble ITAT, Mumbai. The Hon'ble ITAT E' Bench, Mumbai dealing with the assessee's appeal no 1846/Mum/2009 and Departmental Appeal No. 987/Mum/2009 passed an order dated 04.11.2016 wherein the Hon'ble Tribunal held as under: i. Confirmed the order of the Ld. CIT(A) and deleted the addition of Rs. 50 lakhs alleged to have been received from M/s.Natar Parikli Co. Ltd. (hereinafter referred to as 'NPCL'). ii. The addition of Rs. 74,565/- pertaining to alleged discrepancies in Jewellery confirmed by the Ld. CIT(A) was deleted. iii. The additional ground raised by the appellant with respect to the capital gain received out of family settlement was allowed by the Hon'ble Tribunal and the issue was set- aside to the file of the Assessing Officer for deciding afresh in light of materials available on record. 7. The relevant portion of the order of the Hon'ble Tribunal is reproduced hereunder for ready reference: "8. Ld. AR raised an add....
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....Officer again denied the claim of the assessee by contending that the 'family arrangement' for selling of shares by of NPCI., under the order of Company Law Board is actually selling / transfer of shares by one of the exiting, large shareholder. The Assessing Officer also contended that the appellant received many other benefits drawn by it along-with its group members. The Company NPCL has treated this selling of shares as buyback of shares which is akin to a normal equity sale / purchase transaction. Further. the appellant has failed to file the petition submitted by it before the Company Law Board from which inference on the transfer of shares out of 'family arrangement' could be drawn. 9. The Assessing Officer further contended that the appellant had not revised his return of income and had voluntarily declared the receipt on sale of shares as long-term capital gains in his return of income. Further reliance has been placed reliance on the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT reported at 284 ITR 323 (SC) (2006) wherein it was held that the Assessing Officer cannot entertain a claim for deduction otherwise ....
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....law, the Ld.CIT(A) erred in confirming the assessment made by the Ld AO u/s. 113(3) r.w.s. 254 of the Act on ground of levying tax on LTCG of Rs. 2,08,64.397/- being capital gains arising from the transfer of shares because of family arrangement. 2. The appellant craves to add, alter or delete all or modify any or all the above grounds of appeal." Submissions of the Appellant: 14. It is the humble submission of the appellant that he belongs to Parikh Group which carries out business in the name and style of its two main companies viz. NPIL and NPCL together with other small private limited companies and partnership firms. The assessee Sujan Parikh. Ms Avani Parikh. Soha Parikh alias Singh and Enakshi Parikh are known as SAP Group. Sri Apurva Parikh and all other family members are known as ANP Group. In the year 2004. some dispute arose in the family in relation to conducting the business of NPIL and other business concerns. In order to settle the dispute and to bring peace and harmony among the members of the family and to avoid litigation family arrangement was arrived at and orders by way of consent terms of the Company Law Board. Principal Bench, New ....
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....s such as membership of the firms, shares held in group companies. capital equalization, etc. All this was done in a bonafide manner and with a view to settle the disputes. 17. In order to put the said family arrangement in place. consent terms were arrived at before the Company Law Board in the case of Company Petition No 61 of 2005 between Sujan Parikh & Others Vs. Natwar Parikh & Company Private Limited & others. The Company law Board vide order dated 30.3.2006 (Page No 1-11 of the Paperbook) passed minutes of the, order wherein it was decided that SAP group shall transfer their entire shareholding 41.06% in Natwai' Parikh & Co Pvt Ltd to either ANP group or NPCL on receipt of the aggregate consideration comprising of: (a) Rs. 21,57,50.000/- to be received by SAP group from either AN group or NPCL as the case may be and (b) various other payments and benefits. 18. In this regard, attention is invited to the order of Company Law Board dated 13.4.2006 (Page No 38- 41 of the Paperbook) which states as under: `NPCL shall pay a sum of Rs. 19,01,80,753/- to the SAP Group on or before 28.4.2006. The consideration so paid of Rs. 19,01,807....
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....nition of the right asserted by each other cannot be impeached thereafter". The transaction of a family settlement entered into by the parties who are members of a family bona fide to put an end to the dispute among themselves, is not a transfer. It is not also the creation of an interest. For, in a family settlement each party takes a share in the property by virtue of the independent title which is admitted to that extent by the other parties. Every party who takes benefit under it need not necessarily be shown to have, under the law, a claim to a share in the property. All that is necessary to show is that the parties are related to each other in some way and have a possible claim n to the property or a claim or even a semblance of a claim on some other ground as, say, affection. Kale v. Deputy Director of Consolidation, MIR 1976 SC 8071 (Page No 54-77 of the Paperbook) In the above case, the Hon'ble Supreme Court considered the family settlement. the principles behind it, the purpose of the settlement, antecedent title and many more. The/Supreme Court observed he family settlement must be a bona fide one so as to resolve family disputes and rival clai....
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.... transfer. The para 5 of the original assessment order is reproduced hereunder for ready reference: "I have gone through the submissions of the AR. On going through the records and submissions made as well the various company law boards order, the shares transferred out of family arrangement endorsed by the CLB orders and ratio laid down in the case of CIT vs. Kay Arr Enterprises & Ors. (2008) 215 CTR (Mad) 244 are similar to that of the assessee. But however the fact remains that the return filed u/s. 139(1) by the assessee is voluntary and the assessee has himself offered the same as capital gains. assessee has not filed any revised return. Assessee 's request to rectify the same also cannot he entertained as the mistake is not apparent from record. Hence, the capital gains offered voluntary in return of income is accepted and no interference in the same is made. 23. Further, even the Hon'ble Tribunal in its order passed on 04.11.20 16 in the case of' the appellant while disposing the appeals filed by the appellant and the Department for the assessment year under consideration, at para 9 has categorically given a finding that that the appellant had s....
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.... "2. The substantial questions of law which are framed in this appeal on 12th Aug., 2006 read as under : "1. Whether, the Tribunal was correct in holding that the sale proceeds earned by the assessee out of sale of shares held in private limited companies cannot be treated as the income of the assessee and brought to capital gains tax? 2. Whether, the Tribunal was correct in holding that the transfer of shares took place by virtue of family arrangement and there was no transfer as there was family dispute and such arrangement took place at the instance of the arbitrator ? 3 Whether, the Tribunal was correct in holding that the finding recorded by the AO that the sale of shares held by the assessee in his individual capacity over various private limited companies can be brought to capital gains tax which came to be upheld by the CIT(A)?" This Court had an occasion to consider the aforesaid questions in the case of Madhusudhan, GT Appeal Nos. I and 2 of 2008 disposed of on 6th Sept., 2010. In the aforesaid Judgment it was held that the word 'transfer' does not include partition or family settlement as defined under the Act. It is w....
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....hat the order of Company Law Board was solely for buyback of shares of the appellant by NPCL. Further., even the Ld. AO as well as the Ld. CIT(A) have accepted that Company Law Board order contained settlement of other rights over the family dispute. The aforesaid view gets fortified from order of the Company Law Board (Page No 2 Of the Paperbook) which has stated in its opening para that "ordered and decreed that SAP Group shall transfer their entire shareholding of 41.06% in Natvar Parikh & Company Private Limited (NM.) to either the ANP Group or NPCL on receipt of aggregate consideration". 28. The Ld. CIT(A) has also placed reliance on the order of the Hon'ble Jurisdictional High Court in the case of B. A. Mohota Textiles Traders (P.) Ltd. vs. DCIT reported at 397 ITR 616 (Bono (Page No 106-1.15 Of the Paperbook) has through the court which required the assessee company to transfer shares held by it in another company in favour of certain family members, will be required to pay the capital gains tax since the assessee was a separate legal entity being incorporated as a limited company. With respect to the aforesaid judgement, it is submitted that the said j....
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.... SAP Group and ANP Group represented by the respective family heads. The assessee being one of the family head, who was representing the SAP Group. Due to dispute in the functioning of the company NPIL and other group concerns, in order to restore the peace and harmony in the family, all have agreed to family arrangements by filing petition before CLB. It is fact on record that based on the direction of the CLB and their resolutions, the assessee, representing the SAP Group, agreed to transfer the shares either to ANP Group or to the company itself. On agreed terms, the assessee transferred to the shares to company on buy back agreement and received the compensation. These facts were brought on record by the assessee before the AO and CIT(A). Ld CIT(A) agreed that the assessee has transferred the shares on family arrangement only however, he refused to entertain the claim of the assessee by observing that it is an arrangement for buyback of shares by the assessee. We do not agree with the above observation since the assessee has transferred the shares only on the direction of the CLB. As per the direction of CLB, the assessee has to either transfer the shares to ANP Group or to the....