2002 (5) TMI 28 - HC - Income Tax

Transfer Of Assets Revocable Gift - In ordinary practice a person who sells a share keeps the bonus shares which he has got. The bonus shares do not accompany the original share when it is sold. Even the Revenue has not suggested that the dividend which had accrued during the period when the gift was in force should also be deemed to have reverted to the assessee on the revocation of the gift. If the dividend belongs to the donee the bonus shares cannot be treated differently. - No other point has been raised. - In view of the above we find no merit in this appeal. It is consequently dismissed.

Summary

Issues:
1. Validity of a gift made by the assessee during the assessment year 1982-83.
2. Treatment of income derived from bonus shares after the revocation of the gift.

Analysis:
1. The respondent-assessee declared an income of Rs.2,84,930 for the assessment year 1990-91. The Assessing Officer found that the respondent had made a revocable gift of 6,000 equity shares to a group, which later received 28,000 bonus shares and a dividend of Rs.2,62,500. The Assessing Officer treated this amount as income of the assessee due to the alleged void gift made in 1982-83. The Commissioner of Income-tax (Appeals) accepted the appeal, and the Tribunal affirmed this decision. The Revenue argued that the gift was invalid, but a previous decision held revocable gifts as valid under the Gift-tax Act. The Revenue contended that the bonus shares should revert to the donor upon revocation of the gift, making the income derived from them taxable for the assessee.

2. The Revenue's argument that bonus shares should revert to the donor upon revocation of the gift was not raised before the Tribunal and does not have supporting evidence in the record. It was noted that only 6,000 shares had reverted to the assessee, not the total 34,000 shares. The absence of evidence showing the reversion of all shares led to the conclusion that the dividend on the 28,000 shares could not be considered the income of the assessee. The Revenue's contention lacked statutory support, and the general practice of retaining bonus shares after selling the original shares was highlighted. The Revenue did not argue that the dividend accrued during the gift period should revert to the assessee, indicating inconsistency in their position regarding the treatment of bonus shares and dividends. No other points were raised in the appeal.

In conclusion, the High Court found no merit in the Revenue's appeal and dismissed it. The parties were directed to bear their own costs. The judgment emphasized the lack of evidence supporting the Revenue's claim regarding the reversion of bonus shares and the inconsistency in their argument regarding the treatment of dividends.