2014 (8) TMI 907 - HC - Income Tax

Revised return - Whether the revised return filed on 10.01.2007 was binding on the assessee, as the Trust was barred and could not have filed a revised return Held that - Assessee contended that the statement was made on wrong legal advice and there was no violation of Section 13(1)(d) relying upon National Thermal Power Company Limited Versus Commissioner of Income-Tax 1996 (12) TMI 7 - SUPREME Court - the legal issue, which does not involve disputed facts, can be entertained even at the appellate stage - there cannot be any doubt or debate, that the claim and submission could have been raised by the assessee before the appellate authorities Decided against Revenue. Shares gifted or donated - Whether there was violation of Section 13(1)(d) of the Act as the assessee was gifted or donated 16,50,000/- shares of Nicholas Piramal India Limited by way of gift Held that - The letter in categorical terms states that the gift would be towards corpus of the assessee trust Tribunal was rightly of the view that there was a specific direction that 16,50,000 shares would form part of the corpus and should not be treated as voluntary contribution - right from the very beginning that even when the return of income was filed on 30.10.06, the stand of the respondent assessee was that 16,50,000 shares of Nicholas Piramal India Limited were gifted towards and to form part of the corpus of the trust - the assessee trust had sold 4 lac shares in terms of Section 49(1)(ii) - The period of holding of the donor had been taken into consideration and the costs of acquisition was taken as Nil but the gain from transfer of the shares were exempt u/s 10(38) of the Act Decided against Revenue. Exemption u/s 11 to 13 - Whether the assessee had violated Section 13(1)(d) of the Act and therefore should be denied exemption under Section 11 to 13 of the Act Held that - The shares were acquired by the assessee on 03.08.05 - as per Clause (iia) to the proviso, Section 13(1)(d), would be applicable, post period of one year from the end of the previous year in which the shares were acquired - there would be no violation of Section 13(1)(d) on the part of the respondent assessee till 31.03.07 - the assessee had rightly claimed that they had not violated Section 13(1)(d) relying upon Director of Income Tax versus Shree Radha Krishan Charitable Trust 2011 (3) TMI 1064 - DELHI HIGH COURT - the assessee has not claimed exemption from benefit of Section 11 to 13 of the Act with effect from 2007-08 onwards Decided against Revenue.

Summary

Issues Involved:
1. Validity of the revised return filed by the assessee.
2. Taxability of shares received as a gift/donation.
3. Violation of Section 13(1)(d) of the Income Tax Act.

Detailed Analysis:

1. Validity of the Revised Return Filed by the Assessee:
The first issue revolves around whether the revised return filed on 10.01.2007 was binding on the assessee. The original return was filed on 30.10.2006 declaring "Nil" income, and the revised return was filed due to the belief that holding equity shares violated Section 13(1)(d), thus losing exemption under Sections 11 to 13. The assessee later claimed this was based on wrong legal advice and sought to withdraw the revised return during assessment proceedings.

The Tribunal held that the revised computation and the withdrawal of the revised return should have been accepted based on precedents such as NTPC vs. CIT, Jute Corporation of India Ltd. vs. CIT, and others. The Tribunal concluded that the claim and submission could be raised before appellate authorities, thus deciding the issue in favor of the assessee.

2. Taxability of Shares Received as a Gift/Donation:
The second issue concerns whether the 16,50,000 shares of Nicholas Piramal India Limited received by the assessee as a gift from The Piramal Enterprises Executives Trust should be considered part of the corpus of the trust. The Assessing Officer initially treated the market value of the shares as taxable under Section 2(24)(iia). However, the Tribunal found that the shares were intended to form part of the corpus, as evidenced by the resolution and accompanying letter from the donor trust.

Section 11(1)(d) was deemed applicable, indicating that the donation would be part of the corpus and not income. This was consistent with the original return filed by the assessee, which claimed that the shares were part of the corpus and the gains from their sale were exempt under Section 10(38).

3. Violation of Section 13(1)(d) of the Income Tax Act:
The final issue was whether the assessee violated Section 13(1)(d) by holding the shares, which would deny them exemption under Sections 11 to 13. According to Clause (iia) of the proviso to Section 13(1)(d), assets not held in specified forms must be disinvested within one year from the end of the previous year in which they were acquired. The shares in question were acquired on 03.08.2005, meaning the period for compliance extended to 31.03.2007.

The Tribunal concluded that there was no violation of Section 13(1)(d) for the assessment year in question, as the disinvestment period had not yet expired. This position was supported by the precedent in Director of Income Tax vs. Shree Radha Krishan Charitable Trust, which held that disqualification due to non-disinvestment would only apply post the specified period.

Conclusion:
The appeal was dismissed, affirming the Tribunal's findings that the revised return could be withdrawn, the shares were part of the corpus and exempt from tax, and there was no violation of Section 13(1)(d) for the relevant assessment year.