2016 (5) TMI 217 - AT - Income Tax

Addition held to be gift of shares - Held that - AO has connected the impugned gift with the sale of Gotri land and that issue is yet to be decided in AY 2009-10, therefore the ld.CIT(A) has rightly held that the gift being transferred in kind hence not to be taxed for the year under consideration CIT(A) has rightly deleted the addition of ₹ 46,80,540/- as the gift which was part of the total gift received by family members at 4.70 crores formed part of the undisclosed sale consideration of Gotri land which took place during Asst. Year 2009-10 and, therefore, no addition was called for during Asst. Year 2008-09. Accordingly no interference is called for with the order of ld. CIT(A). - Decided in favour of assessee

Summary

Issues Involved:
1. Deletion of addition on account of gift received in kind by the assessee.
2. Assessment year applicability for the addition related to the undervaluing of transactions of sale of land.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Gift Received in Kind by the Assessee:
The primary issue revolves around the deletion of an addition of ?46,80,540/- made by the Assessing Officer (AO) on account of a gift received in kind by the assessee. The assessee had shown to have accepted a gift in the form of equity shares of Sun Pharmaceuticals Industries Ltd. totaling 2400 shares and 1650 shares, respectively, through gift deeds dated 7.2.2008 and 17.3.2008. The AO observed that the market value of these shares was ?46,80,540/- and added this amount to the income of the assessee, treating it as income from undisclosed sources.

The CIT(A) deleted the addition, noting that the gift was part of the total consideration for the sale of Gotri land, which was sold in the subsequent assessment year (2009-10). The CIT(A) concluded that the addition, if any, should be considered in the year of the land sale transaction, i.e., AY 2009-10.

2. Assessment Year Applicability for the Addition Related to the Undervaluing of Transactions of Sale of Land:
The AO linked the gift of shares to the sale of Gotri land, asserting that the total consideration for the land included the value of the shares received as gifts. The AO contended that the total consideration of ?22.61 crores for the Gotri land included ?4.70 crores in the form of shares, ?10.62 crores via cheque, ?3 crores in cash, and ?1.41 crores as the tax component on the value of shares. The AO thus included the value of the shares as part of the sale consideration for the land transaction.

However, the CIT(A) and the Tribunal observed that the sale of Gotri land occurred in AY 2009-10, and hence, any addition related to the sale consideration should be made in that assessment year. The Tribunal upheld the CIT(A)'s decision, emphasizing that the gift of shares, although received in AY 2008-09, was part of the sale consideration for the Gotri land transaction, which should be assessed in AY 2009-10.

The Tribunal also referred to a similar case, Shri Krupeshbhai N. Patel vs. DCIT, where the Hon. Jurisdictional High Court dismissed the Revenue's appeal, affirming that the gift in kind should not be taxed in the year it was received but in the year of the related land sale transaction.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the addition of ?46,80,540/- for AY 2008-09, concluding that the gift of shares was part of the undisclosed sale consideration for the Gotri land, which should be assessed in AY 2009-10. The appeal by the Revenue was dismissed, and the Cross Objection became infructuous, leading to its dismissal as well. The judgment was pronounced in the open Court on 3rd May, 2016.