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Issues:
- Determination of the date from which the assessees became entitled to shares in a voluntary winding up scheme. - Valuation of shares for computing capital gains based on the relevant date. Analysis: The High Court of Bombay was presented with a reference from the Tribunal regarding the entitlement of the assessees to shares in a voluntary winding up scheme. The primary issue was to determine the date from which the assessees became owners of the Madurai shares obtained in specie. The court deliberated on whether ownership commenced on the date of voluntary liquidation, the date of physical handover of shares, or the date of transfer to the assessees' names in the company's share register. The facts revealed that the company, Harveys Private Ltd., decided on voluntary winding up, leading to the distribution of assets in specie among members and creditors. The liquidator distributed 3,000 Madurai shares to each assessee. The Income-tax Officer valued the shares based on the date of physical handover and share registration. However, the Appellate Assistant Commissioner and the Tribunal favored valuing the shares as of the date of the scheme's approval, i.e., December 19, 1959. The court examined the legal framework, particularly Section 486 of the Companies Act, which stipulates that voluntary winding up commences upon passing the resolution. The resolution for winding up Harveys Private Ltd. was passed on December 19, 1959. The liquidator then prepared a scheme for asset distribution, leading to the assessees receiving Madurai shares. Despite the physical transfer occurring later due to regulatory requirements, the court emphasized that the liquidator held the shares for the assessees from the scheme's approval date. Therefore, the relevant date for valuing the shares and computing capital gains was deemed to be December 19, 1959. The court concluded that the assessees became entitled to the Madurai shares as per the scheme of arrangement on that date. In conclusion, the High Court of Bombay answered the referred question in favor of the assessees, affirming that they became entitled to the Madurai shares on December 19, 1959. The court held that the valuation for capital gains should be based on this date, emphasizing the legal significance of the scheme's approval in determining ownership rights. The revenue was directed to bear the costs of the application, concluding the judgment on this matter.
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