1995 (7) TMI 101 - AT - Income Tax

Issues Involved:
1. Valuation of total consideration for sale of shares.
2. Determination of capital gains on the sale of shares.
3. Whether the transaction constituted a family settlement.
4. Applicability of Section 2(47) of the IT Act regarding transfer.
5. Computation of capital gains.

Issue-Wise Detailed Analysis:

1. Valuation of Total Consideration for Sale of Shares:
The appellant contested the valuation determined by the CIT(A), which was Rs. 24,64,000 for the sale of shares, leading to a capital gain of Rs. 21,34,441. The valuation was based on the market value of the property determined by the District Valuation Officer (D.V.O.) at Rs. 78,71,000 as on 31-12-1981. The ITO adopted this valuation, asserting that the procedures under Section 16A of the Wealth Tax Act and Section 55A of the IT Act were similar. The appellant's share in the property was valued at Rs. 24,14,010, leading to a total consideration of Rs. 24,03,100 for the transfer of 231 shares.

2. Determination of Capital Gains on the Sale of Shares:
The ITO computed the capital gains under Section 45 of the IT Act, considering the appellant received Rs. 23,100 in cash and a 31% share in the property. The total consideration was Rs. 24,03,100, from which the original cost of 231 shares (Rs. 3,28,559) was deducted, resulting in a capital gain of Rs. 21,34,441. The appellant's argument that the transaction was a family settlement and thus not subject to capital gains tax was rejected by the ITO, who cited the definition of "transfer" under Section 2(47) of the IT Act.

3. Whether the Transaction Constituted a Family Settlement:
The appellant claimed the transaction was a family settlement, thus not involving a transfer. However, the CIT(A) and the Tribunal found no evidence of a bona fide family arrangement. The Tribunal noted that the appellant's family consisted of herself, her husband, and her daughter, with no disputes among them. The shares were individually owned and capable of being transferred without hindrance. The Tribunal concluded that the transaction did not meet the criteria for a family arrangement as per the Supreme Court's guidelines in Kale v. Dy. Director of Consolidation.

4. Applicability of Section 2(47) of the IT Act Regarding Transfer:
The Tribunal upheld the ITO's view that the transaction constituted a transfer under Section 2(47) of the IT Act. The appellant's receipt of cash and property was considered full value of consideration for the transfer of shares. The Tribunal rejected the appellant's reliance on various case laws, noting that the dispute before the arbitrator concerned the company's properties, not the appellant's individual property.

5. Computation of Capital Gains:
The Tribunal reviewed the appellant's alternative contention regarding the computation of capital gains. The Tribunal found the ITO's detailed calculations and the CIT(A)'s subsequent relief to the appellant to be accurate. The Tribunal rejected the appellant's alternative computation, which suggested a lower capital gain of Rs. 3,89,151, and upheld the CIT(A)'s findings.

Conclusion:
The Tribunal confirmed the CIT(A)'s decision, holding that the transaction involved a transfer as defined under Section 2(47) of the IT Act and was subject to capital gains tax. The Tribunal also validated the ITO's valuation and computation of the capital gains, finding no merit in the appellant's claims of a family settlement or erroneous computation.

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