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TMI Blog1983 (7) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... hold shares in these private limited companies which they have transferred at face value to their relations specified in the aforesaid clauses of section 64(1). The question is whether the transfer of shares at face value is for adequate consideration because the aforesaid clauses of section 64(1) would apply only if it is held that the transfers were otherwise than for adequate consideration. The details of transfers are as under (as per annexures) : ANNEXURE 1 CHART OF TRANSFER OF SHARES BY DIRECTORS OF ELECTRA INDIA (P.) LTD. --------------------------------------------------------------------------------------------------------------------------------------------------- Shares acquired by and No. and Date of Date of acqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E 2 CHART OF TRANSFER OF SHARES BY DIRECTORS OF ELECTRA INDIA (P.) LTD. --------------------------------------------------------------------------------------------------------------------------------------------------- Shares acquired by and No. and Date of Date of acquired of Distn. No. acquisition transfer of shares --------------------------------------------------------------------------------------------------------------------------------------------------- Ajay Kumar Jain : Electra Jaipur (P.) Ltd. 250 shares Nos. 1501-1750 25-2-1973 7-11-1975 Electra Jaipur (P.) Ltd. 92 shares Nos. 6909-7000 15-1-1980 29-3-1980 --------------------------------------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------------------------- Contd . . . --------------------------------------------------------------------------------------------------------------------------------------------------- Transferee Nos. and Distn. Amount received No. of shares from transferee transferred (in Rs.) --------------------------------------------------------------------------------------------------------------------------------------------------- Smt. Sadhana Jain 250 shares 25,000 Nos. 2751-3000 @ Rs. 100 each and Smt. Sadhana Jain 50 shares 5,000 Nos. 1001-1050 @ Rs. 100 each -------------------------------------------------------------------------------------------------------------------------------------------------- In the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividend declared in respect of the transferred shares in the assessment year 1980-81). 4. In the case of Ami Chand Jain where the transfer was of 300 shares of Electra (Jaipur) (P.) Ltd. to the assessee's son's wife on 23-6-1976, the ITO noted that the assessee on valuation date of 31-12-1975 had shown the market value of shares at Rs. 155 per share. He, accordingly, treated Rs. 1,705 and Rs. 1,136 as dividend attributable to inadequate consideration (out of dividend of Rs. 3,000 each declared on the transferred shares for the assessment years 1979-80 and 1980-81). 5. The AAC in identical orders upheld the orders of the ITO in the cases of the three assessees. 6. At the hearing before us the learned counsel for the assessees urged t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Volume 1, 7th edition, page 604). 7. The learned counsel for the assessees relied on CGT v. Cawasji Jehangir Co. (P.) Ltd. [1977] 106 ITR 390, 398 (Bom.) where it was observed that in order that the Court may hold that a particular transfer is not for adequate consideration, the difference between the true value of the property transferred, and the consideration that passed for the same, must be appreciable. The Court further observed that adequate consideration cannot be construed with precision. We have already noted above that there was appreciable difference between the market value of the shares transferred by the three assessees and the consideration received, namely, the face value of the shares. 8. The learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of shares to his wife at price of Rs. 4.22 per share as against the purchase price paid by the assessee of Rs. 4.12 per share was held to be for adequate consideration. In that case, the Tribunal had found that the said company had not declared any dividends and, therefore, the fair market price of the shares had to be determined on the basis of break up value of the shares on the date of transfer (which has been done in the cases in appeal before us). The Tribunal had further found that there were serious restrictions on the transfer of impugned shares in the private limited company as the shares could be transferred only to the specified relations of the members of the company as indicated on page 131 of K. K. Birla's case. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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