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TMI Blog2010 (1) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... shares only on the ground that the return from shares was very low. Thus transaction not liable to gift tax. - 1 to 3 and 6 of 1999 - - - Dated:- 27-1-2010 - ASHUTOSH MOHUNTA, MEHINDER SINGH SULLAR JJ. Krishan Mehta for the appellant. Akshay Bhan for the respondent. JUDGMENT The judgment of the court was delivered by Mehinder Singh Sullar J.- As common question of law and facts are involved, therefore, we propose to dispose of all the abovementioned four appeals, by this judgment, in order to avoid repetition of facts. However, for facilitation, the facts have been extracted from Gift-tax Appeal No. 2 of 1999, titled Commissioner of Gift-tax (Central), Ludhiana v. M/s Rockman Cycle Industries (P) Ltd., Ludhiana. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted by the Commissioner of Gift-tax (Appeals) (Central), vide order dated December 13, 1991 (annexure A3). 5. Aggrieved by the order annexure A3, the appeal filed by the Revenue was also dismissed by the Income-tax Appellate Tribunal, vide order dated October 28, 1998 (annexure A1). 6. The Revenue still did not feel satisfied with the impugned order (annexure A1) and filed the instant appeal. 7. The following question arose for determination in this matter : "Whether on the facts and circumstances of the case the Income-tax Appellate Tribunal was right in law in confirming the order of the Commissioner of Gift-tax (Appeals), (C), Ludhiana and holding that the transaction of 50,000-4 per cent. non-cumulative preference shares at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Khoday Distilleries Ltd. v. CIT [2008] 307 ITR 312. 12. After hearing the learned counsel for the parties, we are of the view that as the element of gift is lacking, therefore, the transaction in question is not liable to gift-tax. 13. Section 3 of the Act postulates the liability to charge gift-tax and section 2(xii) of the Act defines "gift" means the transfer by any person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and (includes the transfer or conversion of any property referred to in section 4, deemed to be a gift under that section). The Explanation to this clause is that "a transfer of any building or part thereof referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermined in the manner laid down in Schedule II exceeds the value of the consideration shall be deemed to be a gift made by the transferor : Provided that nothing contained in this clause shall apply in any case where the property is transferred to the Government or where the value of the consideration for the transfer is determined or approved by the Central Government or the Reserve Bank of India." 16. The combined reading of these provisions would reveal that only that property (transaction), which is transferred otherwise than for adequate consideration, the amount of which exceeds the value of the consideration at the relevant time, would be liable to gift-tax. As per the proviso to sec-tion 4 (1) (a), even transfer of such property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act, the hon'ble apex court ruled that "it was only on allotment that the share came into existence, and the words "allotment of shares" were used to indicate the creation of shares by appropriation out of unappropriated share capital to a particular person. It was observed that there was a vital difference between "creation" and "transfer" of shares. The allotment by the assessee of all the rights shares was not a "transfer" and, therefore, section 4(1)(a) was not applicable." It was also held that "allotment is not transfer. There is no element of existing right in the case of allotment as required by section 2(xii). 19. Again, the hon'ble Supreme Court in the case of Gopal Jalan and Co. v. Calcutta Stock Exchange Association L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n would enter into and that means that non-business considerations were involved. Here, the Assessing Officer appears to have fallen in error, because neither is there any material on record nor specific finding that the assessee has purchased the shares as colourable device to reduce the tax liability. At the most, it may be a measure of commercial expediency and prudence. The assessee could not be prevented from making such investment in certain shares only on the ground that the return from shares was very low. No one can lose sight of the fact that the assessee was not dealing in the shares and investments have been made as incidental activity of commercial expediency/prudence of the business. So, the question of element of/deemed gift ..... X X X X Extracts X X X X X X X X Extracts X X X X
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