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TMI Blog2008 (2) TMI 648X X X X Extracts X X X X X X X X Extracts X X X X ..... donors to the demat account of the assessee Sri Lalit Marda. (2)Whether on the facts and circumstances of the case, the Ld. CIT(A) was justified in accepting that long-term capital gains arose to the assessee out of sale of 6,300 bonus shares of Nestle received as gift from Sri Sushil Marda and Jiwan Ram Marda when in fact the 6,300 bonus shares of Nestle were transferred from the demat account of Sri Jiwan Ram Marda and Sri Sushil Marda directly to the demat account of the broker and not from the demat account of Lalit Marda to the demat account of the share broker. (3)Whether on the facts and circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs. 8,61,900 which was made by treating the remaining 1,700 bonus shares of Nestle as concealed investment of the assessee, by accepting the claim of the assessee that the shares were received by him as gift from Sri Jiwan Ram Marda and Sri Sushil Marda." 3. All the aforesaid three grounds relate to the single issue of deletion of addition in respect of 8,000 bonus shares of Nestle India Ltd. (Nestle) received by the assessee as gift from Sri Jiwan Ram Marda and Sri Sushil Marda. The facts in this regard a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rda (father) were not transferred to the assessee during the relevant assessment year; u The donor Sri Sushil Marda was not holding the sufficient No. of shares to gift the same to the assessee. u No evidence was produced showing broker has paid consideration to the assessee. 4. The assessee objected to the said additions before the CIT(A) and filed a written submission along with supporting documents. After considering the submissions of the assessee and perusing the order of the Assessing Officer, the CIT(A) deleted the additions of Rs. 31,96,258 made under section 68 and Rs. 8,61,900 made as investment out of undisclosed fund with the following observations :- "I have carefully considered the submission of the Ld. ARs and also perused the order of the Ld. Assessing Officer. There is no dispute that the amount shown to have been credited in the accounts of the appellant, was nothing but sale proceeds of shares. The only issue raised by the Ld. Assessing Officer was the source of the shares claimed to have been sold by the appellant. From the paper book submitted by the ARs, it is clear that certain shares have been transferred by three family members of the appellant in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and other evidences produced by the assessee may be evidence for proving that these two persons were holding Nestle shares. But these evidence cannot form part of evidence in support of gift. He further submitted that after the gift effected by those two persons to the assessee, the assessee would become the absolute holder of those gifted shares and naturally, therefore, in the company's record there would be recording as such. But in this case the Nestle has categorically confirmed that none of these shares were transferred in the name of the assessee during the year under appeal and many of the shares were actually transferred in the years 1997-98 and 1998-99. All these facts go to establish that there was no valid and genuine gift. As there was no gift, the assessee's claim of long-term capital gain on sale of shares was nothing but his concealed income. The Assessing Officer has rightly added the same under section 68 of the Act. He further submitted that for the same reasons the investment shown in the balance sheet of the assessee for the unsold 1,700 shares of Nestle has rightly been added to the income of the assessee as unexplained investment and the CIT(A) was not just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areogi [1987] 163 ITR 406 (Cal.). (iii)That since the shares were in demat form, question of physical delivery does not arise. But transfer of shares by the donors directly to the account of the broker of the assessee against sale by him substantiates the claim of the assessee. It was further pointed out that that while drawing the conclusion, the Assessing Officer considered a part of reply received from Nestle to suit his conclusion. Nestle in its reply has categorically stated that once the shares are dematerialized, the company does not have a tract of the share transfer. After the dematerialization the shares are converted in electronic mode and the depository acts on all transfer through their agents. Copy of the said letter of Nestle has been placed in the paper book at pages 55 & 56. The learned counsel, therefore, submitted that in view of the comments of Nestle, the Assessing Officer acted arbitrarily in having placed reliance on the selected portion of the reply and hence his conclusion that the transaction of the said gift was not genuine on such wrong interpretation of the reply should not be entertained. (iv)Referring to wealth-tax returns filed up to assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 10224776 3383 Total 19851 It was contended by the learned counsel that for the same reason, dividend was received by the assessee/other family members though he/other family members was/were not the beneficial owner of the share as per Income-tax Records. The above fact will be corroborated by the dividend warrants wherein numbers of shares were differed as compared to wealth-tax records. Copies of tax deduction certificate showing No. of shares has been enclosed at pages 52 to 54 of the paper book. The above position has been explained by the assessee's learned counsel in the following comparative chart showing comparison of beneficial holding of Nestle as per wealth-tax return and No. of shares on which dividend was received for the year ended 31-3-1992 :- Name of holder As per WT return As per dividend warrant Jiwanram Marda 27376 21712 Sushil Marda 33309 1133 Lalit Marda 15231 50156 The assessee transferred dividend on shares to its beneficial owner at the year end. In the dividend statement for the assessment year 1993-94, it can be seen that out of the aggregate dividend received by the assessee, following were transferred to the donors. Total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 742 shares as on 31-3-2000, out of which 3,131 shares were lying in his demat account and balance shares were demated in the name of the other family members including the assessee for availing credit facility from bank. The shares lying in his demat accounts as on 31-3-2000 and transfer made therefrom during the assessment year 2001-02 are as under :- Account No. Balance as on Transfer Date of transfer Transferee 31-3-2000 10000220 300 300 19-7-2000 Wallfort Fin. Services Ltd. 10009591 300 10009698 1831 1000 1-6-2000 Wallfort Fin. 500 19-7-2000 Service Ltd. 281 25-9-2000 10001103 700 Total 3131 2081 It is to be noted that there were 19,851 shares of Nestle in the demat account of the assessee as on 31-3-2000 which includes 1,768 shares trarsferred by Sushil Marda as on 20-1-2000. (ix)The Assessing Officer added the sale proceeds as cash credit under section 68 of the Income-tax Act. The learned counsel submitted that in the given facts section 68 has no role to play since source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of seciton 69 of the Act. 8.1 The Assessing Officer did not accept the gift as valid and genuine gift mainly on the grounds that (i) the shares of Nestle claimed to have been gifted at the rate of 4,000 shares each by Sri Jiwan Ram Marda and Sushil Marda were not transferred to the assessee during the assessment year under appeal (ii) Sri Sushil Marda was not holding sufficient number of Nestle shares out of which he could have effected gift of 4,000 shares to the assessee; and (iii) the assessee could not produce any evidence to establish that the broker had paid consideration to the assessee. It appears, the doubt of the Assessing Officer about gift of Nestle shares and sale thereof by the assessee was due to information received from M/s. Nestle India Ltd., saying that during the previous year relevant to assessment year under appeal, no such shares were transferred, in the name of the assessee. It is not in dispute that the shares have been credited in the account of the assessee. It is also not in dispute that the amount credited in the assessee's account was out of sale of Nestle shares. From the copy of flow chart of movement of shares in respect of these two donors, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents for several years of Sri Jiwan Ram Marda and Sri Sushil Marda. On perusal of the same and statement of share holding by these persons, it is seen that these two persons were having investments in large number of shares of different companies and there was accretion in their share holdings by way of bonus shares. It has been explained by the assessee how inter-family exchange of shares used to take place for obtaining higher credit limit by pledging the shares with the bank. We have given above the details of share holding in the assessee's demat account. On perusal of the same in contrast with the balance sheet of the assessee, it is seen that the shares of other beneficial family members including the donors were transferred to the demat account of the assessee in earlier years, though in the balance sheet only the beneficial holding was mentioned. As per sum-up closing balance of the demat accounts of the assessee, the closing balance of Nestle was 19,851, whereas as per IT record of the assessee, the assessee was the owner of 1,000 shares only. The above fact is proved by the fact of dividend receipt also. The assessee transferred the dividend on shares to the beneficial ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income of the assessee as undisclosed investment. For the reasons discussed above in regard to 6,300 shares, we find no reason to interfere with the decision of the CIT(A) in deleting this addition also. We uphold the same and direct the Assessing Officer to act accordingly. 9. Ground No. 4 of the department and the only in the assessee's appeal pertain to deduction under section 54F of the Act. The facts of the case are that the assessee had invested a sum of Rs. 25,10,000 in purchase of a new residential house property during the assessment year 2000-01. He had obtained a housing loan of Rs. 12 lakhs in the same year for this purpose. Accordingly, the assessee claimed deduction under section 54F of Rs. 8,29,289 in assessment year 2000-01 and the balance amount of Rs. 16,80,711 in the assessment year under appeal, i.e., assessment year 2001-02. The assessee filed copy of sale deed along with copy of map before the Assessing Officer in support of claim of purchasing residential house property. He disallowed the exemption claimed under section 54F on the grounds that the assessee could not produce original map demarcating the area purchased by the assessee and that purchasing par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. The assessee's learned counsel submitted that it is an admitted fact that the assessee purchased a residential house property in the financial year relevant to assessment year 2000-01 for Rs. 25,10,000 and claimed deduction under section 54F for Rs. 8,29,289 in that year. Balance amount of Rs. 16,80,711 was claimed as deduction under section 54F in the assessment year under appeal. The assessee filed copy of sale deed along with copy of map before the Assessing Officer in support of claim of purchasing residential house property. He disallowed the exemption claimed under section 54F on the grounds that the assessee could not produce original map demarcating the area purchased by him and that purchasing part of residential house is not eligible for exemption under section 54F. It was explained before us that since the original copy of deed along with map was kept with the bank for availing credit facility, the original deed could not be produced before the Assessing Officer. However, the original copy of the said deed was produced before the CIT(A). He further submitted that the assessee purchased a part of the residential house and for the other part, the ownership remained with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year relevant to assessment year 2000-01 and claimed proportionate exemption under section 54F of Rs. 8,29,289 and for the balance amount of Rs. 16,80,711, exemption was claimed in the year under appeal. The Assessing Officer disallowed the entire claim of exemption. The CIT(A) after deducting the amount of bank loan of Rs. 12,00,000 from the total value of house property of Rs. 25,10,000 held that the assessee was eligible for exemption under section 54F on the amount of Rs. 13,10,000. He, therefore, held that as the assessee has already claimed exemption of Rs. 8,29,289 in the earlier assessment year, the assessee shall be entitled to exemption only for the balance amount of Rs. 4,80,711 [Rs. 13,10,000 - Rs. 8,29,289]. Section 54F speaks of capital gain on transfer of certain capital assets not to be charged in case of investment in residential house. It reads as under :- "(1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns which must always be borne in mind while interpreting such provision. The task of interpretation of a statutory enactment is not a mechanical task. It is more than a mere reading of mathematical formulae because few words possess the precision of mathematical symbols. It is an attempt to discover the intent of the Legislature from the language used by it and it must always be remembered that language is at best an imperfect instrument for the expression of human though and as pointed out by Lord Denning, it would be idle to expect every statutory provision to be 'drafted with divine prescience and perfect clarity'." Further, the Hon'ble Apex Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 has held as under :- "If the language is plain, the fact that the consequence of giving effect to it may lead to some absurd result is not a factor to be taken into account in interpreting a provision. It is for the Legislature to step in and remove the absurdity. On the other hand, if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. This is a well-accepted rule of construction." 11.1 Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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