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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 ..... nors 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 regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ram Marda (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 appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax assessment orders 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sheila Devi Chamria v. Tara Chand Sareogi [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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10000238 1768 10001066 1600 10001082 4200 10001945 5900 10002577 3000 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 tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him was valid gift. ( viii )That the allegation of the Assessing Officer that Sushil Marda, one of the donors was not holding sufficient number of shares is devoid of any merit. From the flow chart of shareholding of the donors, it clearly reveals that the donors were beneficial holder of sufficient quantity of shares. He was holding 26,742 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,258 which in entirety was shown as long-term capital gain as the cost of these bonus shares was nil . The remaining 1,700 shares were shown in the balance sheet of the assessee as investment in shares. The Assessing Officer treated the sale proceeds of 6,300 shares of Rs. 31,96,258 as assessee s unexplained cash credit and added the same to the total income under section 68 of the Act. For the balance 1,700 shares, the Assessing Officer treated the value of these shares amounting to Rs. 8,61,900 as concealed investment by invoking provisions 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 Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve confirmed that they had gifted the shares to the assessee not in physical form but by way of transferring the same to the demat account of the broker of the assessee and in turn the sale proceeds of those gifted shares were credited in the assessee s bank account. In view of the above, there remains no doubt about the gift made by the said donors to the assessee. 8.2 Now coming to the issue whether the donors were having shares of Nestle out of which they could have made gifts to the assessee, the assessee filed before us copies of wealth-tax assessments 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 assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any infirmity in it to interfere. The deletion of addition of Rs. 31,96,258 is, therefore, sustained. 8.5 As stated above, out of the total 8,000 Nestle shares received as gift by the assessee, the assessee sold 6,300 shares and claimed long-term capital gain. In regard to balance 1,700 shares, the assessee had shown the same in his balance sheet for the relevant assessment year as investment. The Assessing Officer calculated the cost of investment of these shares at Rs. 8,61,900 by applying market value at the rate of Rs. 507 per share and added the same to the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 12,00,000 out of bank loan. And for remaining Rs. 13,10,000, he has claimed Rs. 8,29,289 as deduction in the assessment year 2000-01. Thus, for assessment year under consideration, the assessee is, at best, can claim deduction of Rs. 4,80,711 only in this year. The Assessing Officer is thus directed to allow only Rs. 4,80,711 as deduction under section 54F of the Act." Being aggrieved by the said direction of the CIT(A), the department is in appeal against the relief of Rs. 4,80,711 and the assessee is in appeal against the addition sustained to the extent of Rs. 12,00,000. 10. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the language and subject of these two sections are different and the decision referred to by the assessee is not a decision of jurisdictional High Court. Accordingly, exemption to the extent of loan taken i.e., Rs. 12,00,000 was not allowed by the CIT(A). 10.1 The Ld. Departmental Representative, on the other hand, relied on the order of the Assessing Officer. 11. We have heard the rival contentions of the parties and perused the material placed before us. The undisputed facts are that the assessee had purchased a portion of house property for a total consideration of Rs. 25,10,000 during the previous 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year prior to transfer of original asset. In our opinion, whether it is a taxing statute or any other statute, it has to be construed reasonably. The effort should always be given to ascertain the intention of Parliament from the words employed, as far as possible; an interpretation which leads to absurdity should be avoided. Net consideration is referred only for comparison purpose in order to compute amount of exemption allowable under section 54F. The Hon ble Supreme Court in the case of K.P. Varghese v. ITO [1981] 131 ITR 597 held as under : "A strictly literal reading of a statutory provision ignores several vital considerations 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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