9911796707
TMI Blog2016 (4) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... ia, Master Aryman Hari Dalmia and Km. Ananya Priya Dalmia with their respective spouses and children. The assessee filed its return showing income from house property, short-term capital gain and long-term capital gain. The assessee declared to have received a gift of Rs. 1.60 crore from Smt. Abha Dalmia during the year towards trust fund account, which was not included in total income. The AO noted relationship between the donor and beneficiaries, being wife of Shri Mridul Hari Dalmia; mother of Shri Gaurav Dalmia and Smt. Kanupriya Somani; and grandmother of Km. Devanshi Dalmia, Master Aryman Hari Dalmia and Km. Ananya Priya Dalmia. He noticed the beneficiaries of the trust to be the relatives of the donor. Provisions of section 56(2)(vi) of the Act were invoked. In this regard, the assessee was found to be admittedly a beneficiary trust assessed in the status of AOP and, hence, neither a firm nor a company. The AO further noticed that the assessee received a gift of Rs. 1.60 crore through cheque from Mrs. Abha Dalmia, which was not a property. As the transaction of gift was executed on 18.9.2009, i.e., prior to the date of 1st June, 2010, the AO held that the claim of exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is whether or not the amount of Rs. 1.60 crore is chargeable to tax as per the provisions of section 56(2)(vi). 4. Section 56 falls under Chapter IV-F of the Act with the caption 'Income from other sources.' Sub-section (1) of this section provides that income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head 'Income from other sources', if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. Then comes subsection (2) of section 56 which provides in particular and without prejudice to the generality of the provisions of sub-section (1) that the incomes discussed under various clauses of this sub-section shall be chargeable to income-tax under the head 'Income from other sources.' Clause (vi), which is relevant for our purpose, reads as under : - "(vi) where any sum of money, the aggregate value of which exceeds fifty thousand rupees, is received without consideration, by an individual or a Hindu undivided family, in any previous year from any person or persons on or after the 1st day of April, 2006 but before the 1st day of October, 2009, the whole of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enshrined in clauses (a) to (g). Explanation to this proviso gives meaning to the term 'relative', which has been used in clause (a) of the proviso to section 56(2)(vi). Effect of the proviso along with Explanation to section 56(2)(vi), to the extent of the issue under consideration, is that where any sum of money exceeding the specified limit is received as gift from any relative as defined in the Explanation, that shall not be chargeable to tax u/s 56(2)(vi). Coming back to the aforenoted four conditions bringing receipt within the charging provision, we find that the first condition, namely, receipt of money in excess of Rs. 50,000/- is satisfied. The second condition is that such amount should be received without consideration. This condition is also satisfied because the assessee trust received a sum of Rs. 1.60 crore from Smt. Abha Dalmia as gift, which is obviously without any consideration. The fourth condition about the receipt of such amount from any person or persons before the designated date is also satisfied. Now we espouse the third condition as per which the receipt of such sum should be by an individual or HUF. This condition is obviously wanting because as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss of Rs. 1.86 crore. It was noted that the assessee did not pay any Securities Transaction Tax (STT) on these transactions of sale of shares to Shri M.H. Dalmia and Smt. Abha Dalmia. He found that the assessee claimed to have transferred these shares through off-market sale on loss. Since the persons to whom such shares were sold happened to be the trustees and also the beneficiaries of the assessee trust, the AO came to hold that such off-market sale transactions were done intentionally to claim benefit of long-term capital loss. On being called upon to justify the claim, the assessee submitted that these shares were purchased and held for a period of more than one year and, hence, were long-term capital assets, which the AO did not dispute. The assessee then argued that such shares, held as investment, were sold at prevailing market rates. In support of this contention, the assessee furnished copies of Quotations of these shares for the dates on which such transfers were made. These quotations have been reproduced on page 5 of the assessment order. The AO observed that the shares were sold at the `Closing price' rather than the 'Highest price of the day'. The assessee's content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares of Bajaj Hindustan Ltd. are concerned, the highest quotation on 1.4.2009 was Rs. 51.25 against the closing rate of Rs. 50.50. Similarly, as regards the share of Tata Consultancy Services Ltd., the highest quotation as on 18.11.2009, being the date of sale, was Rs. 693.00 as against the closing rate of Rs. 690.45. Similarly, for shares of Reliance Communications Ltd., quotation as on 7.12.2009, being the date of sale, had the highest price of Rs. 182/- as against the closing price of Rs. 178.95. It is further noticeable that the lowest quotation of Bajaj Hindustan Ltd. on that day was Rs. 47.50; that of Tata Consultancy Ltd. at Rs. 660/-; and that of Reliance Communications Ltd. at Rs. 175.85. We fail to understand any logic behind the AO considering the highest rates as relevant and ignoring the lowest or the opening or closing rates. As the assessee sold the shares at the closing rates of the respective sale dates, which lie somewhere between the highest and lowest rates of the day, the same cannot be considered as unreasonable by any standard. This demonstrates that the shares were sold by the assessee at the prevailing market rates. It is further evident that even tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision. Income from an exemption provision does not at all enter into computation of total income. If there is a positive income, such income is ignored and thus excluded from taxation and if there is a negative income, namely, loss, then such loss is also ignored and thus neither qualifies for set off against other chargeable incomes nor can be carried forward for a future set off against any other income chargeable to tax. This is on the principle of equality that if positive income from a source is not to be taxed, then on parity, the negative income from the same source should also not get an advantage of set off or carry forward. On the other hand, in the case of a deduction provision, the positive income from the designated source first enters into computation of income, but is then deducted in terms of the eligibility of deduction. In the like manner, if there is a negative income from that designated source, then such loss after entering into computation of income becomes eligible for set off against the other positive incomes subject to other relevant provisions. Here again the principle of equality applies. The essential difference between an exemption and a deduction prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing from transfer of shares etc., held as long term capital assets, on which no STT is paid because of off-market sale transaction, does not fall within purview of section 10(38) and consequently becomes eligible for set off and carry forward as per the other relevant provisions. This is a lacuna in the provision which has been lawfully exploited by the assessee by transferring shares held as long-term capital assets through off market transactions resulting into genuine loss and thus escaping the rigor of the exemption provision contained in section 10(38), which would have otherwise disentitled it to claim set off and carry forward of such a loss. The AO has held these off-market sale transactions as a colorable device and tax avoidance scheme adopted by the assessee to evade payment of legitimate tax due to the exchequer. In our considered opinion, this is a glaring example of tax planning rather than the tax avoidance as has been held by the AO. In view of the fact that the assessee entered into valid transactions of transfer of shares of Bajaj Hindustan Ltd., Tata Consultancy Ltd. and Reliance Communications Ltd. to Shri M.H. Dalmia and Smt. Abha Dalmia, we hold that the loss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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