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TMI Blog2016 (4) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... o law and based on erroneous understanding of the facts. 3. On appreciation of the facts and circumstances of the case and law, the Learned Commissioner of Income Tax (Appeals) has erred in confirming the addition made by the Learned assessing Officer to the tune of Rs. 35,04,75,000/- being surplus on sale of shares received as gift to the book profit for taxation U/s. 115JB. The action of the Learned Commissioner of Income Tax (Appeals) is contrary to the facts and law and deserves to be deleted. 4. The appellant craves to add, amend, modify or alter the above grounds of appeal at any stage of appellate proceedings. 5. The appellant humbly prays that the appeal be allowed in to to. 3. Briefly stated facts are that the assessee is a private limited company which had filed its return of income on 19.10.2007 declaring total income of Rs. 20,28,88,690/- under the regular provisions of the Act and Rs. 7,91,99,923/- u/s 115JB of the Act. The case was selected for scrutiny assessment and notice u/s 143(2) of the Act was issued on 28.08.2008 and served upon the assessee on 1.9.2008. The company is basically an investment company, holding group investments. During the Financial Year un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment for the year under consideration was framed by the AO solely based on the observations of his predecessor AO for Asstt. Year 2003-2004. It is seen that the AO had re-produced the observation of his predecessor AO for Asstt. Year 2003-2004 in the assessment order. It is also seen that for Asstt. Year 2003- 2004, my predecessor CIT(Appeal) had observed asunder:- "I have perused the facts of the case and the arguments put forward by the appellant company. I agree with the appellant company that gifts do not constitute income and that gift cannot be treated as receipts in the profit and loss accounts as per the prevailing accounting standards. Any how the Long Term Capital Gains represent profits of the company which should have been credited to the profit and loss accounts as per the accounting principles. The decision of the Apex Court in the Apollo Tyres Ltd do not authorize the A.O. to scrutinize the net profit of the company prepared in accordance with the part It and III of schedule VI to the Companies Act. In this case the issue in dispute is different. Accordingly I am inclined to agree with the A.O. to the extent that profit on sale of shares should have been par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apex Court has been followed in the following other decisions:- a. Malayala Manorama Co. Ltd vs. CIT [2008] 300 ITR 251 (SC) b. CIT vs. HCL Comnet Systems and Services Ltd [2008] 305 ITR 409 (SC), c. CIT-I Vs. Vijayashree Finance and Investment Co. Pvt. Ltd 2 DTR 38 [216 CTR (Madra) 191], d. CIT Vs. Rubamin P. Ltd [2009] 312 ITR 18 (Guj), e. CIT Vs. Kovai Maruthi Paper and Board P. Ltd [2007] 294 57 (Mad), f. CIT Vs. Adbhut Trading Co. P. Ltd [2011] 338 ITR 94 (Bom), and g. CIT Vs. Akshay Textiles Trading and Agencies P. Ltd [2008] 304 ITR (Bom) 2. Proceeds on sale of gifted shares cannot be credited to P &L A/c a. Shares received as gift do not constitute 'investment' and hence gains on sale of the aforesaid shares are not required to be routed through the profit and loss account. Learned Sr. Counsel submitted that since the gift cannot be equated with investment, the Appellant is justify in crediting the sale proceeds of the gifted shares directly to capital account without routing through profit and loss account. He therefore submitted that the said credit should not be taken into account for purposes of calculation of profits under Section 115JB and the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e up ITA No.1557/Ahd/2012 for Asst. Year 2007-08 (Revenue's appeal) wherein following grounds have been raised :- 1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in the shares received by the appellant company from the Bilakhia Family members constitutes a gift in the hands of the assessee. 2. It is therefore prayed that the order of the learned CIT(A) be set aside and that of the Assessing Officer be restored. 3. The appellant craves to add, alter or amend any grounds of appeal. 11. The only issue before us is to examine whether ld. CIT(A) has erred in holding the shares received by the assessee company from the Bilakhia family members constitutes a gift in the hands of the assessee. 11.1 We have heard the rival contentions and perused the material on record, we find that in the case of Addl.CIT vs. Bilakhia Holding Pvt. Ltd. & others in ITA Nos.981 to 985/Ahd/2009 for Asst. Years 2001-02 to 2006-07 vide its order dated 30.05.2014 has the coordinate bench has dealt with similar issue and held as under :- 10. The issue before us is whether the transfer of the shares of Nestle India Ltd and Hindustan Lever Ltd held by the members of Bilak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness and companies of the parties hereto are under the control and joint management of the three-brothers viz. Yunus, Anjum and Zakir 6. To avoid any future disputes, differences and disagreements which may affect the peace, harmony, honour, and prestige of the family or the parties as also affect the various business and assets and with a view to always remain a joint close knit family, the parties have agreed that each of the three brother: namely Yunus, Anjum and Zakir should have equal rights and owner ship in the various business and assets except when specifically provided otherwise. 7. Yunus, Anjum and Zakir have equal shareholding in Bilakhia Holdings P Limited ("BHL ") Each of Yunus, Anjum and Zakir shall create a separate trust and transfer to such trust and transfer to such trust their shareholding in BHL so that the existing share capital of BHL shall be held by the individual trusts so created. 8. Pursuant to the arrangement arrived at between the parties and with a view to consolidate their respective assets, investments and interests in the family business and assets, the parties hereto have agreed that BHL shall he the main holding company which shall hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being settled in monetary terms by resorting to arbitration and in case such settlements is not done, matter travels to the court and the family suffers heavily not only mentally but also financially. There is a proverb according to which it is said that a person who wins a case actually looses it as by the time matter is settled in his favour he is already a ruined person. Thus, in this case it cannot be said that the consideration for transfer of shares was not for monetary consideration. Now coming to the aspect whether this act of transfer of shares was voluntary or not. Since this transfer was in pursuance of family arrangement, the same was not voluntary as the family arrangement was enforceable and binding on the parties. The argument made on behalf of the assessee that since the family arrangement was voluntary the subsequent action of the parties to the arrangement was also be considered voluntary and for making this submission it was submitted that if ld. DR's contention is accepted then no transfer effected pursuant to an agreement be regarded as voluntary. We find this argument advanced by asssessee devoid of any merit because if this argument of the assessee is accept ..... X X X X Extracts X X X X X X X X Extracts X X X X
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