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TMI Blog2016 (6) TMI 1199X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company to the companies in which shares were held declaring that the partnership firm is the beneficial owner of the shares. Hence we are of the view that the assessee has adopted a tax planning within the four corners of law and hence the same cannot be considered as a colourable device. Further, the accounts of the assessee have been audited and the same has been approved by the Share holders by adopting the same in the Annual General Meeting. The Hon’ble Supreme Court has held in the case of Apollo Tyres Ltd (2002 (5) TMI 5 - SUPREME Court) that the accounts prepared and audited under the Companies Act, which has been approved by the share holders should not be disturbed by the assessing officer. It is also well settled pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year 2009, in which the assessee held 99% share and the other two partners held 1% shares. The shares held by the assessee were given to the firm as its capital contribution. Subsequently the partnership firm sold the shares and earned Long term capital gain. The assessee received its share of profit from the firm and claimed the same as exempt u/s 10(2A) of the Act and the said amount was excluded from book profits as per the Explanation given in sec. 115JB of the Act. 3. The AO noticed that, if the long term capital gains had been earned by the assessee, the same would have been added to the book profit computed u/s 115JB of the Act. The AO also noticed that the shares were continued to be held by the assessee only in its demat acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rbed by the AO. However, the Ld CIT(A) held that Hon ble Supreme Court has expressed the view in the case of Dynamic Orthopaedic (190 Taxman 288)(SC) that the decision taken in the case of Malayala Manorama (supra) was incorrectly decided and hence the matter was referred to a larger bench. Accordingly he agreed with the view taken by the AO that the assessee has adopted a colourable device to evade minimum alternative tax prescribed u/s 115JB of the Act. Aggrieved, the assessee has filed this appeal before us. 5. We heard the parties and perused the record. The issue, in essence, is whether the arrangement made by the assessee by transferring the shares held by it to a partnership firm, so that the long term capital gain could be earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in a planned manner entered into a pre-mediated transaction of buying and selling units yielding exempted dividends with full knowledge about the fall in the NAV after the record date and the payment of tax-free dividend and, therefore, the loss on sale was not genuine. We find no merit in the above argument of the Department. At the matter covers assessment years before insertion of section 94(7) vide the Finance Act, 2001 with effect from April 1, 2002. With regard to such cases we may state that on the facts it is established that there was a sale . The sale price was received by the assessee. That, the assessee did receive dividend. The fact that the dividend received was tax free is the position recognized under section 10(33) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not entitled to open a demat account. Hence the shares belonging to a partnership firm is usually held in the name of its partner. Further it is seen from the paper book that the partnership firm has filed declaration before the Registrar of Companies that it is the beneficial owner of the shares held by assessee company. Further the declaration in Form No. I, as prescribed under the section 187-C of the Companies Act, has also been filed by the assessee company to the companies in which shares were held declaring that the partnership firm is the beneficial owner of the shares. Hence we are of the view that the assessee has adopted a tax planning within the four corners of law and hence the same cannot be considered as a colourable device. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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