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TMI Blog2017 (4) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee computed u/s. 115JB of the Act. 2. The facts relating to the issue are set out in brief. The assessee is a private limited company covered by the provisions of section 115JB of the Act. The assessee along with three other partners formed a partnership firm by name M/s. S.K. Enterprise. The assessee-company held certain shares in another company named M/s. Asian Star Company Ltd. Upon formation of the partnership firm, the assessee-company transferred 3,14,127 shares of M/s. Asian Star Company Ltd. to the partnership firm cited above as its capital contribution. The partnership firm sold 99,394 shares of M/s. Asian Star Company Ltd. in financial year 2010-11 and earned long term capital gain of Rs. 8.66 crores. The assessee re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st the order dated 7-04- 2014 passed by ld CIT(A)-37, Mumbai and it relates to the assessment year 2011-12. The assessee is aggrieved by the decision of Ld CIT(A) in upholding that the long term capital gain earned by a partnership firm, in which the assessee is the major partner, is includible in book profit computed u/s 115JB of the Act. 2. The facts relating to the issue are set out in brief. The assessee is a private limited company liable to pay tax on book profit u/s 115JB of the Act. It held equity shares in some companies. The assessee along with two of its directors formed a partnership firm in the year 2009, in which the assessee held 99% share and the other two partners held 1% shares. The shares held by the assessee were give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Vodafone International Holdings BV Vs. Union of India (17 Taxmann.com 202), yet the same did not find favour with the AO. Accordingly he included the long term capital gains earned by the partnership firm as income of the assessee while computing the book profit u/s 115JB of the Act. 4. Before Ld CIT(A), the assessee placed reliance on the decisions rendered by the Hon'ble Supreme Court in the cases of Apollo Tyres Ltd (255 ITR 273) and the decision rendered in the case of Malayala Manorama Ltd (300 ITR 251) to contend that the accounts adopted in the Annual General Meeting should not be disturbed 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 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter declaration of the dividend, the net asset value of the mutual fund units would go down and upon selling the units purchased, the assessee would incur loss. The dividend income was claimed as exempt and the loss was set off against the other income. The revenue took the view that the assessee has adopted a pre-planned method to claim exemption as well as set off. The Hon'ble Supreme Court held as under: "The real objection of the Department appears to be that the assessee is getting tax free dividend; that at the same time it is claiming loss on sale of the units; that the assessee had purposely and in a planned manner entered into a pre-mediated transaction of buying and selling units yielding exempted dividends with full knowledge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed the colourable device against the legitimate tax planning adopted by the assessee within four corners of the law. Hence, every tax planning cannot be considered to be a colourable device, if it is otherwise made within the provisions of the Act. 7. In the instant case, the formation of partnership firm and transfer of shares held by the assessee as its capital contribution has not been doubted with. With regard to the observations that the shares were continued to be held in the demat account of the assessee, the Ld A.R submitted that a partnership firm cannot become a share holder and hence it is not entitled to open a demat account. Hence the shares belonging to a partnership firm is usually held in the name of its partner. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as filed its return of income for the year under consideration on 30-07-2011. It is stated that the return of income has been accepted as it is by the department. 10. In view of the foregoing, we are of the view that the assessee has adopted a legitimate tax planning within the provisions of the Act and the same cannot be considered to be a colourable device. Accordingly we set aside the order of Ld CIT(A) and direct the AO to exclude the share income from the partnership firm while computing the book profit u/s 115JB of the Act. 11. In the result, the appeal filed by the assessee is allowed." 5. Since the facts are identical in the instant case, consistent with the view taken by the co-ordinate bench in the case of M/s. Rahil Impex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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