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TMI Blog2016 (8) TMI 1419X X X X Extracts X X X X X X X X Extracts X X X X ..... f gift agreement is prima facie approved. - assessee grounds are allowed. Gift transaction is done only between the biological persons and not the firms and the companies - HELD THAT:- The decision of the Tribunal in the case of DP World (P) Ltd [2012 (10) TMI 444 - ITAT MUMBAI] KDA Enterprises [2015 (4) TMI 9 - ITAT MUMBAI] are relevant for the legal proposition that the gifts transferred by the Indian company to the foreign company constitutes a valid gift and the transfer is an exempt transfer u/s 47(iii) of the Act. Further, we accept the Counsel‟s proposition that share transfer by way of gift is allowable u/s 56(2)(viia) & 56(2)(viib) - assessee grounds are allowed. Applicability of provisions of section 28(iv) of the Act. - HELD THAT:- These provisions imply the arising of any benefit / perquisite to the assessee-firm. On facts of the present case, we find, there is no such any benefit or perquisite to the assessee firm by transfer of shares of UPL and UEL to NCPL. Assessee is the transferor and gained nothing in the process. It is the finding of the CIT (A) that the assessee did not receive any consideration - assessee grounds are allowed. Disallowing mainte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a show cause notice and consequently violating the principles of natural justice by not providing an adequate and reasonable opportunity of being heard. 3. On the facts and in the circumstances of the case and in law, the CIT (A) also erred in holding that the fair market value of shares of UPL and UEL gifted by the appellant to NCPL is taxable in the hands of the partners of the appellant firm under section 28(iv) as a benefit arising in the course of business in proportion of share of profit / loss of each partner as per the partnership deed. 4.1. On the facts and in the circumstances of the case and in law, the CIT (A) erred in confirming the action of the AO in holding the aforesaid transaction of gifting of UPL and UEL shares to NCPL as a colourable device to avoid tax by applying the decision of the Supreme Court in the case of McDowell Co Ltd (154 ITR 148). 4.2. On the facts and in the circumstances of the case and in law, the CIT (A) erred in making various observations which are factually incorrect and contrary to the fact available on record which the appellant craves leave to elucidate at the time of hearing, leading to perverse finding that the afore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ismiss the appeal of the assessee eventually by holding that the said share transfer transaction attracts the provisions of section 45(4) read with section 48 of the Act. Alternatively, according to the CIT (A), the provisions of section 28(iv) of the Act apply to these share transactions. In the impugned order, CIT (A) underlined the fact that the Transfer Agreement does not refer to the expression gift . Further, CIT (A) also mentioned that the transfer of shares is a part of colourable device and applied the ratio of the judgment in the case of McDowell Co. Ltd (supra). Further, Ld CIT (A) is of the view (para 5.3.4 of his order) that the word gift‟ as appeared in section 47(iii) of the Act should be understood as the gift between two biological persons only and not the present ones which are between the firm and the company-NCPL. Ld CIT (A) also reasoned that the transfer of shares by the assessee to NCPL cannot be voluntary act given fact that the said transfer is aimed at consolidation of all the shares of UPL and UEL held by many holders in the hands of NCPL. Accordingly, CIT (A) rejected the assessee‟s claim that the said transaction is covered by the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds certain shares of UPL and UEL and the same are transferred voluntarily to NCPL without any consideration. Assessee firm continues to exist and it is not dissolved and profits or gains never arose to the partners by transfer of capital asset by way of dissolution of the firm. Therefore, as per the Ld AR subsection (4) to section 45 of the Act has no application to the facts of the present case. In this regard, Ld Counsel for the assessee brought our attention to the relevant provisions. Further, relying on the Ahmedabad High Court judgment in the case of M/s. Prakriya Pharmachem vs. ITO in Special Civil Application No.20492 of 2015, dated 18.1.2016, Ld Counsel for the assessee submitted that this firm is one of the 17 concerns who similarly gifted shares, like the present assessee, by entering into the identical Transfer Agreement. In this case also, AO invoked the provisions of section 45(1) of the Act treating the transactions as earning of capital gains and denied the benefit of section 47(iii) of the Act. On this issue, Hon‟ble High Court came to a conclusion that section 45 has no application to the transaction and being a case of gift of shares, the provisions of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Enterprises Pvt Ltd (2015) 39 ITR (Trib.) 657 (paras, 27, 31 and 39 of the said Tribunal‟s order are relevant) to support the view that the gifts are given by all the persons. 8. We have heard both the parties and perused the orders of the Revenue Authorities and the case laws cited before us. It is informed to us that there is no cross appeal in this case by the Revenue. The Assessing Officer invoked the provisions of section 45(1) r.w.s 48 of the Act for taxing the transaction of transfer of shares. The AO‟s approach in invoking the provisions of section 45(1) of the Act was not approved by the CIT (A) as there was no aspects payment received by the assessee. He confirmed the addition by invoking the provisions of section 45(4) of the Act and alternatively the provisions of section 28(iv) of the Act were invoked. 9. In this regard, after hearing both the parties, we have perused the relevant provisions of section 45(4) and section 28(iv) of the Act. For the sake of completeness of this order, we extract the above provisions as under:- Sec. 45.(4):- The profits or gains arising from the transfer of a capital asset by way of distribution of capital asset ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (1) of section 45 of the Act considering the absence of full value of consideration . Therefore, the provisions of subsection (1) (4) of section 45 of the Act have no application to the impugned transactions. These arguments of the Ld AR for the assessee are allowed. Relevant findings of the Revenue (AO / CIT (A)) stand reversed. 11. We have also perused the relevant recitals and the clauses from the transfer agreement‟ and find relevant to extract the same as under: Recitals: A...... B. transferors on their own volition desires to transfer the above Equity Interests to Transferee without consideration in terms of money or kind.. Clause 1.1 reads as under,- 1.1 Contribution of equity interests. Upon the terms and subject to the conditions set forth in this Agreement as of (4.pm) on the Effective Date...Transferors hereby voluntarily transfers and conveys irrevocably and forever, the Equity interests to Transferee without consideration and Transferee hereby accepts from Transferors the Equity interests ; 11.1. From the above, we find that the Equity interests are transferred by the assessee without consideration and it was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share transfer by way of gift is allowable u/s 56(2)(viia) 56(2)(viib) of the Act. 13. Similarly, we analyse the provisions of section 28(iv) of the Act. These provisions imply the arising of any benefit / perquisite to the assessee-firm. On facts of the present case, we find, there is no such any benefit or perquisite to the assessee firm by transfer of shares of UPL and UEL to NCPL. Assessee is the transferor and gained nothing in the process. It is the finding of the CIT (A) that the assessee did not receive any consideration. 14. Considering the above, we are of the opinion, there is no case for invoking the provisions of the said sections in the present case. Accordingly, the order of the CIT (A) is required to the reversed. Thus, the grounds no. 2 to 4 raised by the assessee are allowed. 15. Ground no.1 relates to the allowability of maintenance charges for the purpose of calculating the ALV of the property. In support of the assessee‟s claim, revising the ALV to the extent of maintenance charges on par with the municipal charges, assessee relied on the coordinate Bench decision in the case of Sharmila Tagore vs. JCIT (2005) 93 TTJ Mum 483. 16. On the o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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