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TMI Blog2022 (7) TMI 1140X X X X Extracts X X X X X X X X Extracts X X X X ..... s were transferred to the company on the buyback terms. In the given case, the transferor is an individual whereas in the case relied by the CIT(A) in which the transferor is the legal entity. As held in the case of R Nagaraja Rao [ 2012 (5) TMI 184 - KARNATAKA HIGH COURT] observed that Partition or family settlement is not transfer. When there is no transfer there is no capital gain and consequently no tax on capital gain is liable to be paid. Therefore, in the given case, the assessee has transferred the shares based on the family settlement as per the direction of CLB, which the Ld CIT(A) has accepted in his order. Therefore, we are incline to accept that the assessee has transferred the shares under family arrangements only. Therefore, we direct the Assessing Officer to allow the claim of the assessee even though the assessee has paid the tax by calculating the capital gain under mistaken belief that this transaction is taxable. The appellate authorities can direct the Assessing Officer to allow the legal claim of the assessee as held in the case of Goetze India [ 2006 (3) TMI 75 - SUPREME COURT] - Appeal of assessee allowed. - ITA No. 186/MUM/2021 - - - Dated:- 13-7-202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the record we found that during the year assessee sold shares of NPCL to the company self. under a family arrangement scheme, endorsed by Company Law Board's order dated 30.03.2006, 13.04.2006 26.02.2007. Long term Capital gain arising out of said sale is Rs. 16.23.94.604/-. Assessee invested the same in house property u/s 54F and residual amount of Rs.2,08,64,396/- was offered for capital gain and paid taxes accordingly Assessee filed its return of income for the present year under assessment on 01.08.2007 declaring a total income of Rs. 2,81,83.911/- which includes the said capital gain. The said return was filed voluntarily by the assessee u/s 139 (1). No revised return has been filed by the assessee till date. However vide AR letter dated 15.05.2008, it is stated that out of ignorance of legal position this has been referred as capital gain although it is not a capital gain.AR relied on the following judgements: CIT Vs. Kay Arr Enterprises Ors. (2008) 215C1R (Mad) 244 CIT Vs.AL Ramanathan (2000) 245 ITR 494 (Mad) CIT Vs. R. Ponnammal (1987) 164 ITR 706 (Mad) 10. We have considered rival contentions and gone through the orders. of the authorities bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined the addition made by the Assessing Officer. Against this order assessee is in appeal before us. 7. Assessee has raised following grounds in its appeal: - 1. On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in confirming the assessment made by the Ld.AO u/s 143(3) r.w.s. 254 of the Act on the ground of levying tax on LTCG of Rs.2,08,64,397/- being capital gains arising from the transfer of shares because of family arrangement. 2. The Appellant craves to add, alter or delete all or modify any or all the above grounds of appeal. 8. At the time of hearing, Ld. AR filed written submissions vide letter dated 13.12.202, for the sake of clarity it is reproduced below: - 2. The brief facts of the case are that the appellant had filed his return of income on 01.08.2007 declaring total income of Rs.2.81.83.911/- for the A.Y. 2007-08. The assessment order was completed us. 143(3) r.w.s. 153B(1)(b) of the Act on 24.10.2008 determining total income at ₹.3,32,58,476/-, after making the following additions. . Sr, No. Particulars Amount (Rs.) 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was received out of family settlement, therefore, not liable to tax. 9. We have considered rival contentions and found that this ground was raised before the AO, however, in view of the fact that assessee has not filed any revised return with regard to the capital gains originally offered in the return of income, the AO has declined to consider assessee's claim of amount having been received under family settlement and not liable to tax. By the impugned order the CIT(A) confirmed the action of AO. From the record we found that during the year assessee sold shares of NPCL to the company self. under a family arrangement scheme, endorsed by Company Law Board's order dated 30.03.2006, 13.04.2006 26.02.2007. Long term Capital gain arising out of said sale is Rs. 16.23.94.604/-. Assessee invested the same in house property u/s 54F and residual amount of Rs.2,08,64,396/- was offered for capital gain and paid taxes accordingly Assessee filed its return of income for the present year under assessment on 01.08.2007 declaring a total income of Rs. 2,81,83.911/- which includes the said capital gain. The said return was filed voluntarily by the assessee u/s 139 (1). No revised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid order passed by the Assessing Officer u/s. 143(3).r.w.s. 254 of the Act. Before the Ld.CIT(A) the appellant had filed the Petition filed by him before the Company Law Board as an additional evidence and a remand report was called for by the Ld. CIT(A) with respect to the same. In the remand report. the Assessing Officer reiterated the contentions made by him in the assessment order as well as further stated that the petition is incomplete and inconclusive and cannot be accepted as additional evidence. 11. The Ld. CIT(A) admitted the petition filed before the Company Law Board as additional evidence u/s. 46A of the Act deeming the evidence crucial and in the interest of substantial Justice. As far as the contention of the Assessing Officer that the appellant had not filed revised return to claim the voluntarily declared the receipt on sale of shares as long-term, capital gains in his return of income, the Ld. CIT(A) observed that the issue of claim of long term capital gains as non-taxable being a family arrangement was matter sub-judice before the Hon'ble ITAT who had restored the matter to the file of the Assessing Officer to decide the matter afresh in the light ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw Board (Page No 12-37 of the Paperbook) and provided as additional evidence before the Ld. CIT(A) brings out the following facts: i. That the entire shareholding of the NPCL is being held by the Petitioners i.e. SAP group and Respondent Nos. 2 to 7 i.e. ANP Group. The SAP group as well as AM Group are all descendants of Natwar C. Parikh and are related to each other as per their family tree (para 2 of the Petition). Further the shareholding of the SAP Group and ANP Group has been tabulated in the para 2.1 of the Petition. ii. At para 5(b) and 5(c) of the Petition, it has been stated that even-though NPCL is a private company. it is a glorified partnership. It had various businesses including the business of development of immovable properties. iii. At para 5(d) of the aforesaid Petition, it has been clearly mentioned that the appellant (being the 1st Petitioner) had from time to time sent e-mail messages and letters complaining about the mismanagement, financial impropriety and oppression by the ANP Group (being the Respondents) in the affairs of NPCL iv. At paras 5(e) to 5(r) of the Petition. the appellant has explained in detail the allegations on how the mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said order further states that 'it is clarified that implementation of the aforesaid buy hack scheme and the making payment of the aforesaid sum of Rs.19,01,80,753/- to SAP ,group. shall not in any manner affect the 50% of the profit of Phase I project agreed to be paid over to and 'or to be compensated to SAP group under the said order dated 30.3.2006. Para 1(c) of the order farther clearly states that 'the amount of Rs.19,01.80,753/- received by SAP group shall be treated as consideration received in respect of such transfer and ANP group shall not be required to make any further payment to SAP group fin- purchase of the ST-11' grow) shareholding.' 19. The consideration received by the SAP group is as under: Sujan Parikh 16,23,94.604/- Mrs. Enakshi Parikh 2,77,86,149/- 19,01,80,750/- 20. From the above it is abundantly clear that the consideration was received by the assessee as a result of re-arrangement of shareholdings in the company, controlled by the joint family, out of a bonafide family arrangement to avoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id settlement must be voluntary and should not be induced by fraud, coercion or undue influence. The members who may be parties to the family arrangement must have some antecedent title, claim or interest even a possible claim in the property which is acknowledged by the parties to the settlement. Even if one of the parties to the settlement has no title but under the arrangement the other party relinquishes all its claims or titles in favour of such a person and acknowledges him to be the sole owner. then the antecedent title must be assumed and the family arrangement will he upheld and the courts will find no difficulty in giving assent to the same-. Relying on the above judgments the Income-tax Appellate Tribunal-Bangalore in the case of Mrs.P. Sheela V. Income Tax officer 120091 308 ITR (A, T,) 0350 (Page No 78-83 0/ the Paperbook) held the following: `,......notwithstanding the fact that the assessee is a married woman, and becomes a member of husband's family by virtue of marriage, the antecedents with Ramesh Pars family remains intact and family ties are not severed. She being part of Ramesh Pars family and carrying that name still as a daughter of the family, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 26.02.2007. The relevant para of' the order of the Hon* Me Tribunal is reproduced hereunder as ready reference: 9. We have considered rival contentions and found that this ground was raised he/ore the AO, however, in view of the fact that assessee has not filed any revised return with regard to the capital gains originally offered in the return of income, the AO has declined to consider assessee 's claim of amount having been received under family settlement and not liable to tax. By the impugned order the CIT(A) confirmed the action of AO. From the record we found that during the year assessee sold shares of NPCL to the company itself, under a family arrangement scheme, endorsed hi' Company Law Board's order dated 30.03.2006, 13.04.2006 26.02.2007........ 24. Thus, the Ld. AO as well as the Ld. CIT(A) cannot now divert from the view taken by the Assessing Officer in the original assessment order passed u/s. 143(3) r.w.s. 153B(1)(b) of' the Act on 24.10.2008 and the binding decision of the Hon'ble Tribunal vide order dated 04.11.2016 wherein it has been categorically found that transfer of shares by the appellant was due to family arrangemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the subject-matter of a transaction, that is, partition or a family arrangement. So there is a adjustment of shares. crystallization of the respective rights in the family properties and therefore it cannot the construed as a transfer in the eye of law. When there is no transfer, there is no capital gain and consequently no tax on capital gain is liable to he paid. The Tribunal on a proper consideration of the entire material on record has categorically held that the transaction in question is a family arrangement. There is no transfer, there is no capital gain and therefore there is no liability to pay capital gain lax. The order is in accordance with law. The substantial questions of law are answered in favour of the assessee and against the Revenue. No merits in this appeal. Accordingly, this appeal is dismissed. 26. Reliance is also placed on the decision of the Hon'ble Delhi Tribunal in the case of Gonad Kumar Khemka vs. ACIT reported at (2020) 207 TTJ (Del) 393 (Page No 94-105 of the Paperbook) wherein the Hon'ble Delhi Tribunal has held that it is well settled law that partition or family settlement is not a transfer. The relevant para of the order is reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (P) Ltd. to' other family members in pursuance of family arrangement/settlement. The Revenue had objected by stating that the appellant company was not a family member and therefore. the were not part of family settlement. It has been categorically stated by the Hon'ble Bombay High Court that it is not dealing with the case of the family members, who were party to the family settlement but the sale of shares by the appellant company who was not a part of the family settlement. With respect to the same, it is stated that the in the case of appellant. it is not the case of transfer of shares by any company to another person rather in the case of the appellant, being a family member i.e. SAP Group ANP Group he himself had sold his shares in NPCL as a part of the family settlement and has received consideration towards the same. The Company Law Board had provided an option to ANP Group to either buyback the shares of the appellant through NPCL or directly purchase the shares from the appellant. The appellant, part of the SAP Group is a family member and had disputes with ANP Group. To settle the dispute, the appellant being a family member and part of the family settleme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves the compensation as set out by the CLB. In this case, the ANP Group has decided to buy back the shares in the NPCL itself. Therefore, it is not proper on the part of the tax authorities to take divergent view without their being proper reasons. 11. Coming to another objection raised by the Ld CIT(A) that as per the decision in the case of B A Mohota Textiles (supra), it was held that the assessee company to transfer shares held by it in another company in favour of certain family members, will be required to pay the capital gains tax since the assessee was a separate legal entity. We observe that in the case under consideration, there is no doubt that there is a family arrangement and based the condition specified in the order passed by CLB, the shares were transferred to the company on the buyback terms. In the given case, the transferor is an individual whereas in the case relied by the CIT(A) in which the transferor is the legal entity. As held in the case of R Nagaraja Rao (supra), the Hon ble Karnataka High Court observed that Partition or family settlement is not transfer. When there is no transfer there is no capital gain and consequently no tax on capital gain is lia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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