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TMI Blog1978 (2) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares as on the 1st day of January, 1954, under the second proviso to sub-section (2) of section 12B of the Indian Income-tax Act, 1922, in place of cost price. The Income-tax Officer worked out the fair market value of the shares on the basis of the break-up value as on the 1st January, 1954, at Rs. 14.62 per share. With regard to the sale price the Income-tax Officer found that the sales were effected by the assessee at Rs. 2.25 per share. On the facts of the case, the Income-tax Officer held that the sales were to persons with whom the assessee was directly or indirectly connected as the assessee was a Birla group of concerns and the sales were to the members of the Birla family. In those circumstances, the Income-tax Officer came t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable only if : (i) the person acquiring the share, that is, the purchaser, is one with whom the assessee is directly or indirectly connected ; and (ii) the Income-tax Officer has reason to believe that the sale, that is, the only type of transaction relevant here, was effected with the object of avoidance or reduction of liability under this section. It was urged before the Tribunal on behalf of the assessee that there could not be and was no direct or indirect connection between the assessee, a limited company, and the purchasers, the individuals. The Tribunal, for the purpose of considering the argument of the revenue, assumed in favour of the revenue that the shares were sold to persons with whom the assessee was directly or indire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n an assessee in respect of profits or gains arising from the sale, exchange, relinquishment or transfer of a capital asset effected after the 31st day of March, 1956, and such profits and gains would be deemed to be the income of the previous year in which the sale, exchange, relinquishment or transfer took place. The first proviso to sub-section (2) of section 12B provides that where a person who acquires a capital asset from the assessee is a person with whom the assessee is directly or indirectly connected and the income-tax Officer has reason to believe that the sale, exchange, relinquishment or transfer was effected with the object of avoidance or reduction of the liability of the assessee under this section, the full consideration fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndian Income-tax Act. If there was no liability then no question arises of attempt being made at the reduction of liability to tax and of entering into transaction with that view in the end. The second condition of the first proviso to the sub-section requires that the sale, exchange, relinquishment or transfer must be with the object of avoidance or reduction of "liability of the assessee under the section". But if there is no liability or if the transaction is of such a nature that no liability could arise, then in our opinion there cannot be any attempt to reduce the liability by selling at a value less than the fair market value. Such a finding by the Tribunal cannot be described as perverse in the sense that no reasonable person can co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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