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TMI Blog1990 (5) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had transferred 10 shares of Synbiotics Ltd. at a figure of Rs. 20,470 by way of capital contribution to the partnership firm M/s Raksha. The ITO on the basis of the detailed discussion in paras 7 to 45 of the assessment order opined that the provisions of s. 52(2) were applicable and the aforesaid transfer of shares attracted tax as long-term capital gains. By resort to s. 52(2), the ITO adopted the fair market valid of the shares at Rs. 24,080 and by reducing therefrom the cost of Rs. 10,000, arrived at capital gains of Rs. 14,080. 3. The ITO also computed a short-term capital gain of Rs. 56,320 on the sale of 40 shares of the same company once again by resort to the provisions of s. 52(2) by taking the fair 'market' value at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated as a ruse or as non-genuine, then the value of these shares should have been subjected to tax in the wealth of the assessee and the dividend income should have been taxed in the income-tax assessments. This according to the learned counsel had not been done from the date on which the contribution was made viz., 1st Oct., 1977. (3) That gift-tax proceedings had been initiated in the case of the firm which subsequently sold these shares. In case it was to be said that that the transaction was not genuine, then how could the firm be subjected to gift-tax at the time of the sale of these shares. (4) That M/s Raksha had been treated as a genuine firm for the assessment year under consideration, viz., 1978-79 and had also granted regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicability of either s. 52(1) or 52(2) should not arise. Further, in case the transaction was not to be accepted as genuine then the logical conclusion which could follow is that the value of 10 shares as also the dividend income thereof be subjected to tax in the hands of the assessee and the capital gains now being sought to be taxed be deleted. It was, however, reiterated that no such thing had been done by the department since the date on which the shares had been contributed, viz., 1st Oct., 1977. In respect of the sale of 40 shares the submission which was made was that the addition made by the ITO be deleted since the provisions of s. 52(2) were not applicable. In support of his arguments the learned counsel for the assessee plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer of 10 shares as capital contribution to the firm and the sale of 40 shares of the same company. Taking up the sale of 40 shares first, we find that no material has beed brought on record by the tax authorities to prove that something over and above the stated consideration of Rs. 2,047 per share had changed hands. We on the one hand have the sale consideration of Rs. 2,047 per share as disclosed Rs. 2,408 per share by the tax authorities is not stated. Relying on the decision of the Supreme Court in the case of K.P. Varghese we delete the addition in so far as it pertains to the sale of 40 shares. The ITO is directed to recompute the capital gains on the basis of the figure of Rs. 2,047 per share as shown by the assessee. 8. As reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame is the situation in so far as the dividend income is concerned. We have already pointed out that the difference between the stated figure of Rs. 2,047 per share and value substituted by the department under s. 52(2)/52(1) viz., Rs. 2,408 is very nominal. The latter figure has no basis whereas the assessee's figure of Rs. 2,047 per share derives further support by its acceptance vis-a-vis the sale of 40 shares of the same company. The Gujarat High Court in the two decisions relied upon by the assessee's counsel have held that the principles of law applicable to a s. 52(2) transaction are good for a transaction under s. 52(1) as well. 9. Before we part with this appeal we may refer to the reliance placed by the learned Departmental Rep ..... X X X X Extracts X X X X X X X X Extracts X X X X
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