Case Law Details
Manjula Finance Ltd Vs ITO (ITAT Delhi)
It is an undisputed fact that the assessee being the absolute owner of the shares gifted , had full enjoyment rights including to alienate, discard and even demolish, unless prohibited by some statutory provisions, it is within the powers of the assessee to make gift at its free will. Further the shares were credited in the books of account of the donor. The gift is also authorised by articles of association, approved by Board of Directors and Shareholders. Assessee heavily relied upon the decision of the coordinate bench in case of Glebe Trading Private Limited Versus Income Tax Officer (2020) 116 taxmann.com 866 (Delhi) to state that when the assessee in that case received certain shares from various companies as gift without paying any consideration the same was also not chargeable to tax in view of family settlement of Jindal group. We have carefully considered the facts of that case and found that those facts are distinct with the case before us. In that particular case there was no addition in the hands of the appellant donee company but the appeal was merely against a direction by the learned assessing officer to tax the above sum in the hands of the beneficiary by applying the provisions of Section 2 (24) (iv) of the income tax act in the hands of one Ms Arti Jindal while assessing the case of the appellant company. The only grievance in that appeal was that despite no addition was made in the hands of that appellant company, the learned assessing officer’s jurisdiction was challenged wherein it has been held that benefit arose to the shareholder of the appellant company by invoking the above provisions of the income tax act. Here we do not have any issue about the taxability of sum in the hands of the donee companies. In fact those have been assessed and there is no addition in the hands of those companies, even otherwise we are not concerned with that /and issue before us is only about taxation of gift in the hands of the donor company. Therefore reliance on that particular judgment does not apply to the facts of the present case.
It would be proper here referred to the judgment of the coordinate bench in case of Gagan Infra Energy Ltd (2018) 94 taxmann.com 301 (Delhi) wherein the matter was set aside to the file of the learned assessing officer only with a direction with respect to establish the genuineness and validity of the alleged transaction as also in that case the memorandum of family settlement in case of OP Jindal group family was not produced and there was no power with the assessee to give f gift in Articles of association of the company. Assessee , in that particular case could not show that articles of association of that company provided for authorizing the company to make gift. However in the present case before us, we have already held that in view of the decision of the honourable Bombay High Court and honourable Karnataka High Court (317 ITR 253) clearly state that the corporate entity is cannot be part of family so far as the taxability of family arrangement is to be determined. Further there is a provision in articles of association in the case before us for making gift of the assets of the company, which is also not disputed by revenue. Further above judgment did not consider the above two decisions of the honourable High Courts and further it went on the issue of nonproduction of family agreement. In the impugned case, we have held that the transfer of shares held by assessee as stock in trade shown as a gift to a corporate donee it does not have any impact of any family arrangement as corporate entity is cannot be held to be part of a family by any extent.
We have also asked the learned departmental representative to specifically show us any provision in the Income tax Act which provides for taxation of gift of stock in trade in the hands of the Donor by imputing market value. No such specific references to section were made. No such provision was shown to us by the ld DR. The issue before us is prior to insertion of Chapter X- A in The Income Tax Act.
Honourable Supreme Court in case of Kika Bhai Premchand V CIT 24 ITR 506 on the facts of the case that assessee was a dealer in silver and shares and he was the sole owner of the business. The assessee maintained his accounts according to the mercantile system and valued his stock at cost price both at the beginning and at the end of a year. During the relevant year of account the assessee withdrew some silver bars and shares from the business and settled them on certain trusts in which he was the managing trustee. In his books the assessee credited the business with the cost price of the bars and shares so withdrawn. The Income-tax authorities held that the assessee derived income from the stock-in-trade thus transferred and assessed him on a certain sum being the difference between the cost price of the silver bars and shares and their market value at the date of their withdrawal from the business. The coordinate bench and the honourable High Court upheld the action of the Income-tax authorities. On appeal to the honourable Supreme Court, it was held that no income arose to the assessee as a result of the transfer of shares and silver bars to the trustees. The facts of the present case are identical as assessee also withdrew stock in trade and debited it to reserve and surplus by gifting those shares to different corporate entities , Ld assessing officer taxed as income the difference between the cost and market value of such stock in trade. Thus, the issue is also squarely covered by the decision of the honourable Supreme Court in favour of the assessee.
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