Glebe Trading Pvt. Ltd. Vs ITO (ITAT Delhi)
The issue under consideration is whether A.O. is correct in holding that shares of listed companies received by the appellant company as gift without consideration, as part of internal family realignment amongst members of the family, could not be regarded as valid “gift”, and further considering the same to be sham and colorable transactions?
In the given case, the A.O. made addition in the hands of the beneficiary within the provisions of Section 2(24) (iv) of the Income Tax Act, 1961. There is no addition made in the hands of the assessee company.
The words benefit and perquisite are used in this clause of sub-section (24) to Section 2. Whether gifting shares amounts any benefit or perquisite has to be looked into. In the present case at one point the Assessing Officer has stated that there is benefit to assessee company but at the same time states that the transaction of gift of shares held by Mrs. Arti Jindal in the assessee company to M/s PRJ Holding Private Trust was not valid and was a sham and void transaction which was undertaken to avoid tax.But from the MOU submitted by the assessee company it can be clearly seen that it a family arrangement and internal family realignment amongst the members of the family of Late Shri O.P. Jindal and cannot be taken as gift. The chart reproduced in the Assessment Order clearly shows that it is not a gift but a family arrangement and these kind of family arrangement cannot be termed as gift/benefit or perquisite.
The Assessing Officer by lifting the corporate veil, without providing any cogent reasons, and without appreciating that the beneficiary never obtained any benefit from this transaction at any time cannot comment on the said transaction as sham and bogus. Thus, the observations made by the Assessing Officer in the present assessment order are without any jurisdiction. In fact, the Assessing Officer overstepped the provisions of the Income Tax Act wherein the Assessment is nil in the case of present Assessee company and commented on the third party assessee which is not permissible under the Act. The appeal of the assessee is allowed.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal is filed by the assessee against the order dated 24/09/2018 passed by CIT(A)-35, New Delhi for Assessment Year 2014-15.
2. The grounds of appeal are as under:-
“1. That on the facts and circumstances of the case and in law, the Ld.C17(A) erred in dismissing the appeal filed by the assessee and failing to adjudicate the grounds raised by the assessee, challenging the extraneous and extra-jurisdictional findings/ observations of the Assessing Officer in the assessment order.
2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that the following observations/findings in the assessment order were in total disregard of appellant’s factual and legal submissions, were erroneous, extraneous, unsubstantiated, false, baseless and founded on conjectures and surmises, and therefore ought to have been set aside by the Ld. CIT(A).
2.1. That the assessing officer erred in holding that shares of listed companies received by the appellant company as gift without consideration, as part of internal family realignment amongst members of the family, could not be regarded as valid “gift”, and further grossly erred in alleging the same to be sham and colorable transactions, without any cogent reasons. That the assessing officer ought to have appreciated that the gift was given in compliance with necessary statutory provisions, after obtaining necessary authorizations and after following the due process under the law.
2.2 That the assessing officer, despite making no addition in the hands of the Appellant, exceeded his jurisdiction in alleging that benefit arose to the Appellant through receipt of shares from various companies and holding the same to be taxable under section 2(24)(iv) of the Income Tax Act, 1961 (“the Act”) in the hands of Mrs. Arti Jindal alleged to be the beneficiary, by lifting the corporate veil, without providing any cogent reasons, and without appreciating that the alleged beneficiary never obtained any benefit from this transaction at any time.
2.3. That the assessing officer erred in holding that the transaction of gift of shares held by Mrs. Arti Jindal in the Appellant company to M/ s PRJ Holding Private Trust was not valid and was a sham and void transaction which was undertaken to avoid tax.
3. That on the facts and circumstances of the case and in law, Ld. CIT(A) ought to have appreciated that the findings in the assessment order pertaining to taxation of alleged benefit in the hands of the alleged beneficiary under section 2(24)(iv) of the Act, besides being beyond jurisdiction, are capricious and violative of principles of natural justice and fair play.
3. The assessee is an investment company. Return of income was electronically filed on 29/09/2014 declaring total income of Rs. 2,75,836/-. During the course of assessment proceedings, the Assessing Officer observed that the assessee company has claimed to receive shares of various companies from various companies as gift without paying any consideration. The details of which are as under:-
