Shri Brijmohan Devkinandan Chiripal, Ahmedabad V. The Dy.CIT.,Circle-11, Ahmedabad

CO 218/AHD/2010

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8197 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-01-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 26-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 29-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C O NO AHD
• Keywords: Capital asset; Gift; Salary income; Retrospective amendment; Cost of acquisition; Scheme of amalgamation
• Section: 68

Judgement Text

ITA NO 2100/ AHD/2010 WITH C.O.218/AHD/ 2010 . ASSESSMENT Y EAR 2007- 08 . 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO.2100/AHD/2010 (BY REVENUE) C.O. NO. 218/AHD/2010 (BY ASSESS EE) (ARISING OUT OF I TA NO.2100/AHD/2010) (ASSESSMENT YEAR: 2007-08) DEPUTY COMMISSIONER OF INCOME TAX,CIRCLE-11, ROOM NO.118, NARAYAN CHAMBERS, BEHRU BRIDGE CORNER, ASHRAM ROAD, AHMEDABAD. (APPELLANT) VS. SHRI BIRJMOHAN DEVKIANDAN CHIRIPAL, 283 NEW CLOTH MARKET, OUTSIDE RAIPUR GATE, AHMEDABAD. (RESPONDENT) PAN: AACPA7904K APPELLANT BY : MR.T. SHANKAR, SR. D.R. RESPONDENT BY : MR. P. M. MEHTA. ( )/ ORDER DATE OF HEARING : 26-11-20 12 DATE OF PRONOUNCEMENT : 4 -4-2013 PER: SHRI ANIL CHATURVEDI, A.M. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF LD. CIT (A)- XVI, AHMEDABAD DATED 7-4-2010 FOR THE ASSESSMENT YE AR 2007-08. ASSESSEE HAS ALSO FILED CROSS OBJECTION AGAINST THE SAME ORDER PASSED BY THE LD. CIT (A)-XVI, AHMEDABAD. THE GROUNDS OF APPE AL RAISED BY REVENUE READ AS UNDER: ITA NO 2100/ AHD/2010 WITH C.O.218/AHD/ 2010 . ASSESSMENT Y EAR 2007- 08 . 2 1. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN DE LETING A ADDITION OF RS.55,45,500/- U/S. 68 OF THE ACT. 2. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FINDING OF A.O. THAT CONSEQUENT TO THE SCHEME OF AM ALGAMATION THE ASSESSEE ACQUIRED THE SHARES OF AMALGAMATING COMPAN Y IN THE NAME OF GIFTS AND A.O. HAS RIGHTLY CALCULATED COST OF AC QUISITION OF SHARES U/S. 49(2C) OF THE ACT. 3. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FINDING OF THE A.O. THAT ASSESSEE HAS EXCESS CR EDITED THE AMOUNT OF GIFTED SHARES I THE BOOKS OF ACCOUNTS AND ACCORD INGLY, ADDITION U/S. 68 OF THE ACT HAS BEEN RIGHTLY MADE. 2. THE C.O. RAISED BY THE ASSESSEE READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT (A) SHOULD HAVE FURTHER HELD THAT ADDITION MADE U/S. 68 IS WHOLLY CONTRARY TO LAW ADDITION FOR THIS REASON ALSO IT DESERVES TO BE DELETED. 2. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE, THE CIT (A) SHOULD HAVE ALSO HELD THAT EVEN F OR THE VALUATION OF SHARES RECEIVED IN GIFT PROVISIONS OF SECTION 49(2C ) WERE NOT AT ALL ATTRACTED BECAUSE IT WAS NOT AT ALL A CASE OF DEMER GER OF COMPANIES AND ON THE OTHER HAND IT WAS A CASE OF AMALGAMATION . 3. THE BRIEF FACTS AS CULLED OUT FROM THE ASSESSMEN T ORDERS ARE AS UNDER. 4. THE ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM SALARY AND INCOME FROM OTHER SOURCES. HE FILED HIS RETURN OF INCOME O N 9-10-2007 DECLARING TOTAL INCOME OF RS.27,62,620/-. THE CASE WAS SELECT ED FOR SCRUTINY AND ITA NO 2100/ AHD/2010 WITH C.O.218/AHD/ 2010 . ASSESSMENT Y EAR 2007- 08 . 3 THEREAFTER THE ASSESSMENT WAS FRAMED U/S.143(3) VID E ORDER DATED 31-12- 2009. 5. ON PERUSING THE CAPITAL ACCOUNT FILED BY THE ASS ESSEE A.O. NOTICED THAT THE ASSESSEE HAS SHOWN RECEIPT OF 19,70,000 EQ UITY SHARES OF CHIRIPAL INDUSTRIES LTD., AS GIFT FROM RELATIVES AND CREDITE D CAPITAL ACCOUNT BY RS.1,61,88,500/- BEING THE COST OF SHARES IN THE HA NDS OF DONORS. THE A.O. VIDE SHOW CAUSE NOTICE ASKED THE ASSESSEE TO SUBMIT DETAILS OF THE GIFTS. AFTER CONSIDERING THE REPLY OF THE ASSESSEE A.O. OB SERVED THAT ASSESSEE HAD RECEIVED GIFT OF SHARES FROM 4 RELATIVES ON 25- 10-2009. THESE FOUR RELATIVES ORIGINALLY HELD SHARES OF SHANTI PROCESSO RS LTD. AND CHIRIPAL TWISTERS & SIZERS PVT.LTD., WHICH WERE ACQUIRED BY THEM ON VARIOUS DATES. BY VIRTUE OF THE SCHEME OF AMALGAMATION WHICH WAS A PPROVED BY THE HONBLE HIGH COURT OF GUJARAT VIDE ORDER DATED 31-3 -2006 WHICH BECAME EFFECTIVE FROM 25-4-2006 WITH RETROSPECTIVE EFFECT FROM 1-4-2005 SHANTI PROCESSORS LTD., MERGED WITH CHIRIPAL INDUSTRIES LT D. AS PER THE SCHEME OF AMALGAMATION THE SHAREHOLDERS OF SHANTI PROCESSORS WERE ALLOTTED 3 EQUITY SHARES EACH OF FACE VALUE OF RS.10 OF CHIRIPAL INDU STRIES LTD., FOR EVERY TWO EQUITY SHARES RS.10 EACH HELD BY THE SHAREHOLDERS I N SHANTI PROCESSORS LTD. ACCORDINGLY THE FOUR DONORS BECAME THE OWNERS OF SHARES OF CHIRIPAL INDUSTRIES LTD. AND THEY GIFTED THE SHARES TO THE A SSESSEE ON 25-10-2006. A.O. WAS OF THE VIEW THAT AFTER AMALGAMATION, THE S HARES OF AMALGAMATED COMPANY (I.E. CHIRIPAL IND. LTD.) CAME INTO EXISTEN CE AND THAT THE AMALGAMATING CO.(SHANTI PROCESSORS LTD. ) LOST ITS IDENTITY AND EXISTENCE THEREFORE VALUATION OF SHARES OF CHIRIPAL IND. LTD. , RECEIVED AS GIFT HAS TO BE ITA NO 2100/ AHD/2010 WITH C.O.218/AHD/ 2010 . ASSESSMENT Y EAR 2007- 08 . 4 DETERMINED WITH REFERENCE TO SEC. 49(2C) OF THE ACT . HE ACCORDINGLY WORKED OUT THE VALUE OF SHARES IN THE FOLLOWING MAN NER:- (I) COST OF ONE SHARE OF SHANTI PROCESSORS LTD. = R S.10/- (II) BOOK VALUE OF SHARES OF SHANTI PROCESSORS LTD. PAID UP EQUITY SHARE CAPITAL. RS. 4,60,74,000/- SHARE PREMIUM. RS. 4,08,00,000/- -------------------------- BOOK VALUE. RS. 8,68,74,000/- (III) THE NET WORTH OF SHANTI PROCESSORS LTD. AS ON 31-03-2005: ASSETS AMOUNT (RS.) LIABILITIES AMOUNT (RS.) FIXED ASSETS 48,80,08,844 SECURED & UNSECURED LOANS 42,10,42,442 INVESTMENTS 18,11,127 DEFERRED TAX LIABILITY 4,01,55,134 CURRENT ASSETS 30,11,46,899 CURRENT LIABILITIES 16, 56,95,986 TOTAL. 79,09,66,870 (A) TOTAL. 62,68,93,562 (B) NET WORTH =(A-B) =16,40,73,308 COST OF ACQUISITION OF SHARES OF RESULTING COMPANY I.E. CHIRIPAL PROCESSORS LTD. IS = COST OF ONE SHARE OF SPL X BOOK VALUE OF SHARES OF SPL NET WORTH OF SPL = RS. 10/- X RS.8,68,74,000 -------------------------------- RS.16,40,73,308 = RS.5.2 PER SHARE. 6. HE THUS DETERMINED THE COST OF ACQUISITION OF ON E SHARE OF CHIRIPAL INDUSTRIES AT RS.5.20 PER SHARE. A.O. OBSERVED THAT THE ASSESSEE HAS ITA NO 2100/ AHD/2010 WITH C.O.218/AHD/ 2010 . ASSESSMENT Y EAR 2007- 08 . 5 CREDITED THE COST OF ACQUISITION OF SHARES AT RS. 8 .32 PER SHARE (BEING THE AVERAGE COST OF SHARE OF SHANTI PROCESSORS) AND TH EREFORE ACCORDING TO THE A.O. THE ASSESSEE HAS CREDITED EACH SHARE OF CHIRIP AL INDUSTRIES LTD. BY MORE THAN RS.3.12 PER SHARE. ACCORDING TO THE A.O. THE COST OF ACQUISITION OF SHARES GIFTED BY 4 PERSONS SHOULD HAVE BEEN RS.1 ,02,44,000/- (19,70,000 SHARES X RS. 5.20) BUT SINCE THE ASSESSE E HAD CREDITED ITS CAPITAL ACCOUNT BY RS.1,61,88,500/- HE WORKED OUT THE EXCESS AMOUNT OF RS.59,41,500/- (RS.1,61,88,500 LESS 1,02,44,000) BY APPLYING THE PROVISIONS OF SEC. 68. 7. FOR MAKING THE ADDITION U/S. 68 THE A.O. ALSO RE LIED ON THE DECISION OF CIT V/S. MRS. GRACE COLLIS & OTHERS 248 ITR 323 (SC ). BASED ON THE WORKING APPROVED BY HONBLE SUPREME COURT IN THE CA SE OF MRS. GRACE COLLIS & ORS (SUPRA) HE ALSO WORKED OUT THE COST OF ACQUISITION OF SHARES OF CHIRIPAL INDUSTRIES LTD., AS UNDER:- = 2 SHARES OF SHANTI PROCESSORS LTD. X RS.10 ------------------------------------ ----------------- 3 SHARES OF CHIRIPAL INDUSTRIES LTD. = RS.6.6 PER SHARE. 8. BASED ON THE AFORESAID WORKING, THE A.O. WAS OF THE VIEW THAT THE COST OF SHARES GIFTED BY THE 4 PERSONS TO THE ASSES SEE SHOULD BE RS.1,30,02,000/- (19,70,000 SHARES X 6.60). HE WAS THEREFORE OF THE VIEW THAT SINCE THE ASSESSEE HAD CREDITED THE CAPITAL AC COUNT IN RESPECT OF ITA NO 2100/ AHD/2010 WITH C.O.218/AHD/ 2010 . ASSESSMENT Y EAR 2007- 08 . 6 SHARES RECEIVED AT RS.8.31 PER SHARE INSTEAD OF RS .6.6 PER SHARE BY MORE THAN IN THE CAPITAL ACCOUNT. THE SOURCE OF WHICH W AS NOT EXPLAINED BY THE ASSESSEE AND THEREFORE THE ADDITION OF RS.31,85,500 /- (RS.1,61,88,500 LESS 1,30,02,000) SHOULD BE MADE U/S. 68. HE HOWEVER CO NCLUDED THAT SINCE THE ADDITION OF RS.59,44,500/- ARRIVED AS PER THE P ROVISIONS OF SEC. 49(2C) OF THE ACT WAS MORE REALISTIC THAN THE ADDITION OF RS.31,85,500/- WORKED OUT ON THE BASIS OF WORKING APPROVED BY HONBLE SUPREME COURT IN THE CASE OF CIT VS. MRS. GRACE COLLIS & ORS.(SUPRA) HE MADE ADD ITION OF RS.59,54,500/- U/S. 68 OF THE ACT. THE ASSESSEE BEING AGGRIEVED CA RRIED THE MATTER BEFORE CIT (A). 9. CIT (A) AFTER CONSIDERING THE SUBMISSIONS MADE B Y THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER:- 5. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT AS PER STATEMENT OF FACTS. THE APPELLANT RECEIVED GIFT OF FOLLOWING SHARES OF CHIRIPAL INDUSTRIES LTD. NAME OF DONOR NO. OF SHARES VALUE SHOWN BY THE A PPELLANT IN HIS BOOK. MINOR RUCHI CHIRIPAL 618750 45,90,000 PRIYAKA B. CHIRIPAL 618750 45,90,000 MINOR RONAK B.CHIRIPAL 618750 63,70,000 PRITIDEVI B.CHIRIPAL 113750 6,37,000 TOTAL 1970000 1,61,87,000 5.1 THE AVERAGE COST OF SHARES OF CHIRIPAL INDS . LTD., IS SHOWN BY THE APPELLANT AT RS.8.31 PER SHARES. ACCORDING TO T HE A.O. THE ABOVE MENTIONED DONORS HAVE HELD SHARES OF SHANTI PROCESS ORS LTD. AND ITA NO 2100/ AHD/2010 WITH C.O.218/AHD/ 2010 . ASSESSMENT Y EAR 2007- 08 . 7 CHIRIPAL TWISTER & SIZER PVT. LTD. WHO AMALGAMATED WITH CHIRIPAL INDS. LTD. (CIL) W.E.F. 1-4-2005. AS PER THE SCHEM E OF AMALGAMATION 3 EQUITY SHARES OF RS.10 EACH OF CHIRIPAL INDS. LTD . WERE ALLOTTED AGAINST 2 EQUITY SHARES OF RS.10 EACH OF SHANTI PRO CESSORS LTD. THE SHARES OF CHIRIPAL INDS. LTD. WERE ALLOTTED TO THE SE PERSONS UNDER THE SCHEME OF AMALGAMATION WHICH HAVE BEEN GIFTED BY TH ESE DONORS TO THE APPELLANT ON 25-10-2006.THOUGH THE SHARES OF CH IRIPAL INDS. LTD., HAVE BEEN GIFTED TO THE APPELLANT, THE COST OF ACQU ISITION OF SHARES HAVE BEEN TAKEN AS THE COST OF ACQUISITION OF SHARE S OF SHANTI PROCESSORS LTD. THE A.O. FURTHER OBSERVED THAT THER E IS TRANSFER OF SHARES IN THE SCHEME OF AMALGAMATION AS PER DECISIO N OF HONBLE SUPREME COURT IN THE CASE OF MRS. GRACE THOMAS AS M ENTIONED ABOVE. HE WORKED OUT THE COST OF SHARES OF CHIRIPAL INDS.LTD. AS UNDER:- 2 SHARES OF SHANTI PROCESSORS / 3 SHARES OF CHIRIPA L INDS LTD., X 10 = RS.6.6 5.2. IN MY OPINION, THE A.O. HAS NOT PROPERLY APPR ECIATED THE FACTS. THERE IS NO DISPUTE THAT THE APPELLANT RECEIVED SHA RES OF CHIRIPAL INDS. LTD., ON 25-10-2006 FROM THE 4 DONORS AS MENT IONED ABOVE AFTER AMALGAMATION OF SHANTI PROCESSORS PVT. LTD., WITH C HIRIPAL INDS. LTD. W.E.F. 1-4-2005. IN HIS BALANCE SHEET / CAPITAL A/C . THE APPELLANT HAS VALUED SUCH SHARES AS THE COST IN THE HANDS OF THE DONORS. SINCE SOME OF THE DONORS HAVE SHARES OF SHANTI PROCESSORS PVT. LTD. BEFORE AMALGAMATION AND IN LIEU OF SUCH SHARES THEY WERE A LLOTTED SHARES OF CHIRIPAL INDUSTRIES LTD., THE APPELLANT TOOK THE OR IGINAL COST OF SHARES OF SHANTI PROCESSORS PVT. LTD., AS PER SEC. 47(III) OF THE I.T. ACT. IN MY OPINION, IT IS IMMATERIAL AS TO WHAT COST IS SHOWN BY THE APPELLANT IN HIS BOOKS OF ACCOUNTS BECAUSE THE APPELLANT HAS REC EIVED ALL THE 19,70,000 EQUITY SHARES SHOWN BY WAY OF GIFT. IN TH E HANDS OF THE APPELLANT, ITS COST IS NIL. BUT FOR THE PURPOSE OF TRANSFER OF SHARES THERE ARE SPECIFIC PROVISIONS LIKE SEC. 47(III) AND 49(II ) SEC. 47(III) SAYS THAT ANY TRANSFER OF A CAPITAL AMOUNT UNDER A GIFT WILL NOT BE REGARDED AS TRANSFER. SECTION 49(II) SAYS ABOUT THE COST WITH R EFERENCE TO CERTAIN MODES OF ACQUISITION. AS PER SECTION 49(III), IF TH E CAPITAL ASSET BECAME THE PROPERTY OF THE APPELLANT UNDER A GIFT O R WILL THEN THE COST OF ACQUISITION OF THE ASSET SHALL BE DEEMED TO BE T HE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPERTY ACQUIRED IT, AS INCREASED BY THE ITA NO 2100/ AHD/2010 WITH C.O.218/AHD/ 2010 . ASSESSMENT Y EAR 2007- 08 . 8 COST OF ANY IMPROVEMENT OF THE ASSETS INCREASED BY THE PREVIOUS OWNER OR THE ASSESSEE, AS THE CASE MAY BE. THE CASE OF THE APPELLANT FALLS UNDER SEC. 47(III) & SEC. 49(II) OF THE ACT AND NOT U/S. 49(2) OR 49 (2C) AS APPLIED BY THE APPELLANT OR BY THE A.O. AS PER SEC. 47(III) THERE IS NO TRANSFER OF SHARES GIFTED BY THE DONORS TO THE APPELLANT. SECTION 49(II) SAYS THAT WHEN THE SHARES ARE TRANSFERRED BY THE APPELLANT TO ANY OTHER PERSON THEN THE COST OF ACQUISITION OF SUCH SHARES WOULD BE TREATED NOT AS NIL BUT THE COST IN THE HANDS OF ITS PREVIOUS OWNER. SINCE THERE IS NO TRANSFER OF SHARE S BY THE APPELLANT IN THIS YEAR UNDER APPEAL, THERE IS NO QUESTION OF VALUATION OF SHARES AT A PARTICULAR PRICE. IT IS RELEVANT ONLY WHEN THE SHARES ARE TRANSFERRED BY THE APPELLANT TO SOME OTHER PERSONS. 5.3. ROUGHLY SPEAKING THE COST OF GIFTED SHARES IN THE HANDS OF THE APPELLANT IS NIL. IF FOR THE PURPOSE OF ACCOUNTING THE APPELLANT SHOWS THE VALUE OF EACH SHARE OF RS.(X) SAY, THEN ALSO IT IS IMMATERIAL BECAUSE IN THE BALANCE SHEET, ON THE ASSET SIDE THE ASSETS ARE IN THE FORM OF SHARES AND IN THE LIABILITY SIDE THE VALUE OF SHARES IS SHOW AT X MULTIPLIED BY NUMBER OF SHARES. AS LONG AS THE SHAR ES ARE NOT TRANSFERRED OR THE APPELLANT GETS BENEFIT OUT OF TH ESE SHARES, THE BOOK ENTRY OF VALUATION OF SHARES WILL HAVE NO MEANING, WHETHER X =1 OR 1000, WILL NOT HAVE ANY IMPACT ON THE TAX LIABILITY OF THE APPELLANT. IT IS ONLY AT THE TIME OF TRANSFER OF SHARES WHEN THE COS T OF ACQUISITION OF SHARES IS TO BE CALCULATED. THE TREATMENT OF VALUAT ION OF SHARES SHOWN BY THE APPELLANT IN HIS BOOKS IS NOT RELEVANT . WHAT IS RELEVANT IS WHAT WAS THE COST OF SHARE IN THE HANDS OF THE P REVIOUS DONOR. THAT VALUE ALONE WILL BE TAKEN TO CONSIDERATION FOR THE PURPOSE OF CALCULATING CAPITAL GAIN IN THE HANDS OF THE APPELL ANT AT THE TIME OF TRANSFER OF SHARES. TILL THE TIME THE SHARES ARE N OT TRANSFERRED BY THE APPELLANT, OR ANY OTHER BENEFIT IS DERIVED OUT OF T HE SHARES, IN MY OPINION, THE VALUE OF THE SHARES IN THE HANDS OF TH E APPELLANT IS NIL. BECAUSE WHETHER THE COST OF SHARE IN THE HANDS OF P REVIOUS OWNER IS RS.1000/- OR RE.1/- PER SHARE AND SUCH SHARES ARE G IFTED TO THE APPELLANT THEN ALSO THE APPELLANT HAS NOT PAID ANY CONSIDERATION TOWARDS SUCH SHARES. IN EITHER CASE NO ADDITION U/ S. 68 CAN BE MADE IN THE HANDS OF THE APPELLANT UNLESS IT IS PROVED T HAT THE GIFT IS NOT GENUINE. FURTHER THE COST OF SHARE SHOWN BY THE AP PELLANT IN HIS BOOKS IS IRRELEVANT BECAUSE ONLY AT THE TIME OF TRA NSFER OF SHARES BY THE APPELLANT, FOR THE PURPOSE OF CALCULATING CAPIT AL GAIN, THE COST OF ITA NO 2100/ AHD/2010 WITH C.O.218/AHD/ 2010 . ASSESSMENT Y EAR 2007- 08 . 9 ACQUISITION OF THE SHARE WOULD BE TAKEN AS THE COST OF ACQUISITION IN THE HANDS OF ITS PREVIOUS OWNER WHO DONATED THE SHA RES TO THE APPELLANT. FOR EXAMPLE, IF THE COST OF ACQUISITION OF SHARES IN THE HANDS OF PREVIOUS OWNERS WAS RS. (A) SAY AND THE APPELLANT IS SHOWING THE COST IN HIS BOOKS OF ACCOUNTS AT RS.1,0 00/- (OR RE.1/-) AND HE TRANSFERS THE SHARES AT RS. B (SAY), THEN TH E CAPITAL GAIN WOULD BE COMPUTED AT RS. (B-A) AND NOT AT B-1000 (OR B-1) AS PER BOOKS OF ACCOUNTS OF THE APPELLANT. I THEREFORE, HAVE NO HES ITATION IN DELETING THE ADDITION OF RS.59,44,500/- U/S. 68 OF THE ACT. 10. AGGRIEVED BY THE ORDER OF CIT (A), THE REVENUE IS NOW IN APPEAL BEFORE US. THE EFFECTIVE GROUND OF REVENUE IS AGAIN ST THE DELETION OF ADDITION OF RS.59,45,500/- BY CIT (A) AND THE CROSS OBJECTION BASICALLY ARE SUPPORTING THE ORDER OF CIT (A). 11. BEFORE US THE LD. D.R. SUPPORTED THE ORDER OF T HE A.O. ON THE OTHER HAND THE LD. A.R. SUBMITTED THAT PROVISIONS OF SEC. 68 DO NOT APPLY TO THE FACTS OF THE PRESENT CASE. HE SUBMITTED THAT PROVIS IONS OF SEC.68 ARE APPLICABLE WHEN SOME MONEY IS CREDITED IN THE BOOKS OF ACCOUNTS WHICH IS SHOWN AS RECEIPT OF CASH. HE SUBMITTED THAT THE PRO VISION U/S. 68 COVERS MONETARY TRANSACTION AND IT DOES NOT COVER THE ALLE GED UNDER VALUATION OF GIFTS RECEIVED IN KIND. HE THUS SUBMITTED THAT PRO VISIONS OF SEC.68 WERE NOT AT ALL APPLICABLE TO THE FACTS OF THE CASE. THE LD . A.R. FURTHER SUBMITTED THAT AS A RESULT OF AMALGAMATION OF SHANTI PROCESSORS LT D. AND CHIRIPAL TWISTER & SIZER PVT. LTD. ASSESSEE RECEIVED THE SHARES OF O F CHIRIPAL IND. LTD. IN GIFT FROM 4 RELATIVES. THE VALUE OF SHARES WERE RECORDED IN THE BOOKS OF ACCOUNTS AT RS.1,61,87,000/- BEING THE ACTUAL COST OF SHARES IN THE HANDS OF THE DONORS. THE SHARES RECEIVED IN GIFT BY THE A SSESSEE HAVE NOT BEEN TRANSFERRED DURING THE YEAR AND THEREFORE THE RECEI PT OF SHARES BY WAY OF ITA NO 2100/ AHD/2010 WITH C.O.218/AHD/ 2010 . ASSESSMENT Y EAR 2007- 08 . 10 GIFT IN THE YEAR UNDER APPEAL DOES NOT GIVE RISE TO TAXABLE EVENT. THE VALUE OF SHARES ACCOUNTED FOR THE ASSESSEE IS AS PER THE PROVISIONS OF SEC. 49(2) R.W.S. 47(VII) OF THE ACT. THE PROVISION OF SEC. 49 (2C) AS APPLIED BY A.O. IS NOT AT ALL APPLICABLE TO THE FACTS OF THE CASE BECA USE SEC. 49 (2C) APPLIES TO CASE OF DEMERGER AND NOT AMALGAMATION. THE QUESTION OF COMPUTATION OF CAPITAL GAIN WOULD ARISE ONLY IN THE YEAR OF TRANSF ER OF SHARES. HE THUS SUPPORTED THE ORDER OF CIT (A). 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAD RECEIVED GIFT OF SHARES OF CHIRIPAL INDUSTRIES LTD., FROM 4 DONORS. THE DONORS WERE INITIALLY HOLDING THE SHARES OF SHANTI PROCESSORS LTD., PRIOR TO ITS AMALGAMATION WITH CHIRIPAL INDUSTRIES LTD. ON AMALGAMATION OF SHANTI PROCESSORS LTD., WITH CHIRIPAL INDUSTRIES LTD., THE SHAREHOLDERS OF SHANT I PROCESSORS LTD., WERE ALLOTTED THE SHARES OF CHIRIPAL INDUSTRIES LTD. IT IS ALSO AN UNDISPUTED FACT THAT THE SHARES RECEIVED AS GIFT HAVE NOT BEEN TRAN SFERRED IN THE YEAR UNDER APPEAL. CIT (A) HAS HELD THAT THE CASE OF THE ASSE SSEE FALLS U/S. 47(III) AND SEC. 49(II) OF THE ACT AND NOT U/S.49(2) OR 49(2C) OF THE ACT. THIS FINDING OF CIT (A) HAS NOT BEEN DISPUTED BY THE REVENUE. SECTI ON 47(III) STATES THAT ANY TRANSFER OF A CAPITAL AMOUNT UNDER A GIFT WILL NOT BE REGARDED AS TRANSFER. SEC. 49(III) STATES THAT WHEN THE SHARES ARE TRANSFERRED BY A PERSON TO ANY OTHER PERSON THEN THE COST OF ACQUISI TION OF SUCH SHARES WOULD NOT BE TREATED AS RS. NIL BUT THE COST OF ACQ UISITION WOULD BE THE COST IN THE HANDS OF PREVIOUS OWNER. THE QUESTION OF VAL UATION OF SHARES WOULD THEREFORE ARISE IN THE YEAR OF TRANSFER. THE ABOVE STATED FACTS COULD NOT BE CONTROVERTED BY REVENUE BY BRINGING ANY MATERIAL ON RECORD. IN VIEW OF ITA NO 2100/ AHD/2010 WITH C.O.218/AHD/ 2010 . ASSESSMENT Y EAR 2007- 08 . 11 THESE FACTS, WE FIND NO REASON TO INTERFERE WITH TH E ORDER OF CIT (A). WE THUS UPHOLD THE ORDER OF CIT (A) AND THUS DISMISS T HE APPEAL OF THE REVENUE. SINCE THE APPEAL OF REVENUE IS DISMISSED, THE CROSS OBJECTION OF THE ASSESSEE HAS BECOME INFRUCTUOUS AND THEREFORE T HE SAME IS ALSO DISMISSED. 13. THUS THE APPEAL OF REVENUE AND C.O. OF ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 4 - 01- 2013. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) XVI, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD 1.DATE OF DICTATION 27 - 11 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 28 / 12/ 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 3 - 1 -2013. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 4 - 1 -2013 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 4 - 1 -2013 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 4 - 1 -2013. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER