Bilakhia Holding P Ltd, Vapi V. The Addl.CIT.,Vapi Range, Vapi

ITA 1505/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9292 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 12-01-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 09-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Gift; Depreciation
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE S/SHRI RAJPAL YADAV, JM, & MANISH BORAD, AM. ITA NO.1505/AHD/2012 ASST. YEAR: 2007-08 BILAKHIA HOLDINGS PVT. LTD. BILAKHIA HOUSE, MUKTANAND MARG, CHALA, VAPI, GUJARAT. VS. ADDL. CIT, VAPI RANGE, VAPI APPELLANT RESPONDENT PAN AADCS 4420J AND ITA NO.1557/AHD/2012 ASST. YEAR: 2007-08 ADDL.CIT, VAPI RANGE, VAPI. VS. BILAKHIA HOLDINGS PVT. LTD. BILAKHIA HOUSE, MUKTANAND MARG, CHALA, VAPI, GUJARAT. APPELLANT RESPONDENT APPELLANT BY SHRI M. K. PATEL, AR RESPONDENT BY SHRI SANJAY AGRAWAL, CIT, DR DATE OF HEARING: 12/1/2016 DATE OF PRONOUNCEMENT: 8/ 03/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THESE TWO CROSS APPEALS ONE BY THE ASSESSEE AND T HE OTHER BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF LD . CIT(A), VALSAD, DATED 31.03.2012 IN APPEAL NO.CIT(A).VLS/166/09-10 FOR ASST. YEAR ITA NO. 1505 & 1557/AND/2012 ASST. YEAR 2007-08 2 2007-08. ASSESSMENT WAS FRAMED U/S 143(3) OF THE IT ACT, 1961 (IN SHORT THE ACT) ON 30/10/2009 BY ADDL. CIT, VAPI RAN GE, VAPI. 2. WE WILL TAKE UP FIRST ASSESSEES APPEAL IN ITA NO.1505/AHD/2012 FOR ASST. YEAR 2007-08. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE IN THIS APPEAL :- 1. THE ORDER OF ASSESSMENT IS CONTRARY TO THE FACT S AND PREJUDICIAL TO THE ASSESSEE. 2. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES O F THE CASE AND LAW, THE ADDITIONS MADE BY THE LEARNED ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ARE CO NTRARY TO LAW AND BASED ON ERRONEOUS UNDERSTANDING OF THE FACTS. 3. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES O F THE CASE AND LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN CONFIRMING THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER TO THE TUNE OF RS. 35,04,75,000/- BEING SURPLUS ON SALE OF SHARES RECE IVED AS GIFT TO THE BOOK PROFIT FOR TAXATION U/S. 115JB. THE ACTION OF THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO THE FACTS AND L AW AND DESERVES TO BE DELETED. 4. THE APPELLANT CRAVES TO ADD, AMEND, MODIFY OR AL TER THE ABOVE GROUNDS OF APPEAL AT ANY STAGE OF APPELLATE PROCEEDINGS. 5. THE APPELLANT HUMBLY PRAYS THAT THE APPEAL BE A LLOWED IN TO TO. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY WHICH HAD FILED ITS RETURN OF INCOME ON 19. 10.2007 DECLARING TOTAL INCOME OF RS.20,28,88,690/- UNDER THE REGULAR PROVISIONS OF THE ACT AND RS.7,91,99,923/- U/S 115JB OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143 (2) OF THE ACT WAS ISSUED ON 28.08.2008 AND SERVED UPON THE ASSESSEE O N 1.9.2008. THE COMPANY IS BASICALLY AN INVESTMENT COMPANY, HOL DING GROUP INVESTMENTS. DURING THE FINANCIAL YEAR UNDER CONSID ERATION, THE ITA NO. 1505 & 1557/AND/2012 ASST. YEAR 2007-08 3 COMPANY HAS TRANSACTED IN SHARES AND SECURITIES AND HAS SHOWN INCOME UNDER THE HEAD CAPITAL GAINS, EXEMPTED INCOM E AND INCOME FROM OTHER SOURCES. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSE SSING OFFICER OBSERVED THAT THERE WAS A FAMILY ARRANGEMEN T IN THE BILAKHIA FAMILY OF VAPI, PURSUANT TO WHICH VARIOUS TRANSACTI ONS TOOK PLACE IN TERMS OF REDISTRIBUTION OF ASSETS AND SOME OF THE A SSETS WERE TRANSFERRED TO ONE GROUP COMPANY NAMELY M/S BILAKHI A HOLDING PVT. LTD. THE TRANSACTIONS UNDERTAKEN BETWEEN THE FAMILY MEMBERS OF BILAKHIA FAMILY AND M/S BILAKHIA HOLDING PVT. LTD. WERE TERMED AS GIFT TO M/S BILAKHIYA HOLDING PVT. LTD. THE SHARES SO RE CEIVED BY THE ASSESSEE WERE SUBSEQUENTLY SOLD AND THE COMPANY CLA IMED LONG TERM CAPITAL GAIN ON SALE OF SUCH SHARES. EVEN THOU GH RECEIPT OF SHARES TOOK PLACE IN F.Y. 2000-01 RELEVANT TO ASST. YEAR 2001-02, THE SALES WERE UNDER TAKEN DURING F.Y. 2000-01, 2001-02 , 2002-03, 2003-04, 2004-05, 2005-06, 2006-07 ETC. DURING ASSE SSMENT PROCEEDINGS U/S 143(3) OF THE ACT R.W.S. 147 OF THE ACT FOR ASST. YEAR 2001-02 TO 2004-05 THESE TRANSACTIONS OF RECEIPT OF SHARES WERE TREATED AS DISCOUNTED PURCHASE AND NOT AS GIFT AND ALSO LD. ASSESSING OFFICER FOLLOWING THE DECISION OF FIRST APPELLATE A UTHORITY FOR ASST. YEAR 2001-02 TO ASST. YEAR 2006-07 TREATED LONG TERM CAP ITAL GAIN FROM SALE OF SHARES AT RS.35,04,75,000/- TO THE BOOK PRO FIT OF ASSESSEE AND ACCORDINGLY ASSESSED BOOK PROFIT U/S 115JB OF THE A CT AT RS.42,96,74,923/-. ITA NO. 1505 & 1557/AND/2012 ASST. YEAR 2007-08 4 5. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A) AGAINST THE ORDER OF LD. ASSESSING OFFICER, TREATING THE RE CEIPT OF SHARES AS DISCOUNTED PURCHASES AND NOT AS GIFT AND ALSO AGAIN ST THE ACTION OF LD. ASSESSING OFFICER OF ADDING LONG TERM CAPITAL G AIN FROM SALE OF SHARES AT RS.35,04,75,000/- TO THE BOOK PROFIT OF A SSESSEE U/S 115JB OF THE ACT. LD. CIT(A) ALLOWED THE FIRST GROUND OF ASSESSEE BY TREATING THE RECEIPTS OF SHARES BY THE ASSESSEE COMPANY FROM BILAKHIA FAMILY MEMBERS AS GIFTS AND AS REGARDS THE ADDITION MADE B Y ASSESSING OFFICER OF ADDING LONG TERM CAPITAL GAIN ON SALE OF SHARES AT RS.35,04,75,000/- TO THE BOOK PROFIT U/S 115JB OF T HE ACT DISMISSED THE GROUND OF ASSESSEE BY OBSERVING AS UNDER :- 8. 1 HAVE CONSIDERED THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER AS WELL AS THE CONTENTION RAISED BY THE AR OF THE APPELLANT I N THE WRITTEN SUBMISSION. ADMITTEDLY THE ASSESSMENT FOR THE YEAR UNDER CONSID ERATION WAS FRAMED BY THE AO SOLELY BASED ON THE OBSERVATIONS OF HIS PREDECESSOR AO FOR ASSTT. YEAR 2003-2004. IT IS SEEN THAT THE AO HAD RE-PRODUCED THE OBSERVATION OF HIS PREDECESSOR AO FOR ASSTT. YEAR 2003-2004 IN THE ASSESSMENT ORDER. IT IS ALSO SEEN THAT FOR ASSTT. YEAR 2003- 2004, MY PREDECESSOR CIT(APPEAL) HAD OBSERVED ASUND ER:- 'I HAVE PERUSED THE FACTS OF THE CASE AND THE ARGUM ENTS PUT FORWARD BY THE APPELLANT COMPANY. I AGREE WITH THE APPELLANT COMPA NY THAT GIFTS DO NOT CONSTITUTE INCOME AND THAT GIFT CANNOT BE TREATED AS RECEIPTS IN THE PROFIT AND LOSS ACCOUNTS AS PER THE PREVAILING ACCOUNTING STANDARDS. ANY HOW THE LONG TERM CAPITAL GAINS REPRESENT PROFITS OF THE COMPANY WHICH SHOULD HAVE BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNTS AS PER THE ACCOUNTING PRINCIPLES. THE DECISION OF THE APEX COURT IN THE APOLLO TYRES LTD DO NOT AUTHORIZE THE A.O. TO S CRUTINIZE THE NET PROFIT OF THE COMPANY PREPARED IN ACCORDANCE WITH THE PART IT AND III OF SCHEDULE VI TO THE COMPANIES ACT. IN THIS CASE THE ISSUE IN DISPUTE IS DIFFERENT. ACCORDINGLY I AM INCLINED TO AGREE WITH THE A.O. TO THE EXTENT THAT PROFIT ON SALE OF SHARES SHOULD HAVE BEEN PART OF BOOK PROFIT TO THE EXTENT IT HAS BEEN EXCLUDED AS PER THE NOTES TO THE ACCOUNTS ADOPTED BY THE COMPANY. ' SINCE THE FACTS OF THE CASE FOR THE YEAR UNDER CONS IDERATION ARE SAME AS THAT OF ASSTT. YEAR 2003-2004 AS HELD BY MY PREDECESSOR CIT (APPEALS), I AGREE WITH THE ITA NO. 1505 & 1557/AND/2012 ASST. YEAR 2007-08 5 AO AS REGARDS THE RE-COMPUTATION OF BOOK PROFIT. TH IS GROUND OF APPEAL IS ACCORDINGLY DISMISSED. : 6. AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 7. GROUND NO,1,2,4 & 5 ARE OF GENERAL NATURE, HENCE NEED NO ADJUDICATION. 8. THEREFORE, WE WILL ADJUDICATE GROUND NO.3 WHICH RELATES TO CONFIRMATION OF ADDITION MADE BY THE LEARNED ASSES SING OFFICER TO THE TUNE OF RS. 35,04,75,000/- BEING SURPLUS ON SAL E OF SHARES RECEIVED AS GIFT TO THE BOOK PROFIT FOR TAXATION U/ S. 115JB OF THE ACT. 8.1 AT THE OUTSET THE LD. DR SUBMITTED THAT SIMILAR ISSUE HAS BEEN DEALT WITH BY THE CO-ORDINATE BENCH IN ASSESSEES O WN CASE IN ITA NOS.981 TO 985/AHD/2009 FOR ASST. YEARS 2001-02 TO 2006-07 AND THE ASSESSEES APPEALS WERE DISMISSED. 8.2 THE LD. AR DID NOT OBJECT TO THE SUBMISSIONS MA DE BY LD. DR. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD AND WE FIND THAT SIMILAR GROUND REGARDING ADDITION OF SURPLUS FROM SALE OF SHARES ADDED TO BOOK PROFIT U/ S 115JB OF THE ACT WAS HELD TO BE CORRECT AND THE CO-ORDINATE BENCH IN THE CASE OF ADDL.CIT VS. BILAKHIA HOLDING PVT. LTD. & OTHERS IN ITA NOS.981 TO 985/AHD/2009 FOR ASST. YEARS 2001-02 TO 2006-07 VID E ITS ORDER DATED 30.05.2014 HAS HELD AS UNDER :- ITA NO. 1505 & 1557/AND/2012 ASST. YEAR 2007-08 6 27. GROUND NO. 5 & 6 RELATE TO ADJUSTMENT TO BOOK P ROFIT U/S. 115JB OF THE ACT. THE AO DURING THE ASSESSMENT PROCEEDINGS MADE AN ADDITION OF RS. 45,58,654/- BEING SURPLUS TO SALE OF SHARES TO THE BOOK PROFIT FOR TAXATION U/S. 115JB WHICH HAS BEEN CONFIRMED BY LD.CIT(A). BEFORE US RELIANCE WAS PLACED ON THE FOL LOWING SUBMISSION:- 1. THE AO HAS NO AUTHORITY TO ADJUST BOOK PROFITS ONCE THE ACCOUNTS ARE AUDITED AND ACCEPTED BY THE GENERAL BODY, SAVE AND EXCEPT SUCH ADJUSTMENT AS ARE PROVIDED FOR IN EXPLANATION TO SECTION 115JB. RELIANCE WAS PLACED O N THE DECISION OF THE SUPREME COURT IN THE CASE OF THE APOLLO TYRES VS. CIT (255 ITR 27 3), WHERE THE SUPREME COURT HAD HELD THAT WHILE DETERMINING THE BOOK PROFIT UNDER S ECTION 115JB, THE ASSESSING OFFICER COULD NOT RE-COMPUTE THE PROFIT AND LOSS ACCOUNT BY EXCLUDING THE PROVISIONS MADE FOR ARREARS OR DEPRECIATION. THE DECISION OF THE APEX C OURT HAS BEEN FOLLOWED IN THE FOLLOWING OTHER DECISIONS:- A. MALAYALA MANORAMA CO. LTD VS. CIT [2008] 300 ITR 251 (SC) B. CIT VS. HCL COMNET SYSTEMS AND SERVICES LTD [200 8] 305 ITR 409 (SC), C. CIT-I VS. VIJAYASHREE FINANCE AND INVESTMENT CO. PVT. LTD 2 DTR 38 [216 CTR (MADRA) 191], D. CIT VS. RUBAMIN P. LTD [2009] 312 ITR 18 (GUJ), E. CIT VS. KOVAI MARUTHI PAPER AND BOARD P. LTD [20 07] 294 57 (MAD), F. CIT VS. ADBHUT TRADING CO. P. LTD [2011] 338 ITR 94 (BOM), AND G. CIT VS. AKSHAY TEXTILES TRADING AND AGENCIES P. LTD [2008] 304 ITR (BOM) 2. PROCEEDS ON SALE OF GIFTED SHARES CANNOT BE CRED ITED TO P &L A/C A. SHARES RECEIVED AS GIFT DO NOT CONSTITUTE INVES TMENT AND HENCE GAINS ON SALE OF THE AFORESAID SHARES ARE NOT REQUIRED TO BE ROUTED THRO UGH THE PROFIT AND LOSS ACCOUNT. LEARNED SR. COUNSEL SUBMITTED THAT SINCE THE GIFT CANNOT BE EQUATED WITH INVESTMENT, THE APPELLANT IS JUSTIFY IN CREDITING THE SALE PROCEEDS OF THE GIFTED SHARES DIRECTLY TO CAPITAL ACCOUNT WITHOUT ROUTING THROUGH PROFIT AND LOSS ACC OUNT. HE THEREFORE SUBMITTED THAT THE SAID CREDIT SHOULD NOT BE TAKEN INTO ACCOUNT FOR PU RPOSES OF CALCULATION OF PROFITS UNDER SECTION 115JB AND THE PROVISIONS OF SECTION 115JB I S NOT APPLICABLE IN SUCH SITUATION. B. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS: I. CIT VS. INSANYAT TRUST (173 ITR 248) II. 203/349 (GUJ) III. 209/390 (GUJ) IV. 209/865 (GUJ) V. 252/610 (GUJ) VI. 258/712 (GUJ) 3. ADOPTING NOTES TO ACCOUNTS DOES NOT AMOUNT TO QU ALIFICATION. RELIANCE IS PLACED ON PARAGRAPH 3.9 AND IN PARTICULAR 3.12 OF THE ICAIS GUIDELINES SPECIFY THE MANNER OF ITA NO. 1505 & 1557/AND/2012 ASST. YEAR 2007-08 7 QUALIFICATION-ADOPTION OF NOTES OF ACCOUNTS (AS CON TAINED IN PARA 4.6 AT PG. 11 OF THE PAPER BOOK) CANNOT AMOUNT TO A QUALIFICATION. 4. THE DECISION IN THE CASE OF VEEKAYLAL (BOM)-249 ITR 597 RELIED UPON BY THE AO IS NO LONGER GOOD LAW IN VIEW OF THE LATER DECISIONS OF T HE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. ADBHUT TRADING CO. P . LTD. [2011] 338 ITR 94 (BOM) AND COMMISSIONER OF INCOME-TAX VS. AKSHAY TEXTILES TRADING AND AGENCIES P. LTD [2008] 304 ITR 401 (BOM) WHICH HAVE HELD THAT IN VI EW OF THE DECISION OF APOLLO TYRES VS. CIT (2555 ITR 273). SINCE IN REVENUES APPEAL WE HAVE HELD THAT SHARES RECEIVED BY THE ASSESSEE-COMPANY WERE NOT GIFTS IN THE HANDS OF ASSESSEE-COMPANY, TH E ARGUMENT ADVANCED ON BEHALF OF THE ASSESSEE-COMPANY THAT SHARES RECEIVED AS GIFT DO NO T CONSTITUTE INVESTMENT AND HENCE GAIN ON SALE OF THESE SHARES WERE NOT REQUIRED TO BE ROU TED THROUGH PROFIT AND LOSS ACCOUNT FALLS FLAT ( CASE LAWS IN SUPPORT OF THIS ARGUMENT ARE TH EREFORE NOT APPLICABLE TO THE FACTS OF THIS CASE), THE ASSESSEE WAS NOT JUSTIFIED IN CREDITING THE SALE PROCEEDS OF THE SHARES DIRECTLY TO CAPITAL RESERVE ACCOUNT WITHOUT ROUTING THROUGH PRO FIT AND LOSS ACCOUNT. WE ARE THEREFORE OF THE CONSIDERED OPINION THAT AO HAS RIGHTLY TAKEN THESE CREDITS FOR THE PURPOSE OF ADJUSTMENT TO BOOK PROFIT U/S. 115JB OF THE ACT. TH E ORDER PASSED BY LD. CIT(A) CONFIRMING THE ACTION OF AO IS HEREBY UPHELD. GROUN D NO. 5 & 6 OF ASSESSEES APPEAL ARE ALSO DISMISSED. 28. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH IN ASSESSEES OWN CASE AND GOING THROUGH THE FACTS OF THE CASE OF ASSESSEE BEFORE US ARE SIMILAR TO THE ISSUE DEALT B Y THE CO-ORDINATE BENCH IN THE DECISION REFERRED ABOVE, WE ARE OF THE VIEW THAT LD. ASSESSING OFFICER HAS RIGHTLY ADDED THE LONG TERM C APITAL GAIN FROM SALE OF SHARES TO THE BOOK PROFITS U/S 115JB OF THE ACT AND ACCORDINGLY, WE DISMISS THE GROUND OF ASSESSEE. 10. NOW WE TAKE UP ITA NO.1557/AHD/2012 FOR ASST. Y EAR 2007-08 (REVENUES APPEAL) WHEREIN FOLLOWING GROUNDS HAVE B EEN RAISED :- ITA NO. 1505 & 1557/AND/2012 ASST. YEAR 2007-08 8 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) HAS ERRED IN THE SHARES RECEIVED BY THE APPELLANT COMPA NY FROM THE BILAKHIA FAMILY MEMBERS CONSTITUTES A GIFT IN THE HANDS OF T HE ASSESSEE. 2. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LEARNE D CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES TO ADD, ALTER OR AMEND ANY GRO UNDS OF APPEAL. 11. THE ONLY ISSUE BEFORE US IS TO EXAMINE WHETHER LD. CIT(A) HAS ERRED IN HOLDING THE SHARES RECEIVED BY THE ASSESS EE COMPANY FROM THE BILAKHIA FAMILY MEMBERS CONSTITUTES A GIFT IN T HE HANDS OF THE ASSESSEE. 11.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE MATERIAL ON RECORD, WE FIND THAT IN THE CASE OF ADDL.CIT VS. BILAKHIA HOLDING PVT. LTD. & OTHERS IN ITA NOS.981 TO 985/AHD/2009 F OR ASST. YEARS 2001-02 TO 2006-07 VIDE ITS ORDER DATED 30.05.2014 HAS THE CO- ORDINATE BENCH HAS DEALT WITH SIMILAR ISSUE AND HEL D AS UNDER :- 10. THE ISSUE BEFORE US IS WHETHER THE TRANSFER OF THE SHARES OF NESTLE INDIA LTD AND HINDUSTAN LEVER LTD HELD BY THE MEMBERS OF BILAKHIA FAMILY AS INVESTMENT BY THEM TO THE ASSESSEE-COMPANY AS PER FAMILY ARRANGEMENT DATE D 16-02-2001 CLAIMED TO HAVE BEEN TRANSFERRED WITHOUT ANY MONETARY CONSIDERATION CAN BE HELD TO BE GIFT OR NOT? 10.1 AS PER TRANSFER OF PROPERTY ACT 1882 SECTION 1 22 GIFT HAS BEEN DEFINED AS UNDER:- GIFT AS A TRANSFER OF CERTAIN EXISTING MOVING OR I MMOVABLE PROPERTY MADE VOLUNTARILY AND WITHOUT CONSIDERATION BY ONE PERSON , CALLED THE DONER, TO ANOTHER, CALLED THE DONEE AND ACCEPTED OR ON BEHALF OF THE D ONEE. IT IS CLEAR FROM THE ABOVE THAT ANY TRANSFER OF ANY MOVEABLE OR IMMOVABLE PROPERTY CAN BE TREATED AS GIFT ONLY IF THE SAME IS MADE VOLUNTARIL Y AND WITHOUT ANY CONSIDERATION. THE REVENUES CONTENTION IS THAT SINCE THIS TRANSFER OF SHARES BY THE FAMILY MEMBERS TO THE ASSESSEE-COMPANY HAS BEEN MADE IN PURSUANCE OF A FA MILY AGREEMENT, THE SAME CANNOT BE CALLED VOLUNTARY OR WITHOUT CONSIDERATION. FOR MAKI NG THIS SUBMISSION RELIANCE WAS ITA NO. 1505 & 1557/AND/2012 ASST. YEAR 2007-08 9 PLACED ON THE DECISION OF SUPREME COURT IN THE CASE OF CWT VS. HH VIJAYABA, DOWGNER MAHARANI SAHEB OF BHAVNAGAR PALACE (117 ITR 784) WH EREIN IT WAS HELD AS UNDER:- 5. TAKING THE TOTALITY OF THE FACTS AS FOUND BY TH E TRIBUNAL AND MENTIONED IN THE IMPUGNED JUDGMENT OF THE HIGH COURT IT WAS A CASE O F FAMILY SETTLEMENT OR FAMILY ARRANGEMENT WHICH IS BINDING ON THE PARTIES CONCERN ED. THE ASSESSEE AGREED TO PURCHASE PEACE FOR THE FAMILY, AND TO PAY TO HER SON THE AMO UNT WHICH FELL SHORT OF RS. 50,00,000/- IF HER ELDER SON DID NOT PAY ANY PORTION THEREOF. I T IS, WELL ESTABLISHED THAT SUCH A CONSIDERATION IS A GOOD CONSIDERATION WHICH BRINGS, ABOUT AN ENFORCEABLE AGREEMENT BETWEEN THE PARTIES. SECTION 25 OF THE CONTRACT ACT DOES NOT HIT THIS.' IT IS CLEAR FROM THE ABOVE THAT HONBLE APEX COURT HELD THAT FAMILY ARRANGEMENT CANNOT BE REGARDED AS BEING WITHOUT CONSIDERATION SO AS TO RENDER THEM UNENFORCEABLE. SINCE IT IS AN ADMITTED POSITION THAT FAMILY ARRANGEMENT IN THE PRESENT CASE IS ENFORCEABLE AND BINDING, THE ASSESSEE CANNOT TAKE THE PLEA THAT TRA NSFER OF SHARES BY THE FAMILY MEMBERS TO THE ASSESSEE IN PURSUANCE TO THE FAMILY ARRANGEMENT WAS WITHOUT CONSIDERATION. 11. THE NEXT QUESTION ARISES WHETHER THIS CONSIDERA TION CAN BE MEASURED IN MONEY OR MONIES WORTH OR NOT. TO ANSWER THIS QUESTION WE WIL L HAVE TO EXAMINE THE VARIOUS CLAUSES OF THE FAMILY ARRANGEMENT DATED 16-02-2001. THE MAI N CLAUSES OF WHICH ARE AS UNDER:- '5. THE VARIOUS BUSINESS AND COMPANIES OF THE PARTI ES HERETO ARE UNDER THE CONTROL AND JOINT MANAGEMENT OF THE THREE-BROTHERS VIZ. YUNUS, ANJUM AND ZAKIR 6. TO AVOID ANY FUTURE DISPUTES, DIFFERENCES AND DI SAGREEMENTS WHICH MAY AFFECT THE PEACE, HARMONY, HONOUR, AND PRESTIGE OF THE FAM ILY OR THE PARTIES AS ALSO AFFECT THE VARIOUS BUSINESS AND ASSETS AND WITH A V IEW TO ALWAYS REMAIN A JOINT CLOSE KNIT FAMILY, THE PARTIES HAVE AGREED THAT EAC H OF THE THREE BROTHER: NAMELY YUNUS, ANJUM AND ZAKIR SHOULD HAVE EQUAL RIGHTS AND OWNER SHIP IN THE VARIOUS BUSINESS AND ASSETS EXCEPT WHEN SPECIFICALLY PROVID ED OTHERWISE. 7. YUNUS, ANJUM AND ZAKIR HAVE EQUAL SHAREHOLDING I N BILAKHIA HOLDINGS P LIMITED ('BHL ') EACH OF YUNUS, ANJUM AND ZAKIR SHA LL CREATE A SEPARATE TRUST AND TRANSFER TO SUCH TRUST AND TRANSFER TO SUCH TRU ST THEIR SHAREHOLDING IN BHL SO THAT THE EXISTING SHARE CAPITAL OF BHL SHALL BE HEL D BY THE INDIVIDUAL TRUSTS SO CREATED. 8. PURSUANT TO THE ARRANGEMENT ARRIVED AT BETWEEN T HE PARTIES AND WITH A VIEW TO CONSOLIDATE THEIR RESPECTIVE ASSETS, INVESTMENTS AN D INTERESTS IN THE FAMILY BUSINESS AND ASSETS, THE PARTIES HERETO HAVE AGREED THAT BHL SHALL HE THE MAIN HOLDING COMPANY WHICH SHALL HOLD ALL INVESTMENTS IN OTHER COMPANIES AND BUSINESS PRESENT AND FUTURE. 9. THE PARTIES HERE TO HOLD DISPROPORTIONATE AND UN EQUAL SHARES AND SECURITIES IN THE COMPANIES SPECIFIED IN ANNEXURE 'A' HERE TO. TH E DETAILS OF THE SHAREHOLDING ITA NO. 1505 & 1557/AND/2012 ASST. YEAR 2007-08 10 OF THE PARTIES IN THE SHARES AND SECURITIES OF THE COMPANIES SPECIFIED IN ANNEXURE 'A. ' HERE TO ARE SPECIFIED IN ANNEXURE 'B-L' TO '' B-12' RESPECTIVELY. 10. WITH A VIEW TO CONSOLIDATE AND EQUALIZE THE HOL DINGS BETWEEN THE RESPECTIVE FAMILIES OF YUNUS, ANJUM AND ZAKIR , IT HAS BEEN AG REED BY AND BETWEEN ALL THE PARTIES HERETO THAT EACH PARTY WILL GIFT AND TRANSF ER TO BHL ALL THE SHARES AND SECURITIES HELD BY SUCH PARTY IN THE COMPANIES SPEC IFIED IN ANNEXURE 'A ' HERETO. 11. YUNUS, ANJUM, AND ZAKIR WILL JOINTLY FUND SEPAR ATELY FAMILY MAINTENANCE TRUSTS TO BE CREATED BY EACH OF YUNUS, ANJUM AND ZA KIR FOR THE MAINTENANCE AND BENEFIT OF THE RESPECTIVE FAMILIES OF YUNUS, ANJUM AND ZAKIR. 12. IN ADDITION, YUNUS, ANJUM AND ZAKIR WILL JOINTL Y FUND SEPARATE TRUSTS FOR EACH OF THE CHILDREN OF YUNUS, ANJUM AND ZAKIR WHERE BY CERTAIN AMOUNT WILL BE SETTLED FOR BENEFIT OF EACH CHILD. 13. THE OTHER INVESTMENTS HELD BY THE PARTIES HERET O I.E. THE ASSETS OTHER THAN THE SHARES AND SECURITIES OF THE COMPANIES SPECIFIED IN ANNEXURE 'A' HERETO ARE SPECIFIED IN ANNEXURE 'C-1', 'C-2', 'C-3' AND 'C-4' RESPECTIVELY. WITH A VIEW TO CONSOLIDATE AND EQUALIZE THE VALUES OF THE ASSETS H ELD BY EACH OF THE PARTIES HEREIN AND SPECIFIED IN ANNEXURE C-1 TO C-4 HERETO THE PAR TIES WILL GIFT TO BHL ALL THE ASSETS HELD BY EACH PARTY IN THE COMPANIES SPECIFIE D IN ANNEXURE CL TO C-4. ' EMPHASIS PROVIDED) ' IT IS CLEAR FROM THE ABOVE THAT FAMILY ARRANGEMENT WAS TO EQUALIZE THE HOLDINGS BETWEEN THE RESPECTIVE FAMILIES OF THREE BROTHERS. THEREFOR E, IT CANNOT BE SAID THAT CONSIDERATION FOR TRANSFER OF SHARES CANNOT BE MEASURED IN TERMS OF MONEY OR MONIES WORTH. THE EQUALIZATION OF WEALTH HAS ONLY MONETARY CONNOTATIO N. IT IS ALSO PERTINENT TO MENTION THAT ASSESSEE-COMPANY IN ITS SYNOPSIS OF ARGUMENT HAS EM PHASIZED ON THE FACT THAT BILAKHIA FAMILY WAS A CLOSELY KNIT FAMILY AND WAS LIVING IN PEACE AND TO AVOID ANY FUTURE DISPUTE THIS FAMILY ARRANGEMENT WAS SIGNED AND ACTED UPON. TO AVOID DISPUTES CANNOT BE SAID TO BE WITHOUT MONETARY CONSIDERATION AS IT IS COMMON K NOWLEDGE THAT FAMILY DISPUTES RUIN THE FAMILY FINANCIALLY. THE FAMILY DISPUTES ARE BEI NG SETTLED IN MONETARY TERMS BY RESORTING TO ARBITRATION AND IN CASE SUCH SETTLEMEN TS IS NOT DONE, MATTER TRAVELS TO THE COURT AND THE FAMILY SUFFERS HEAVILY NOT ONLY MENTALLY BU T ALSO FINANCIALLY. THERE IS A PROVERB ACCORDING TO WHICH IT IS SAID THAT A PERSON WHO WIN S A CASE ACTUALLY LOOSES IT AS BY THE TIME MATTER IS SETTLED IN HIS FAVOUR HE IS ALREADY A RUINED PERSON. THUS, IN THIS CASE IT CANNOT BE SAID THAT THE CONSIDERATION FOR TRANSFER OF SHARES WAS NOT FOR MONETARY CONSIDERATION. NOW COMING TO THE ASPECT WHETHER THI S ACT OF TRANSFER OF SHARES WAS VOLUNTARY OR NOT. SINCE THIS TRANSFER WAS IN PURSUA NCE OF FAMILY ARRANGEMENT, THE SAME WAS NOT VOLUNTARY AS THE FAMILY ARRANGEMENT WAS ENF ORCEABLE AND BINDING ON THE PARTIES. THE ARGUMENT MADE ON BEHALF OF THE ASSESSEE THAT SI NCE THE FAMILY ARRANGEMENT WAS VOLUNTARY THE SUBSEQUENT ACTION OF THE PARTIES TO T HE ARRANGEMENT WAS ALSO BE CONSIDERED VOLUNTARY AND FOR MAKING THIS SUBMISSION IT WAS SUB MITTED THAT IF LD. DRS CONTENTION IS ACCEPTED THEN NO TRANSFER EFFECTED PURSUANT TO AN A GREEMENT BE REGARDED AS VOLUNTARY. WE FIND THIS ARGUMENT ADVANCED BY ASSSESSEE DEVOID OF ANY MERIT BECAUSE IF THIS ARGUMENT OF ITA NO. 1505 & 1557/AND/2012 ASST. YEAR 2007-08 11 THE ASSESSEE IS ACCEPTED THEN WHAT WAS THE NEED OF SIGNING ENFORCEABLE BINDING FAMILY AGREEMENT IN THE FIRST PLACE. WE FURTHER FIND THAT IN THE MITRAS LEGAL AND COMMERCIAL DICTIONARY WORD VOLUNTARY IS DEFINED AS UNDER:- FREE CHOICE; DONE WITH FREE WILL; WITHOUT ANY COMP ULSION, OBLIGATION OR VALUABLE CONSIDERATION. FREELY, WITHOUT COMPULSION, NOT UNDE R ANY OBLIGATION. A-G V ELLIS (1895) QB 466: 64 LJ QB 813 SINCE TRANSFER OF SHARES WAS FOR EQUALIZATION OF WE ALTH OF THE FAMILY MEMBERS WHICH HAD MONETARY CONNOTATION, THE SAME CANNOT BE SAID TO BE VOLUNTARY. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THE JUDGMENT O F HONBLE APEX COURT IN THE CASE OF KRI SONIA BHATIA VS. STATE OF U.P. (AIR 1981 SC 127 4) IS OF NO HELP TO THE ASSESSEE RATHER IT SUPPORTS THE CASE OF REVENUE. 12. IN VIEW OF OUR ABOVE DISCUSSION, WE HAVE NO HES ITATION IN HOLDING THAT TRANSFER OF SHARES OF NESTLE INDIA LTD AND HINDUSTAN LEVER LTD HELD AS INVESTMENT BY MEMBERS OF BILAKHIA FAMILY TO THE ASSESSEE-COMPANY AS PER FAMI LY ARRANGEMENT DATED 16-02-2001 CLAIMED TO HAVE BEEN TRANSFERRED WITHOUT ANY MONETA RY CONSIDERATION CANNOT BE HELD TO BE A GIFT AND THEREFORE ORDER PASSED BY LD. CIT(A) HOLDING THE TRANSFER OF SHARES AS GIFT IS HEREBY REVERSED AND THAT OF AO IS RESTORED. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE CO -ORDINATE BENCH WE ARE OF THE VIEW THAT RECEIPT OF SHARES BY ASSESS EE FROM BILAKHIA UNDER FAMILY ARRANGEMENTS, CANNOT BE HELD TO BE A G IFT AND, THEREFORE, THE DECISION OF LD. CIT(A) ON THIS ISSUE IS SET ASI DE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 12. IN THE RESULT, APPEAL OF ASSESSEE IS DISMISSED AND THAT OF THE REVENUE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH MARCH, 2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 8/03/2016 MAHATA/- ITA NO. 1505 & 1557/AND/2012 ASST. YEAR 2007-08 12 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 25/02/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 7/03/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK:8 /3/2016 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: