Dy.Director of Income-Tax -II(IT), Hyderabad V. Smt V.Sandhya Reddy, Hyderabad

ITA 1730/HYD/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5889 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 19-12-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 10-11-2014
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Reopening of assessment; Capital asset; Share purchase agreement; Reason to believe
• Section: 143(3); 234B; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 1730/HYD/14 2006-07 DEPUTY COMMISSIONER OF INCOME TAX-2, INTERNATIONAL TAXATION, HYDERABAD SMT. V. SANDHYA REDDY, HYDERABAD [PAN: AUZPS8710Q] 1731/HYD/14 2007-08 FOR REVENUE : SMT. U. MINICHANDRAN, DR FOR ASSESSEE : SHRI K.A. SAI PRASAD, AR DATE OF HEARING : 19-12-2016 DATE OF PRONOUNCEMENT : 30-12-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : THESE ARE REVENUE APPEALS FOR AYS. 2006-07 & 2007-0 8 AGAINST THE COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, HYDERABAD, DATED 08-07-2014. THE MAIN ISSUE IN THESE APPEALS IS WITH REFERENCE TO REOPENING OF ASSES SMENT U/S. 147 OF THE INCOME TAX ACT [ACT] WHICH WAS HELD INVALI D FOR AYS. 2006-07 & 2007-08. THE OTHER ISSUE FOR CONSIDERATION IS WHETHER THE CAPITAL GAINS CAN BE BROUGHT TO TAX PROTECTIVELY/SUBS TANTIVELY IN THE RESPECTIVE ASSESSMENT YEARS. 2. BRIEFLY STATED, ASSESSEE IS A FAMILY MEMBER OF SH RI B.V. REDDY AND PARTNER ALONG WITH TWELVE OTHER MEMBERS OF FAMILY IN THE FIRM M/S. B.V. REDDY ENTERPRISES (BVRE). ASSESSE E WAS ALSO ITA NOS. 1730 & 1731/HYD/14 SMT. V. SANDHYA REDDY :- 2 -: SHAREHOLDER IN M/S. NUTRINE CONFECTIONARY COMPANY PRI VATE LTD., (NCCPL). THE SHARES OWNED IN THE ABOVE COMPANY WERE TRANSFERRED TO THE FIRM. THE COMPANY, M/S. NCCPL, TILL THE YEAR 2 005, WAS A CLOSELY HELD COMPANY OF B.V. REDDY GROUP. M/S. B.V . REDDY ENTERPRISES WAS FORMED IN THE YEAR 1971, CONSISTING OF SOME OF THE FAMILY MEMBERS. THIS FIRM WAS RE-CONSTITUTED ON 24-0 3-2006 BY ADMITTING SEVEN NEW PARTNERS WHO CONTRIBUTED THEIR SHARES OF M/S. NCCPL AS THE RESPECTIVE CAPITAL TO THE FIRM ON 24-03-200 6. THE FIRM, BVRE ON 05-05-2006 HAS ENTERED INTO WRITTEN BUSIN ESS TRANSFER AGREEMENT WITH M/S. NUTRINE CONFECTIONARY & SW EETS (P) LTD., (NCSPL) AND WAS SUCCEEDED BY THE SAID COMPANY. AT THE FINAL STAGE ON 10-06-2006, A SHARE PURCHASE AGREEMEN T WAS MADE BETWEEN GODREJ BEVERAGE AND FOODS LTD., MUMBAI (GBFL ) AND NCSPL, WHEREBY THE SHARES OF NCCPL WERE TRANSFERRED TO GBFL FOR A CONSIDERATION OF RS. 265 CRORES ON 29-06-2006. FU RTHER, NCSPL GOT ITS NAME CHANGED ON 18-08-2006 TO B.V. REDDY ENTE RPRISES PVT. LTD., (BVREPL). ASSESSEE OFFERED THE CAPITAL GAIN S IN AY. 2006-07, WHEREAS AO WAS OF THE VIEW THAT THE SALE PRICE RECEIVED FROM GBFL SHOULD BE THE SALE CONSIDERATION AND IN A LATER YEAR AND ACCORDINGLY, RE-WORKED OUT THE CAPITAL GAINS. HE HAS MADE THE SUBSTANTIAL ADDITION OF CAPITAL GAINS IN AY. 2007-08, WHEREAS THE AMOUNT TO THE SAME EXTENT WAS BROUGHT TO TAX ON PROTECTIV E BASIS IN AY. 2006-07. FOR DOING SO, HE HAS REOPENED THE A SSESSMENTS U/S. 148 BY RECORDING THE REASONS. 3. LD.CIT(A) HAS EXAMINED THE ISSUE OF REOPENING AS WELL AS ISSUE ON MERITS. AS FAR AS THE ISSUE OF REOPENIN G IS CONCERNED, HIS FINDINGS ARE AS UNDER: ITA NOS. 1730 & 1731/HYD/14 SMT. V. SANDHYA REDDY :- 3 -: 9. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CAS E, THE SUBMISSIONS OF THE APPELLANT AND THE CASE LAWS REFE RRED TO BY THE APPELLANT. IN HIS ORDER FOR AY.2006-07, THE ASSESSI NG OFFICER SIMPLY RELIED ON THE DECISION OF GUJARAT HIGH COURT AND THE ORDER FOR AY.2007 -08 IS TOTALLY SILENT ON THIS ISSUE. 9.1 THE REASONS FOR ISSUE OF NOTICE U/S 148, IN BRI EF, AS MENTIONED IN THE ASSESSMENT ORDERS, ARE AS UNDER: (I) INFORMATION WAS RECEIVED FROM ASST. COMMISSIONE R OF INCOME TAX, COMPANY CIRCLE- 1(2), CHENNAI REGARDING THE TRANSFER OF SHARES BY THE A PPELLANT TO BVRE FIRMAND THAT THIS FIRM WAS SUCCEEDED BY THE COMPANY MIS NUTRINE CO NFECTIONEY & SWEETS (P) LTD. , WHICH WAS LATER RENAMED ASB. V.REDDY ENTERPRISES PVT L TD. THE ABOVE TAKEOVER OF THE BUSINESS OF THE FIRM, BVRE BY THE COMPANY, NCSPL WAS F OR A SUM OF RS.270.07 CRARES FOR WHICH SHARES OF NSPL WERE ALLOTTED TO THE PARTNERS OF BVRE IN THE SAME PROPORTION IN WHICH THEIR CAPITAL ACCOUNTS STOOD IN THE BOOKS OF THE FIRM BVRE. AS PER SHARE PURCHASE AGREEMENT DATED 10-06-2006, SHARES OF NCCPL HELD BY NCSPL WERE SOLD TO GODREJ BEVERAGE AND FOODS LTD (GBFL) FOR RS.257,52, 32,953/-. (II) FROM THE SEQUENCE OF THE TRANSACTIONS, IT IS EVI DENT THAT THE TRANSFER OF SHARES OF NCCPL WAS MERELY A DEVICE/RUSE TO AVOID THE PAYMENT OF TAX ON THE CAPITAL GAINS IN THE HANDS OF THE PARTNERS, INCLUDING THE APPELLANT. (III) THE COMMISSIONER OF INCOME TAX(A)-111 CHENNAI W HILE DISPOSING OF THE CASE OF BVRE (P) LTD FOR A Y.2007-08 IN HIS ORDER DT.26.11.20 10 HELD THAT PARTNERS ARE TO BE ASSESSED SUBSTANTIALLY IN RESPECT OF FINAL SALE CON SIDERATION OF RS.270 CRORES. 9.2 I HAVE CAREFULLY CONSIDERED ALL THE FACTS AND C ONTENTIONS OF THE APPELLANT. THE APPELLANT HERSELF HAD FILED RETURN O F INCOME FOR ASST YEAR 2006-07 INDICATING THE TRANSFER OF SHARES AS CAPITA L TO BVRE FIRM. AS POINTED OUT BY THE AUTHORISED REPRESENTATIVE, THESE FACTS FIND MENTION EVEN IN THE ORDER OF THE COMMISSIONER OF INCOME TAX , TIRUPATHI IN HIS ORDER DI.13.06.2008 AGAINST THE ORDER U/S 143(1)/154 FOR THE ASSESSMENT YEAR 2006-07 IN CONNECTION WITH CHARGING OF INTEREST U/S 234B AND 234C. IN THE RETURN OF INCOME FOR ASST YEAR 2007-08, THE ASS ESSEE ENCLOSED A NOTE ON THE TRANSACTION BETWEEN BVRE (P) LTD AND BVRE FI RM AND CLAIMED EXEMPTION U/S 47 (XIII). 9.3 IT IS CLEAR THAT THE ACTION FOR INITIATING THE PROCEEDINGS U/S 147 WAS TAKEN ONLY AFTER RECEIPT OF INFORMATION ABOUT THE O BSERVATIONS OF THE COMMISSIONER OF INCOMETAX (APPEALS)-III, CHENNAI IN HIS ORDER DATED 26-11-2010 IN THE CASE OF M/S BV.REDDY ENTERPRISES PVT LTD. THE OBSERVATIONS IN THE ORDER COMMISSIONER OF INCOMETAX (APPEALS)-III, CHENNAI WAS A SUBJECT MATTER OF APPEAL BEFORE THE I NCOME TAX APPELLATE TRIBUNAL, CHENNAI. THE FOLLOWING ARE THE EXTRACTS F ROM THE ITAT'S ORDER: ITA NOS. 1730 & 1731/HYD/14 SMT. V. SANDHYA REDDY :- 4 -: '. ..... WHEN THERE IS A FINDING BY THE INCOME TAX APP ELLATE TRIBUNAL, BANGALORE, IN THE CASE OF THE PARTNERS, THAT ALL THESE TRANSACTIONS ARE WITHIN THE FOUR WALLS OF THE LAW, WE HAVE TO FOLLOW THE SAID FINDING OF THE TRIBUNAL. THE RE SULT IS THAT WE HAVE TO ACCEPT THE CONTENTIONS OF THE ASSESSEE IN THESE APPEALS THAT ALL THE FACTORS LEADING TO THE SUCCESSIVE TRANSACTIONS ARE VALID AND THEY ARE LEGIT IMATE AND THEREFORE ACCEPTABLE IN LAW. THEREFORE, WE CANNOT GO BEYOND THE FACTS APPAREN T ON RECORDS AND EXAMINE THE QUESTION OF COLOURABLE DEVICE, AS ARGUED BY THE REVE NUE.' (PARA 56) 9.4 SINCE THE OBSERVATIONS OF THE COMMISSIONER OF L NCORNETAX (APPEALS)-III, CHENNAI THAT ALL THE TRANSACTIONS ARE A COLOURABLE DEVICE TO AVOID TAX WERE STRUCK DOWN BY THE INCOMETAX APPELLATE TRIBUNAL, CH ENNAI, THERE DOES NOT EXIST ANY REASON EVEN TO SUSPECT ANYTHING ELSE. THUS, THERE ARE NO FAIR REASONS FOR INITIATION OF PROCEEDINGS U/S 147 AND T HERE WAS NO FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE FULL AND TRUE MATERIAL, EITHER IN THE ASSESSMENT YEAR 2006-07 OR IN THE ASSESSMENT YEAR 2 007 -08. 9.5 FURTHER, AS HELD BY HON'BLE SUPREME COURT IN TH E CASE INDIAN OIL CORPORATION VS ITO (159 ITR 956 SC) AND ALSO IN ITO VS LAKHMANI MEWAL DAS 103 ITR 437 (SC), REASON TO BELIEVE IS NOT THE SAME THING AS REASON TO SUSPECT. I FIND THAT THE REASONS, GIVEN FOR REOPENI NG, MAY, AT BEST, GIVE RISE TO A SUSPICION, BUT IT CANNOT LEAD TO BELIEF THAT T HE ADDITION OF CAPITAL GAINS IS WARRANTED SINCE THERE ARE NO PROVISIONS IN THE A CT TO BRING THE SAME TO TAX IN THE HANDS OF THE APPELLANT EITHER IN ASST.YE AR 2006-07 OR IN ASST. YEAR 2007-08. 9.6 I ALSO FIND THAT THE ASSESSING OFFICER IN HIS ORDER DATED 22-03-2013 FOR THE A.Y.2006-07 HAD AT PARA.5 GAVE A FINDING TH AT 'THE REAL TRANSACTION IS THE SALE OF SHARES BY THE AS SESSEE TO GODREJ I.E., HER SHARE OF NCCPL SHARES AT THE TIME OF ACQUISITION OF NCCPL IN A CCORDANCE WITH THE SHARE PURCHASE AGREEMENT DATED 10.06.2006 BETWEEN NCCPL AND GODREJ FOODS & BEVERAGES'. 9.6.1 HENCE SAID CAPITAL GAINS CANNOT BE BROUGHT TO TAX IN THE HANDS OF THE APPELLANT FOR ASST.YEAR 2006-07 SINCE THE ASSESSING OFFICER HIMSELF CONSIDERED THAT THE RELEVANT DATE OF TRANSFER IS 10 .06.2006 WHICH IS OUTSIDE THE PREVIOUS YEAR FOR A.Y. 2006-07. I THERE FORE HOLD THAT FOR A.Y.2006-07 THE ASSESSMENT, EVEN ON PROTECTIVE BASI S, IS NOT CORRECT. 9.7 I ALSO FIND THAT THE ORDER OF THE INCOME TAX AP PELLATE TRIBUNAL, BANGALORE IN THE CASE OF SRI V.MADHUSUDHANA REDDY & . OTHERS(SUPRA) WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER IN T HE COURSE OF PROCEEDINGS U/S 143(3) R.W.S. 147 FOR THE ASSESSMENT YEAR 2006- 07 - VIDE LETTER FILED ON 22-2-2013. IN THE CIRCUMSTANCES OF THE CASE, ISS UE OF NOTICE U/S 148 DATED 2-4-2013 FOR THE ASSESSMENT YEA 2007-08 ON TH E VERY SAME SET OF FACTS IS NOT CORRECT AND IS INVALID SINCE THE OBSER VATIONS OF THE COMMISSIONER OF INCOMETAX (APPEALS) CHENNAI HAVE BE EN DISAPPROVED BY ITA NOS. 1730 & 1731/HYD/14 SMT. V. SANDHYA REDDY :- 5 -: THE INCOME TAX APPELLATE TRIBUNAL BANGALORE IN ITS ORDER DATED 8-2-2013 (SUPRA). THERE IS NO SCOPE FOR THE ASSESSING OFFICE R TO EVEN SUSPECT ESCAPEMENT OF INCOME IN THE LIGHT OF THE DECISION C ITED ABOVE. HENCE, I HAVE TO HOLD THAT THE ASSESSING OFFICER HAS NO REAS ON TO BELIEVE THAT ANY INCOME HAS ESCAPED ASSESSMENT OR HAS BEEN UNDER ASS ESSED FOR A.Y.2007-08. 9.8 I AM ALSO OF THE VIEW THAT IN THE LIGHT OF THE FACTS DISCUSSED ABOVE, THERE IS NO FRESH MATERIAL TO WARRANT ISSUE OF NOTI CE U/S 148 FOR THE BOTH THE ASST.YEARS 2006-07 & 2007-08. EVEN THOUGH THE I NITIAL ASSESSMENTS FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION A RE COMPLETED U/S 143(1), RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE FOLLOWING DECISIONS, I HOLD THAT IN THE ABSENCE OF ANY FRESH MATERIAL THE ASSESSMENTS COMPLETED U/S 143(3) R.W.S 147 FOR THE ASSESSMENT YEARS 2006-07AND 2007-08 ARE NOT VALID. I. CIT VS. KELVINATOR INDIA LTD 320 ITR 561 (SC) II. INDUCTOTHERM (INDIA) (P) LTD. VS OCIT 356 ITR 481 ( GUJ) III. INDIVEST P LTD VS.ADDI.CIT 350 ITR 120 (BAM) IV. S.RANJIT REDDYVS.DCIT CIRCLE 6(1), HYD 144 ITD 461 (ITAT HYD) 4. COMING TO THE MERITS OF THE ADDITION, LD.CIT(A) HAS GIVEN THE FOLLOWING FINDINGS: 11. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AN D FACTS OF THE CASE. I FIND THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE INCOME TAX APPELLATE TR IBUNAL BANGALORE IN THEIR COMMON ORDER DT. 08.02.2013 IN ITA NOS.149; 1 50; 158 AND 159/BNG/2011 IN THE CASES OF SRI V. MADHUSUDHAN RED DY (HUF) AND SMT. V.SOUMINI REDDY VS. DCIT CIRCLE -7(2) BANGALOR E AND V. VIKRAM REDDY (INDIVIDUAL) AND (HUF) VS ACIT CIRCLE 1(1) BA NGALORE. IT IS PERTINENT TO NOTE THAT SAID MADHUSUDHAN REDDY AND VIKRAM REDD Y ARE THE OTHER MEMBERS OF REDDY FAMILY AND ARE ALSO THE OTHER PART NERS OF BVRE FIRM, WHO HAVE TRANSFERRED THESE SHARES IN NCCPL AS CAPIT AL TO THE FIRM BVRE FIRM. THE BANGALORE ITA T DISCUSSED THE ISSUE AT LE NGTH AND SOME OF THE RELEVANT OBSERVATION/FINDINGS EXTRACTED IN THE SUBM ISSIONS OF THE APPELLANT ARE: (I) PARA 61 OF ORDER ITAT BANGALORE : THE FOURTH ISSUE WHICH ARISES FOR CONSIDERATION IS AS TO WHETHER THERE WAS A VALID TRANSFER OF SHARES OF NCCPL HELD BY THE ASS ESSEES IN FAVOUR OF THE FIRM BVRE DURING THE PREVIOUS YEAR RELEVANT TO AY 0 6-07? THE FACTUAL DETAILS IN THIS REGARD AS NARRATED IN PARA-15 TO 23 OF THIS ORDER ARE NOT ITA NOS. 1730 & 1731/HYD/14 SMT. V. SANDHYA REDDY :- 6 -: DISPUTED BY THE REVENUE. ON THOSE ADMITTED FACTS IT HAS TO BE HELD THAT THERE WAS A VALID TRANSFER OF SHARES OF NCCPL HELD BY THE ASSESSEES IN FAVOUR OF THE FIRM BVRE DURING THE PREVIOUS YEAR RE LEVANT TO AY 06-07. WE SHOULD ALSO ADD THAT THE SHARES ARE REGISTERED IN T HE NAME OF MADHUSUDAN REDDY IN THE SHARE REGISTER OF THE COMPA NY NCCPL THOUGH THE SHARES BELONG TO THE FIRM BVRE. THIS IS BECAUSE A FIRM CANNOT HOLD SHARES IN A COMPANY AND CANNOT BE SHOWN AS A REGIST ERED SHARE HOLDER BECAUSE FIRM HAS NO LEGAL EXISTENCE AND IS A MERE C OMPENDIOUS NAME TO DESCRIBE ITS PARTNERS. THE DECLARATION U/S.187-C OF THE COMPANIES ACT, 1956 CLEARLY SHOWS THAT THE BENEFICIAL OWNER OF THE SHARES STANDING IN THE NAME OF MADHUSUDAN REDDY IS THE FIRM BVRE. APART FR OM THE ABOVE, THE FACTUM OF TRANSFER BY THE ASSESSEES IN FAVOUR OF TH E FIRM HAS BEEN ACCEPTED BY THE REVENUE AND THE CAPITAL GAIN DECLAR ED IN A Y 06-07 HAS BEEN TAXED IN THE HANDS OF THE ASSESSEES BY THE REV ENUE IN THOSE YEARS. THIS FACT HAS ALSO BEEN REITERATED IN THE ASSESSMEN T ORDERS OF THE ASSESSEES FOR AY 07-08(WHICH IS THE SUBJECT OF THE PRESENT APPEALS) WHEREIN THE REVENUE HAS TAXED ONLY THE DIFFERENCE B ETWEEN THE ACTUAL CAPITAL GAIN (ACCORDING TO THE REVENUE THAT ACCRUES IN AY 07-08) AND THE CAPITAL GAIN ALREADY TAXED IN THE HANDS OF THE ASSE SSEES FOR AY 06-07. WE THEREFORE HOLD ON ISSUE NO.4, THAT THERE WAS A VALI D TRANSFER OF SHARES BY THE ASSESSEES IN FAVOUR OF THE FIRM BVRE IN THE PRE VIOUS YEAR RELEVANT TO AY 06-07. (II) PARA 62 OF ORDER OF ITAT BANGALORE : THE FIFTH ISSUE THAT ARISES FOR CONSIDERATION IS TH E ISSUE AS TO WHETHER THERE WAS A TRANSFER OF SHARES OF NCCPL BY THE ASSE SSEES IN FAVOUR OF GBFL DURING THE PREVIOUS YEAR RELEVANT TO A Y. 2007 -08, SO AS TO BRING TO TAX CAPITAL GAIN ON TRANSFER OF SUCH SHARES U/S. 45 OF THE ACT IN THE HANDS OF THE ASSESSE . 13.3.3 TO DECIDE THE ISSUE NO.5, WE HAVE TO LOOK AT THE DOCUMENT BY WHICH SHARES WERE TRANSFERRED TO GBFL BY NCSPUBVREPL VIZ. , SHARE PURCHASE AGREEMENT DATED 10.6.2006. 13.3.4 THE SUBJECT MATTER OF THE SHARE PURCHASE AGR EEMENT IS THE ENTIRE SHARE CAPITAL OF NCCPL VIZ., 6,71,823 EQUITY SHARES . THE 13 PARTNERS OF THE FIRM HOLDING 6,65,325 EQUITY SHARES HAD ALREADY TRANSFERRED THEIR SHARE HOLDING TO THE FIRM BVRE. BVRE WAS TAKEN OVER AS A GOING CONCERN BY NCSPL AND THUS NCSPL WAS THE SELLER OF SHARES OF 6,625,325 IN THE SHARE PURCHASE AGREEMENT DATED 10.6.2006 AND HAS BE EN DESCRIBED AS SELLER NO.1 IN THE SAID AGREEMENT. THE THREE OTHER PERSONS LISTED AT S/.NO.14 TO 16 ARE DESCRIBED IN PAR-A OF ANNEXURE-I TO THE SHARE PURCHASE AGREEMENT DATED 10.6.2006. THEY ARE DESCRIBED AS OT HER SELLERS. SELLER NO.1 AND OTHER SELLERS ARE TOGETHER DESCRIBED AS 'S ELLERS' UNDER THE SHARE PURCHASE AGREEMENT DATED 10.6.2006. THE 13 PARTNERS OF THE FIRM BVRE ARE DESCRIBED IN THE SHARE PURCHASE AGREEMENT DATED 10.6.2006 AS ITA NOS. 1730 & 1731/HYD/14 SMT. V. SANDHYA REDDY :- 7 -: CONFIRMING PARTY AND ARE SHOWN IN PART-B OF ANNEXUR E-I TO THE SHARE PURCHASE AGREEMENT DATED 10.6.2006. CLAUSE-3 OF THE AGREEMENT WHICH REFERS TO THE TRANSFER OF SHARES, MAKES A REFERENCE TO SALE OF SHARES BY THE SELLERS TO THE PURCHASERS (GBFL) AND THERE IS NO RE FERENCE TO THE CONFIRMING PARTIES TO THE AGREEMENT SELLING SHARES TO GBFL. TH E CONFIRMING PARTIES ONLY CONFIRM THE FACT THAT THEY HAVE TRANSFERRED TH E SHARES OF NCCPL HELD BY THEM TO THE FIRM BVRE AND THAT THEY HAVE NO RIGH T, TITLE OR INTEREST WHATSOEVER OVER THE SHARES SO TRANSFERRED. THUS IT CANNOT BE SAID THAT THERE WAS ANY TRANSFER OF SHARES OF NCCPL BY THE AS SESSEES TO GBFL DURING THE PREVIOUS YEAR RELEVANT TO AY 07-08. THIS ISSUE IS DECIDED ACCORDINGLY. 13.4.1 PARA 63 OF ORDER OF ITAT BANGALORE : 13.4.2 ISSUE NO.6 AND 7 CAN BE TAKEN UP TOGETHER. T HESE ISSUES ARE: '(6) CAN IT BE SAID THAT THE ENTIRE SERIES OF TRANS ACTIONS BY WHICH THE SHARES OF NCCPL WERE ULTIMATELY TRANSFERRED TO GBFL WERE ALL NOT VALID AND IN ANY EVENT WERE ARRANGED IN SUCH A MANNER SO AS TO AVOID PAYMENT OF TAX ON THE CORRECT QUANTUM OF CAPITAL GAIN THAT WOULD RESULT ON TRANSFER OF SHARES OF NCCPL TO GBFL? (7) IF THE SERIES OF TRANSACTIONS BY WHICH THE SHAR ES OF NCCPL WERE ULTIMATELY TRANSFERRED TO GBFL WERE NOT COLOURABLE TRANSACTIONS AND ARE CONSIDERED TO BE LEGAL AND VALID, CAN IT BE SAID TH AT THE ENTIRE SERIES OF TRANSACTIONS WERE PLANNED CONSCIOUSLY AND DELIBERAT ELY BY THE ASSESSEES TO MITIGATE ITS TAX BURDEN AND THEREFORE CAN THE SE RIES OF TRANSACTIONS BE IGNORED AND CAN THE REVENUE BRING TO TAX THE QUANTU M OF CAPITAL GAIN WHICH WOULD HAVE RESULTED, HAD THE TRANSACTIONS OF' SALE OF SHARES OF NCCPL TO GBFL BEING CARRIED OUT BY THE ASSESSEES DI RECTLY TO GBFL INSTEAD OF THROUGH NCSPUBVREPL?' 13.5 PARA 80 OF ORDER OF ITAT BANGALORE : FROM THE ABOVE OBSERVATIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF VODAFONE (SUPRA) IT IS CLEAR THAT ALL TAX PLANNING IS NOT ILLEGAL/ILLEGITIMATE/IMPERMISSIBLE. IT IS ONLY WHEN COLOURABLE OR DUBIOUS DEVICES ARE EMPLOYED OR TRANSACTIONS ARE SHAM OR WH EN ARRANGEMENTS ARE A MERE SUBTERFUGE, AS PART OF TAX PLANNING CAN IT B E SAID THAT THEY ARE ILLEGAL, ILLEGITIMATE, AND IMPERMISSIBLE. FOR ASCER TAINING WHAT THE REAL INTENTION OF THE PARTIES WAS, IT IS PERMISSIBLE TO 'GO BEHIND' THE DOCUMENTS. GENERALLY ONE MUST PROCEED ON THE BASIS OF THE INTE NTION AS EXPRESSED IN THE TRANSACTION OR DOCUMENT. IF THAT IS CHALLENGED AS NOT TRUE ON GOOD GROUNDS THEN THE REAL INTENTION CAN BE LOOKED INTO. IF IT IS FOUND THAT THE ARRANGEMENT IS A MAKE-BELIEVE AFFAIR, OR A DUBIOUS DEVICE AND THE REAL INTENTION WAS TAX EVASION THEN THE ARRANGEMENT NEED NOT BE GIVEN EFFECT TO. IN CASES WHERE TRANSACTIONS OR ARRANGEMENT ARE EVIDENCED BY WRITTEN ITA NOS. 1730 & 1731/HYD/14 SMT. V. SANDHYA REDDY :- 8 -: AGREEMENT/ARRANGEMENT IT IS NOT POSSIBLE TO REWRITE THE AGREEMENT/ARRANGEMENT. THE RIGHT OF THE PARTIES TO ENTER INTO TRANSACTIONS ACCORDING TO THEIR FREE WILL AND CHOICE HAS ALWAYS BEEN PROTECTED, THE ONLY RIDER BEING THAT BOTH THE PROFESSED INTENTION AND T HE REAL INTENTION SHOULD BE THE SAME. ANY TRANSACTION IN WHICH THE PROFESSED INTENTION AND THE INTENTION GATHERED FROM THE DOCUMENTATION ARE THE S AME MUST BE CONSIDERED TO BE GENUINE. 13.6 PARA 81 OF ORDER OF ITAT BANGALORE : THE LAW IS BROUGHT IN BY THE PARTNERS AS CAPITAL CO NTRIBUTION OR TREATED AS PROPERTY OF THE FIRM BECOMES THE PROPERTY OF THE FI RM. THE EVIDENCE ON RECORD CLEARLY INDICATE THAT THERE WAS A TRANSFER O F OWNERSHIP IN SHARES FROM THE 13 INDIVIDUALS IN FAVOUR OF THE FIRM BVRE AS ON 24.3.2006 WHEN THE FIRM MADE THE NECESSARY BOOK ENTRIES AND WHEN T HE PARTNERS MADE THEIR INTENTIONS CLEAR THAT THE SHARES WERE TO BE T REATED AS THE PROPERTY OF THE FIRM IN THE FORM OF RESOLUTION, DECLARATION ULS .187-C OF THE COMPANIES ACT, 1956. THUS THE ASSESSEES COULD NO LONGER BE CO NSIDERED AS OWNERS OF SHARES OF NCCPL BROUGHT IN AS CAPITAL OF THE FIRM, ON AND FROM 24.3.2006. THERE IS NOTHING ON RECORD TO SUGGEST REAL INTENTIO N OF THE PARTIES WAS TO TREAT THE ASSESSEE AS OWNER OF THE SHARES EVEN AFTE R THE TRANSFER OF SHARES TO THE FIRM. 13.7 PARA 84 OF ORDER OF ITAT, BANGALORE : AS ALREADY STATED THE SERIES OF TRANSACTIONS BY WHI CH THE SHARES OF NCCPL HELD BY THE ASSESSEE ULTIMATELY WAS TRANSFERRED TO GBFL WERE INTENDED TO LESSEN THE TAX BURDEN ON CAPITAL GAIN ON TRANSFER O F SHARES. THE COURSE ADOPTED BY THE ASSESSEES WAS WITHIN THE FRAMEWORK O F LAW AND WAS PERMISSIBLE. IN FACT THERE WAS A LACUNA IN THE LAW WHICH HAS NOW BEEN FILLED UP BY A RETROSPECTIVE STATUTORY AMENDMENT TO THE PROVISIONS OF LAW. THAT ONLY SHOWS THAT THE COURSE ADOPTED BY THE ASSE SSEES WAS LEGALLY VALID. EVEN THE ASSESSEE IN THE WRITTEN SUBMISSIONS DATED 2.1.2013 HAS ACCEPTED THE POSITION THAT IN VIEW OF THE RETROSPEC TIVE STATUTORY AMENDMENT THERE IS NO TAX ADVANTAGE AT ALL. IN THAT VIEW OF THE MATTER, WE ARE OF THE VIEW THAT ON ISSUE NO.6, WE HAVE TO HOLD THAT THE ENTIRE SERIES OF TRANSACTIONS BY WHICH THE SHARES OF NCCPL WERE ULTI MATELY TRANSFERRED TO GBFL WERE ALL VALID. EVEN IF IT WERE TO BE CONSIDER ED THAT THEY WERE ARRANGED IN SUCH A MANNER SO AS TO AVOID PAYMENT OF TAX ON THE CORRECT QUANTUM OF CAPITAL GAIN THAT WOULD RESULT ON TRANSF ER OF SHARES OF NCCPL TO GBFL, SUCH A COURSE WAS PERMITTED AND WITHIN THE FRAMEWORK OF LAW. ON ISSUE NO.7, WE HAVE TO HOLD THAT THE SERIES OF T RANSACTIONS BY WHICH THE SHARES OF NCCPL WERE ULTIMATELY TRANSFERRED TO GBFL WERE NOT COLOURABLE OR DUBIOUS DEVICE OR SUBTERFUGE AND WERE LEGAL AND VALID. THE CONSEQUENCE OF THE SAME, EVEN IF IT RESULTS IN REDU CTION OF TAX BURDEN, IS THAT THEY CANNOT BE IGNORED AND THE REVENUE CANNOT BRING TO TAX THE QUANTUM OF CAPITAL GAIN WHICH WOULD HAVE RESULTED, HAD THE TRANSACTIONS ITA NOS. 1730 & 1731/HYD/14 SMT. V. SANDHYA REDDY :- 9 -: OF SALE OF SHARES OF NCCPL TO GBFL BEING CARRIED OU T BY THE ASSESSEES DIRECTLY TO GBFL INSTEAD OF THROUGH NCSPUBVREPL. WE HOLD ACCORDINGLY ON ISSUE NO.6 AND 7. 11.1 THE HON'BLE INCOME TAX APPELLATE TRIBUNAL BANG ALORE IN THE SAID CASE FINALLY AT PARA 84 HELD THAT: THE CONCLUSION ON THE COMMON ISSUE THAT ARISES FOR CONSIDERATION IN THESE APPEALS BY THE ASSESSEES IS THAT THE ORDER OF THE R EVENUE AUTHORITIES BRINGING TO TAX CAPITAL GAIN ON SALE OF SHARES OF NCCPL TO GODR EJ BY NCSPL IN THE HANDS OF THE ASSESSEES CANNOT BE SUSTAINED AND THE ADDITION MADE BY THE REVENUE AUTHORITIES IN THE CASE OF THE ASSESSEES IS DIRECTE D TO BE DELETED. THE RELEVANT GROUNDS OF APPEAL OF THE ASSESSEES IN THEIR APPEALS ARE ALLOWED. (EMPHASIS SUPPLIED). 11.2 THE INCOME TAX APPELLATE TRIBUNAL, CHENNAI, IN ITS ORDER DT.03-03- 2014 IN THE CASE OF BVREPL VS. ITO IN ITA NO.152/MD S/2011 AT PARA 56 REFERRED TO THE ABOVE FINDINGS OF THE ITAT, BANGALO RE AND HELD THAT THE SUCCESSIVE TRANSACTIONS ARE VALID AND REFUSED TO IG NORE THE FACTS APPARENT ON RECORD TO EXAMINE THE QUESTION OF THE COLOURABLE DEVICE. 12. SINCE THE FACTS OF THE ISSUE IN THE PRESENT APP EALS BEFORE ME ARE EXACTLY IDENTICAL AND SIMILAR TO THE FACTS IN THE C ASES DECIDED BY ITAT BANGALORE (SUPRA), RESPECTFULLY FOLLOWING THE ABOVE DECISION, I HOLD THAT THE APPELLANT SHOULD SUCCEED ON THE ISSUE ON MERITS ALSO FOR THE FOLLOWING BRIEF REASONS. (I) THE COMPUTATION OF CAPITAL GAINS IN THE ASSESSM ENTS IN DISPUTE BEFORE ME ARE ON THE PREMISE THAT THE SERIES OF TRANSACTIO NS IS A COLOURABLE DEVICE. THIS VIEW HAS NOW BEEN EMPHATICALLY REJECTE D ON FACTS BY THE TWO HIGHEST FACT FINDING AUTHORITIES, I.E., INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH AND CHENNAI BENCH. (II) THE TRANSFER IN THE HANDS OF THE APPELLANT IS COMPLETED ON 26.03.2006 ITSELF, AND LEGITIMATE CAPITAL GAINS U/S 45(3) WAS ALREADY ASSESSED AS DECLARED BY THE ASSESSEE. (III) THERE IS NO PROVISION IN THE ACT TO SUBSTITUT E THE VALUE RECORDED IN THE BOOKS ON TRANSFER OF PERSONAL ASSET AS CAPITAL CONT RIBUTION TO A FIRM. SEC 45(3) IS CHARGING SECTION AND IT PROVIDES FOR COMPU TATION ALSO. THE COMPUTATION PROVISIONS ARE: 'FOR THE PURPOSES OF SECTION 48, THE AMOUNT RECORDE D IN THE BOOKS OF ACCOUNT OF THE FIRM, ASSOCIATION OR BODY AS THE VALUE OF THE C APITAL ASSET SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET. ITA NOS. 1730 & 1731/HYD/14 SMT. V. SANDHYA REDDY :- 10 -: HENCE NOTHING MORE CAN BE IMPORTED BY THE ASSESSING OFFICER TO BRING SOMETHING ELSE TO TAX UNDER THIS SECTION. (IV) THE INCOMETAX APPELLATE TRIBUNAL, BANGALORE IN THE CASE OF SRI MADHUSUDHANA REDDY (SUPRA) AND THE INCOMETAX APPELL ATE TRIBUNAL, CHENNAI, IN THE CASE OF BVREPL HAVE CATEGORICALLY H ELD THAT, ON THE FACTS OF THE CASE, THE SERIES OF TRANSACTIONS INVOLVED AR E VALID, LEGITIMATE AND ACCEPTABLE IN LAW. BOTH THE TRIBUNALS HAVE REFUSED TO GO BEYOND THE FACTS APPARENT ON RECORD TO EXAMINE THE QUESTION OF COLOU RABLE DEVICE, DECIDED BY THE ASSESSING OFFICER. 13. IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING TH E DECISION OF THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE, IN THE CASE OF S RI MADHUSUDHANA REDDY (SUPRA) AND THE INCOMETAX APPELLATE TRIBUNAL, CHENNAI, IN THE CASE OF BVREPL, I HOLD THAT ACTION OF THE ASSESSING OFFI CER IN BRINGING TO TAX CAPITAL GAINS ON TRANSFER OF SHARES OF NCCPL BY BVR EPL TO GBFL IN THE HANDS OF THE APPELLANT IS NOT CORRECT EXCEPT TO THE EXTENT OF COMPUTATION U/S 45(3) AS RETURNED BY THE APPELLANT FOR THE ASSE SSMENT YEAR 2006-07. THE COMPUTATION BY THE ASSESSING OFFICER CANNOT BE SUSTAINED EITHER FOR THE A.Y.2006-07 OR FOR THE A.Y.2007-08. 5. REVENUE IS AGGRIEVED ON THE ABOVE AND RAISED DETA ILED GROUNDS. 6. LD. DR SUBMITTED THAT THERE WERE NO REGULAR ASSESSMENTS IN THIS CASE AND REOPENING OF ASSESSMENT I S VALID ON THE FACTS OF THE CASE AND RELIED ON THE FOLLOWING JUDGM ENTS: I. ACIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD., [291 ITR 500] (SC); II. COMMISSIONER OF INCOME TAX VS. IDEAL GARDEN COMPLEX (P) LTD., [340 ITR 609] (HIGH COURT OF MADRAS); 6.1. HOWEVER, IT WAS FAIRLY ADMITTED THAT ON THE ISSUE O F MERITS, THE ISSUES ARE COVERED BY VARIOUS JUDGMENTS AS RELIED ON BY THE CIT(A). ITA NOS. 1730 & 1731/HYD/14 SMT. V. SANDHYA REDDY :- 11 -: 7. LD. COUNSEL IN REPLY SUBMITTED THAT SIMILAR ISSUE WAS CONSIDERED BY THE CO-ORDINATE BENCH IN THE CASE OF ITO VS. SMT. V. INDIRA (REP. BY MRS. NAITHA, D/O. LATE MRS. V. INDIRA) IN ITA NOS. 786 & 787/HYD/2015 DT. 13-05-2016, WHEREIN ON SIMILAR FA CTS, THE ITAT HAS FOLLOWED THE DECISION OF THE CO-ORDINATE BENC HES AND DISMISSED THE REVENUE APPEALS. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUS ED THE DOCUMENTS ON RECORD. AS FAR AS THE ISSUE OF REOPE NING IS CONCERNED, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE CIT(A) AS ASSESSEE HAS DISCLOSED THE RELEVANT CAPI TAL GAINS. IN FACT THE CAPITAL GAINS WERE BROUGHT TO TAX PROTECTIVELY IN AY. 2006- 07 AND SUBSTANTIVELY IN AY. 2007-08. THUS, AO IS NOT C LEAR IN WHICH YEAR THE AMOUNTS WERE TO BE TAXED. BE THAT AS IT MA Y, LD.CIT(A) HAS GIVEN A FINDING THAT THERE SHOULD BE A SATISFACTORY REASON TO REOPEN THE ASSESSMENT AND SUSPICION CANNOT BE THE BASIS FOR REOPENING THE ASSESSMENT. CONSIDERING THE FACTS OF THE CASE AND ORDERS OF THE ITAT ON THE ISSUE IN OTHER CASE S, WE DO NOT FIND ANY REASON TO DIFFER FROM THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, WE FIND NO MERIT IN THE REVENUE CONTENTIONS. 9. COMING TO THE MERITS OF THE ISSUE I.E., QUANTUM OF CAPITAL GAINS, THIS ISSUE WAS ALREADY CRYSTALISED BY VARIOUS DECISION OF THE CO-ORDINATE BENCHES OF ITAT, AS RELIED ON BY T HE LD.CIT(A). CO-ORDINATE BENCH AT HYDERABAD IN THE CASE OF ITO VS. SMT. V. INDIRA (REP. BY MRS. NAITHA, D/O. LATE MRS. V. INDIRA) IN ITA NOS. 786 & 787/HYD/2015 DT. 13-05-2016 (SUPRA) ALSO HAS CONSI DERED THE ISSUE AND HELD AS UNDER: ITA NOS. 1730 & 1731/HYD/14 SMT. V. SANDHYA REDDY :- 12 -: 7. FURTHER, CO-ORDINATE BENCH AT CHENNAI ALSO EXTRACT ED THE ORDERS OF ITAT, BANGALORE BENCH WHICH WAS FOLLOWED BY THE LD. CIT (A) VIDE PARA 55 AND 56 AS UNDER: 55. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE CIT(A) HAS ACCEPTED THE LEGAL POSITION THAT WHEN A PERSON IS S HOWN IN THE PARTNERSHIP DEED AS PARTNER REPRESENTING THE HUF, THE HUF DOES NOT BECOME THE PARTNER. THE CLT(A) HAS HOWEVER PROCEEDED ON THE BA SIS THAT THE DESCRIPTION IN THE PARTNERSHIP DEED IN THE PRESENT CASE SHOWED THAT HUF WAS THE PARTNER. THEREAFTER, THE CIT(A) APPLIED THE PROPOSITION THAT HUF CANNOT ENTER THE PARTNERSHIP AND CARRY ON BUSINESS AND FINALLY CONCLUDED THAT THE PARTNERSHIP ITSELF IS ILLEGAL AS HUF WAS A PARTNER OF THE FIRM. IN OUR VIEW, THE CIT (A) HAS NOT PROPERLY APPRECIATED THE TRUE EFFECT OF THE DESCRIPTION IN THE PARTNERSHIP DEED. AS FAR AS V.MA DHUSUDAN REDDY, V.VIKRAM REDDY AND V.DINESH REDDY ARE CONCERNED, TH EY WERE SHOWN AS PARTNERS IN THEIR INDIVIDUAL CAPACITY IN ALL THE PA RTNERSHIP DEEDS PRIOR TO 24.3.2006. THE FACT THAT THEIR NAMES APPEARING IN INDIVIDUAL CAPACITY IN ALL THE DEEDS PRIOR TO 24.3.2006 WAS IN FACT IN THE IR CAPACITY VIZ., REPRESENTING THE HUF HAS BEEN BROUGHT OUT IN THE PA RTNERSHIP DEED DATED 24.3.2006. THIS BECAME NECESSARY BECAUSE, THESE 3 P ERSONS ALSO BECAME PARTNERS OF THE FIRM BVRE IN THEIR INDIVIDUAL CAPAC ITY UNDER THE DEED OF PARTNERSHIP DATED 24.3.2006. AS FAR AS DWARKANATH R EDDY IS CONCERNED, HE BECAME PARTNER IN TWO CAPACITIES UNDER THE DEED OF PARTNERSHIP DATED 24.3.2006 VIZ., IN HIS CAPACITY ON BEHALF OF THE HU F AND IN HIS INDIVIDUAL CAPACITY. HERE AGAIN TO DISTINGUISH THE TWO CAPACIT IES IN WHICH HE WAS A PARTNER, THE DESCRIPTION 'IN HIS HUF CAPACITY' AND 'IN -HIS INDIVIDUAL CAPACITY' HAD BEEN USED IN THE PARTNERSHIP DEED DAT ED 24.3.2006. AS RIGHTLY CONTENDED ON BEHALF OF THE ASSESSEE, THE FA CT THAT THE NAME OF AN INDIVIDUAL IS WRITTEN IN THE PARTNERSHIP DEED FOLLO WED BY THE DESCRIPTION 'PARTNER IN HIS HUF CAPACITY' CANNOT CONSTITUTE THE HUF AS A PARTNER. THE INTENTION OF THE PARTIES IS VERY CLEAR THAT THE IND IVIDUAL IS A PARTNER OF THE FIRM AS FAR AS THE FIRM IS CONCERNED. AS FAR AS THE MEMBERS OF THE HUF ARE CONCERNED, HE IS ACTING ON THEIR BEHALF IN 'A REPRE SENTATIVE CAPACITY. THIS FACT IS ALSO CORROBORATED BY THE FACT THAT THE SHAR E INCOME OF V.MADHUSUDAN REDDY, V.VIKRAM REDDY AND V.DINESH RED DY, WHO WERE SHOWN AS INDIVIDUALS IN THE PARTNERSHIP DEEDS PRIOR TO 24.3.2006, THE CONCERNED INDIVIDUAL OFFERED TO TAX IN THE HANDS OF THE HUF AND TAXED IN THE HANDS OF THE RESPECTIVE HUFS. THE DETAILS IN TH IS REGARD HAVE ALREADY BEEN GIVEN IN PARA-3 TO 15 OF THIS ORDER. A PARTNER MAY BE THE KARTA OF A JOINT HINDU FAMILY, HE MAY BE A TRUSTEE, HE MAY BE A REPRESENTATIVE OF A GROUP OF PERSONS, HE MAY BE A BENAMIDAR FOR ANOTHER . IN ALL SUCH CASES HE OCCUPIES A DUAL POSITION; QUA THE PARTNERSHIP, HE F UNCTIONS IN HIS PERSONAL CAPACITY; QUA THE THIRD PARTIES, IN HIS REPRESENTAT IVE CAPACITY; THIRD PARTIES, WHOM ONE OF THE PARTNERS REPRESENTS, CANNO T ENFORCE THEIR RIGHTS AGAINST THE OTHER PARTNERS, NOR CAN THE OTHER PARTN ERS DO SO AGAINST THE SAID THIRD PARTIES. THEIR RIGHT IS ONLY TO A SHARE IN THE PROFITS OF THEIR ITA NOS. 1730 & 1731/HYD/14 SMT. V. SANDHYA REDDY :- 13 -: PARTNERS WHO (QUA THEM) WAS REPRESENTATIVE. IT IS T HUS CLEAR THAT HUF WAS NEVER PARTNER IN THE FIRM BVRE AND THE CONCLUSIONS TO THE CONTRARY BY THE CIT(A) CANNOT BE SUSTAINED. THUS IT IS HELD ON ISSU E NO.(2) THAT HUF WAS NOT PARTNER OF THE ' FIRM BVRE AND THEREFORE THE FI RM BVRE CANNOT BE SAID TO BE NOT VALID. 56. THE THIRD ISSUE THAT ARISES FOR CONSIDERATION I S AS WHETHER THERE WERE MORE THAN 20 PERSONS AS PARTNERS IN THE FIRM B VRE, AND CONSEQUENTLY THE FIRM IS NOT VALID? SEC. 11 OF THE COMPANIES ACT, 1956 PROVIDES THAT NO PARTNERSHIP SHALL CONSIST OF MORE THAN 10 PERSONS IF IT CARRIES ON BUSINESS OF BANKING AND 20 PERSONS IN TH E CASE OF ANY OTHER BUSINESS. THE FIRM BVRE WAS NOT CARRYING ON BANKING BUSINESS AND THEREFORE COULD HAVE 20 PARTNERS AND ON THIS THERE IS NO DISPUTE. A PARTNERSHIP FIRM IF IT VIOLATES THE ABOVE PROVISION S WILL BE CONSIDERED ILLEGAL. THE CIT(A) IN HIS ORDER FOUND THAT THERE F OUR OF THE PARTNERS WHO WERE DESCRIBED AS REPRESENTING THEIR HUFS VIZ., V.M ADHUSUDHAN REDDY, V.VIKRAM REDDY, V.DINESH REDDY AND V.DWARAKANATH RE DDY. HE ALSO LISTED MEMBERS OF EACH OF THE HUFS AS FOLLO WS: 1. V.DWARAKANATH REDDY (HUF) (A) SRI.V.DWARAKANATH REDDY (B) SRIV.DINESH REDDY (SON) (C ) SRNT.V.ANITA REDDY (DAUGHTER) (D) SRNLV.SANDHYA REDDY (DAUGHTER) II. V.VIKRARN REDDY (HUF) (A) SRI. V.VIKRAM REDDY (B) SRIV.NITYA REDDY (WIFE) (C ) SRNT.BINDUVASINI (DAUGHTER) (D) SRNT.BHANYATINI (DAUGHTER) III. V.MADHUSUDAN REDDY (HUF) (A) SRI.V.MADHUSUDAN REDDY (B) SRNT. SOUMINI REDDY (WIFE) (C) NACHIKETA (SON) IV. V.DINESH REDDY (HUF) (A) SRI.V.DINESH REDDY (B) SMT.SRUTHI REDDY (DAUGHTER) (C) KIRTANA (SON) (D) TANNA (SON). ACTUAL NAME IS TARUN NOT TANNA AS RECORDED IN THE ORDER OF CIT(A) ITA NOS. 1730 & 1731/HYD/14 SMT. V. SANDHYA REDDY :- 14 -: THE CIT(A) THEREAFTER CONCLUDED THAT THE NUMBER OF MEMBERS OF THE HUF WAS 15. THERE WERE 13 PARTNERS INCLUDING THE 4 HUFS UNDER THE DEED OF PARTNERSHIP DATED. 24.3.2006. ACCORDING TO THE CIT( A), IF THE OTHER 9 PARTNERS (OTHER THAN THE 4 HUFS) WERE TAKEN INTO CO NSIDERATION THEN THE PARTNERSHIP WOULD CONSIST OF MORE THAN 20 PERSONS A ND HENCE ILLEGAL. 7.1. IN VIEW OF THE DECISIONS OF THE CO-ORDINATE BENC HES AT BANGALORE AND CHENNAI NOTED ABOVE, WE ARE OF THE OPINION THAT THE TR ANSACTIONS UNDERTAKEN BY ASSESSEE ARE NOT COLOURABLE TRANSACTIONS AND ASSESS EE HAS CORRECTLY OFFERED THE CAPITAL GAINS ARISING BY WAY OF CONTRIBUTING THE SHARES AS SHA RE CAPITAL IN THE FIRM, B.V.R. ENTERPRISES. CONSEQUENTLY, AO HAS ERRED IN BRINGING TO TAX THE SO CALLED GAIN IN THE HANDS OF THE INDIVIDUAL SHAREHOLDER DURING THE YEAR UNDE R CONSIDERATION. THERE IS NO MERIT IN THIS APPEAL OF REVENUE. GROUNDS ARE DISMIS SED. 9.1. IN VIEW OF THIS, SINCE CIT(A) HAS FOLLOWED THE DECISION OF THE CO-ORDINATE BENCHES AT CHENNAI AND BANGALORE, WE D O NOT FIND ANY REASON TO INTERFERE WITH SUCH FINDINGS. HIS ORD ER IS IN COMPLIANCE TO THE ORDERS OF THE ITAT. ACCORDINGLY, TH E GROUNDS RAISED IN MERITS ALSO ARE REJECTED. 10. IN THE RESULT, BOTH THE REVENUE APPEALS ARE DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER, 2016 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMB ER HYDERABAD, DATED 30 TH DECEMBER, 2016 TNMM ITA NOS. 1730 & 1731/HYD/14 SMT. V. SANDHYA REDDY :- 15 -: COPY TO : 1.THE DEPUTY COMMISSIONER OF INCOME TAX-2, INTERNAT IONAL TAXATION, HYDERABAD. 2. SMT. V. SANDHYA REDDY, D.NO. 8-2-703/A/1, ROAD N O. 12, BANJARA HILLS, HYDERABAD. 3. THE COMMISSIONER OF INCOME TAX (APPEALS)-V, HYDE RABAD. 4. THE DIT (IT & TP), HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.