COMMISSIONER OF GIFT TAX vs. RAMESH SURI

GTA/3/2006HC DelhiDLHC01060703200616 January 2018Author: CASES PERTAINING TO SPL.DIVISION BENCHES7 pages
AI SummaryDismissed

What were the facts?

The assessee, Ramesh Suri, purchased 17,90,700 shares of M/s Bharat Hotels Limited at ₹25.70 per share from various family-controlled companies and individuals. These transactions were part of a family settlement to resolve disputes concerning control of the company and other properties, which were pending before the Delhi High Court. The Assessing Officer (AO) opined that the amounts paid in excess of the face value constituted a gift under Section 2(xii) read with Section 4 of the Gift Tax Act, 1958, considering the definition of 'transfer of property' under Section 2(24). The Commissioner of Income Tax (Appeals) [CIT(A)] reversed the AO's order, and the Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision. The Revenue has appealed this decision.

What did the High Court hold?

The Tribunal held that the provisions of the Gift Tax Act would ordinarily not apply to share transfers or property transfers that are part of a family settlement aimed at effectuating peace and resolving disputes. The Tribunal's decision was based on the consistent judicial opinion, particularly citing the Gauhati High Court's judgment in Ziauddin Ahmed vs. Commissioner of Gift Tax. In that case, the Court held that a transfer made bona fide by way of a family settlement to put an end to disputes amongst family members is not a 'transfer' in the context of Section 4(1)(a) of the Gift Tax Act, as it is not a transfer for inadequate consideration. The Tribunal noted that this dicta has been approved by other High Courts, including the Gujarat High Court. Therefore, the questions of law were answered against the revenue and in favour of the assessee. The appeal was dismissed.

What were the issues?

1. Whether a transaction involving the transfer of shares, where the price paid exceeds the actual market price, can constitute a gift under Section 2(xii) read with Section 4 of the Gift Tax Act, 1958? (Question of law) 2. Whether such a transfer will not constitute a gift if it is made in pursuance of a family settlement? (Question of mixed law and fact) Assessee's contentions: The assessee argued that the case squarely applies the principle laid down in Ziauddin Ahmed vs. Commissioner of Gift Tax (1976) 102 ITR 253 (Gauhati). In that case, shares transferred pursuant to a family settlement were held not to attract the Gift Tax Act, as the transfer was for family peace and harmony, and its value could not be precisely quantified. The assessee relied on this precedent. Revenue's contentions: The Revenue contended that the excess amounts paid over the face value for the shares constitute a gift taxable under Section 4(1)(a) of the Gift Tax Act. It was argued that the Act makes no exception for family settlements or similar arrangements and should be strictly construed as a fiscal statute.

Which sections of the Income-tax Act were involved?

Section 2(xii),Section 2(xxiv),Section 4(1)(a),Section 3

AI-generated summary — verify with the full judgment below

$~41 * IN THE HIGH COURT OF DELHI AT NEW DELHI Date of decision: 16.01.2018 + COMMISSIONER OF GIFT TAX

..... Appellant

Through : Mr. Zoheb Hossain, Sr. Standing

Counsel

versus

RAMESH SURI

..... Respondent

Through : Mr. Prakash Kumar, Adv.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE R. K. GAUBA

HON'BLE MR. JUSTICE S. RAVINDRA BHAT (ORAL) %

1.

In this appeal, the following questions of law arise for consideration:- (i) Whether a transaction involving transfer of shares can constitute a gift under section 2(xii) read with section 4 of the Gift Tax Act in cases where the price paid for such transfer is proved to be in excess of the actual market price of the shares so transferred? (ii) Whether the transfer in the above circumstances will not constitute a gift if the same is in pursuance of a family settlement?

2.

Brief facts are that the assessee purchased 17,90,700 shares of M/s Bharat Hotels Limited at `25.70 per share. Purchase was from different companies controlled by family me

The order continues below.

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