COMMISSIONER OF INCOME TAX, RAIPUR vs. M/S SIMPLEX FABRICATORS, BHILAI

ITA/20/2004HC ChhattisgarhCGHC01008019200428 January 2015Author: HON'BLE THE ACTING CHIEF JUSTICE,HON'BLE SHRI JUSTICE P. SAM KOSHY6 pages
AI SummaryDismissed

What were the facts?

The Revenue (Commissioner, Income Tax) appealed an order of the Income Tax Appellate Tribunal (ITAT) which affirmed the order of the Commissioner for Income Tax (Appeals). The CIT(A) had set aside the Assessing Officer's order that held the Respondent (M/s Simplex Fabricators Pvt. Ltd.) liable for gift tax. The AO had determined this liability on the ground that the Respondent allotted 4000 shares to Shri Vijay H. Shah for inadequate consideration. The AO ascertained the book value of each share at Rs. 3,564/-, while the allotment was at par value of Rs. 100/- per share. The gift tax liability was fixed at Rs. 1,38,26,000/- for Assessment Year 1996-97.

What did the High Court hold?

The High Court held that the appeal raised no substantial question of law. It affirmed the view of the CIT(A) and ITAT that shares held by a company do not constitute property, and the allotment of shares by the company does not constitute a transfer of existing property to attract the provisions of the Gift Tax Act by way of a deemed gift. The Court relied on the Supreme Court's judgments in Mrs. Bacha F. Guzdar v. CIT and Khoday Distilleries Ltd. v. CIT, and a Full Bench decision of the Madras High Court in Secretary, Board of Revenue Triplicane, Madras v. Madura Mills Co. Ltd. The Court noted that the Assessing Officer had dismissed the ratio of Getti Chettiar without proper discussion and relied on a Division Bench judgment without considering a Full Bench decision. The Court emphasized the distinction between the creation and transfer of shares, stating that allotment of shares is a creation, not a transfer of existing property. Therefore, Section 4(1)(a) was not applicable as the precondition of transfer of property was not fulfilled. The Court expressed regret that the observations of the CIT(A) regarding Kamlakshi Finance Corporation Ltd. were not heeded before filing the appeal.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Learned Income Tax Appellate Tribunal was justified in law in upholding the order of the Commissioner of Income Tax (Appeals) whereby the CIT(A) held that there was no transfer of shares and as such no deemed gift under Section 4(1)(a) of the Gift Tax Act, 1958 by the Company? 2. Whether, on the facts and in the circumstances of the case, the Learned Income Tax Appellate Tribunal was justified in law in holding that the allotment of fresh shares by the Company to Shri Vijay H. Shah could not be treated as a deemed gift within the meaning of Section 4(1)(a) of the Gift Tax Act, 1958? Assessee's contentions: The appeal involved no substantial question of law in view of settled judicial precedents. Revenue's contentions: Under Section 2(xxiv) of the Gift Tax Act, any disposition, conveyance, assignment, or other alienation of property done with the intention to diminish the value of one's own property and increase another's can be construed as a transfer. The AO was correct in treating the allotment as a deemed gift since shares were allotted at a much lesser value than the book value, amounting to intentional diminishing of value to evade taxes.

Which sections of the Income-tax Act were involved?

Section 260A,Section 4(1)(a),Section 2(xxiv)

AI-generated summary — verify with the full judgment below

0) é/w g IN THE HIGH COURT OF JUDICATURE AT BILASPUR (CHHATTISGARH! . A. No. 110 OF 2004 y .-" W [ ,x" H (Commissioner, Income Tax, 0 éx 6/ Raipur (Chha‘ttisgarh) ‘ . } i v E R s U s «v k Qi- ( V X, M/ s Slmplex . Fabrlcators . Pvt. (5 Ltd. 11, Industrial Estate, Bhilai, District Durg [CG] “ t v APPEALx UNDER SECTION 260A OF INCOME TAX ACT 1961 x I. T APPELLANT J i 0Q%’ \w \ § $ Q ° 7 : g§FDNDENT f b 3 ‘

;«:=\ HIGH COURT OF CHHATTISGARH AT BILASPUR DIVISION BENCH CORAM ; HnN'RI F SHRI NAVIN SINHA ACTING CHIFF .IUSTICF AND HON’BLE SHRI P. SAM KOSHY, J. I.T.A. NO. 20 OF 2004 JUDGEMENT (29—01 —2015) Per Navin Sinha, Acting CJ.’ (1) The presentAppeal arises from order dated 31.10.2003 passed by the Income Tax Appellate Tribunal. Nagpur Bench, Nagpur, amrming the order dated 12.9.2001 of the Commissioner for Income Tax (Appeals) The latter had set aside the order of the Assessing Officer dated 12.1.2001 holding'the Respondent liable to pay gift tax on the ground that allotment of Shares by the respondent had been done for inadequate consideration. (2) The Appeal was admitted for hearing framing the following . substantial questions of law :

1.

Whether on the facts and in the circumsta

The order continues below.

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