COMMISSIONER OF INCOME TAX vs. SUHRID SARABHAI (HUF) TRUST NO.1

ITR/305/1993HC GujaratGJHC24021326199306 November 2001Author: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE D.A.MEHTA3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court of Gujarat, while hearing the reference at the instance of the revenue, noted that the controversy was concluded by its earlier decision in CIT vs. Leena Sarabhai, 221 ITR 520. In that case, the court had observed that the revenue had accepted in similar cases belonging to the same group or set of assessees that receiving shares and bonds of an amalgamated company in lieu of shareholding in the amalgamating company did not amount to a 'transfer' under Section 2(47) of the Income-tax Act, 1961. The court also noted correspondence from the Commissioner of Income Tax indicating the department's view not to prefer appeals in such matters. Due to the department's acceptance of this position in similar cases, the court held that the question referred to it did not require determination. The question was left unanswered, and the reference was disposed of accordingly.

What were the facts?

The Commissioner of Income Tax (Revenue) filed an Income Tax Reference No. 305 of 1993 before the High Court of Gujarat at Ahmedabad. The reference pertains to the assessment year 1982-83 and concerns the assessee, Suhrid Sarabhai (HUF) Trust No. 1. The Tribunal had held that when the assessee received shares, debentures, and bonds of amalgamated companies, there was no transfer under Section 2(47) of the Income-tax Act, 1961, and consequently, no capital gains tax could be charged. The reference had been pending for eight years.

What were the issues?

1. Whether, the Appellate Tribunal is right in law and on facts in holding that when the assessee received shares, debentures and bonds of amalgamated companies, there was no transfer under section 2(47) of the Income-tax Act and consequently no capital gains tax could be charged? Assessee's Contention: The judgment does not record any specific arguments made by the assessee. However, the Tribunal's decision, which is the subject of the reference, implies that the assessee argued that the receipt of shares and bonds of an amalgamated company in lieu of shareholding in an amalgamating company does not constitute a 'transfer' under Section 2(47) of the Income-tax Act, 1961, and therefore, no capital gains tax is leviable. Revenue's Contention: The revenue, through its counsel Mr. Akil Qureshi, requested the court to dispose of the reference, acknowledging that the controversy was concluded by a prior decision of the same court in CIT vs. Leena Sarabhai, 221 ITR 520. The revenue's stance, as indicated by the court's reliance on the Leena Sarabhai case, was that in similar cases involving the same group of assessees, the department had accepted that there was no transfer.

Which sections of the Income-tax Act were involved?

Section 2(47)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 305 of 1993

For Approval and Signature:

Hon'ble MR.JUSTICE M.S.SHAH and Hon'ble MR.JUSTICE D.A.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO

The order continues below.

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