COMMISSIONER OF INCOME TAX vs. MANORAMA SARABHAI TRUST NO.3

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ITR/247/1995HC GujaratGJHC24022570199502 February 1998Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE KUNDAN SINGH2 pages
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What did the High Court hold?

The High Court, for reasons given in a related judgment (ITR No. 221 of 1995 concerning an assessee from the same group with identical facts), left the question referred at the instance of the Revenue unanswered. This implies the court did not provide a definitive ruling on whether the receipt of shares, debentures, and bonds upon amalgamation constitutes a 'transfer' under Section 2(47) or if capital gains tax is chargeable. However, the Court answered the question referred at the instance of the assessee in the affirmative, but in favour of the Revenue and against the assessee. This means the Tribunal was held to be correct in denying the assessee exemption under Section 47(vii) of the Income Tax Act, 1961. The reference was disposed of accordingly, with no order as to costs.

What were the facts?

This case involves an Income Tax Reference before the High Court of Gujarat at Ahmedabad, arising from an order of the Income-Tax Appellate Tribunal, Ahmedabad. The reference was made under Section 256(1) of the Income Tax Act, 1961, at the instance of both the Revenue and the assessee, Manorama Sarabhai Trust No. 3. The core of the dispute concerns the taxability of shares, debentures, and bonds received by the assessee from amalgamated companies. The assessment years are not explicitly stated in the provided text. The procedural history indicates that the Tribunal made a reference to the High Court for its opinion on two specific questions of law.

What were the issues?

The Tribunal had to decide two questions of law. The first question, referred at the instance of the Revenue, is: 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? The Revenue's contention, as implied by the question, is that the receipt of shares, debentures, and bonds upon amalgamation constitutes a 'transfer' under Section 2(47) of the Income Tax Act, making capital gains taxable. The second question, referred at the instance of the assessee, is: 2. Whether, on the facts and circumstances of the case, the Tribunal was right in law in holding that the assessee was not entitled to exemption under section 47(vii) of the Income-Tax Act, 1961? The assessee's contention, as implied by the question, is that the transaction should qualify for exemption under Section 47(vii) of the Income Tax Act, 1961.

Which sections of the Income-tax Act were involved?

Section 2(47),Section 47(vii),Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 247 of 1995

For Approval and Signature:

Hon'ble MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements?

[ 2. To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question 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?

-------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus MANORAMA SARABHAI TRUST NO.3 -------------------------------------------------------------- Appearance: Mr. Pranav G Desai for MR MANISH R BHATT for Petitioner D.A.Mehta & R K Patel for respondent. --------------------------------------------------------------

CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH Date of decision: 02/02/98

ORAL JUDGEMENT

The Income-Tax Appellate Tribunal, Ahmedabad has referred the following two questions, the first being at the instance of Revenue and the second at the instance of the assessee for the opinion of this Court under the provisions of Section 256(1) of the Income Tax Act, 1961. At the instance of Revenue:

"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 ? "

At the instance of the assessee:

Whether, on the facts and circumstances of the case, the Tribunal was right in law in holding that the assessee was not entitled to exemption under section 47 (vii) of the Income-Tax Act, 1961 ? "

2.

For the reasons given by us in the judgment delivered today in ITR No.221 of 1995 in the case of an assessee belonging to the same group as in this matter which raises an identical question in the background of similar facts, we leave the question referred to us at the instance of Revenue, as unanswered, and, answer the question referred to us at the instance of assessee in the affirmative and against asessee and in favour of the Revenue. The Reference stands disposed of accordingly with no order as to costs.

(R.K.Abichandani,J) (Kundan Singh,J)

***darji

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