COMMISSIONER OF INCOME TAX vs. MANORAMA SARABHAI TRUST NO.4

PDF · subscribers
ITR/221/1995HC GujaratGJHC24022544199502 February 1998Author: HONOURABLE MR. JUSTICE R.K.ABICHANDANI,HONOURABLE MR. JUSTICE KUNDAN SINGH3 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court decided not to answer the question referred at the instance of the Revenue. This was because the Revenue, through its learned counsel, did not press for the reference, acknowledging a prior High Court decision in CIT vs. Leena Sarabhai (221 ITR, 520) where the department had accepted that no transfer of capital assets occurred under Section 2(47) in similar amalgamation cases involving receipt of shares and bonds. Therefore, the Revenue's question regarding transfer under Section 2(47) was not answered. Regarding the assessee's question on exemption under Section 47(vii), the High Court held that the Tribunal was right in disallowing the exemption. The Court relied on its own decision in CIT vs. Gautam Sarabhai Trust (173 ITR, 216), which held that if a shareholder of an amalgamating company receives something more than just shares in the amalgamated company, such as bonds or debentures, in consideration for their shares, they cannot claim the benefit of Section 47(vii). The question was answered against the assessee and in favour of the Revenue.

What were the facts?

The assessee, Manorama Sarabhai Trust No. 4, held shares in an amalgamating company. Following a High Court order for amalgamation, the assessee received shares and bonds of the amalgamated company in lieu of its shares in the amalgamating company. The Income Tax Officer (ITO) considered this a transfer under Section 2(47) of the Income Tax Act, 1961, attracting capital gains tax. The assessee appealed, arguing no transfer occurred and that any gains were exempt under Section 47(vii). The Appellate Assistant Commissioner (AAC) held the gains exempt under Section 47(vii). The Revenue appealed to the Tribunal, which, while noting a prior Gujarat High Court decision against the assessee on Section 47(vii), found no transfer under Section 2(47) and thus no capital gains tax was leviable. The High Court was then asked to decide two reference questions.

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? (Revenue's question). The Revenue contended that the receipt of shares and bonds constituted a transfer. The assessee argued that the transaction did not amount to a transfer under Section 2(47) and that any capital gains were exempt under Section 47(vii). 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? (Assessee's question). The assessee contended for exemption under Section 47(vii). The Revenue argued against this exemption.

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 221 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.4 -------------------------------------------------------------- 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.

The assessee held shares in certain amalgamated company in lieu of the assessee's share holding in the amalgamating company it is a transfer as contemplated under section 2(47) of the Act, was not required to be determined mainly because it appeared from the letter of Commissioner of Income-tax referred to in ***darji

More judgments on Section 2(47)

All 851 judgments and leading authorities on Section 2(47) →

Recent GST High Court judgments

Search GST case law →