ASSTT. C.I.T vs. GIRA SARABHAI (GS) TRUST NO.39

O/TAXAP/263/2001 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 263 of 2001 TO TAX APPEAL NO. 286 of 2001 With TAX APPEAL NO. 324 of 2001 TO TAX APPEAL NO. 332 of 2001

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE KS JHAVERI

and HONOURABLE MR.JUSTICE K.J.THAKER

================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ A.C.I.T.....Appellant(s) Versus HUF OF AMBALAL SARABHAI....Opponent(s) ================================================================ Appearance: MR NITIN K MEHTA, ADVOCATE for the Appellant(s) No. 1 Page 1 of 6

O/TAXAP/263/2001 JUDGMENT MR RK PATEL, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER

Date : 05/12/2014

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. The Revenue has filed these appeals u/s.260A of the Income Tax Act, 1961 (for short, the Act) being aggrieved by and dissatisfied with the order passed by the Income Tax Appellate Tribunal (for short, the ITAT) in I.T.A. Nos. 1511/Ahd/1994

1582/Ahd/1994 with

1874

to 1883/Ahd/1994 and 1928 to 1930/Ahd/1994 with 1942/Ahd/1994 and 1945/Ahd/1994, 1687/Ahd/95 and 1940, 1941, 1944, 1968, 1969 and 2413/Ahd/1994 dated 20.03.2001. 2. While admitting the appeals, the following substantial questions of law came to be formulated by this Court; (1) Whether, the Appellate Tribunal has substantially erred in law and on facts in holding that distribution made by the Company, namely, Alkapuri Investment P.Ltd. to it's shareholders on reduction of it's share capital does not attract the provisions of section 2(22)(d) of the Act in the case of the shareholders ? (2) Whether, the Appellate Tribunal has substantially erred in law and on facts in computing the accumulated profits of the said Company at a negative figure of Rs.48,61,000/- as against profit of Rs.14,68,39,788/- computed by the Assessing Officer ? Page 2 of 6

O/TAXAP/263/2001 JUDGMENT 3. The assessee firms in this case belong to Sarabhai Group and are shareholders of Alkapuri Investments Pvt. Ltd. (AIPL). During the previous year corresponding to the assessment year, Alkapuri had effected reduction of its share capital and the AO rejected the same and taxed the amount of distribution as ‘deemed dividend’ in the hands of the shareholder. On appeal, the CIT(A) deleted the addition made by the A.O and held that since the assessee had not received any amount in excess of what was paid for acquiring the shares no capital gain tax would be leviable as a result of reduction of capital by AIPL. The revenue preferred an appeal before the Tribunal challenging the said order passed by CIT(A). The Tribunal partly allowed the appeals. The revenue has challenged the order passed by the Tribunal to the extent it holds the reserve of accumulated profit of amalgamating company loses its character as accumulated profit in amalgamated company. 4. Mr. Nitin Mehta learned Standing Counsel appearing for the Revenue submitted that the Tribunal has erred in holding the entire reserve as reserve arising out of the scheme of amalgamation instead of limiting it. He submitted that the balance amount of reserve should have been considered as reserve of accumulated commercial profit inherited from amalgamating company. 5. Mr. R.K. Patel, learned advocate appearing for the assessee firms supported the impugned order and submitted that the same having been passed in accordance with law Page 3 of 6

O/TAXAP/263/2001 JUDGMENT does not call for any interference by this Court. He submitted that these appeals are not maintainable at the first place as the order passed in the lead matter has attained finality as the same has not been challenged. He has placed reliance on the decision of this Court in the case of CIT vs. Shahibaug Enterprises (P) Ltd. reported in [2010] 320 ITR 695 (Guj) and also judgement and order dated 13.10.2014 passed in Tax Appeal No. 11 of 2002 with Tax Appeal No. 14 of 2002 and submitted that the appeals are not competent. 6. In the case of Shahibaug Enterprises (supra), this Court has held as under: “5. Heard the learned Senior Standing Counsel for the applicant - Revenue as well as Shri R.K. Patel learned advocate for the assessee. It is an accepted fact between the parties that in case of Sercon P. Ltd., the order of Tribunal was carried before this Court by way of Income Tax Application No. 253/1988 under section 256(2) of the Act and vide order dated 16.4.1980 the application was rejected refusing to direct the Tribunal to raise and refer any question of law, either as proposed or otherwise. In the fact situation when on similar facts the issue stands concluded in favour of one assessee and there is nothing on record to suggest that the aforesaid order dated 16.4.1990 in case of Sercon P. Ltd. has been challenged further, the order made by the Apex Court in the case of Union of India & Ors. vs. Kaumudini Narayan Dalal & Anr., reported in (2001) 249 ITR 219, wherein, it is held that “it is not open to the Revenue to accept the judgment in case of one assessee and challenge its correctness in the case of other assessee without just cause” applies with full force. No distinguishing feature has been pointed out and hence in absence of any just cause the question referred to the Court requires to be answered in Page 4 of 6

O/TAXAP/263/2001 JUDGMENT the affirmative upholding the view taken by the Tribunal considering the fact that in case of Sercon P. Ltd. similar issue stands concluded against the revenue. The question is, therefore, answered in the affirmative, that is, in favour of assessee and against the revenue. “ 7. We have heard learned counsel for the parties and have perused the records of the case. It is borne out that the revenue has not challenged the order passed in the main matter. Moreover, in majority of cases the Income Tax Officer has implemented the decision of the Tribunal. Therefore, considering the observations made by this Court in the case of Shahibaug Enterprises (supra), we are of the opinion that when the revenue has accepted the judgement in the case of one assessee it shall not be open to the revenue to challenge its correctness in the case of other assessee without just cause. This Court vide judgement and order dated 13.10.2014 passed in Tax Appeals No. 11 & 14 of 2002 has also taken a similar view. In that view of the matter we are of the opinion that the question raised in the present appeals is required to be answered in favour of the assessee and against the revenue. 8. In the premises aforesaid, we answer the question raised in the present appeals in favour of the assessee and against the revenue. Appeals are dismissed accordingly. (K.S.JHAVERI, J.) Page 5 of 6

O/TAXAP/263/2001 JUDGMENT (K.J.THAKER, J) divya Page 6 of 6