URVI PREMAL SHAH,BANDRA-EAST vs. ITO, WARD-19(3)(1), TARDEO ROAD

Perused the records and heard learned representative for the appellant assessee and learned DR for the respondent revenue department.

The small issue involved under appeal is as to whether the difference in the cost of shares donated by the assessee’s relative to assessee and that recorded at ‘fair market value’ by the assessee, be treated as unexplained credit u/s 68 of the Act? 6. Learned representative for the assessee has submitted that the shares gifted by the assessee’s relative to the assessee were recorded in donor’s A/c showing the cost of acquisition of Rs. 2,73,06,266/-. However, these were recorded by assessee in her books of account at the ‘fair market value’ of Rs. 7,76,25,000/- on the date of gift deed. The said gift received from the relative of the assessee is wholly exempt under the Act. It is further submitted that the gifted shares have not been sold in the year under consideration. Prayed to set aside the impugned order and delete the addition.

Learned DR has vehemently supported the impugned order.

It is not disputed that assessee has received gift of total number of Rs. 2,81,250/- equity shares of M/s. Ecobrilliance Private Limited company from Mr. Milan S. Shah (Donar), who is the brother of assessee’s spouse. The value of the aforestated shares has been shown at Rs. 7,76,25,000/- on the date of gift deed dated 03.02.2018. The gift deed is part of the assessee’s paper book at page 46 and 47. The assessee has not sold the gifted shares during the year under consideration. According to section 56(2)(X), the gift being from the relative of the assessee is wholly exempt from tax. There cannot be treated any profit or gain on the receipt of such gift from relative.

Learned CIT(A), while passing the impugned order, has taken support from the decision of Hon’ble Bombay High Court in CIT(A) V. Trikamlal Maneklal (Karta of HUF) [1987] 32 Taxman 479 (Bom) and the decision of the ITAT Jaipur bench in Utsav Cold Storage (P.) Ltd. V. ITO Ward 3(2) Jaipur [2016] 70 taxmann.com 13 (Jaipur-Trib.). These cases relate to the capital gain on the profit or gain that arise on the transfer of the capital asset. In the instant case, there is no transfer of aforesaid gifted shares after the assessee (donee) received these shares in gift from the relative (brother of assessee’s spouse). The facts of the cases referred and relied by the Ld. CIT(A) are easily distinguishable and not applicable to the facts of the present case.

We notice that the assessee received the gift of shares from the brother of her spouse, who is a relative in terms of explanation (a) attached to the proviso to clause (xiii) r/w explanation to clause (vii) of section 56(2) of the Act. The gifted shares of Rs. 2,73,06,266/- were recorded by the assessee in her account exhibiting the cost of gifted shares at ‘fair market value’ @ Rs. 7,76,25,000/-. Such a gift is wholly exempt u/s. 56(2)(X)

of the Act. The aforesaid issue is accordingly determined in negative against the revenue and in favour of the assessee. Assessing officer is directed to delete the said addition 11. In the result, the assessee’s appeal is allowed.