Allowing the appeal the Tribunal held that the gift made by the assessee-company could not be said to be a part of a family arrangement as a company cannot be a member of a family but a separate juridical entity having its own separate existence. Therefore, whether or not the assessee had produced the family settlement deed or a family memorandum of understanding did not make any difference. A family arrangement is an arrangement between members of the same family intended to be generally for the benefit of the family by compromising doubtful or disputed rights or by preserving the family property for peace and security of the family by avoiding litigation or by saving its honour. Therefore, the family settlement should necessarily comprise a dispute or possible dispute to be settled amicably between the members of a “family”. A company being a separate and distinct entity does not form part of a family. The company cannot be said to be in real relation to any of the family members but a separate legal entity. Therefore, if there is a transaction between two family members of the family, a corporate entity is not entitled to get any benefit which a member of the family is entitled to. Relied on B. A. Mohota Textiles Traders Pvt. Ltd. v. Dy. CIT (2017)397 ITR 616 (Bom) (HC) and CIT v. Sea Rock Investments Ltd. (2009) 317 ITR 253 (Karn)(HC). Transfer of shares were done by way of gift which was accepted by the donees hence the acceptance of the gift was proper. In view of this the requisite conditions as envisaged under section 122 of the Transfer of Property Act, 1882 were satisfied. As the assessee had gifted the shares, there was no accrual of any revenue to the assessee. As there was no sale of securities by the assessee, there was no inflow of cash, receivables or other consideration, and there was no question of accrual of any consideration to the assessee. Tribunal also held that there was no provision which provided for taxation of gift of stock-in-trade in the hands of the donor by imputing market value. Relied on Sir Kikabhai Premchand v. CIT (1953) 24 ITR 506 (SC). The Tribunal also held that no business income could be charged to tax in the hands of donor assessee on account of the gift made by the assessee to the four different corporate entities, in the absence of any consideration.(AY.2014-15)
Manjula Finance Ltd. v. ITO (2021) 85 ITR 210/ 212 TTJ 444 (Delhi)(Trib.)
S. 45 : Capital gains-Gift-Company-Family arrangement-Arrangement between members of family-Company separate and distinct entity not part of family-Shares held as stock in trade-Gift of shares to other group companies-Articles empowering gift-Shares disclosed in recipients’ annual accounts and recipients assessed-Shares transacted trough Dematerialised account-No real income taxable in assessee’s hands-Conversion of stock-in-trade into capital asset-Provision for taxation brought with effect from 1-4-2019-No provision for taxation of gift of stock-in-trade in hands of Donor imputing market value. [S. 2(24)(xiia), 2(42A), Expln. 1, 28(via), 45(2), 49(9), Companies Act, 2013, or the Companies Act, 1956. Transfer of Property Act, 1882, S. 122]