The shares of UFIPL have been introduced as capital contribution @ 92.88\/- per share totalling to Rs.2,50,77,507\/-. The fair value of Rs.92.88\/- per share was computed on 17\/12\/2015 as per the valuation report prepared by the Chartered Accountant as per Rule 11UA of the Income-tax Rules, 1962. \u00a0As per the will and family settlement the profit sharing ratio of the partners have been changed . Thereafter, on 18\/01\/2016, all the assets of the assessee firm including shares of UFIPL were valued based on valuation report of M\/s. V B Desai Financial Services Limited (VBDFSL), a SEBI registered merchant banker. On the basis of \u00a0the report of VBDFSL, \u00a0the AO held \u00a0that the value per share of UFIPL was computed by a merchant banker on intrinsic value of Rs.4786.53\/- per share. The AO accordingly took the differential price of Rs.4693.65 (4786.53 \u2013 92.88) per share aggregating to Rs.126,72,80,806\/- as the fair value of shares of UFIPL . Accordingly the AO \u00a0invoked \u00a0the provisions of Section 56(2)(viia) of the Act, and \u00a0made the addition of Rs.126,72,80,806\/-. \u00a0On appeal the CIT(A) deleted the addition . On appeal by the \u00a0Revenue the Tribunal held that the provisions of Section 56(2)(viia) is not applicable in respect of capital contribution by partner in a firm. \u00a0The entire transaction is part of \u00a0the family settlement and \u00a0the transfer of shares between family members was part and parcel of family settlement entered into between brothers and sisters to give effect to the will and desire of the father, who were the promoters of the companies. The Tribunal held that \u00a0when \u00a0there is a family settlement to bring harmony and settlement of disputes, there is no transfer of assets and the provisions of Section 56(2)(viia) of the Act would not apply. The Tribunal held that shares were contributed as capital of the firm to give effect to the intention of Mr. D.M. Neterwala. Therefore \u00a0for capital contribution, the provisions of Section 56(2)(viia) of the Act would not apply . \u00a0The AO has treated the entire transactions as a colourable device to avoid tax completely ignoring the will and the family settlement . The Honourable Tribunal affirmed the order of the CIT(A) . Referred ,Ram Charan Das v. Girjanandini Devi \u00a0AIR 1966 SC 323, Ziauddin Ahmed v. CGT \u00a0[1976] 102 ITR 253(Gauhati )( HC) , CIT v. R. Ponnammal [1987] 164 ITR 707 (Mad) (HC) , CGT v \u00a0D. Nagrirathinam [2003]129 Taxman \u00a0822 (Mad)( HC) \u00a0(ITA No. 2457\/Mum. \/2024 dt. 20 -3 -2025 )( AY. 2016 -17 )<\/p>\n","protected":false},"excerpt":{"rendered":"
S. 56 : Income from other sources -Transactions between partners and firm-Will – Family settlement \u2013Brothers and sisters -Changes in the profit sharing ratio- Colourable device – Transfer – Capital contribution- The provisions of Section 56(2)(viia) of the Act is not applicable \u2013 Order of CIT(A) deleting the addition is affirmed . [ S. 2(31)(iv), 2(47), 14, 56(2)(viia), R. 11UA ] <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-52776","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-dJe","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/52776","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=52776"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/52776\/revisions"}],"predecessor-version":[{"id":52777,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/52776\/revisions\/52777"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=52776"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=52776"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=52776"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}