Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: articles on VAT and GST in India :: due date for vat payment :: ACCOUNTING STANDARDS :: cpt :: TDS :: VAT RATES :: TAX RATES - GOODS TAXABLE @ 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: Central Excise rule to resale the machines to a new company :: ARTICLES ON INPUT TAX CREDIT IN VAT :: form 3cd :: list of goods taxed at 4% :: ACCOUNTING STANDARD :: VAT Audit :: empanelment
« From the Courts »
  Dr. Gautam Sen vs. CCIT (Bombay High Court)
 Dr. Gautam Sen vs. CCIT (Bombay High Court)
 DCIT vs. Shivshankar R. Sharma (ITAT Mumbai)
 ACIT vs. Jawaharlal Agicha (ITAT Mumbai)
 CIT vs. M/s. D. Chetan & Co (Bombay High Court)
 Makes further amendments to Notification no. 157/90-Customs dated 28th March, 1990 regarding temporary admission under the ATA Carnet
 Appointment of Common Adjudicating Authority by DGRI - 2/2016-Customs
 ransfers Of Hon’ble Members Of The ITAT (September 2016)
 M. G. Contractors Pvt. Ltd vs. DCIT (ITAT Delhi)
 Haryana State Road & Bridges Development Corporation Ltd vs. CIT (P&H High Court)
 Dharamshibhai Sonani vs. DCIT (ITAT Ahmedabad)

Satya Nand Munjal vs. CGT (Supreme Court)
February, 04th 2013

Taxability of a revocable transfer as deemed gift u/s 4(1)(c) of the Gift-tax Act

The assessee owned 6000 shares of Hero Cycles. On 20.02.1982, he executed a deed of revocable transfer in favour of M/s Yogesh Chandra. The deed permitted the assessee to, after completion of 74 months from the date of transfer but before the expiry of 82 months from the said date, exercise the power of revoking the gift. In other words, there was a window of 8 months within which the gift could be revoked. The deed of revocable transfer specifically stated that the gift shall not include any bonus shares or right shares received and/or accruing or coming to the transferee from Hero Cycles by virtue of ownership of the said shares. Effectively, therefore, only a gift of 6000 equity shares was made by the assessee to the transferee. On 29.09.1982 & 31.5.1986, the company issued 4000 and 10,000 bonus shares to the transferee. On 15.6.1988, the assessee revoked the gift with the result that the 6000 shares gifted to the transferee came back to the assessee. However, the 14,000 bonus shares allotted to the transferee while it was the holder of the equity shares of the company continued with the transferee. In AY 1982-83, the GTO relied on McDowell 154 ITR 148 (SC) and held that the revocable transfer was only for the purpose of reducing the wealth tax liability and was void. He, however, made a protective gift-tax assessment. The Tribunal and the High Court (CGT vs. Satya Nand Munjal 256 ITR 516 (P&H)) reversed the AO and held that a revocable transfer was valid even if its object was to avoid wealth-tax. The assessee was held liable to pay gift-tax u/r 11 of the Gift-tax Act. In AY 1989-90 the AO & CIT(A) held that the 14,000 shares belonged to the assessee and as the revocation was only with respect to the 6,000 shares and the 14,000 bonus shares continued with the transferee, there was a chargeable gift to that extent. The Tribunal reversed the AO & CIT(A). On appeal by the department, the High Court reversed the Tribunal and held that the assessee was liable to gift tax on the value of the bonus shares gifted by him to the transferee applying the principles of Escorts Farms (Ramgarh) 222 ITR 509 (SC). On appeal by the assessee to the Supreme Court, HELD:

The fundamental question is whether there was in fact a gift of 14,000 bonus shares made by the assessee to the transferee. The answer to this question lies in s. 4(1)(c) of the Gift-tax Act which provides that “where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge, surrender, forfeiture or abandonment to the extent to which it has not been found to the satisfaction of the AO to have been bona fide, shall be deemed to be a gift made by the person responsible for the release, discharge, surrender, forfeiture or abandonment“. On facts, the assessee had made a valid revocable gift of 6000 equity shares in the company on 20.2.1982 to the transferee. The only event that took place in AY 1989-90 was the revocation of the gift by the assessee on 15.6.1988. The question whether the revocation of the gift of the original shares in AY 1989-90 constitutes a gift of the bonus shares that were allotted to the transferee on 29.09.1982 and 31.05.1986 requires to be answered in the light of s.4(1)(c). The question of applicability of Escorts Farms has to be decided after a finding is reached on the applicability of the first part of s. 4(1)(c) (matter remanded).

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
SEO Company Search Engine Optimization Company US SEO Local SEO Company Website SEO Company Alabama SEO Company Alaska SEO Company Arizona SEO Company Arkansas SEO Company California SEO Company Colorado SEO Company Connecticut SEO Company Delawa

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions