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The Tax Publishers2016 TaxPub(DT) 4782 (Mum-Trib) Ultima Search v. Asstt. CIT INCOME TAX ACT, 1961 --Capital gains--Applicability of section 45(4)Transfer of asset to third party----Provisions of section 45(4) could not be invoked, in case assessee firm was not dissolved and more so, when asset was transferred to a third party and not to partner. --Assessee, partnership firm, was engaged in manufacturing and trading business. It was holding shares of certain companies, which it transferred to a third party in pursuance of a 'transfer agreement'. Assessee contended that it was a gift transaction and therefore, transaction was not liable to tax as per section 47(iii). AO contended that said transfer was taxable under section 45(4). *Held:* It was held that provisions of section 45(4) could be invoked in case of dissolution of firm or AOP or BOI. As assessee firm was not dissolved and, moreover, asset was not distributed to partners, AO was not correct in applying provisions of section 45(4). Income Tax Act, 1961 Section 45(4) *REFERRED :* Sharmila Tagore v. JCIT (2005) 93 TTJ (Mum-Trib) 483, Prakriya Pharmachem v. ITO, Special Civil Application No.20492 of 2015, DP World (P) Ltd v. Dy. CIT (2013) 140 ITD 694 (Trib) and Dy. CIT v. KDA Enterprises Pvt. Ltd. (2015) 39 ITR (Trib.) 657. FAVOUR : In assessee's favour A.Y. : 2010-2011 INCOME TAX ACT, 1961 --Capital gains--Transaction not regarded as transfer under section 47(iii)Gift of shares to third party--AO alleging consideration received--Where assessee had made certain gifts of shares and claimed that said transaction could not be brought to capital gains tax, in accordance with section 47(iii), but AO made addition alleging that assessee had received consideration against such transfer, then action of AO was held unjustified, based on the facts that AO had brought nothing on record to support his contention.--Assessee, partnership firm, was engaged in manufacturing and trading business. It was holding shares of certain companies, which it transferred to a third party in pursuance of a 'transfer agreement'. Assessee contended that it was a gift transaction and therefore, transaction was not liable to tax as per section 47(iii). AO held that it was not mentioned in transfer agreement that transfer was as gift, and therefore, made addition of capital gain by taking sale consideration at fair market value and purchase cost at nil. AO further held that gift as mentioned in section 47(iii) could be made only between two biological persons and not between the firms and the companies.Held: AO had not brought any adverse material against the above to conclude that the transactions involved the payment of consideration to the firm and the transfer of shares was not a voluntary act. Further, AO was not correct in holding that gift could only be made between two biological persons. Therefore, addition made by AO was deleted. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2016 TaxPub(DT) 4782 (Mum-Trib)

Ultima Search v. Asstt. CIT

INCOME TAX ACT, 1961

--Capital gains--Applicability of section 45(4)Transfer of asset to third party----Provisions of section 45(4) could not be invoked, in case assessee firm was not dissolved and more so, when asset was transferred to a third party and not to partner. --Assessee, partnership firm, was engaged in manufacturing and trading business. It was holding shares of certain companies, which it transferred to a third party in pursuance of a 'transfer agreement'. Assessee contended that it was a gift transaction and therefore, transaction was not liable to tax as per section 47(iii). AO contended that said transfer was taxable under section 45(4). Held: It was held that provisions of section 45(4) could be invoked in case of dissolution of firm or AOP or BOI. As assessee firm was not dissolved and, moreover, asset was not distributed to partners, AO was not correct in applying provisions of section 45(4).

Income Tax Act, 1961 Section 45(4)

REFERRED : Sharmila Tagore v. JCIT (2005) 93 TTJ (Mum-Trib) 483, Prakriya Pharmachem v. ITO, Special Civil Application No.20492 of 2015, DP World (P) Ltd v. Dy. CIT (2013) 140 ITD 694 (Trib) and Dy. CIT v. KDA Enterprises Pvt. Ltd. (2015) 39 ITR (Trib.) 657.

FAVOUR : In assessee's favour

A.Y. : 2010-2011

INCOME TAX ACT, 1961

--Capital gains--Transaction not regarded as transfer under section 47(iii)Gift of shares to third party--AO alleging consideration received--Where assessee had made certain gifts of shares and claimed that said transaction could not be brought to capital gains tax, in accordance with section 47(iii), but AO made addition alleging that assessee had received consideration against such transfer, then action of AO was held unjustified, based on the facts that AO had brought nothing on record to support his contention.--Assessee, partnership firm, was engaged in manufacturing and trading business. It was holding shares of certain companies, which it transferred to a third party in pursuance of a 'transfer agreement'. Assessee contended that it was a gift transaction and therefore, transaction was not liable to tax as per section 47(iii). AO held that it was not mentioned in transfer agreement that transfer was as gift, and therefore, made addition of capital gain by taking sale consideration at fair market value and purchase cost at nil. AO further held that gift as mentioned in section 47(iii) could be made only between two biological persons and not between the firms and the companies.Held: AO had not brought any adverse material against the above to conclude that the transactions involved the payment of consideration to the firm and the transfer of shares was not a voluntary act. Further, AO was not correct in holding that gift could only be made between two biological persons. Therefore, addition made by AO was deleted.