INCOME TAX ACT, 1961

Section 2(24)(iv)

Income - Shares obtained from a listed company as gift - Shares claimed to be received as part of internal family realignment amongst family members -

Assessee contended that AO erred in holding that shares of listed companies received by assessee-company as gift without consideration, as part of internal family realignment amongst members of the family, could not be regarded as valid “gift”. AO alleged transaction to be sham and colorable transactions. Held: Words benefit and perquisite are used in clause of sub-section (24) to Section 2. Whether gifting shares amounts any benefit or perquisite has to be looked into. In instant case at one point, AO stated that there was benefit to assessee company but at same time stated that transaction of gift of shares was not valid and was a sham and void transaction which was undertaken to avoid tax. But from MOU submitted by assessee it was clear that it was a family arrangement and internal family realignment amongst members of the family and could not be taken as gift. AO by lifting the corporate veil, without providing any cogent reasons, and without appreciating that the beneficiary never obtained any benefit from this transaction at any time, could not comment on said transaction as sham and bogus. Observations made by AO in assessment order were without any jurisdiction.

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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