COMMISSIONER OF INCOME-TAX VS SATYA NAND MUNJAL
1999 P T D 3024
[229 I T R 216]
[Punjab and Haryana High Court (India)]
Before N.K. Sodhi and M.L. Singhal, JJ
COMMISSIONER OF INCOME-TAX
Versus
SATYA NAND MUNJAL
Income-tax Cases Nos.58 and 59 of 1994, decided on 28/05/1996.
Income-tax---
----Reference---Question of law---Assessee gifting certain shares to donee -- Donee receiving bonus shares thereon as also dividend on bonus shares-- Question whether dividend income should be assessed in hands of assessee depends on answer to question whether gift made by assessee was valid or not---Question regarding validity of gift already referred to High Court-- Hence both questions should be disposed of together---Tribunal directed to refer question of law---Indian Income Tax Act, 1961. S.256(2).
The assessee made a gift of a certain number of shares to the donee. A certain number of bonus shares as also a sum of Rs.25,000 as dividend income on the bonus shares came to be received by the donee during the relevant assessment years. In proceedings under the Gift Tax Act, 1958, the Gift Tax Officer held that the gift was void. The Commissioner (Appeals) affirmed the order of the Gift Tax Officer. On further appeal, the Tribunal held that the gift was valid. During the pendency of the gift-tax proceedings before the High Court, in the assessment proceedings under the Income Tax Act, 1961, the Assessing Officer held that since the gift to the donee was void, the sum of Rs.25,000 received by -the donee had to be assessed in the hands of the donor-assessee. The Commissioner (Appeals) affirmed the order of the Assessing Officer. On further appeal, the Tribunal, after referring to its earlier decision in the gift-tax appeal, in which it held that the gift was valid, observed that there was no justification for the addition of Rs.25,000 in the hands of the assessee and deleted the addition. The Tribunal rejected the application of the Revenue under section 256(1) of the Income Tax Act, 1961, to refer a question of law. On an application under section 256(2) for a direction to the Tribunal to refer a question of law, the assessee contended that since the Department had not challenged the finding of the Tribunal regarding the validity of the gift, the question sought to be raised could not be referred to the High Court:
Held, that the finding regarding the validity of the gift had been challenged, by the Department and the Tribunal itself had referred that question to the High Court against its order in the g. -tax appeal. The question whether the sum of Rs.25,000 should be assessed in the hands of the assessee depended on the answer to the question whether the gift made by the assessee was valid or not and since that question already stood referred to the High Court, it was necessary to dispose of both the questions together. Therefore, the question of law, "whether the Tribunal was right in law in deleting the addition of Rs.25,000 made in the hands of the assessee relating to dividend income on bonus shares received by the donee to whom the assessee had earlier gifted the shares", arose for reference.
CIT v. Lakhiram Ramdas (1962) 44 ITR 726 (SC) and Haripada Samanta Pramatha Nath Samanta v. CIT (1981) 128 ITR 592 (Cal.) ref.
R.P. Sawhney, Senior Advocate and Sanjay Goyal for the Commissioner.
B.S. Gupta, Senior Advocate and Sanjay Barisal for the Assessee
JUDGMENT
N.K. SODHI, J.---This order will dispose of two income-tax cases Nos.58 and 59 of 1994, in which common questions of law and fact arise. For the sake of convenience, the facts are being taken from I.T.C. No.58 of 1994,
The assessee is an individual. He through a gift deed gifted 6,000 equity shares of the face value of Rs.25 each of Hero Cycles to Yogesh Chander and Brothers Associates. 4,000 shares by way of bonus came to be received by the donee, and a sum of Rs.25,000 was also received during the relevant assessment years as dividend income on these bonus shares. In proceedings under the Gift-tax Act, the Gift-tax Officer held that the gift was void. This finding was affirmed in appeal but in second appeal the Tribunal as per its order, dated August 23, 1991 in G.T.A. No.3 of 1988 reversed the' finding and held that the gift was 'valid. By an order, dated December 31, 1993, the Tribunal referred the question regarding the validity of the gift to this Court for its opinion and the matter is pending in this Court.
In the assessment proceedings under the Income-tax Act (for short the "Act"), the Assessing Officer held that since the gift to Yogesh Chander and Brothers Associates was void, the sum of Rs.25,000 received by the donee had to be taxed in the hands of the donor-assessee herein. Feeling aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) who upheld the ,order and affirmed the addition made in the income of the assessee. When the matter came up before the Tribunal in second appeal, it referred to its earlier decision, dated August 23, 1991, in G.T.A. No.3 of 1988, and observed that since the gift had already been held to be valid, there was no justification for the addition of Rs.25,000 in the hands of the assessee. Consequently, the appeal of the assessee was allowed as per order, dated November 6, 1992, and the addition was ordered to be deleted. It is against this order that the Revenue has filed the present petition under section 256(2) of the Act for a direction to the Tribunal to refer the following question of law to this Court for its opinion:
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in deleting the addition of 89.25,000 made in the assessee's hands relating to dividend income on bonus shares received by Yogesh Chander and Brothers Associates to whom the assessee had earlier gifted equity shares and the said gift was held to be wholly void?"
We have heard counsel for the parties and perused the orders of the Appellate Tribunal. The question whether the sum of Rs.25,000 should be assessed in the hands of the assessee depends on the answer to the question whether the gift made by the assessee was valid or not and since that question already stands referred to this Court, it becomes necessary to dispose of both the questions together.
Mr. B.S. Gupta, Senior Advocate appearing for the assessee, strenuously urged before us that since the Department has not challenged the finding of the Tribunal regarding the validity of gift, the question now sought to be raised could not be referred to this Court. He relied on Haripada Samanta Pramatha Nath Samanta v. CIT (1981) 128 ITR 592 (Cal.) and CIT v. Lakhiram Ramdas (1962) 44 ITR 726 (SC). We are unable to agree with this contention of learned counsel. The finding regarding the validity of the gift has been challenged by the Department and the' Tribunal itself has referred that question to this Court against its order in G.T.A. No.3 of 1988. The cases relied upon by learned counsel are distinguishable on the facts.
In the result, we allow these petitions and direct the Tribunal to refer the following question of law to this Court for its opinion alongwith the statement of case:
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in deleting the addition of Rs.25,000 made in the hands of the assessee relating to dividend income on bonus shares received by Yogesh Chander & Brothers Associates to whom the assessee had earlier gifted the equity shares?"
No costs,
M.B.A./3080/FC Petitions allowed