The
assessee was a wholly owned subsidiary of DHPL and all the shares of DHPL were
held by
Shroff
group. For purpose of restructuring the group organization, certain equity
shares in companies
UPL
and UEL transferred to assessee by Shroff group without any monetary
consideration. The
assessee
treated said transaction as gift and same being capital receipt claimed to be
not taxable. The
Assessing
Officer taxed under the head 'Income from other sources', a sum representing
the market
value
of shares of UPL and UEL in hands of assessee holding that said transaction was
transfer and
not
by way of gift and thereafter, he sought to tax same under section 25(iv). The
assessee filed an
appeal
before Commissioner (Appeals) against the said assessment order. In the meantime,
the
Assessing
Officer served a notice of demand. The assessee filed appeal against the said
assessment
order.
The Commissioner (Appeals) after hearing the assessee disposed of the stay
application and
directed
the assessee to pay 25 per cent of the demand in four equal monthly instalments
and directed
for
the stay on the recovery of the balance amount. On writ, the assessee prayed to
set aside the order
of
Commissioner (Appeals). It was held that he assessee has more than just a
strong prima facie case
in
this regard. The assessee case is supported by an order of the Tribunal in the
case of D.P. World
(P.)
Ltd. v. Dy. CIT [2013] 140 ITD 694/[2012] 26 taxmann.com 163 (Mum.)(Trib.). The
transaction
involved
a transfer of the shares which entitled the holder of the shares to the said
flats. The Tribunal
had
held that simply because both the donor and the donee happened to belong to the
same group
cannot
ipso facto establish that they have any business dealings and it is a case of a
valid gift which is
to
be treated as capital receipt in the hands of the assessee, in the absence of
any specific provision
taxing
a Gift as a deemed business income, provisions of section 28(iv) cannot be
applied on the facts
of
the case. In view of the judgment of the Tribunal, the assessee has more than
just a strong prima
facie
case for a stay. Prior to the transfer of the said shares the assessee held
1.59 per cent and 1.44
per
cent of the equity shares of UPL & UEL respectively. After the transfer the
assessee holds 21.35
per
cent and 47.88 percent of the equity shares in UPL & UEL. A refusal to
grant a stay would in all
probability
entail a sale of the said shares to meet the demand. Upon a sale of the shares,
the Shroff
group
would loose a substantial benefit of such a large shareholding in both the
companies. The
Shroff
group always held the shares. They transferred the shares to the assessee only
for
administrative
convenience. If the assessee succeeds, ultimately the damage caused by the sale
of the
shares
would be irreversible. They would loose the benefit of a large shareholding in
both the listed
companies
permanently and irreversibly. Thus, if the stay is not granted, the assessee
will suffer
irreparable
harm and injury. On the other hand, the conditions upon which we the stay will
be granted
will
protect the revenue. The balance of convenience is also therefore, in favour of
the assessee.
Balance
of convenience and the question of irreparable injury are relevant factors
while considering
an
application for stay even in proceedings under the Income-tax Act. This would
be by restraining
the
assessee from parting with possession of, selling, disposing of or in any
manner whatsoever
encumbering
its shareholdings in UPL & UEL to an extent of Rs. 1000.00 crores pending
the appeal
before
the Commissioner (Appeals) and with deposit Rs. 10.00 crores.( AY.2010-11)
Nerka
Chemicals (P) Ltd. .v. UOI (2014) 103 DTR 249 (Bom.)(HC)
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