Commissioner Of Income Tax v. Vikram A Sarabhai Trust

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No 302 of 1985 For Approval and Signature: Hon'ble MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements? 2. To be referred to the Reporter or not? 3. Whether Their Lordships wish to see the fair copy of the judgement? 4. Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? -------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus VIKRAM A SARABHAI TRUST NO.2, -------------------------------------------------------------- Appearance: MR MANISH R BHATT for Petitioner SERVED BY RPAD - (N) for Respondent No. 1 -------------------------------------------------------------- CORAM : MR.JUSTICE R.K.ABICHANDANI and MR.JUSTICE KUNDAN SINGH Date of decision: 05/03/98 ORAL JUDGEMENT ��(Per R.K.Abichandani,J) ��The Income-tax Appellate Tribunal has referred the following question for the opinion of this Court under section 256(1) of the Income-tax Act, 1961. "1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that in respect of sale of shares by the assesseee, the provisions of section 11(1A) of the Income-tax Act, 1961 were applicable and that no capital gains tax was chargeable eventhough 90% of the sale proceeds unrealised were kept by way of fixed deposits with the purchasers ?" 2.��The matter relates to the assessment year 1974-75. The assessee filed Refund application on 31.8.1974 in form no. 30 declaring a loss of Rs. 21,770/-. During the relevant previous year, the assessee Trust had sold certain shares for a net consideration of Rs. 95,128/-. It was claimed before the ITO that the amounts received on account of sale of these shares were kept in fixed deposits bearing interest and therefore, the provisions of section 11(1A) of the Act were attracted. The Income-tax Officer rejected this claim and proceeded to work out capital gains by applying the provisions of section 52(2) of the Act. The assessee had also claimed that shares were received by way of donation and that there was no investment made by the trustees in a concern in which the person referred in section 13(3) had a substantial interest. The ITO had forfeited the exemption of dividend income by invoking the provisions of section 13(3) of the Act and non-allowance of deduction under section 80(L) of the Act. In appeal, on the first count it was held that the provisions of section 11(1A) of the Act were applicable to the assessee's case. On the other ground, the appellate authority held that the assessee was not hit by the provisions of section 13 (2)(h) of the Act. The Tribunal in appeal preferred by the Department following its earlier order dated 10.7.80, in the case of ITO vs. Ambalal Sarabhai Trust No. 3 held that the provisions of section 11(1A) of the Act were applicable to the facts of the assessee's case. Following its earlier decision in CIT vs. Insaniat Trust rendered on 5.4.1978, the Tribunal held that the assessee was not hit by the provisions of section 13(2)(h) of the Act. 3.��At the hearing of this Reference, it is brought to our notice that in CIT vs. Ambalal Sarabhai Trust No. 3 reported in 173 ITR, 683 this Court had opined on a question identical to the question of this Reference that capital gains resulting from the sale of shares were required to be exempted under section 11(1A) preferred by the Department following its earlier order dated 10.7.80, in the case of ITO vs. Ambalal Sarabhai Trust No. 3 held that the provisions of section 11(1A) of the Act were applicable to the facts of the assessee's case. Following its earlier decision in CIT vs. Insaniat Trust rendered on 5.4.1978, the Tribunal held that the assessee was not hit by the provisions of section 13(2)(h) of the Act. 3.��At the hearing of this Reference, it is brought to our notice that in CIT vs. Ambalal Sarabhai Trust No. 3 reported in 173 ITR, 683 this Court had opined on a question identical to the question of this Reference that capital gains resulting from the sale of shares were required to be exempted under section 11(1A) of the Act. For the same reasons as are given for deciding the said question, by this Court in Ambalal Sarabhai Trust No. 3 (Supra), we answer the question in the affirmative against Revenue and in favour of the assessee. 4.��The Reference stands disposed of accordinglywith no order as to costs. ���.... ***darji