October 20 To October 26, 2018 u Taxmann’s Corporate Professionals Today u Vol. 43 u (^19377)
u In the meanwhile, a charitable non-profit
company by name “Young Indian” (YI)
was incorporated as section 25 compa-
ny under the Companies Act, 1956 on
13.08.2010. The two founder members
co-opted some of the writ petitioners
as director (non-shareholder) or nomi-
nated them as ordinary members. Each
founder member, viz., Mr. Suman Dubey
and Mr. Sam Pitroda had 550 equity
shares of 100 each in the company. u Subsequently, the AICC assigned the book debt of 90 crores to YI on
18.12.2010 and, thus, YI became eligible
to recover the amount from the debtor
AJL. In consideration for the transfer
YI issued a cheque for 50 lakhs to AICC on 26.02.2011. There was a separate proceedings in the appellate forum with regard to taxability of YI and that had no bearing on this case of the petitioners. u The AJL convened an EGM on 21.01. and issued 9.021 crore shares to YI which resulted in YI having 99% of total equity share capital of AJL. Ap- parently, it was in consideration for 90 crore advanced by AICC which
was assigned in favour of YI. It may
be noted by obtaining 99% of share-
holding in AJL, the non-profit company
YI became beneficial owner of assets
worth more than 400 crores u On 22.01.2011, the managing committee meeting of YI was held. The founder members transferred their 550 shares each to the writ petitioners and the company also allotted shares to the writ petitioners on the same date. Thus, the company YI had 4 shareholders, viz., Ms. Sonia Gandhi, Mr. Rahul Gandhi, Mr. Motilal Vora and Mr. Oscar Fer- nandes with 1900+1900+600+600 shares, respectively, aggregating to 5000 shares with face value of 100 each.
Non-disclosure of acquisition of shares
- The assessees (Ms. Sonia Gandhi, Mr. Rahul
Gandhi and Mr. Oscar Fernandes being the
writ petitioners) filed their returns of income
for the assessment year 2011-12 disclosing
income from various sources. The assessment
was completed under section 143(3) in the
case of Mr. Rahul Gandhi and the returns
were accepted under section 143(1) in the
case of other two petitioners.
The assessees who acquired shares in YI did
not disclose the acquisition in the returns
filed by them. The necessity for mentioning
the same in the return is due to the fact that
the shares acquired by them for a price was
far below their fair market value computed
in terms of rule 11UA of the Income-tax
Rules, 1962. This prompted the Assessing
Officer to issue a notice under section 148
both electronically and by speed post to the
assessees.
Thus, the crux of the issue is obtaining
shares in a company on 22.01.2011 on which
date the company YI held huge net worth
assigned by a political party on 18.12.2010.
The shareholder, having obtained the shares
at a throw away price, became liable to tax
under section 56(2)(vii).
Arguments of the petitioners
- The petitioners were aggrieved by the issue
of notice under section 148 on 31.03.2018, being
the last day for reopening the assessment.
The grounds of the assessee-petitioners could
be summarized as under:
(i) The assessee, Mr. Rahul Gandhi filed his
return of income and all the queries
raised before assessment under section
143(3) were replied and the shares held
in a non-profit and charitable company
were not disclosed. It was contended
that there was no obligation to disclose
the value of shares since the shares were
held in trust or institution registered
CuriOus Case OF ‘naTiOnal Herald’