October 20 To October 26, 2018 u Taxmann’s Corporate Professionals Today u Vol. 43 u (^23381)
(vi) The shares held in the non-profit com-
pany registered under section 12AA
does not attract provisions of section
56(2)(vii). However, the company YI
had acquired assets by way of assign-
ment of debt which got converted in
to 99% of shareholding in AJL and
the taxing event of allotment of shares
to the shareholders had taken place
subsequently.
(vii) The memorandum of association of the
company provided that the outgoing
member could sell his shares at fair
market value and, thus, the value of
shares had to be ascertained based on
the underlying assets.
(viii) In the case of Mr. Rahul Gandhi the
assessment was completed under section
143(3). Had he disclosed in his returns
or any related documents about share
acquisition, the primary facts would
have been on the record. The Assessing
Officer’s subsequent action in pursuing
that aspect or letting go of it, after
enquiry might well have justified the
charge of a second and impermissible
opinion on the same subject. However,
that was not the case and the inves-
tigation reports constituted tangible
materials which were new and, thus,
justified triggering of reassessment
provisions.
(ix) As regards Ms. Sonia Gandhi and Mr.
Oscar Fernandes the returns filed were
processed under section 143(1) and
such instances were not treated as
assessments.
The court, accordingly, dismissed the
writ and held that the assessees’ rights
to their contentions on merits remained
reserved in the Income-tax proceedings.
Fallout of the decisions
- The sequence of actions had put the
petitioners in great discomfort. There was no
fresh flow of funds or income or resources.
It was just a reallocation of assets from AJL
to YI backed up by funds support given by
AICC in the earlier years. The fallout of the
decision could be stated as below:
(i) In the assessment under section 143(3)
where a specific query was made on
the directorship in companies, the
assessee (Mr. Rahul Gandhi) did not
furnish the details. Though it was on
the assumption that having shares or
directorship in section 25 company
does not provide any interest of sub-
stance the non-disclosure provided the
elbow room to the Revenue to invoke
reassessment provisions. However, the
memorandum of association of the com-
pany (independent of the cancellation
of registration under section 12AA)
indicated that the beneficial interest was
acquired by the assessee-petitioners.
(ii) The sequence of events showed that the
section 25 company YI obtained book
debts of ` 90 crores and 99% shares
in AJL just before allotting the shares
to the petitioners. If the shares were
allotted on the previous day and the
book debts were assigned in favour
of YI subsequently, the entire tax
consequence would not have arisen in
the hands of petitioners. May be, the
company YI might have been subjected
to tax, consequent to cancellation of
section 12AA registration or by means
of reassessment or any other possible
provisions.
(iii) Prima facie, the contention of the Revenue,
that section 25 company can become a
normal company and there is no bar in
law, could not be accepted. Section 115
TD deals with tax on accreted income
of non-profit organizations, being trusts
or institutions when they get converted
into regular commercial organizations.
(iv) The assessment of YI was in appellate
forum by holding that the amount
of ` 90 crores assigned to it was aCuriOus Case OF ‘naTiOnal Herald’