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2002 DIGILAW 552 (PNJ)

Commissioner Of Income-tax v. Om Parkash Munjal

2002-05-17

JAWAHAR LAL GUPTA, N.K.SUD

body2002
Judgment Jawahar Lal Gupta, J. 1. The respondent-assessee filed his return of income for the assessment year 1990-91. He declared an income of Rs. 2,84,930. During the course of proceedings, the Assessing Officer found that the respondent had made a revocable gift of 6,000 equity shares, of Hero Cycles (P.) Limited to Om Parkash Pankaj Munjal Associates during the accounting period relevant to the assessment year 1982-83. During the period from 1982-83 to 1990-91, Om Parkash Pankaj Munjal Associates received 28,000 bonus shares. They also got a dividend of Rs. 2,62,500. During the assessment of 1990-91, this amount was treated as income in the hands of the respondent on the hypothesis that the gift made by him during the assessment year 1982-83 was void. Thus, the amount was added to the taxable income of the assessee. 2. The assessee filed an appeal. It was accepted by the Commissioner of Income-tax (Appeals). The Revenue filed an appeal before the Tribunal. Vide order dated August 16, 2000, the Tribunal affirmed the order of the Commissioner (Appeals) and dismissed the appeal. Hence, this appeal under Section 260A of the Income-tax Act, 1961. 3. Mr. R. P. Sawhney, counsel for the Revenue, contends that the gift made by the assessee during the assessment year 1982-83 was invalid. Thus, the allotment of 28,000 bonus shares to Om Parkash Pankaj Munjal Associates was also void. The income from these shares, viz., Rs. 2,62,500 should have been assessed in the hands of the respondent-assessee. 4. The issue regarding the validity of the gift was raised by the Revenue in G. T. R. No. 1A of 1994. Vide order dated May 16, 2002 (see CGT v. Satya Nand Munjal [2002] 256 ITR 516 (P & H)), it has been held that a revocable gift made by an assessee is not invalid. It is recognised under the Gift-tax Act. The issue has been answered against the Revenue. In view of this decision, counsel for the parties are agreed that the gift made by the assessee to Om Parkash Pankaj Munjal Associates cannot be held to be void. However, it is contended that the gift being revocable, the bonus shares also should be deemed to have reverted to the donor on the revocation of the gift. Thus, the income derived by the respondent-assessee after the revocation of the gift should be treated as his income. 5. However, it is contended that the gift being revocable, the bonus shares also should be deemed to have reverted to the donor on the revocation of the gift. Thus, the income derived by the respondent-assessee after the revocation of the gift should be treated as his income. 5. This contention was never raised before the Tribunal. The issue does not arise out of the order. Thus, the Revenue cannot be permitted to raise it. In any event, it is the admitted position that on revocation of the gift, only 6,000 shares had reverted to the assessee and not 34,000. Nothing has been pointed out from the record to show that in fact all the 34,000 shares, viz., the 6,000 originally gifted and 28,000 bonus shares had reverted to the assessee. In the absence of such evidence on record, it cannot be said that the dividend on the 28,000 shares would represent the income of the assessee. 6. Mr. Sawhney contends that the revocation of gift should automatically imply even the reversion of bonus shares. Counsel is unable to refer to any provision of the statute which may support such a conclusion. In ordinary practice, a person who sells a share keeps the bonus shares which he has got. The bonus shares do not accompany the original "share" when it is sold. Even the Revenue has not suggested that the dividend which had accrued during the period when the gift was in force should also be deemed to have reverted to the assessee on the revocation of the gift. If the dividend belongs to the donee, the bonus shares cannot be treated differently. 7. No other point has been raised. 8. In view of the above, we find no merit in this appeal. It is, consequently, dismissed. In the circumstances, the parties are left to bear their own costs.