Whether transfer of shares under a family agreement are for a determinable "consideration" or "voluntary", whether the shares are received under a "gift" and benefit of cost and holding period be claimed by transferee?

Last updated: 17 June 2014

Court :
ITAT Ahmedabad

Brief :
The Respondent is an investment company in which individual members of the Bilakhia family held equal interest. The family members executed a deed of family arrangement with an objective to consolidate and equalize values of the assets held by each of the parties. The family members transferred held by them as investment in pursuance to the family arrangement. The assessee sold the shares, claimed cost of acquisition and period of holding while computing capital gains alleging that the shares were acquired as ‘gift’. On the issues arising whether shares received on family arrangement is pursuant to a “gift” and whether the consideration for transfer of shares is monetary consideration, it was held that family arrangement which is to buy peace is for good consideration and creates an enforceable agreement between the parties and thus cannot be said that a family arrangement is without consideration and a “gift”. It cannot be said that the consideration for transfer of shares was not for monetary consideration. The receipt of shares under family arrangement cannot be termed as ‘voluntary’ because it was enforceable and binding on the parties and with the purpose of equalization of wealth of the family members, which had monetary connotation.

Citation :
Addl. Commissioner of Income-tax – Appellant – Versus - Bilakhia Holdings P. Ltd - Respondent