BPL LIMITED Vs. DEPUTY COMMISSIONER OF GIFT TAX

JUDGEMENT

(1.) APPELLANT is a company engaged in the manufacture and sale of consumer electronic products like colour television sets, VCRs, various other audio and video products, etc. Appellant had also invested its fund in various other companies manufacturing allied or similar electrical, electronic and engineering goods. On 2-3-1993, appellant sold its holdings in eight companies to one Celestial Finance Limited for a total consideration of Rs. 23,10,03,974/- which was equal to the cost of acquisition of those shares for the appellant.

(2.) APPELLANT filed its return for the assessment year 1993-94 before the Deputy Commissioner of Income-tax, Trichur, Kerala. Though originally intimation was issued under Section 143 (1) (a) of the Income-tax Act, the assessment was taken up for scrutiny subsequently. During the income-tax proceedings, internal audit was taken and there was an audit objection dated 17-8-1995 to the assessing officer and the assessing officer issued a letter to the assessee. Reply was submitted. Details were provided. There was correspondence between the department and the assessee. According to the appeal memo, appellant satisfied the Department that there was no element of gift, and accordingly the then officer did not proceed with any gift tax proceedings under the gift-tax Act, 1958 (for short, "the Act" ). Thereafter, in August 1998 a search was carried out under Section 132 of the Income-tax Act. After search, the Deputy commissioner of Gift-tax issued a notice under Section 16 the Gift-tax Act in the matter. The said letter was replied to by the appellant. Assessments were reopened. Assessing authority declined to accept the appellant's contention and rejected the submission of the appellant and concluded that there was a deemed gift under Section 4 (l) (a)and Section 4 (l) (b) of the Act to the extent of rs. 69,78,49,800/- and levied gift-tax along with interest under section 16b of the Act from july 1993 to Jan. 2000 quantified at Rs. 54,01,12,525/ -. An appeal was filed before the commissioner of Income-tax Appeals. He upheld the validity of reopening. He however reduced the quantum of gift-tax. He ruled that the shares of M/s. BPL Sanyo Utilities and appliances Ltd. and M/s. BPL Sanyo Technologies Ltd. , the transfer of which are also the subject matter of Gift-tax proceedings, have to be treated as up quoted equity shares; and that in accordance with the same, the assessing Officer was directed to compute the value of those shares also under Rule 5 of the g. T. Rules and to substitute the same in place of valuation adopting quoted value of shares. Insofar as the deemed gift under Section 4 (1) (b), he ruled that it was difficult to hold that the consideration was not intended to pass, and consequently he deleted the amount assessed under Section 4 ( 1 ) (b) of the Act. The commissioner, insofar as interest is concerned, was of the view that Section 16b of the Act provides for levy of interest on the gift-tax withheld by it on the amount of tax payable on the taxable gift determined in assessment as modified in accordance with that order. He partly allowed the appeal.

(3.) AGGRIEVED by the order of the Commissioner, a second appeal was filed by the assessee and a cross objection was filed by the revenue. The Tribunal approved the action of the Assessing Officer and thereby the Tribunal modified the order of the Commissioner. Tribunal, however, accepted the finding with regard to the issue under S. 4 (1) (b) of the Act. The Tribunal directed the Assessing Officer to levy such interest on the basis of taxable gift on the amount of tax payable determined in the assessment as may be modified while giving effect to its order. Tribunal ultimately dismissed the appeal of the assessee. Tribunal accepted the appeal of the Revenue in part. Cross-objections of the assessee stood dismissed. Aggrieved by the order of the Tribunal dated 30-8-2004, assessee is before us in this appeal.