COMMISSIONER OF GIFT TAX Vs. RAGHU HARI DALMIA

JUDGEMENT

(1.) THESE references involve identical issue, therefore, are disposed of by this judgment. Following questions have been referred under S. 26(1) of the GT Act, 1958 (in short, the 'Act'), by the Income tax Appellate Tribunal, Delhi Bench 'A', New Delhi (in short, the 'Tribunal'), for opinion of this Court :

(2.) FACTUAL position, in a nutshell, is as follows : Assessees, respondents in the references, were holders of equity shares of a face value of Rs. 100 per share in M/s Hari Brothers (P) Ltd. (hereinafter referred to as the 'company'). They held different number of shares totalling 2,000. The original number of equity shares held by each of these persons was only 250 and the increase to 2,000 shares had taken place, as a result of the issue of 1,750 bonus shares. The company was incorporated on 2nd March,1995, (sic) and its paid up capital was Rs. 2 lakhs consisting of 2,000 shares of Rs. 100. As indicated above, 250 equity shares were allotted in cash and subsequently 1,750 bonus shares were issued. Assessees are family members and trust belonging to Dalmia Group and the company was a closely held private limited company. On 19th Sept., 1970, the Board of directors of the company decided to increase the equity capital from Rs. 2 lakhs to Rs. 3 lakhs by issuing 10,000 new equity shares of Rs. 10 each. On 1st Oct., 1970, 5,000 new equity shares were allotted to M/s Dalmia Agencies (P) Ltd. and the remaining 5,000 equity shares to M/s Govan Brothers (Rampur) Ltd. Allottees were companies belonging to J. Dalmia Group. The existing shareholders were not allotted any shares. With the allotment of 10,000 new equity shares, paid up capital increased from Rs. 2 lakhs to Rs. 3 lakhs. As the company was a private limited one, new share could not have been allotted to the allottee companies except with approval and consent of existing shareholders. On 23rd Nov., 1970, special resolution was adopted in General Body Meeting of the shareholders to convert 2,000 fully paid equity shares of the face value of Rs. 100 each held by the assessees respondents into 2,000 fully paid up cumulative preference shares of the face value of Rs. 100 each. On 10th Dec., 1970, 2,000 equity shares of Rs. 100 each ceased to exist and in return assessees were issued, cumulative preference shares of the face value of Rs. 100 each in the company.

(3.) ON being moved for reference, as noted supra, the questions as set out above, have been referred for opinion of this Court.