MANUBHAI BHIKHABHAI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AS the point involved in these three references is identical, they are heard together and disposed of by this common judgment.

(2.) THESE three references have been made by the Tribunal under S. 256(1) of the IT Act, 1961, at the instance of the assessee. The question referred to this Court is identical in all the three references and it reads as under :

(3.) IT is a fact that about 7,000 shares were purchased by the three brothers at the rate of Rs. 50 per share from outsiders, i.e., not from their family members. It is also not in dispute that, as per the agreement, the said shares after having been purchased at the rate of Rs. 50 per share were sold to Shantilal Somaiya at the rate of Re. 1 per share. But, if we look at the agreement, it becomes clear that Re. 1 did not really reflect the correct value of the shares. The agreement was a composite agreement. It was not only for purchase and sale of shares, but also for release of the assessees from their onerous obligation as guarantors. They had agreed to sell the shares at the rate of Re. 1 per share in order to get rid of their liabilities. The document read as a whole clearly shows that the consideration, i.e., sale price of the shares included release and discharge of the three brothers from their liabilities and obligations. Clauses 6 to 11 clearly show that the only reason why they had agreed to sell the shares at the rate of Re. 1 per share was to get rid of the liabilities. Thus, the difference of Rs. 49 per share which was claimed as loss was also a part of the consideration for release of their liabilities. The assessees, therefore, can be said to have received by way of consideration, the full amount of Rs. 50 per share and, in reality, they had not suffered any loss in selling the shares at the rate of Re. 1 per share.