Setback for the Gandhi Family – Properties taxable u/s 28(iv)

Case Details: Young Indian v. ACIT (E) - [2022] 137 taxmann.com 12 (Delhi - Trib.)

Judiciary and Counsel Details

• • Anil Chaturvedi, Accountant Member and Amit Shukla, Judicial Member
  • Saurabh Soparkar, Sr. Adv. Ankit Agarwal and Ms. Anjali Agarwal, CA’s for the Appellant. 

    G.C. Srivastava, Special Counsel, Kalrav Malhotra, Adv. and Mayank Patawari, CA for the Respondent.

Facts of the Case

Assessee-Young Indian (YI) was incorporated with the main object of inculcating in the mind of India’s youth. Its registration under section 12A was cancelled with inception by the CIT(E) as it was not carrying out any charitable activity. Smt. Sonia Gandhi, Sh. Rahul Gandhi, Sh. Moti Lal Vora – treasurer of the All India Congress Committee (AICC), and Mr. Oscar Fernandes were Directors of Young Indian.

Associated Journals Limited (AJL) was a public limited company publishing newspapers such as National Herald in English, Navjivan in Hindi and Quami Awaz in Urdu. Later its publication business was suspended due to financial and labour problems. Thereafter income of AJL was mainly from letting out various properties held in different parts of the country.

AICC had advanced loan to AJL from time to time, aggregating to Rs. 90.21 crores. The entire loan was transferred in favour of Young Indian for a consideration of Rs. 50 lakh. The loan assigned to YI was later converted into shares of AJL, and almost 99.99% of shareholdings were transferred to YI.

Based on the information received from the investigation wing, the Assessing Officer (AO) reopened the assessment of Young Indian under section 147. AO computed the benefit/perquisite under section 28(iv) in respect of the purported Fair Market Value (FMV) of the immovable properties owned by AJL in the hands of Young Indian.

ITAT Held

The Delhi Tribunal held that Young Indian was incorporated on 23.11.2010, and the first step taken was the assignment of the loan of Rs. 90.21 crores by AICC to Young Indian for a very paltry sum of Rs. 50 lakh.

Immediately after that, the entire shareholding of AJL is allotted, i.e., 90.21, crore equity shares in lieu of assignment of the loan of Rs. 90.21 crores.

The AJL, whose publication business was suspended, had income from commercial exploitation of the properties. Once Young Indian took over the entire company, all the underlying assets had also been acquired. A clear-cut benefit had come to Young Indian in the form of assets owned by the AJL. The intention of the assessee was never to take over the entire AJL to run the publication business.

Section 28(iv) says that there should be benefit or perquisite, whether convertible into money or not, arising from business or exercise of a profession. The term business has been defined under section 2(13), which includes any adventure or concern in the nature of trade or commerce.

The adventure in the nature of trade is something where a person undertakes an adventure that may result in gain or profit immediately or may be in the future. The Young Indian was holding more than 99% shares of AJL and, after this adventure, got complete control over these properties.

Further, the word ‘benefit’ occurring in section 28(iv) means some kind of adventure or gain or had the same value or acquire any interest in any land, chattel, etc. Thus, this benefit is nothing but any form of adventure, and in the instant case, the adventure is getting the huge underlying properties by the stroke of one transaction.
Thus, the Assessing Officer rightly taxed the FMV of properties acquired as business income in the hands of Young India under section 28(iv).