Transfer of Shares and Section 13 Violation | Exemption Denied

Case Details: ASPAM Academy Noida v. Assistant Commissioner of Income-tax - [2025] 176 taxmann.com 335 (Delhi-Trib.)

Judiciary and Counsel Details

• Vikas Awasthy, Judicial Member & Avdhesh Kumar Mishra, Accountant Member
• Ms Rano Jain, Ms Sakshi Rustogi, Advs. & Ms Mansi Jain, CA for the Appellant.
• Javed Akhtar, CIT (DR) for the Respondent.

Facts of the Case

Assessee, a company registered under Section 8 of the Companies Act, and running a school, was formerly controlled by one promoter group ‘F’ and later taken over by another group ‘A’. A search was conducted in the case of ‘A’ Group, and documents seized showed that although share transfer was officially recorded at Rs. 20.57 crore, a “receipt” document indicated the agreed consideration was Rs. 45.50 crore, out of which Rs. 24.92 crore was allegedly paid in cash to the former promoters.

Based on seized documents, the Assessing Officer (AO) initiated proceedings under Section 153C and held that the assessee, being a party to the share transfer transaction, had allowed specified persons to derive substantial benefit in violation of Sections 13(1)(c), 13(2) and 13(3). Accordingly, he denied the exemption under Section 11. The CIT(A) upheld the order of the AO. Aggrieved by the order, the assessee filed an appeal to the Delhi Tribunal.

ITAT Held

The Tribunal held that the benefit from the transfer of 100% shares and control of the assessee company had indeed accrued to the specified persons under section 13(3) through undisclosed cash consideration. It emphasised that the exemption under section 11 is not available when any part of the trust’s property is used directly or indirectly for the benefit of such persons.

The seized documents clearly demonstrated the flow of undisclosed consideration, and the assessee company was an active party to the transaction. Therefore, the Tribunal upheld the denial of exemption under section 11. It further held that in terms of section 164(2), the entire income became taxable at the maximum marginal rate due to the violation. The appeal was dismissed.

List of Cases Reviewed

• Chandarkala Somani Charitable Trust v. ITO [1989] 30 ITD 70 (Mum) (para 11) followed.

List of Cases Referred to

• Manickavasagam Chettiar v. CIT [1964] 53 ITR 292 (Madras) (para 11)
• DIT (Exemption) v. Span Foundation [2009] 178 Taxman 436 (Delhi) (para 11)
• Chandarkala Somani Charitable Trust v. ITO [1989] 30 ITD 70 (Mum) (para 11)
• CIT (Exemptions) v. Audyogik Shikshan Mandal [2019] 101 taxmann.com 247/261 Taxman 12 (Bombay) (para 13)
• DIT (Exemption) v. Charanjiv Charitable Trust [2014] 43 taxmann.com 300/223 Taxman 71 (Delhi) (para 13).