9911796707
TMI Blog1991 (1) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... n object was to take over the business of the assessee-firm. On 15-6-1982 the assessee entered into an agreement with M/s. Indag Products (P.) Ltd. for the transfer of the business as a going concern. Clause 2 of that agreement provided that the company will take over the entire assets and liabilities as on 15-6-1982 and clause 3 provided that it will satisfy the payment of the amounts standing to the credit of the partners as may be mutually agreed upon. Thereafter, under an agreement dated 29-12-1982 it was decided that the balances remaining in the current accounts of the partners as on 15-6-1982 shall be settled by the company by issuing equity shares to them for the same value. The total amount of outstanding in the current accounts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the provisions of the Gift-tax Act and that the transfer of the business was not for inadequate consideration so as to envisage any deemed gift under section 4(1)(a) of the Act. On the other hand, it was contended on behalf of the revenue that since the valuation of the closing stock at cost was less than the market value, the difference must be considered to be a deemed gift within the scope of section 4(1)(a) of the Act. 5. On a consideration of the rival submissions, we are of the opinion that the assessee is entitled to succeed. It is clear from the transaction that the eleven persons who held the business as partners of the firm have, by transferring it to the company in which they were themselves the shareholders, continued t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout consideration. This view is incorrect because the Allahabad High Court has held in the case of CGT v. Motor Sales [1990] 186 ITR 419 that where the entire assets of the firm were taken over by the company as a going concern, the shares allotted would encompass all the assets of the company including the profits which are embedded in the assets transferred. The inevitable conclusion is that, the consideration for the transfer of the business of the going concern by issue of shares of equal value has not-been established to be inadequate and, therefore, there could be no deemed gift under section 4(1)(a) of the Gift-tax Act. The assessment bringing to tax such a deemed gift is, therefore, annulled. The appeal is allowed - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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