9911796707
TMI Blog2012 (11) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... ence i. Land 25,36,281 1,18,49,500 93,13,219 ii. Building 22,35,402 21,30,000 (-) 1,05,402 Total 92,07,817 It was, further, observed by the AO that on 16.3.2007, there was a major change in the share-holding pattern of the firm and five new partners have been introduced. It was the stand of the AO that this way, by revaluation of assets, the investments made by the new partners had appreciated without paying any taxes. It was the case of the AO that as the assessee had not fulfilled the provisions of s.47 (xiii) of the Act, it was disentitled for exemption and, thus, capital gains u/s 45(iv) of the Act was attracted in this case. Accordingly, an addition of Rs.92.07 lakhs was made under the head 'capital gains'. Aggrieved, the assessee had approached the Ld. CIT (A) for relief. After due consideration of the lengthy and comprehensive submission of the assessee as recorded in the impugned order under consideration, the learned CIT (A) had observed thus: CIT(A)Page-No-13 "2.2.............................................................................................It is seen that Hon'ble courts including Ahmedabad Tribunal are consistently taking a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se also, there is no distribution of capital asset on dissolution of firm or otherwise. In view of above facts, I am of the considered view that in the case of revaluation of assets and its conversion of firm into Pvt. Ltd company does not attract provisions of section 45(iv). Accordingly, the addition made by the AO of Rs.92,07,817/- is ordered to be deleted....." 4. Aggrieved, the Revenue has come up before us with a plea that the CIT (A) had erred in law in deleting the addition of Rs.92,07,817/- under the head 'capital gains'. It was, further, submitted that the AO had analyzed the issue in depth and came to a conclusion, by extensively quoting various judicial pronouncements on a similar issue, that the contentions of the assessee were rejected on the following grounds: (a) the part - IX of the Companies Act, 1956 does not have any over-riding effect on the provisions of I.T. Act, 1961 & (b) the assessee failed to produce evidences to prove that the assessee fulfilling all the four condition of section 47 (xiii) to ascertain whether the succession of firm by the company is not a transfer. 4.1 To strengthen his arguments, the learned D R had placed reliance on the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion was not liable to be taxed under the head 'capital gains'. At this juncture, we shall proceed to analyze the judicial views on a similar issue as under: (1) Well Pack Packing v. DCIT - ITA No.235/Ahd/2001 dt.22.5.2001: It was held by the Hon'ble earlier Bench of this Tribunal that since there was no transfer on conversion of the firm into company under part IX of the Companies Act, there does not arise any question of applicability of s.50 or 45 or any other provisions of the Act. 6.2 Aggrieved, the Revenue took up the issue before the Hon'ble jurisdictional High Court through a reference application. The Tax Appeal No.368 of 2001 of the Revenue was, however, dismissed by the Hon'ble Court with an observation that no question of law, much less substantial question of law arose out of the order of the Tribunal. The Revenue preferred a SLP before the Hon'ble Supreme Court against the ruling of the Hon'ble High Court (supra). The Hon'ble Supreme Court in Civil Appeal No.8569 of 2002 dated 6.5.2008 had ruled as under: "We do not agree with the view taken by the High Court. In our opinion, the questions of law raised by the Revenue before the High Court are substantial questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst appellate authority as well as the assessing authority and in holding that the transaction in question does not constitute a transfer under the Act. in that view of the matter, we answer the first substantial question of law framed, against the revenue and in favour of the assessee......" (3) In the case of ITO v. Gulabdas Printers (supra), the Hon'ble earlier Bench of this Tribunal had recorded its findings as under: "Where a firm becomes a limited company under Part IX of the Companies Act, 1956, section 45(4) is not attracted as the very first condition of transfer by way of distribution of capital asset is not satisfied. In the circumstances, latter part of section 45(4) which refers to computation of capital gains under section 48 by treating the fair market value of the asset on the date of transfer, does not apply." Aggrieved, the Revenue had preferred a reference application before the Hon'ble jurisdictional High Court in Tax Appeal No.1559 of 2010 which, according to the AO, is still pending for disposal before the Hon'ble Court [Refer: AO's letter dated 18.6.2012 to the D.R.] 6.3 Let us now analyze the case laws relied on by the Revenue as under: (1) ITO v. Om N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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