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TMI Blog2014 (4) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the partnership firm to avoid capital gain tax – Provisions of section 47(xiii) cannot be ignored when there is an indirect way of avoiding tax by applying accounting techniques against provisions of Income tax Act - Do not find any error, much less, a prima facie error – order of ITAT sustained - Decided against the assessee. Indexation of cost of acquisition – Held that:- assessee has not raised indexation issue before assessing officer - Though a ground was raised before CIT(A) with regard to indexation, this was not apparently disposed of by CIT(A) - Therefore, ground raised by assessee with regard to indexation is not arising out of order of CIT(A) - Assessing officer shall consider issue of indexation with regard to cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l dated 27-09-2013. 2. Shri V Sathyanarayanan, the ld.representative for the assessee submitted that the name of the assessee is K.T.C. Automobiles . However, in the Tribunal order, in the cause title, the Tribunal mentioned the name of the assessee as K.T.C. Automobiles (P) Ltd . This is an error which needs to be rectified. 3. The ld.representative for the assessee further submitted that grounds No.3, 4, 5 of the appeal were not disposed of. The ld.representative submitted that balances in the current accounts of the partners are current liabilities of the firm and not capital which the partners are entitled to withdraw any time. The balance in the current account is not capital of the firm. According to the ld.representative, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive, when there is no transfer within the meaning of section 2(47) of the Act, there cannot be any capital gain. On a query from the bench, if there was no transfer u/s 2(47) what is the occasion for the Parliament to insert section 47(xiii) in the context of the asset of the firm was transferred to the company as a result of succession of the firm by the company, incorporating certain conditions, the ld.representative clarified that this is applicable only if section 2(47) is applicable. When section 2(47) is not applicable, according to the ld.representative, the provisions of section 47(xiii) are not applicable, therefore, the order of this Tribunal is an error which needs to be rectified. 4. The ld.representative further submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was shown as loan in the books of account of the company apart from drawing interest. The Tribunal has also specifically found that the partnership firm indirectly transferred the asset to the private limited company and distributed the consideration to the erstwhile partners, as it is shown as if the partners advanced loan to the private limited company. This is an indirect method of transfer of property by applying the accounting technique to avoid tax on capital gain contrary to the provisions of the Income-tax Act. When the Tribunal specifically found that this is an accounting technique adopted by the partnership firm to avoid capital gain tax, we are of the considered opinion that there is no error, much less, a prima facie error, wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (c) of section 47(xiv) as above could be invoked .. 8. In the case before us, we find that there is a clear violation of conditions prescribed in section 47(xiii). The revaluation amount was shown as loan instead of treating the same as shares in the hands of the erstwhile partners / shareholders. Therefore, the decision of this Tribunal in K.V. Mohammed Zaker (supra) may not be applicable to the facts of the present case. Moreover, the decision of the Tribunal in K.V. Mohammed Zaker (supra) was not brought to the notice of the Tribunal when the appeal of the assessee was heard. Shares were not allotted in respect of revaluation amount of capital asset. Therefore, we are of the considered opinion, the decision of this Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, the assessing officer shall consider the issue of indexation with regard to the cost of the property on merit in accordance with law after giving reasonable opportunity to the assessee. 11. The next issue is with regard to levy of interest u/s 234B and 234C of the Act. The levy of interest u/s 234B and 234C on the capital gain has to be computed in accordance with law while giving effect to the order of this Tribunal. This Tribunal, at this stage, cannot compute the interest. The assessing officer shall consider whether the assessee is liable to pay interest u/s 234B and 234C on the capital gain and thereafter compute the same in accordance with law. 12. Now coming to the name of the assessee, apparently, in the cause title, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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