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TMI Blog2016 (2) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... tire assets and liabilities of the assessee’s proprietorship concern are absorbed by the resultant private limited company. The assessee has also complied with the provisions of section 47(xiv) of the Act in all respects. Considering these facts which could not be controverted by the Revenue we are of the view that the entire transaction falls outside the ambit of Section-45 of the Act. Further, provisions of section 50B of the Act will not be applicable in the present case before us because this transaction is not slump sale as envisaged under the provisions of the Act. In these circumstances, we fully agree with the decision of the Ld. CIT (A) and accordingly, uphold his order. - Decided against revenue - I.T.A.No.1807/Mds. /2015 - - - D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Assessing Officer brought to tax under the head long term capital gain `3.47 crores being the goodwill taken over by the resultant private limited company on the conversion of the assessee s proprietary concern. While doing so, the Ld. Assessing Officer made the following observations in his order:- It was seen from the relevant balance sheets of the assessee that intangible asset-goodwill was shown as under:- As at 31/03/2005 Rs.2,06,50,000/- As on 27/09/2005 Rs.3,47,95,733/- On a perusal of the balance sheet of the assessee company, the intangible asset-goodwill amounting to ₹ 3,47,95,734/-(as at 31/03/2006) was shown. The va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id to the assessee by way of allotment of shares of ₹ 1 crore. No other consideration was received by the assessee in any form. 4.1.3 The provisions of sec.47 of the Act exclude some of the transactions from the purview of transfer for the purpose of determining the capital gains. One of such transactions is the transfer of business of a proprietary concern to a private limited company, as a going concern with all assets and liabilities. In such a case, the transaction should not be recognized as a transfer and as a result, no capital gains will arise out of such transaction, subject to the conditions stipulated in the statutes. The provisions of sec.47(xiv) are reproduced as under - Transactions not regarded as transfer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by the assessee in any form. Further, the assessee s share in the company is at 51% of the voting power immediately after the transfer of the business. Therefore, the assessee s transaction fulfilled the requirements of the provisions of sec.47(xiv) of the Act. Consequently, the assessee s transaction will get exempted from the classification of transfer for the purpose of the LT. Act and accordingly no capital gains are required to be computed on account of the transfer of the proprietary concern to the company. Therefore, the Assessing Officer justified in computing the capital gains. 4.1.5 The next observation of the Assessing Officer is that the goodwill shown in the books of the assessee was a self-generated asset whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s action of determining the long term capital gains of ₹ 3.47 crores on transfer of goodwill is neither factually correct nor justified. 4. Before us the Ld. D.R vehemently argued in support of the order of the Ld. Assessing Officer by stating that the assessee has transferred the goodwill of his proprietary concern to the private limited company which would amount to transfer resulting in capital gain considering the provisions of section 50B of the Act and therefore liable to be taxed under the head long term capital gain . It was therefore argued that the order of the Ld. Assessing Officer may be confirmed. Ld. A.R. on the other hand argued in support of the order of the Ld. CIT (A). 5. We have heard both the parties a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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