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TMI Blog2017 (9) TMI 1236X X X X Extracts X X X X X X X X Extracts X X X X ..... that assets were equal to that of the liabilities. Accordingly, the Assessing Officer came to the conclusion that it was merely a device to evade tax. He applied gross profit @ 9.6 per cent and estimated profit to transfer tradable assets worth R. 70,11,090/- and made an addition of ₹ 6,35,204/- Held that:- The profit so transferred would form part of cost of acquisition of the shares, dealership rights and the goodwill. The transferee was required to incur extra cost for acquisition of these assets. Such cost being capital in nature is not an allowable expenditure. Therefore, component of gross profit on the transfer of trading assets belonging to the assessee at cost price is a profit liable to tax in the hands of the company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Company. M/s Janki Motor Pvt. Ltd. was having dealership rights for sale of vehicles etc. of Maruti Udyog Ltd. In the aforesaid company, one Krishan Kumar and Ushal Amla were the shareholders and Directors having 4 lacs equity shares of ₹ 10 per share. By an agreement dated 26.07.2001, the Directors agreed to transfer dealership rights of Maruti Udyog ltd. and the entire shareholdings to one Daveder Singh Rana for consideration of ₹ 40 lacs. In the balance sheet the assessee had shown goodwill of ₹ 40 lacs as the transferee had purchased the dealership rights from the then Directors and assets and liabilities of the company as on the date of takeover were transferred to the outgoing Directors. The Assessing Officer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel for the appellant submitted that principle which is to be applied while dissolving the firm cannot be applied to continue the Company. It is further submitted that the Tribunal has failed to appreciate that the decision of the Supreme Court in the case of A.L.A. Firm vs. C.I.T 189 ITR 285 has no application to the fact situation of the case. It is further submitted the profit, if any, can be in the hands of the outgoing Directors in their individual capacity and not in the hands of the Assessee. Therefore, no addition could be made in the hands of the Assessee. 5. On the other hand, learned counsel for Revenue has submitted that the plea that principle which is to be applied while dissolving the firm cannot be applied to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm (supra) to the fact situation of the case. Even otherwise, the fact that the Assessing Officer has made the addition in the hands of the Directors would not make any difference in the present case for the reason that such income actually belongs to the assessee and therefore, taxable as such in its hand. 8. In the preceding analysis, first substantial question of law in the fact situation of the case is answered in negative. The second substantial question of law is answered by stating that the tax is to be levied on actual profits as has been done in the instant case. The third substantial question of law is also answered in affirmative in favour of the Revenue. 9. In the result, we do not find any merit in this appeal. The same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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