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TMI Blog2002 (9) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the court was delivered by G. SIVARAJAN J.-Income-tax Reference No. 302 of 1997 is at the instance of the assessee. The Tribunal has referred the following three questions for decision by this court at the instance of the assessee: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that there was a transfer of the assets of the firm giving rise to capital gains liable to tax? 2. Whether, on the facts and in the circumstances of the case, the Tribunal ought to have held that as the business as a going concern was the capital asset which was the subject of the transfer and not the individual assets and the gain, if any, on the transfer of the business as a whole had to be computed and brought to tax? 3. Whether the Tribunal ought to have held that the cost of acquisition and cost of improvement of the business as a going concern were not ascertainable and so a business as a going concern was not an asset on the transfer of which a liability to capital gains arose?" Income-tax Reference No. 303 of 1997 is at the instance of the Revenue arising out of the same order of the Income-tax Appellate Tribunal. The follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitting capital gains on the transfer of the land and the block of assets such as building and machinery on the basis of the revalued figure which is entered in the assessee's accounts. The assessee however did not revalue the closing stock. Though the Assessing Officer. had accepted separate valuation of the land and block of assets, the Assessing Officer treated the land as part of the block of assets and declined to grant deduction available to long-term capital assets. Similarly, the Assessing Officer revalued the closing stock by adding gross profit and the difference between the book value and the value as ascertained as profit and assessed the said figure to tax. The assessee in fact had contended before the Assessing Officer that in the case of a transfer of business as a going concern there is no question of assessing the profit to capital gains tax. The assessee also contended that the land being a separate asset having been acquired by the assessee in the year 1981 it has to be assessed only as a long-term capital asset by granting deductions available under law. Similarly the assessee contended before the Assessing Officer that since the assessee had sold the closing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of land and building and forming part of the assets of the party of the first part as valued by the approved valuer, Sri A.V. James of Trichur, and recorded in his report dated April 16, 1990, and the market value of the plant and machinery, equipments, furniture and fixtures forming part of the assets of the party of the first part as valued by the approved valuer Sri C. Narayanan of Ernakulam, and recorded in his valuation report dated April 30, 1990, shall be substituted for the book value of the respective assets and the resultant difference in the value shall be apportioned among the partners as provided for in the partnership deed by which the party of the first part was last reconstituted and the balance-sheet of the party of the first part for the purpose of takeover shall be drawn up accordingly. 4. The ownership of all the assets of the party of the first part as borne on its balance-sheet as at June 1, 1990, drawn up for the purpose of take over shall stand transferred to and vest in the party of the second part with effect from June 1, 1990, and the party of the first part shall have no manner of claim or right to any of the said assets. The party of the first part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in F.X. Periera and Sons (Travancore) Pvt. Ltd. 's case [1990] 184 ITR 461 relied on the decision of the Supreme Court in Alapati Venkataramiah v. CIT [1965] 57 ITR 185. Similarly the decision of the Supreme Court in R.R. Ramakrishna Pillai's case [1967] 66 ITR 725 is applicable to the facts of the present case. In view of the aforesaid two decisions, we are of the view that the contention of the assessee that in the case of transfer of business as a going concern the profit arising out of such transaction is not exigible to capital gains cannot be accepted. The three questions referred at the instance of the assessee in I.T.R. No. 302 of 1997, are different facets of the same issue which we have decided hereinabove. In the above circumstances, we answer the said three questions against the assessee and in favour of the Revenue. Now we will deal with the question whether the assessee is entitled to deduction as provided under section 48 of the Income-tax Act. The assessee had separately valued the land. The Assessing Officer also accepted the separate valuation. However, the Assessing Officer did not grant deduction sought for by the assessee treating the land also as part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment clearly provided that the entire business is transferred as on June 1, 1990. In the above circumstances, there cannot be a firm thereafter in the eye of law. In this context the decision of the Supreme Court in A.L.A. Firm v. CIT [1991] 189 ITR 285 relied on by the Department and by the first appellate authority deserves consideration. In that case the assessee-firm carried on money-lending business in Malaya and as a part of and incidental thereto, a business in purchase and sale of house properties, gardens and estates. The firm closed its accounts as on March 13, 1961, with effect from which date the firm was dissolved. Along with the return filed for the year 1961-62, the assessee had produced a profit and loss account and certain other statements. In the profit and loss account a sum of $ 1,01,248 was shown as difference on revaluation of estates, gardens and house properties. However, this amount was deducted in the adjustment memo for income-tax purposes on the ground that it was not assessable to tax either as revenue or as capital gains. This was practically accepted in the assessment. However, in reassessment proceedings this amount was added to the income earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the decision of the Supreme Court discussed above applied. The Tribunal has distinguished this decision only on the ground that in the present case the firm continued even after the transfer of the business as a going concern for the purpose of realisation of the dues. This view according to us is not correct. In the above circumstances we hold that the Tribunal was not justified in deleting the addition of Rs. 6 lakhs and odd. We answer the second question referred by the Tribunal at the instance of the Revenue in the negative, i.e., in favour of the Revenue and against the assessee. Coming to the third question, viz., whether interest can be levied under section 234B, the said question is covered by the decision of this court in CIT v. R. Ramalingair [2000] 241 ITR 753. It has been held by this court in R. Ramalingair's case [2000] 241 ITR 753 that the levy of interest under section 234B is automatic. In view of the above, there is no point in affording any opportunity to the assessee. Accordingly, we hold that the Tribunal was not justified in directing the Assessing Officer to give an opportunity to the assessee on this aspect. Thus, we answer question No.3 referred at the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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