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TMI Blog2008 (9) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... aging of coating units of the assessee has been transferred to M/s. Coates Coating India Pvt. Ltd. ("CCIPL") with effect from December 31, 1997. While transferring the units, the assessee received a sum of Rs. 29,89,87, 000 by way of adjustment and issue of equity shares of Rs. 10 each in CCIPL credited as fully paid-up share capital. In the process of such transfer a surplus amount of Rs. 19,14,55,804 was credited to the accounts of the assessee over and above the book value of the assets actually transferred to the CCIPL as on December 31, 1997. The assessee claimed that this excess amount is not taxable on the ground that the assessee transferred the assets of the company to its wholly owned subsidiary company. It was further stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the proviso to section 47(iv) excludes the operation of section 47(iv) in case the capital asset is transferred to stock-in-trade. 6. The Commissioner of Income-tax (Appeals) took into consideration all such facts and the further fact that CCIPL was a wholly owned subsidiary of the assessee as on the date of coming into effect of the scheme of arrangement and that amalgamation (or demerger) of these companies was also accepted by the hon'ble High Court in the company jurisdiction. 7. Therefore, there cannot be a formula which had no connection with the value of the individual assets and the liabilities. The price was determined that of the business and, therefore, there is no question of picking up any portion of such price and chargin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of the different assets belonging to the undertaking. (ii.) In view of the decision of the Supreme Court in CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294 as no cost of acquisition can be conceived for the undertaking, the consideration received on transfer of the packaging coating business by the assessee cannot be subjected to capital gains tax. Therefore, the Assessing Officer was wrong in assuming that the amount of Rs. 19,14,55,804 credited in capital reserve was received on account of goodwill. (iii.) Further, even assuming that the amount of Rs. 19,14,55,804 is on account of transfer of goodwill, the same cannot be brought to tax as the transaction enjoys exemption under section 47(iv) of the Income-tax Act as explained earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration was determined with reference to capitalised value of the said business. In our opinion, the proviso to section 47(v) and (iv) is applicable, if any only if, in the hands of the 'transferee' the capital asset on its transfer constitutes 'stock-in-trade'. Nothing was brought on record by the Revenue authorities at any stage to substantiate that such packaging coating business on its transfer was accounted for in the books of CCIPL as 'stock-in-trade'. Having regard to the facts on record, therefore, we are fully satisfied that since the entire paid-up capital of CCIPL as on December 31, 1997, was held by the respondent, the transfer of the undertaking was squarely covered by the provisions of section 47(iv) and, therefore, no income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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