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2012 (6) TMI 658 - HC - Income TaxEvaluation of closing stock - at Cost price or market price - conversion of partnership firm into a private limited company - Held that:- Considering the case of Commissioner Of Income-Tax Versus S. Koder [1996 (9) TMI 21 (HC)]the assets and liabilities of the erstwhile firm were taken over by the company with the same persons as shareholders, therefore, it was a case of succession of business in its entirety by another entity the question whether the assessee-firm, upon the transfer of its business to a limited company, was obliged to value the stocks as per the market value was answered in the negative. The assets of the erstwhile firm vested in the company and as such there was no transfer of assets by way of distribution - provisions of section 45(1) and 45(4) of the Act were not attracted even though there was a "transfer" of assets from the firm to a newly constituted com- pany on conversion of the firm to a company under Chapter IX of the Companies Act. The shareholding of the erstwhile partnership firm remained the same upon conversion of the firm into a company as there was no transfer of assets of the firm to the company it is only that the business was taken over by the company, thus the closing stock of the erstwhile firm cannot be valued at the market price - in favour of assessee.
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