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2017 (9) TMI 1236 - HC - Income TaxAdditions - whether stocks transferred on cost price can be assessed to tax on a notional price? - fix the price of the stock and transfer the same at a price less than the market value - principles of assessing the value of the stock of a dissolved firm for assessing the mutual adjustment of partner's shares can be applied to a running company? AO observed that the outgoing Directors of the Company were entitled only to an amount of ₹ 40.00 lacs being share held by them and it was observed that amount of goodwill shown in the balance sheet was only to create an impression that no amount was due towards the company and 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. In our considered view the Tribunal has rightly applied the ratio laid down in the case of A.L.A Firm (1991 (2) TMI 1 - SUPREME Court ) 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. - Decided in favour of revenue.
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