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2017 (12) TMI 908 - AT - Income TaxDisallowance u/s. 40(a)(ia) - non deduction of tds - Held that:- As discernible from the documents on records clearly shows that the Private Limited Company i.e. M/s. BCRCPL existed from 04.07.2002 and it was existing for the main purpose of taking over the assessee’s proprietary concern M/s. Basu & Co. and vide the Governor’s approval the Govt. of West Bengal has permitted the assessee’s business to be run through the Private Limited Co. w.e.f. 31.03.2008. In such a scenario, the AO’s conclusion that this was a cooked up story to get rid of the clutches of disallowance u/s. 40(a)(ia) cannot be accepted and the AO erred in making such a conclusion and the Ld. CIT(A) has rightly appreciated the facts and has found that the entire contract work has been executed by M/s. BCRCPL and w.e.f. 31.03.2008, the proprietary concern has been taken over by the Private Limited Company with all its assets and liabilities, so the question of deducting TDS does not arise. Not only that M/s. BCRCPL has filed its return of income for the relevant assessment year and has also remitted tax on the amount of which the contract was executed and for that the payment was received on which the AO has made disallowance and, therefore, the disallowance u/s. 40(a)(ia) was not warranted and, therefore, rightly the Ld. CIT(A) has deleted the addition and we confirm the same. Undisclosed investment on account of shares claimed to have been allotted by M/s. BCRCPL - Held that:- The shares were allotted by the Private Limited Company to the assessee after valuation of the assets and liabilities taken over by the Private Limited Company which was valued at their book value and the shares were allotted to the assessee in his individual capacity as a proprietor of the erstwhile proprietary concern. Since no shares were issued in the name of the proprietary concern M/s. Basu & Co. which did not exist after the takeover by Private Limited Company, no investment in shares were reflected in the Balance sheet of the proprietary concern M/s. Basu & Co. We take note that the takeover account was settled through mere book entry by debiting or crediting the amount of either person in their books. This is a mere book entry and no real monetary transaction has taken place. It should be noted that nothing changed on ground i.e. the assets and liabilities of the proprietary concern was taken over by the Private Limited Company along with its assets and liabilities, and the shares allotted on the book value of the assets, so nothing changed except that the business will be run by the Private Limited Company from 31.03.2008 and no money changed hands or any new investment made by the assessee in the form of share application amount in the company. The AO has not understood this aspect and, therefore, has erroneously made the addition which has been rightly deleted by the Ld. CIT(A) and warrants no interference and, therefore, we confirm the action of the Ld. CIT(A) and dismiss the appeal of the revenue.
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