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2023 (1) TMI 959 - AT - Income TaxCapital gain on conversion of a Private Limited Company into LLP - Addition on account of asset being goodwill brought into books of accounts after conversion of a Private Limited Company into LLP holding that there is a violation of provisions of section 47(xiiib) - CIT(A) held that the commercial expediency in valuing Goodwill cannot be ignored merely on the theory of presumptions - As per DR if the corporate veil is lifted, one can clearly gather that the assessee has merely adopted a colourable device to avoid tax as whole state of affairs of the assessee LLP have been manipulated per se merely to come out of the conditions stipulated in the provisions of section 47(xiiib) - whether the partners of the assessee LLP had actually benefited either directly or indirectly on conversion of the predecessor company into LLP or not which has been alleged by the Assessing Officer? HELD THAT:- Partners of the assessee LLP and the erstwhile shareholders of the predecessor company can be considered to have obtained any benefit directly or indirectly only if the same fits into the specific conditions prescribed. CIT(A) have duly considered that the clause (c) operates only till the date of conversion i.e. 17/03/2016 and it is clear from the balance sheets pre conversion and post conversion that the shareholders have not received any consideration or benefit directly or indirectly. As regards clause(f) refers to amount paid to the partner of LLP out of the balance of the accumulated profits standing in the accounts of the company on the date of conversion, which in the present case cannot be said to be violative in view of the fact that the commercial expediency explained by the assessee has not been controverted by the AO and who cannot step into the shoes of the assessee to decide and direct as to how the assessee should conduct its state of affairs. Also, the condition prescribed relates to the balance of accumulated profits as on date of conversion out of which amount is paid to the partner, however, since the accumulated profits did not include the amount of Goodwill in the books of the predecessor company, there cannot be said to be any violation of clause (f) either. Hence, merely on presumptions of the AO, additions cannot be sustained which the ld. CIT(A) have categorically dealt with considering all the aspects of the case. Grounds of appeal of the revenue are dismissed
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