TMI Blog2011 (12) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause higher number of shares have been allotted due to revaluation - Decided in favor of the assessee - IT Appeal No. 2108 (Mum.) of 2009 - - - Dated:- 30-12-2011 - N.V. Vasudevan, Pramod Kumar, JJ. For the Appellant: Pravin Verma For the Respondent: Vijay Mehta ORDER N.V. Vasudevan, Judicial Member 1. ITA No.2108/M/09 is an appeal by the revenue against the order dated 30/1/2009 of CIT(A) 23, Mumbai relating to assessment year 2005-06. The ground of appeal raised by the revenue read as follows: (i) On the facts and circumstances of the case, the Hon'ble CIT(A) erred in holding that the conditions prescribed in section 47 (xiv) are satisfied. (ii) On the facts and circumstances of the case, the Hon'ble CIT(A) erred in holding that the assessee is eligible for exemption u/s. 47(xiv) and no capital gains are to be taxed. 2. The Assessee is a proprietor of a concern by the name of Krystal Colloids through which the business of various kinds of gums exports is carried out. The facts of the case are as under. It is seen that during the year under assessment there has been reorganization of business. It is further observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act, 1961 (the Act) was not satisfied. In this regard the AO found as part of the Agreement for assignment listing out the assets and liabilities which were required to be transferred to the Limited Company, the sole proprietor was required to transfer the Bank Accounts to the Company. On enquiry it was submitted that there were 6 bank accounts of the sole proprietor. The details are as under:- Name of Bank Account Number Status Citi Bank 0301435134 Account closed Citi Bank 0301435126 Account closed ABN Amro Bank 984556 Account closed Citi Bank 0858608112 Account not closed Canara Bank 5406 Account not closed Ahmedabad Co-Operative Bank 01-162075 Account not closed The assessee submitted that some of these bank accounts were continued to ensure that the various refunds, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shares would be entitled to claim higher cost and thereby avoiding capital gains of the shares. The AO also was of the view that as per Accounting Standard 26 of the ICAI which prescribes that intangible assets have to be recorded at the cost of acquisition and other direct cost and self generated intangible assets should also not be recognized on the balance sheet. The AO also referred to the decision of the Hon'ble Gujarat High Court in the case of CIT v. Gautam Sarabhai Trust No. 31 [1988] 173 ITR 216/40 Taxman 178, which was a case of claim of exemption under section 47(vii) of the Act. We will deal with this decision in the later part of this order. The AO accordingly held that the assessee was not entitled to the exemption and according brought to tax a sum of ₹ 3,67,50,000/- as long term capital gain. 4. On appeal by the assessee the CIT(A) held as follows: 5. The appellant's submission have been considered. During the relevant previous year, the appellant has transferred his proprietary concern to a closely held private limited company with 99% shares of himself and 1% to his wife. It has been held in assessment order that appellant had no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as the application of proviso -A to section 47 (xiv) is concerned we find that the agreement for assigning of business in favour of a Private Limited Company dated 24/3/2005 clearly envisages the approval of the following: On the date of execution of these presents, the Assigner is in the legal control/ownership/possession of factory buildings, plant and machineries, furniture, fixtures and other tangible and intangible assets, rights and entitlements in respect of the said business, more particularly set out in the list annexed hereto and marked Annxure-1 hereto. Annexure 1 to the agreement in Item No.11 refers to bank balance with banks. Thus the agreement transfers all the bank balances. As between the assessee and the Limited company the transfer of bank account is complete and the fact that sum of the bank accounts continue to be operated by the assessee will not result in the application of proviso A to section 47 (xiv) of the Act. It is also seen that in the individual balance sheet of the assessee these bank accounts are shown on the asset side of the balance sheet. It is also noticed that the assessee had given a declaration in the form of an affidavit w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, where shares are issued on amalgamation. One of the condition for such allowance was that the consideration should be received in the form of shares in the amalgamated company. On facts of that case the assessee was given apart from shares bonds or debentures in the amalgamated company. In such circumstances the Hon'ble Court dealt held that the consideration was not in the form of only shares and, therefore, the benefit of exemption under section 47(vii) of the Act would not be available. We are of the view that the decision in the aforesaid case has no relevance to the case dealing with the case of the assessee. For the reasons given above we uphold the order of the CIT(A) and dismiss the appeal of the revenue. C.O.No.177/M/2009: 10. Grounds No.1 and 2 raised in the Cross Objection reads as follows: The Respondent (Cross Objector) submits the following grounds, which are without prejudice to one another: 1. The order passed by the Learned Commissioner of Income Tax (Appeals) is bad in law and on facts. 2. Re: Disallowance of depreciation claimed of ₹ 62,338/- 2.1 On the facts and in the circumstances of the case and in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Sales Agency Ltd. [1951] 19 ITR 191. Depreciation can be allowed on any asset only when it is in a position of being put to use. The asset was not capable of being put to use in the month of March. Since the asset has not been put to use, the depreciation claimed by the Assessee of ₹ 62,338/- on the same is disallowed. Total disallowance on account of Depreciation works out to ₹ 63,823/- (Rs.1485+Rs.62,338) and the same is added back to the total income of the Assessee. 12. On appeal by the assessee the CIT(A) confirmed the order of the AO. 13. We have heard the rival submissions and perused the material on record. At page 63 of the paper book the addition to the fixed assets has been given and the same is as follows: Details of addition to Fixed - Gunsun orter Machine. Particulars Date of invoice Date of put to use Cost price Gunsun Sorter Machine 14-Mar-2005 25-Mar-2005 291200 Air Compressor for Sorter Machine 22-Mar-2005 25-Mar-2005 83881 Transpor ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
