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2016 (1) TMI 977 - ITAT MUMBAI

2016 (1) TMI 977 - ITAT MUMBAI - TMI - Succession of the firm - revaluation of assets - claim of depreciation by the assessee allowed by CIT(A) - cost of acquisition - AO was of the firm belief that the transaction does not constitute transfer in terms of Sec. 2(47) of the Act. According to the AO, the revaluation of the assets was only an increase in the value on paper and depreciation on the revalued assets cannot be allowed as per the provisions of the Act. - Not to be treated as transfer u/s .....

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ion took place upto the date of succession and of the previous year preceding that year shall be made on the successor in like manner and to the same extent as it would have been made on the predecessor. The facts of the case in hand do not warrant any relevance to the aforesaid provision of the Act.

It would not be out of place to mention here that the revaluation of the assets is supported by the certificate of a registered valuor and the AO has not appointed his own valuor for valu .....

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e Ld. CIT(A).- Decided against revenue - I.T.A. Nos.4003, 4004/Mum/2012 - Dated:- 14-10-2015 - SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER For The Appellant : Shri Premanand J For The Respondent : Shri Vijay Mehta ORDER PER N.K. BILLAIYA, AM: These two appeals by the Revenue are preferred against two separate orders of the Ld. CIT(A)-13, Mumbai dated 13.03.2012 pertaining to Assessment years 2005-06 & 2006-07. Both these appeals have common grievance therefore .....

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ssessment. During the course of the assessment proceedings, the Assessing Officer came to know that M/s. Suyash Chemicals, a partnership firm was succeeded in its business by the assessee company on 31.3.2004 by which all the assets and liabilities of the partnership firm were transferred to the assessee company. 3.1. The AO further noticed that erstwhile partnership firm had revalued its assets during the financial year 2003-04 by which the assets value were increased by ₹ 29,18,45,075/-. .....

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assessee filed a detailed reply stating that the entire transaction is covered by the provisions of Sec. 47(xiii) of the Act. It was brought to the notice of the AO that the depreciation has been claimed by the assessee company on cost incurred by it for purchase of assets and therefore the depreciation should be allowed as per the provisions of the law. The explanation did not find any favour with the AO. The AO was of the firm belief that the transaction does not constitute transfer in terms .....

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no cost has been paid to the firm by the assessee company and only the shares have been issued to the partners in the erstwhile firm in their profit sharing ratio. 3.4. Another reason given by the AO is that the partnership firm has revalued two intangible assets in financial year 2003-04 which are trade name and Technical Know-how which assets were not in existence in the books of the firm. These assets were created is only for the purpose of claiming higher depreciation. Heavily relying upon E .....

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the case of the assessee-company. After verifying the facts, the Ld. CIT(A) was convinced that the AO has granted exemption u/s. 47(xiii) on transfer of capital assets to the erstwhile firm and therefore the facts of the case are covered by the decision of the Tribunal in the case of Modular Infotech Pvt. Ltd. 40 DTR 172 and Chitra Publicity Co. Pvt. Ltd 127 TTJ 01 wherein the Tribunal has taken a view that in cases covered by Section 47(xiii), the successor company ought to be entitled to depre .....

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t is that by an agreement for assignment of business, the entire assets and liabilities of M/s. Suyush Chemicals, a partnership firm registered under the provisions of Indian Partnership Act 1932 have been assigned to the assessee company. It is also an undisputed fact that the assessment of the firm M/s. Suyush Chemicals was made u/s. 143(3) of the Act and vide order dated 29.11.2006, the AO has accepted the transaction between the firm and the assessee company u/s. 47(xiii) of the Act. It is a .....

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3(6) of the Act. The relevance of the applicability of Explanation-1 to Sec. 43(6) of the Act is highly questionable in the hands of the present assessee inasmuch as the said explanation refers to the provisions of Sec. 170(2) of the Act which is relevant when the predecessor cannot be found then the assessment of the income of the previous year in which the succession took place upto the date of succession and of the previous year preceding that year shall be made on the successor in like manne .....

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to Sec. 43 of the Act. The Hon ble High Court of Gujarat in the case of Ashwin Vanaspati Industries Vs CIT 255 ITR 26 has made the following observations: The valuation report is by a registered valuer. Neither in the assessment order nor in the Tribunal s order is there any whisper that the valuation report by the registered valuer is incorrect in any manner whatsoever. Once there is a report by the registered valuer it is encumbent upon the authority to dislodge the same by bringing adequate m .....

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ee having made a claim for depreciation on enhanced cost, which is the actual cost in its hands, it was necessary for the authority who wanted to determine the actual cost (as required by Explanation 3 to section 43 of the Act) to place some evidence on record. It could not have substituted its opinion and adopted the book value or the written down value in the hands of the assessee-company. As can be seen from Explanation 3 to section 43(1) of the Act, the Income-tax Officer is required to dete .....

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t be applied . 8.3. This decision of the Hon ble High Court of Gujarat directly apply on the facts of the case and strengthens the claim of depreciation by the assessee . 8.4. One more allegation by the AO that the assessee has not incurred any cost in acquiring the assets as the consideration has been paid by the allotment of shares. The AO is totally misdirected in not understanding the provisions of Sec. 47(xiii) of the Act which read as under: any transfer of a capital asset or intangible as .....

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