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M/s. Utsav Cold Storage Pvt. Ltd. Versus The Income Tax Officer

2016 (6) TMI 328 - ITAT JAIPUR

Capital gain - Transactions not regarded as transfer - succession of company - cost of acquisition of the company - indexation on the cost of acquisition - converting the Short Term Capital Loss into Long Term Capital Gain and taxing the same - Held that:- The firm is succeeded by the company, therefore, the cost of acquisition of the company would be as that of acquisition of the firm. The valuation of land and assets of firm though valued by the valuer will not change or alter the cost of acqu .....

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ld that the cost of acquisition of the company (assessee) would be the cost of acquisition of the firm (M/s. Sarju Cold Storage). Therefore, the assessee would only be entitled to the indexation on the cost of acquisition of the firm on the amount of ₹ 2,50,000/-. The argument of the assessee that the AO has wrongly calculated the cost of acquisition of the assessee u/s 49(1)(iii)(a), in our view, is not correct as both the AO and ld. CIT (A) have applied the cost of acquisition on the bas .....

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ovided the cost of acquisition in case of succession of firm to the company. However, the said cost of acquisition was already in existence under section 49(1)(iii)(a) of the IT Act. Therefore, in our view no fresh charge has been created on account of succession of a firm to the company. It has only clarified the existing basis of calculating the cost of acquisition in case of succession of the firm to the company. - Decided against assesssee

Levy of interest under section 234B - Hel .....

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ORDER PER SHRI LALIET KUMAR, J.M. The present appeal is filed by the assessee arising out of the order of ld. CIT (A)-I, Jaipur dated 06.03.2013. The grounds raised by the assessee are as under :- 1. That in the facts and circumstances of the case and in view of the settled legal position the ld. CIT (A) has erred in law in holding that the amendment in section 49(iii)(e) inserting clause (xiii) of section 47 was of clarificatory nature. That such holding resulted in a wrong finding in law and .....

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position prevailing at the time when such an action was taken or an order is framed because subsequent happenings if are put into use and considered, it may validate an order which was otherwise an illegal order in law when was made. This is impermissible in the eye of law. Hence the action of ld. A.O. was erroneous and which was liable to be cancelled, by deleting the addition by the ld.CIT (A), which was not done. Hence she erred. The addition may kindly be deleted. 3. That without prejudice t .....

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the assessee had denied completely its liability to charge of interest u/s 234B, the ld. CIT (A) should have deleted the same cancelling the order of A.O. In not doing so, she has erred. 2. The brief facts of the case are that the appellant company filed its return on 30.09.2009 declaring total income of Rs. Nil after set off of loss. The same was processed under section 143(1) on 01.11.2010. Thereafter, the case was selected for scrutiny and the notice was issued calling upon the appellant com .....

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of ₹ 1,05,97,152/-. The assessee company was called upon to furnish the details of the property sold. In response thereto, the assessee company has filed its reply wherein it was submitted that M/s. Sarju Cold Storage (in short SCS) had purchased the land and in the assessment year 2006-07 the value of the land was shown as ₹ 2,50,000/- in the return of income. It is further the case of the assessee that M/s. Sarju Cold Storage in the A.Y. 2007-08 had shown the capital reserve as  .....

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e in the relevant year. It was further submitted that in terms of sec. 47(xiii), M/s. Sarju Cold Storage was taken over by M/s. Utsav Cold Storage Pvt. Ltd. along with its assets and liabilities and there was no transfer within the meaning of law and, therefore, no tax was payable. It was further submitted that the book value of the assets sold in the hands of the assessee company was ₹ 3,81,62,525/- and, therefore, when the property was sold, a total sale consideration of ₹ 2,00,00, .....

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to claim the revalued figure as cost of the land and the value which has been paid for acquiring the land can only be considered as the cost of asset. Hence, the cost of land can be amount paid by the assessee for acquiring the said land which in the present case is ₹ 2,50,000/- and ₹ 1,83,714/- being the registration and other charges incurred for purchasing the said land, which has also been taken into consideration by the then ACIT, Circle 2(1), Jaipur while assessing the assessee .....

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ence, the same is also taken into considering while working out the capital gain. 10. It is also worthwhile to mention that the assessee who had purchased the land for ₹ 2,50,000/- has revalued it to ₹ 3,70,00,000/- before transferring the assets and liabilities in the assessee company and such revaluation has been done in the FY 2006- 07. The said land was sold during the year under consideration for ₹ 2,00,00,000/- and the DLC rate as per the Sub-Registrar was also assessed a .....

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take made in the original return. 3. Feeling aggrieved by the order passed by the AO, the appellant filed the appeal before the ld. CIT (A). The ld. CIT (A) after elaborately discussing the contention of the assessee has held as under :- Thus as per these provisions of the Act the property is to be taken at the value at which it was acquired by the firm that is ₹ 2,50,000/- and the cost of improvement which the AO has taken into consideration that is ₹ 1,83,714/- and ₹ 7,15,000 .....

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of the case of the appellant because this amendment with retrospective effect was clarificatory and not substantive in nature. The AR of the appellant has submitted that the cost could not have been determined u/s 49(1)(iii)(a) which has been done by the AO but should have been done u/s 49(1)(iii)(e). First of all, it is a presumption that the cost worked out by the AO is u/s 49(1)(iii)(a) and not u/s 49(1)(iii)(e) because the assessment order is completely silent regarding the section under whi .....

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the Commissioner (Appeals) by express words, he exercise the same powers as does the original court or authority. In fact, the entire assessment is thrown open before him. He can travel outside the record, i.e., the return made by the assessee and assessment order passed by the Assessing Officer. He is competent to conduct a detailed examination of any aspect dealt with summarily or briefly by the Assessing Officer. In view of the above observation of the Hon ble ITAT Allahabad Bench it is held .....

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Storage and in view of section 47(xiii) of the IT Act, there is no transfer in the eyes of law. It was further submitted that the partnership firm i.e. M/s. Sarju Cold Storage was merged with the assessee company in view of section 47(xiii) after revaluation of the assets of the company to ₹ 3,70,00,000/- from ₹ 2,50,000/-. Thus the cost of acquisition in the hands of the assessee company was ₹ 3,70,00,000/-. It was also the case of the assessee that on the basis of the book v .....

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f section 49(1)(iii)(e) to the case in hand as the law was amended with effect from 1.4.1999. The ld. Counsel has also taken us to the explanation to the amended provision to show that the amendment will take retrospective effect from 01.04.1999 and accordingly apply in relation to the A.Y. 1999-2000 and subsequent assessment years. It was submitted that section 49(1)(iii)(e) is a charging provision and being a charging provision, the same cannot be retrospectively apply to the transaction which .....

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can be attributed to the assessee. This has been so recognized by the Hon ble Supreme Court in the case of Vodaphone International case wherein the principles laid down in McDowell s (154 ITR 148 (SC) case was upheld. 4.3. It was thereafter contended by the ld. A/R for the assessee that the specific provisions of section 47(xiii) which prevail over the general provisions i.e. section 49(1)(iii)(a) of the Act and on the basis of the above said submission, it was submitted that the AO was wrong in .....

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ansfer of land was wrong. In fact, the assessee has suffered short term capital loss on account of sale of the assets and there is no short term capital gain to the assessee. In the alternative, it was submitted that provisions of section 234B & 234C should not be applied for payment of interest on the basis of retrospective amendment on account of non-payment of advance tax. 4.4. The ld. D/R on the other hand, has submitted that the transfer within the meaning of law has taken place and the .....

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ed the material available on record. Before we deal with the factual aspects of the matter, it is necessary to reproduce section 47(xiii) and 49 for the purpose of clarity and reference. Section 47 : Transactions not regarded as transfer Nothing contained in section 45 shall apply to the following transfers :- (xiii) any transfer of a capita asset or intangible asset by a firm to a company as a result of succession of the firm by a company in the business carried on by the firm, or any transfer .....

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fore the succession become the shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the succession; (c) The partners of the firm do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company; and (d) The aggregate of the shareholding in the company of the partners of the firm is not less than fifty per cent of the total voting power in .....

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cquisition. (1) Where the capital asset became the property of the assessee - (i) On any distribution of assets on the total or partial partition of a Hindu undivided family; (ii) Under a gift or will; (iii) (a) by succession, inheritance or devolution, or (b) on any distribution of assets on the dissolution of a firm, body of individuals, or other association of persons, where such dissolution had taken place at any time before the 1st day of April, 1987, or (c) on any distribution of assets on .....

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o be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be. From the bare reading of both the provisions i.e. section 47 and section 49 of the Act, it is clear that section 47 deals with the transaction not regarded as transfer whereas section 49 deals with the cost with reference to certain mode of acquisition. Both the sections, in our understanding .....

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calculated. If we look into section 49(1)(iii), it is specifically provide transfer by way of succession, inheritance/devaluation. The firm is succeeded by the company, therefore, the cost of acquisition of the company would be as that of acquisition of the firm. The valuation of land and assets of firm though valued by the valuer will not change or alter the cost of acquisition of the firm despite valuation of assets of the firm and would remain the same, and therefore the cost of acquisition .....

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