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M/s Jamkas Vehicleades (P) Ltd Versus Income Tax Officer

2017 (9) TMI 1236 - JAMMU & KASHMIR HIGH COURT

Additions - whether stocks transferred on cost price can be assessed to tax on a notional price? - fix the price of the stock and transfer the same at a price less than the market value - principles of assessing the value of the stock of a dissolved firm for assessing the mutual adjustment of partner's shares can be applied to a running company? - AO observed that the outgoing Directors of the Company were entitled only to an amount of ₹ 40.00 lacs being share held by them and it was o .....

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t of cost of acquisition of the shares, dealership rights and the goodwill. The transferee was required to incur extra cost for acquisition of these assets. Such cost being capital in nature is not an allowable expenditure. Therefore, component of gross profit on the transfer of trading assets belonging to the assessee at cost price is a profit liable to tax in the hands of the company. - In our considered view the Tribunal has rightly applied the ratio laid down in the case of A.L.A Firm (1 .....

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t : Mr. K.D. S. Kotwal, Advocate ORDER Per Alok Aradhe, J. This appeal under section 260-A of Income Tax Act, 1961 was admitted by a Bench of this Court vide order dated 05.04.2011 on the following substantial questions of law: i) Whether the stocks transferred on cost price can be assessed to tax on a notional price? ii) Whether the assessee has the right to fix the price of the stock and transfer the same at a price less than the market value, if so whether the tax can be levied on notional pr .....

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umar and Ushal Amla were the shareholders and Directors having 4 lacs equity shares of ₹ 10 per share. By an agreement dated 26.07.2001, the Directors agreed to transfer dealership rights of Maruti Udyog ltd. and the entire shareholdings to one Daveder Singh Rana for consideration of ₹ 40 lacs. In the balance sheet the assessee had shown goodwill of ₹ 40 lacs as the transferee had purchased the dealership rights from the then Directors and assets and liabilities of the company .....

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itled only to an amount of ₹ 40.00 lacs being share held by them and it was observed that amount of goodwill shown in the balance sheet was only to create an impression that no amount was due towards the company and that assets were equal to that of the liabilities. Accordingly, the Assessing Officer came to the conclusion that it was merely a device to evade tax. He applied gross profit @ 9.6 per cent and estimated profit to transfer tradable assets worth R. 70,11,090/- and made an additi .....

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ssessing Officer. In the aforesaid factual background, this appeal has been filed. 4. Learned counsel for the appellant submitted that principle which is to be applied while dissolving the firm cannot be applied to continue the Company. It is further submitted that the Tribunal has failed to appreciate that the decision of the Supreme Court in the case of A.L.A. Firm vs. C.I.T 189 ITR 285 has no application to the fact situation of the case. It is further submitted the profit, if any, can be in .....

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e capital assets and orders passed by the Assessing Officer as well as Tribunal are perfect, just and legal. 6. We have considered the submissions made by the learned counsel for the parties and have perused the record. The outgoing Directors and Shareholders had the dealership of Maruti Cars and the stock of cars and spare parts, which were part of the trading assets of the company. The resultant profits of these assets also stood transferred to the outgoing Directors as these were transferred .....

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