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2018 (9) TMI 1458

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.... authorities have failed to appreciate that revaluation of the intangibles was effected by the erstwhile firm, before the succession, and not that of the Appellant and therefore, they were not justified in observing that the aforesaid intangible assets were under Section 47 (xiii) of the IT Act. 3. The lower authorities have failed to appreciate that the assets (including the intangible assets) of the erstwhile firm were transferred to the Appellant in the succession as contemplated under Section 47(xiii) of the IT Act. 4. The lower authorities have failed to appreciate that neither under Section 47(xiii) or elsewhere in the IT Act is there a stipulation that assets cannot be revalued prior to succession or the fact that transfer needs to necessarily take place at the book value. The very fact that Section 47(xiii) exempts such transaction from the purview of transfer for the purpose of capital gains is that there is a contemplation that in a scenario of succession there could arise profits due to the sale of assets at a value higher than the cost. 5. The lower authorities have failed to appreciate that Section 47(xiii) makes an explicit mention of transfer of intangible asse....

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....of certified by a valuer has not been disputed by the Learned Assessing Officer. 14. The Learned Commissioner (Appeals) is not justified in upholding the action of the Learned Assessing Officer in disallowing the depreciation, when the fact that the intangibles originally belonged to the firm has not been questioned and in the Appallent's own case for A Y 2013-14 the Hon'ble ITAT has allowed the depreciation. 15. The Learned Commissioner (Appeals) is not justified in upholding the action of the Learned Assessing Officer in disallowing the depreciation, merely because the Hon'ble ITAT has disallowed the depreciation in earlier years and the matter is before the Hon'ble Karnataka High Court. 3. The Learned Commissioner (Appeals) is not justified in not considering allowing the carried over losses for A Ys 2011-12 - Rs. 3,54,897/-; A Y 2012-13 - Rs. 2,52,90,640/- and A Y 2013-14 - Rs. 32,14,291/- which was not allowed by the Learned Assessing Officer while arriving at the tax liability for A Y 2014-15. For the above reasons and for such other reasons which may be allowed by the Hon'ble members to be urged at the time of hearing, it is prayed that the afores....

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....had placed reliance upon the decision of the Hon'ble Supreme Court in the case of Kartikeya A.V Sarabhai (cited Supra) in support of his contention that the shareholders who buy shares will not have any interest in the property of the company which is entirely distinct from the shareholder and the true position of the shareholder in a company on buying the shares is that he becomes entitled to a percentage in the profits of the company if and when company declares, subject to memorandum of association that the profits or any portion thereof should be distributed as dividend amongst the shareholders and he has further right to percentage in the assets of the company which would be left-over after winding up. Thus, he tried to bring out distinction between the rights of the partners in a partnership firm which is joint and several in contrast to the rights and liabilities of the shareholders in a company. He has also relied upon the decision of the Hon'ble Supreme Court in the case of Vodafone International holdings reported in 341 ITR 1 (SC) to bring out distinction between the holding company and wholly owned subsidiary in which the Hon'ble Supreme Court has held that the legal rel....

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....hat the assets should be owned by the assessee and should have been used for the purposes of the business or profession of the assessee. The sub-clauses thereto enumerate the deductions allowable u/s 32. Sub-clause (ii) thereof provides for a deduction at a prescribed percentage of the written down value of the block of assets. 5th proviso thereto provides that in respect of circumstances such as succession, amalgamation or demerger, the average deduction on account of depreciation on tangible or intangible assets shall not exceed, in any previous year, the deduction calculated at the prescribed rates as if the succession, amalgamation or demerger has not taken place and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and amalgamated company or the demerged company and the resulting company as the case may be, in the ratio of days for which the assets were used by them. 18. In all the three circumstances above, the erstwhile company ceases to exist and a new company comes into existence. In the case on hand also, on account of conversion, the erstwhile partnership firm ceased to exist while the company has come into exist....