TMI Blog2019 (8) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of distribution of assets is satisfied, Section 45(4) will not be attracted. Therefore, in the facts and circumstances of the case, we find that there is no transfer by way of distribution of assets. We find that the CIT(A) did not take into consideration the legal issue involved i.e. when a firm is succeeded by a company with no change either in the number of members or in the value of assets with no dissolution of the firm and no distribution of assets with change in legal status alone, whether there is a 'transfer' as contemplated u/ss 2(47) and 45(4). This issue was rightly decided by the Tribunal by taking into consideration the decision of a Division Bench of this Court in the case of CADD Centre Vs. ACIT [ 2016 (5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondent assessee. 2. This appeal filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for short, the Act) is directed against the order dated 29.10.2018 made in ITA.No.1047/Chny/2018 on the file of the Income Tax Appellate Tribunal, Chennai 'A' Bench (hereinafter called the Tribunal) for the assessment year 2009-10. 3. The Revenue has filed this appeal by raising the following substantial questions of law : i. Whether the Appellate Tribunal is correct in law in holding that there is no violation of the conditions stipulated in Section 47(xiii) of the Income Tax Act without taking cognizance of the fact that the partners of the erstwhile firm derived benefit other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed on 30.6.2016 under Sections 143(3) read with 147 of the Act. The Assessing Officer held that the total revalued value of the capital accounts of all the four partners stood at ₹ 1,17,32,87,069.51 Ps, that the shares were alloted to the partners of the firm for a total amount of ₹ 10,00,000/- and that the balance of ₹ 1,17,22,87,070/- was given as credit of loan to the partners of the erstwhile firm in the same proportion as their share capital of the firm. Thus, the Assessing officer held that this was a deviation stipulated under Section 47(xiii) of the Act for exemption from capital gains and therefore, made an addition of ₹ 1,17,22,87,070/- towards short term capital gains and demanded ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Part IX of the Companies Act, 1956, the assets and liabilities were vested into the company by virtue of law and that there was no transfer of assets. It was further contended that there was no dissolution of the firm or distribution of assets among partners, which is a condition precedent to tax the transaction under Section 45(4) of the Act. In support of their contention, the assessee referred to various decisions of the Tribunal and the High Courts. 10. However, the CIT(A) opined that the shares worth of ₹ 10 lakhs were given as credit of loan to the partners of the erstwhile firm in the same proportion and that this has to be treated to fall foul of the condition stipulated in Section 47(xiii) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount as per the priority like payment of taxes to the Government, BMC etc., payment to unsecured creditors etc. This difference is very important. This difference is amply brought out conceptually in the judgment of the Supreme Court in the case of Malabar Fisheries Co. Vs. CIT [1979] 120 ITR 49. In the present case, therefore, we are of the view that Section 45(4) is not attracted as the very first condition of transfer by way of distribution of capital assets is not satisfied. In the circumstances, the latter part of Section 45(4), which refers to computation of capital gains under Section 48 by treating fair market value of the asset on the date of transfer, does not arise. 13. The endeavor of Mr.T.R.Senthilkumar, learne ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
