TMI Blog2018 (6) TMI 1643X X X X Extracts X X X X X X X X Extracts X X X X ..... as per clause (xiii) of section 47 as evident from the finding that the assessee, in our view, has wrongly got confused with the principles laid down under section 47 which talks about the transaction which are not regarded as transfer, with that of principles for determining of cost of acquisition under section 49 instead of corresponding clause relating to cost of acquisition relating to transfer as contemplated under section 47(xiii) as introduced in section 49(1)(iii)(e) However, if we look at the first two grounds of appeal, these grounds of appeal were raised by the assessee specifically in the context of section 49(1)(iii)(e) as amended by the Finance Act, 2012 which were brought on the statute subsequent to passing of the assessment order u/s 143(3) of the Act and which were invoked by the ld CIT(A). In these grounds of appeal, the assessee has challenged the findings of the ld CIT(A) in holding that amendment to section 49(1)(iii)(e) inserting clause (xiii) of section 47 was clarificatory in nature. The said findings of the ld CIT(A), as we have noted above, were rendered in the context of amendment being retrospective and hence clarificatory in nature. However, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtions therein. Therefore, a wrong and erroneous fact relating to existence of law, including the amendment vide Finance Act 2012, w.e.f. 01-04-1999 was considered, leading the Coordinate Bench to arrive at a wrong conclusion in rendering the decision. Clause (xiii) of Section 47 was only inserted along with clause (xiiib) thereof in clause (e) of Section 49(1) (iii) vide Finance Act 2012, with retrospective effect from 01- 04-1999. Also therefore, the Coordinate Bench committed a patent and obvious error in rendering the decision. Had the insertion in law vis-a-vis appellant's submissions, been understood in consonance with existing statutory position of the previous year relating to asst. yr. 2009-10, i.e. prior to insertion of clause (xiii) of Section 47, in clause (e) of Sec. 49, vide Finance Act, 2012 with retrospective effect from 01-04-1999 and thereafter, then the conclusion and decision would have been not the same but a correct decision would have been rendered by the Bench. There would have been also no occasion to base the decision on Clause (iii)(a) which deals with the transfer under or by way of succession, inheritance or devolution, in a gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und no. 3 denied its liability for charge of any interest, because no advance tax payment liability was in existence during the previous year relevant to the assessment year, as well as also the same was neither in existence on the date when the return of income was filed or the assessment was made. Because clause (xiii) of section 47 was not in existence in section 49(1) (iii) (e) of the Act during the previous year relevant to the asst. Yr. 2009-10. Any subsequent change cannot be foreseen or anticipated while performing an act in present therefore appellant had taken the ground denying its total liability for charge of interest u/s 234B etc., even if alternatively addition is sustained. In support of this submission, various decisions were relied upon and were cited as were available in brief summary of arguments advanced. All these had escaped the attention of the Bench, resulting in a patent error of fact and law, required to be rectified u/s 254(2) of the Act by recalling the order. 4th Mistake: It was specifically submitted before the Hon'ble ITAT that the provisions contained u/s 49(1)(iii)(e) is a special provision as against Sec.49(1)(a) which is a merely ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as further submitted that what the ld AR has submitted will lead to a review of the decision taken by the Coordinate Bench and the same is not permissible under section 254(2) of the Act. It was submitted that where the decision of the Coordinate Bench is not acceptable to the assessee, the law has provided for an appropriate remedy by way of further appeal before the Hon ble High Court. 4. We have heard the rival contentions and purused the material available on record. 5. Firstly, we refer to grounds of appeal which were the subject matter of adjudication before the Coordinate Bench and the same reads 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 consequently upholding the action of AO in assessing the income of the appellant at ₹ 1,57,88,459/- is erroneous and wrong in the eye of law, which deserves to be cancelled. 2. The impugned order is unsustainable in the eye of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above observation of the Hon ble ITAT Allahabad Bench, it is held that the cost of the property for determining the capital gains in the hands of the appellant is to be worked out as per section 49(1)(iii)(e) of the Act. 7. In the context of the above two grounds of appeal and the findings of the ld CIT(A), the Coordinate Bench has then recorded the contentions of the ld. AR in its order which are reproduced as under:- 4.1 ..It was submitted before us that section 49(iii)(e) was introduced with effect from 1.4.1999 by the Finance Act, 2012 and, therefore, the ld. CIT (A) was long(wrong) in applying the provisions of 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 has taken place in the assessment year 2009-10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of demutualization or corporatization of a recognized stock exchange in India as a result of which an association of persons or body of individuals is succeeded by such company : Provided that (a) All the assets and liabilities of the firm or of the association of persons or body of individuals relating to the business immediately before the succession become the assets and liabilities of the company; (b) All the partners of the firm immediately before 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 the company and their shareholding continues to be as such for a period of five years from the date of the succession; (e) The demutualization or corporatization of a recognized stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh various conditions is required to be 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 of the company would be cost of acquisition of the firm. The firm is being succeeded by the company and the company is not buying or purchasing the assets of the firm. The element of sale and purchase of the assets of the firm were not involved in the case of succession of the firm to the company. In view thereof, we decide the issue against the assessee and held 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 assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost of acquisition in such situations as so defined in section 49 of the Act. 11. In the instant case, in respect of cost of acquisition in the hands of the company, the Coordinate Bench further has held that section 49(1)(iii) specifically provides for such transfer by way of succession, inheritance/devaluation. It was held by the Coordinate Bench that where the firm is succeeded by a company, the cost of acquisition of the company would be as that of acquisition of the firm. It was further held by the Coordinate Bench that 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 basis of principles stated herein above i.e. cost of acquisition of the firm. The Coordinate Bench has further held that the assessee, in our view, has wrongly got confused with the principles laid down under section 47 which talks about the transaction which are not regarded as transfer, with that of principles for determining of cost of acquisition under section 49. Section 49(1)(iii)(e) was introduced by the Finance Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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