TMI Blog2020 (1) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... red. It is not the case of the Assessing Officer that the assessee has not valued the assets while transferring the same to the company. What is to be considered is that this exchange/barter is on a particular date. When the exchange was on 27/03/2012 and when the shares were allotted on 27/03/2012, the Assessing Officer seeks to value the already allotted shares on 31/03/2012 i.e., after allotment of 40,000 equity shares at a premium of ₹ 400/- per share which gave the company premium of ₹ 1,56,00,000/-. This is not permissible. Such method of computation is not laid down under any provision of the Act. Thus, the same is not in accordance with law. In view of the above discussion, we delete, both the addition made under the head Capital Gain as well as under the head income from other sources on the issue of transfer. Addition u/s 14A r.w.r. 8D - HELD THAT:- set aside to the file of the Assessing Officer for fresh adjudication, in accordance with law. The Assessing Officer shall apply the judgment of the Special Bench of the ITAT in the case ACIT v. Vireet Investments (P) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] and take into account only those investments w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds except Ground No. 2(a), Ground No. 3 and Ground No. 4, are not pressed. Hence, we dismiss the Ground Nos. 1, 2(b), as not pressed. 5. We have heard Shri Subash Agarwal, the ld. Counsel for the assessee and Mr. Altaf Hussain, JCIT, ld. Sr. D/R on behalf of the revenue. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- 6. Ground No. 2(a) reads as follows:- (a) On the facts and in the circumstances of the case, the learned C.I.T. (A) erred in confirming the order of the A.O. and charging to tax by way of Short Term Capital Gain or income from other source whatever name may call on a sum of ₹ 1,24,54,080/- . 6.1 The assessee was running a business of trading in gold under the name and style of M/s. Ravi Jalan. This business was transferred by the assessee to a Private Limited Company, M/s. J.S. Tradex Pvt. Ltd., by way of an agreement dt. 27/03/2012. All the assessee's liabilities specified in schedule (a) and schedule (b) to the agreement dt. 27/03/2012, belonging to the assessee, were transferred to the company for a con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11UA(1)(c)(b) of the Income Tax Rules, 1962 ('Rules'), instead of face value of ₹ 10/- per share declared by the assessee. He also mentions, without giving any reason that, the short term capital gain is also assessable under the head income from other sources . The ld. CIT(A) upheld the findings of the Assessing Officer that the assessee is not entitle to the benefit u/s 47(xiv) of the Act for the detailed reasonings given at page 15 to 18 of his order. On the issue of computation of capital gains, the ld. CIT(A) at para 9 page 18 of his order held as follows:- 9. In the appellate proceedings, the appellant has not disputed or raised any objection to the computation of sale consideration of ₹ 3,95,23,280/- by the Ld. AO. I am also in agreement with the computation of sale consideration. The only objection raised by the appellant is with reference to the cost of acquisition. According to the appellant, the Ld. AO ought to have considered the cost of intangible asset i.e. the appellant's goodwill as well. Undeniably goodwill is a capital asset; however I find that no cost whatsoever was incurred by the appellant in this regard instead it was a self-gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the agreement to the company. He relied on the decision of the Kolkata Bench of the Tribunal in the case of M/s. Aravali Polymers LLP v. JCIT, order dt. 27.06.2014, where it was held that, the value of the assets taken-over as per the agreement would be the sale price and the value of the assets appearing in the books of the erstwhile entity would be the cost of acquisition and the difference would be either capital gain or capital loss. He submitted that as the value of assets taken-over by way of agreement and the value of these assets in the balance sheet of the assessee company being the same, there is no capital gains earned by the assessee. 6.6 He argued that Section 56(2)(vii)(c) of the Act, has been wrongly invoked by the Assessing Officer. He submitted that the provision can be invoked only when the assessee acquires property other than immovable property for a consideration which is less than the FMV of these properties. In such cases, only the FMV of the property over and above the sale consideration is assessed as income from other sources. He submitted that the Assessing Officer committed a grave error in valuing shares of M/s. J.S. Tradex Pvt Ltd. as on 31/03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has not pressed for benefit u/s 47(xiv) of the Act, he submitted that capital gains have to be computed after determining the FMC of the assets u/s 56(2)(vii)(c) of the Act. He argued that the assessee has acquired shares in consideration for sale of his proprietary concern as a growing concern. He pointed that ld. CIT(A) has recorded that the assessee has not disputed or raised any objection on the computation of the sale consideration at ₹ 3,95,29,280/- and submitted that it is not correct for the assessee to raise this issue before the Tribunal. He relied on the order of the Assessing Officer as well as the ld. CIT(A) and submitted that the same may be upheld. 9.1 On the issue of disallowance u/s 14A r.w.r. 8D, he submitted that the issue may be set aside to the file of the Assessing Officer for applying the proposition of law laid down by the Hon'ble Jurisdictional High Court in the case of REI Agro Ltd. (supra). For other issues, he relied on the order of the lower authorities. 9.2 In reply, the ld. Counsel for the assessee submitted that it is not correct on behalf of the ld. CIT(A) to record that the assessee has not raised any dispute or objection regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Aravali Polymers LLP(supra), at para 12 held as follows:- 12. ..In the computation of capital gains, nowhere in the Act is there provision, more so in section 45, for deeming the sale price in the case of equity shares. The value at which the shares or the assets of the Company Aravali Polymers Pvt. Ltd. was taken over by the Limited Liability Partnership firm, would be the sale price and the cost of acquisition thereof is to be as per books of the erstwhile Company. In these circumstances, the issue of computation of the capital gains under section 45 is restored to the file of the Assessing Officer, who shall take the sale consideration as on 12.10.2010 at the figure, at which the assets of the erstwhile firm has been acquired or taken over by the appellant Aravali Polymers LLP. 12. Applying the propositions of law laid down in the case, to the facts of the case on hand, the value of the assets taken over by the company should be considered as the full value of consideration for the purpose of computation of capital gains under the Act. In this case, the full value of consideration is ₹ 2,70,69,200/-. This is also, the cost of acquisition of assets. As the cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee has not valued the assets while transferring the same to the company. What is to be considered is that this exchange/barter is on a particular date. When the exchange was on 27/03/2012 and when the shares were allotted on 27/03/2012, the Assessing Officer seeks to value the already allotted shares on 31/03/2012 i.e., after allotment of 40,000 equity shares at a premium of ₹ 400/- per share which gave the company premium of ₹ 1,56,00,000/-. This is not permissible. Such method of computation is not laid down under any provision of the Act. Thus, the same is not in accordance with law. 14. In view of the above discussion, we delete, both the addition made under the head Capital Gain as well as under the head income from other sources on the issue of transfer. In the result, Ground No. 2(a) of the assessee is allowed. 15. Ground No. 3 is set aside to the file of the Assessing Officer for fresh adjudication, in accordance with law. The Assessing Officer shall apply the judgment of the Special Bench of the ITAT in the case ACIT v. Vireet Investments (P) Ltd. [2017] 82 taxmann.com 415 (Delhi - Trib.) and take into account only those investments whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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