TMI Blog2023 (1) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Limited Company. It is settled that title to an immovable property worth more than Rs.100/- can be trasferred only by way of a Deed of Conveyance duly executed and registered and not by Book entry In view of the settled position, Section 45(4) of the Act has no application in this case. Consequently, the addition made by the AO under Section 45(4) of the IT Act as long term Capital gains, is not sustainable. With regard to the plot, we hold that the addition made by the Assessing Officer on the ground of short-term Capital gains is also not sustainable. We may record that the building in question is situated on the plot in respect of which the Assessing Officer had added long term Capital gains Tax. We have held that the plot belonged to the Partner Shri. Aeranpurwala. By logical corollary, the building thereon, also must belong to him. Hence, the short term Capital gains added by the Assessing Officer is not sustainable. Disallowance of premium on Insurance Policy - Assessee Firm had taken a Insurance Policy on its Partner Shri. Aeranpurwala - HELD THAT:- Keyman Insurance Policy is taken to protect a Firm from a Financial loss due to the death of the insured person in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alloy steel for Refineries, Boiler industries etc. Therefore, they cannot be sold in the open market as any other consumer goods. It is also not is dispute that the partners of the firm are the promoters of the Company. In the light of these facts, the firm has taken a decision to transfer the goods at book value. As held in S.A. Builders [ 2006 (12) TMI 82 - SUPREME COURT] the Revenue cannot substitute its opinion with a business decision of an assessee. In our considered view, the gross profit estimated by the Assessing Officer and modified by the CIT(A) are notional and not traceable to any provision in the IT Act and therefore it is imaginary and perverse. Decided in favour of the assessee. - I.T.A NO.201 OF 2017 - - - Dated:- 2-12-2022 - HON BLE MR. JUSTICE P.S. DINESH KUMAR AND HON BLE MR. JUSTICE UMESH M. ADIGA APPELLANT (BY SHRI. A. SHANKAR, SENIOR ADVOCATE FOR SHRI. U.A. MADHUSUDHA, ADVOCATE) RESPONDENT (BY SHRI. E.I. SANMATHI, STANDING COUNSEL) JUDGMENT P.S.DINESH KUMAR J, This appeal by the assessee challenging the order dated 23.01.2017 in ITA No.1550/Bang/2013 for the A.Y. 2009-10 has been admitted to consider the questions framed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 14A of the IT Act; (ii) addition under Section 45(4) with regard to: (a) land at Adugodi Rs.54,89,677/- (b) Building Rs.68,86,826; (iii) disallowance of premium on Insurance Policy of Rs.3,33,333/-. 4. Re-disallowance of Rs.53,367/- under Section 14A of the IT Act. Shri. Shankar submitted that assessee had made investment of Rs.1,06,73,419/- in various mutual funds from out of the Bank loans and Partners' Capital Account and paid interest on the borrowings. The Assessing Officer called upon the assessee to show cause as to why disallowance should be made under Section 14A of the IT Act and Rule 8(D) of the Rules. The assessee has explained that the investment is in the nature of savings or to keep some amount out of the business mainly to pay the advance Income tax whenever required. Further, assessee had suo moto disallowed Rs.1,39,239/- as expenditure incurred towards exempt income and the total exempt income earned is Rs.2,12,146/-. He contended that in order to disallow a portion of the expenditure, the Assessing Officer ought to have satisfied himself that the suo moto disallowance made is incorrect. Without recording such satisfaction, the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by the ITAT. 9. Shri. Shankar argued that there was no transfer of Capital Asset. The plot was purchased by Shri. Aeranpurwala and it was his property. However, inadvertantly/erroneously, it was not debited in partner's account. He urged that in order to attract Section 45(4) of the IT Act, the following two conditions have to be fulfilled: there should be a transfer of Capital Asset; the transfer should be by way of distribution of Capital Asset on dissolution of the Firm or otherwise. 10. Shri. Shankar submitted that in this case, both the conditions mentioned above, are not fulfilled. Therefore, invocation of Section 45(4) of the Act, is not sustainable in law. 11. Shri. Sanmathi, submitted that the plot was admittedly reflecting in the Firm's books. Further construction was also made by the Firm. It was transferred in 2008-09 to the partner. Therefore, the transaction is one traceable to Section 45(4) of the Act. 12. We have considered rival submissions. It is not in dispute that the sale deed is executed in the name of Shri. Aeranpurwala. The assets of the Firm was sold to the Private Limited Company in which the partners of the firm were t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. 16. Shri. Shankar contended that the purpose of 'Keyman Insurance Policy' is to protect the business against a financial set-back occurring as a result of premature death of the insured. Since the assets of the Firm were sold to the Private Limited Company, it was not prudent to continue the Keyman Insurance in the name the Partner. The Firm is still in existence and is receiving the rental income and other receivables. The expenditure incurred towards the Insurance Policy was for the benefit of the Firm. Therefore, disallowance of 1/3rd expenditure by the Assessing Officer is not sustainable. 17. Shri. Sanmathi submitted that the Firm has discontinued the policy. Therefore, the Firm ought to have surrendered the Policy and offered the proceeds received to tax. 18. Keyman Insurance Policy is taken to protect a Firm from a Financial loss due to the death of the insured person in charge of the affairs of the Firm. In this case, policy was taken in the name of Shri. Aeranpurwala and a premium of Rs.10 Lakhs was paid by the Firm. The assets of the Firm have been sold to the Private Limited Company and the Firm has discontinued the Policy. Whilst the Firm was doing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that whenever goods are transferred/sold, the sale value shall not be less than the market value. Therefore, the Assessing Officer has rightly estimated the margin at 8% and the CIT(A) in his wisdom has reduced it to 6% and the same has been upheld by the ITAT. Hence, no interference is called for on this edition. 22. We have considered rival submissions. The assessee has transferred the 'Stock in Trade' to M/s. Evergreen Seamless Pipes and Tubes Pvt. Ltd., under a BTA. Assessee's case is, it has transferred a bundle of assets which includes Stock-in-trade transferred at book value. The Assessing Officer has recorded thus: The AR states that the if the firm offers to sell the whole stock, none of the companies would be interested to purchase. If that is the case, how was the Company able to sell and pay the entire consideration of about 25 crores in a short span of 4 months. The acts of the firm have resulted in gross reduction in GP ratio at the rate of 16% of 24 crores. The contentions of the AR have no legal support and backing. Hence, I hold to bring the lost GP margin of 16% minus 8% for selling expenses net margin of 8% of Rs.24,63,51,641 that is 1,97,05,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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