Sri R.K.H.L.Mohanaraman, L/R of Late R.K.H.Lakshmana Iyer, Kumbakonam V. ITO, Kumbakonam

ITA 1373/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4935 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-05-2011
• Assessment Year: misc
• Appeal Filed On: 23-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P B SEKARAN
• Assessee Lawyers: S SRIDHAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI BEFORE SHRI U.B. BEDI, J.M. AND SHRI N.S. SAINI, AM .. I.T.A. NO. 1373/MDS/2010 ASSESSMENT YEARS 1982-83 SHRI R.K.H.L. MOHANARAMAN L/R OF LATE R.K.H. LAKSHMANA IYER RAMASWAMY KOVIL EAST STREET KUMBAKONAM (PAN NO. L-2203) VS. THE INCOME-TAX OFFICER WARD 1(3) KUMBAKONAM (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. SRIDHAR DEPARTMENT BY : SHRI P.B. SEKARAN O R D E R PER N.S. SAINI, A.M :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE LD. CIT(A), TIRUCHIRAPALLI DATED 30.0 7.2010 FOR ASSESSMENT YEAR 1982-83. PAGE 2 OF 4 I.T.A. NO. 1373/MDS/2010 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT T HE COMMISSIONER OF INCOME-TAX [APPEALS] ERRED IN VALUING THE CLOSIN G STOCK AT MARKET PRICE FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF A.L.A FIRM VS. CIT 189 ITR 285 [SC] ON THE GROUND THAT AFTER THE DEATH OF KARTA OF THE HUF, THE BUSINESS WHICH W AS RUN AS FIRM BY THE HUF AS ONE OF THE PARTNERS WAS NOT CONTINUAT ION OF BUSINESS AS CLAIMED BY THE ASSESSEE. 3. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING THE ORDERS OF THE AUTHORITIES BELOW AND MATERIAL ON RECORD, WE FI ND THAT THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE HUF WAS CARRYING ON A BUSINESS UNDER THE PROPRIETORSHIP TILL 17.8.19 81 I.E. THE DATE ON WHICH THE THEN KARTA OF THE ASSESSEE HUF EXPIRED . AFTER THAT, THE SAID BUSINESS WAS CARRIED ON AS PARTNERSHIP FIR M BY THE ASSESSEE HUF BY TAKING OTHERS AS PARTNERS OF THE FIRM. THE ASSESSEE HUF ALSO WAS A PARTNER OF THE FIRM. ACCORDING TO THE REVENU E, AT THE TIME OF TRANSFER OF THE BUSINESS FROM HUF TO PARTNERSHIP FI RM, THE STOCK OF THE HUF SHOULD HAVE BEEN VALUED AT MARKET VALUE AND NOT AT COST AND, THEREFORE, THE ASSESSING OFFICER ADDED ` . 77,878/- TO THE PAGE 3 OF 4 I.T.A. NO. 1373/MDS/2010 INCOME OF THE HUF WHICH WAS ALSO CONFIRMED BY THE C OMMISSIONER OF INCOME-TAX [APPEALS]. 4. WE FIND THAT IT IS NOT IN DISPUTE THAT THE CON SIDERATION WHICH WAS RECORDED BY THE PARTNERSHIP FIRM IN THE NAME OF HUF AS CAPITAL CONTRIBUTION BY HUF TO THE PARTNERSHIP FIRM WAS THE VALUE WHICH WAS SHOWN BY THE ASSESSEE HUF ON 17.8.1981. IN THE ABOVE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE REVEN UE HAS ERRED IN APPLYING THE PRINCIPLE LAID DOWN BY THE HON'BLE SUP REME COURT IN THE CASE OF A.L.A FIRM VS. CIT 189 ITR 285 [SC]. 5. WE FIND THAT IN THE INSTANT CASE, THERE IS NO DI SSOLUTION OF ANY PARTNERSHIP FIRM BUSINESS. THUS THE RATIO LAID DOWN IN THE CASE OF A.L.A FIRM VS. CIT 189 ITR 285 [SC] IS NOT APPLICAB LE IN THE INSTANT CASE. 6. ON THE OTHER HAND, IN THE INSTANT CASE A NEW PAR TNERSHIP FIRM WAS FORMED IN WHICH ONE OF THE PARTNER HAS CONTRIBU TED HIS BUSINESS AS ITS CAPITAL CONTRIBUTION TO THE FIRM AND THE AMO UNT OF CAPITAL RECORDED IN THE BOOKS OF THE PARTNERSHIP FIRM WAS V ALUE OF PAGE 4 OF 4 I.T.A. NO. 1373/MDS/2010 CONSIDERATION RECEIVED BY THE HUF FOR ITS BUSINESS BEING THE BOOK VALUE BY NO STRETCH OF IMAGINATION, IT CAN BE PRESU MED THAT THE ASSESSEE HUF ACTUALLY EARNED ANYMORE INCOME. THE A BOVE VIEW ALSO FINDS SUPPORT FROM THE PROVISIONS OF SECTION 4 5(3) OF THE ACT WHICH WAS INSERTED BY THE FINANCE ACT, 1987 W.E.F 1 .4.1988. THEREFORE, IN OUR CONSIDERED OPINION, THE ADDITION OF ` . 77,878/- WAS MADE ON WRONG FOOTING AND HENCE THE SAME IS DEL ETED. THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE STAN DS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 10.06.2011. SD/- SD/- ((U.B.S BEDI ) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 10 TH JUNE, 2011. VL COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE