UTSAV COLD STORAGE P LTD., JODHPUR V. ITO, Jaipur

ITA 428/JPR/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5307 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 22-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Gift; Business income; Retrospective amendment; Cost of acquisition; Revised return
• Section: 234B

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOE FLAG ;KNO] YS[KK LNL; ,OA JH YFYR DQEKJ] U; KF;D LNL; DS LE{K BEFORE: SHRI VIKRAM SINGH YADAV, AM & SHRI LALIET K UMAR, JM VK;DJ VIHY LA-@ ITA NOS. 428/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2009-10 . M/S. UTSAV COLD STORAGE PVT. LTD., D-155, DURGA MARG, BANI PARK, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 3(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAACU 9306 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI NAURATAN MERTIA AND SHRI SURENDRA CHOPRA (CAS) JKTLO DH VKSJ LS@ REVENUE BY : SHRI P.R. MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 06.05.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 27/05/2016. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THE PRESENT APPEAL IS FILED BY THE ASSESSEE ARISIN G OUT OF THE ORDER OF LD. CIT (A)-I, JAIPUR DATED 06.03.2013. THE GROUNDS RAISED BY THE ASSESSEE ARE 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 CLAUS E (XIII) OF SECTION 47 WAS OF CLARIFICATORY NATURE. THAT SUCH HOLDING R ESULTED IN A WRONG FINDING IN LAW AND CONSEQUENTLY UPHOLDING THE ACTION OF A.O. IN ASSESSING THE INCOME OF THE APPELLANT AT RS. 1,5 7,88,459/- IS ERRONEOUS AND WRONG IN THE EYE OF LAW, WHICH DESERV ES TO BE CANCELLED. 2 ITA NO. 428/JP/2013 UTSAV COLD STORAGE PVT. LTD. 2. THE IMPUGNED ORDER IS UNSUSTAINABLE IN THE EYE OF L AW ON THE ISSUE OF CONVERTING THE SHORT TERM CAPITAL LOSS INTO LONG TERM CAPITAL GAIN AND TAXING THE SAME BECAUSE THE SETTLED POSITI ON OF LAW IS THAT THE VALIDITY OF AN ORDER OF A STATUTORY FUNCTIONARY HAS TO BE JUDGED ON THE BASIS OF MATERIAL AVAILABLE AND LEGAL POSITI ON PREVAILING AT THE TIME WHEN SUCH AN ACTION WAS TAKEN OR AN ORDER IS F RAMED BECAUSE SUBSEQUENT HAPPENINGS IF ARE PUT INTO USE AND CONSI DERED, IT MAY VALIDATE AN ORDER WHICH WAS OTHERWISE AN ILLEGAL OR DER IN LAW WHEN WAS MADE. THIS IS IMPERMISSIBLE IN THE EYE OF LAW. HENCE THE ACTION OF LD. A.O. WAS ERRONEOUS AND WHICH WAS LIABLE TO B E CANCELLED, BY DELETING THE ADDITION BY THE LD.CIT (A), WHICH WAS NOT DONE. HENCE SHE ERRED. THE ADDITION MAY KINDLY BE DELETED. 3. THAT WITHOUT PREJUDICE TO THE GROUND NO. 1 AND 2 AB OVE, THE LD. CIT (A) GROSSLY ERRED IN LAW AND IN FACTS IN UPHOLDING LEVY OF INTEREST U/S 234B OF THE ACT IGNORING THE SUBMISSIONS AND LEGAL POSITION PARTICULARLY WHEN THE AMENDMENT IN STATUTE WAS A RE TROSPECTIVE CHARGING AMENDMENT AND THE ASSESSEE HAS BEEN DENYIN G COMPLETELY ITS LIABILITY FOR SUCH A CHARGE OF INTER EST EVEN IF ACTION OF CONVERTING THE SHORT TERM CAPITAL LOSS INTO LONG TE RM CAPITAL GAIN IS UPHELD. 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, SI NCE THE ASSESSEE HAD DENIED COMPLETELY ITS LIABILITY TO CHARGE OF IN TEREST U/S 234B, THE LD. CIT (A) SHOULD HAVE DELETED THE SAME CANCEL LING THE ORDER OF A.O. IN NOT DOING SO, SHE HAS ERRED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLA NT COMPANY FILED ITS RETURN ON 30.09.2009 DECLARING TOTAL INCOME OF RS. NIL AFTER SET OFF OF LOSS. THE SAME WAS PROCESSED UNDER SECTION 143(1) ON 01.11.2010. THERE AFTER, THE CASE WAS SELECTED FOR SCRUTINY AND THE NOTICE WAS ISSUED CALLING UPON THE APPELLANT COMPANY TO FURNISH THE DETAILS ALONG WITH QUESTIONNAIRE. IN PURSUANT T HERETO, THE ASSESSEE COMPANY FILED ITS REPLY. THE ASSESSEE HAS SUBMITTED THAT TH E TRADING OF SHARES AND F & O, COMMODITIES. DURING THE ASSESSMENT YEAR UNDER CONS IDERATION, THE ASSESSEE COMPANY HAS SHOWN THE TOTAL SALES OF RS. 16,44,997/ - AND DECLARED A NET LOSS OF RS. 3 ITA NO. 428/JP/2013 UTSAV COLD STORAGE PVT. LTD. 15,54,485/-. DURING THE COURSE OF VERIFICATION OF R ECORD, IT CAME TO THE NOTICE OF THE AO THAT THE ASSESSEE COMPANY SOLD A PROPERTY FOR A CONSIDERATION OF RS. 1,05,97,152/-. THE ASSESSEE COMPANY WAS CALLED UPON TO FURNISH THE DETAILS OF THE PROPERTY SOLD. IN RESPONSE THERETO, THE ASSESSEE CO MPANY HAS FILED ITS REPLY WHEREIN IT WAS SUBMITTED THAT M/S. SARJU COLD STORAGE (IN S HORT SCS) HAD PURCHASED THE LAND AND IN THE ASSESSMENT YEAR 2006-07 THE VALUE OF THE LAND WAS SHOWN AS RS. 2,50,000/- IN THE RETURN OF INCOME. IT IS FURTHER THE CASE OF THE ASSESSEE THAT M/S. SARJU COLD STORAGE IN THE A.Y. 2007-08 HAD SHOWN TH E CAPITAL RESERVE AS RS. 3,67,50,000/-. THIS CAPITAL RESERVE WERE SHOWN ON T HE BASIS OF RE-VALUATION OF THE FIXED ASSETS DONE BY M/S. SARJU COLD STORAGE. THE AO HAD SOUGHT CLARIFICATION ON 19.12.2011 AND IN RESPONSE THERETO IT WAS SUBMITTED THAT M/S. SARJU COLD STORAGE RE-VALUED THE LAND FROM RS. 2,50,000/- TO RS. 3,70, 00,000/- DURING THE A.Y. 2006-07 AND IT WAS FURTHER SUBMITTED THAT RE-VALUATION OF A SSET DOES NOT RESULT IN ANY GAIN AND, THEREFORE, NO LONG TERM CAPITAL GAIN WAS SHOWN IN THE RETURN OF INCOME IN THE RELEVANT YEAR. IT WAS FURTHER SUBMITTED THAT IN TER MS OF SEC. 47(XIII), M/S. SARJU COLD STORAGE WAS TAKEN OVER BY M/S. UTSAV COLD STORAGE P VT. LTD. ALONG WITH ITS ASSETS AND LIABILITIES AND THERE WAS NO TRANSFER WITHIN TH E MEANING OF LAW AND, THEREFORE, NO TAX WAS PAYABLE. IT WAS FURTHER SUBMITTED THAT THE BOOK VALUE OF THE ASSETS SOLD IN THE HANDS OF THE ASSESSEE COMPANY WAS RS. 3,81,62,5 25/- AND, THEREFORE, WHEN THE PROPERTY WAS SOLD, A TOTAL SALE CONSIDERATION OF RS . 2,00,00,000/- WAS RECEIVED AS A RESULT THEREOF. THERE WAS A SHORT TERM CAPITAL LOS S OF RS. 1,81,62,525/- IN THE HANDS OF THE ASSESSEE. THE AO HAD EXAMINED THE SUBMISSIO NS MADE BY THE ASSESSEE AND AFTER EXAMINING THE REPLY SUBMITTED BY THE ASSESSEE HAS HELD AS UNDER :- 4 ITA NO. 428/JP/2013 UTSAV COLD STORAGE PVT. LTD. 8. FROM THE ABOVE FACTS IT IS CLEAR THAT THE ASSE SSEE HAS REVALUED ITS LAND TO RS. 3,70,00,000/- FROM RS. 2,50,000/- A ND THIS HAS BEEN DONE SIMPLY TO INFLATE THE VALUE AND REVALUATION OF ANY ASSET DOES NOT ENTITLE THE ASSESSEE TO CLAIM THE REVALUED FIGURE A S COST OF THE LAND AND THE VALUE WHICH HAS BEEN PAID FOR ACQUIRING THE LAN D CAN ONLY BE CONSIDERED AS THE COST OF ASSET. HENCE, THE COST OF LAND CAN BE AMOUNT PAID BY THE ASSESSEE FOR ACQUIRING THE SAID LAND WH ICH IN THE PRESENT CASE IS RS. 2,50,000/- AND RS. 1,83,714/- BEING THE REGISTRATION AND OTHER CHARGES INCURRED FOR PURCHASING THE SAID LAND , WHICH HAS ALSO BEEN TAKEN INTO CONSIDERATION BY THE THEN ACIT, CIR CLE 2(1), JAIPUR WHILE ASSESSING THE ASSESSEES CASE (M/S. SARJU COL D STORAGE PFAS) IN AY 1990-91, ORDER OF WHICH HAS BEEN PASSED ON 18.2. 1992, THEREFORE, THE TOTAL VALUE OF THE LAND COMES TO RS. 4,33,714/- WHICH IS TAKEN INTO CONSIDERATION FOR WORKING OUT THE CAPITAL GAIN. 9. ASSESSEE HAS ALSO INCURRED AN AMOUNT OF RS. 7,15 ,000/- WHICH HAS BEEN PAID TO RIICO IN THE FY 2007-08 FOR CONVER TING THE NAME ETC. WHICH HAS BEEN DULY ACCOUNTED FOR BY THE ASSESSEE C OMPANY IN THE PRECEDING YEAR BY CAPITALIZING THE SAME IN THE VALU E OF LAND. HENCE, THE SAME IS ALSO TAKEN INTO CONSIDERING WHILE WORKI NG OUT THE CAPITAL GAIN. 10. IT IS ALSO WORTHWHILE TO MENTION THAT THE ASSES SEE WHO HAD PURCHASED THE LAND FOR RS. 2,50,000/- HAS REVALUED IT TO RS. 3,70,00,000/- BEFORE TRANSFERRING THE ASSETS AND LI ABILITIES IN THE ASSESSEE COMPANY AND SUCH REVALUATION HAS BEEN DONE IN THE FY 2006- 07. THE SAID LAND WAS SOLD DURING THE YEAR UNDER CO NSIDERATION FOR RS. 2,00,00,000/- AND THE DLC RATE AS PER THE SUB-REGIS TRAR WAS ALSO ASSESSED AT RS. 2,00,00,000/-. THUS THE ASSESSEE H AS DELIBERATELY REVALUED THE LAND TO A FIGURE OF RS. 3,70,00,000/- IN THE FY 2006-07 WHICH IS MORE THAN THE DLC RATE IN FY 2008-09 WHICH IS SUFFICIENT TO ESTABLISH THE MALAFIDE INTENTION OF THE ASSESSEE TO EVADE THE LONG TERM CAPITAL GAIN ON SALE OF PROPERTY BY CLAIMING T HE LOSS. FURTHER, THE ASSESSEE HAS FAILED TO DISCLOSE THE RELEVANT FACTS IN THE RETURN OF INCOME FILED AND HAS FURTHER FAILED TO FILE REVISED RETURN IN TIME DULY RECTIFYING THE MISTAKE MADE IN THE ORIGINAL RETURN. 3. FEELING AGGRIEVED BY THE ORDER PASSED BY THE AO, THE APPELLANT FILED THE APPEAL BEFORE THE LD. CIT (A). THE LD. CIT (A) AFTE R ELABORATELY DISCUSSING THE CONTENTION OF THE ASSESSEE HAS HELD AS UNDER :- THUS AS PER THESE PROVISIONS OF THE ACT THE PROPE RTY IS TO BE TAKEN AT THE VALUE AT WHICH IT WAS ACQUIRED BY THE FIRM THAT IS RS. 2,50,000/- AND THE COST OF IMPROVEMENT WHICH THE AO HAS TAKEN INTO CONSIDERATION THAT IS RS. 1,83,714/- AND RS. 7,15,0 00/- BEING EXPENSES 5 ITA NO. 428/JP/2013 UTSAV COLD STORAGE PVT. LTD. INCURRED, WHILE CALCULATING THE COST OF THE LAND. T HE SECTION SIGNIFICANTLY MENTIONS THE COST AT WHICH THE PROPERTY WAS ACQUIRE D AND DOES NOT MENTION THAT IT SHOULD BE TAKEN AT THE VALUE RECORD ED IN THE BOOKS OF ACCOUNTS OF THE TRANSFEROR SINCE THAT IS SUBJECT TO MANIPULATION OR CHANGE. GIVEN THE FACT THAT THE LAW WAS CLARIFIED A ND THIS CLARIFICATION WAS MADE WITH RETROSPECTIVE EFFECT FROM 01.04.1999 BY THE FINANCE ACT, 2012 THESE PROVISIONS ARE CLEARLY APPLICABLE T O THE FACTS OF THE CASE OF THE APPELLANT BECAUSE THIS AMENDMENT WITH R ETROSPECTIVE EFFECT WAS CLARIFICATORY AND NOT SUBSTANTIVE IN NATURE. THE AR OF THE APPELLANT HAS SUBMITTED THAT THE COST COULD NOT HAVE BEEN DETERMINED U/S 49(1)(III)(A) WHICH HAS BEEN DO NE BY THE AO BUT SHOULD HAVE BEEN DONE U/S 49(1)(III)(E). FIRST OF A LL, IT IS A PRESUMPTION THAT THE COST WORKED OUT BY THE AO IS U/S 49(1)(III )(A) AND NOT U/S 49(1)(III)(E) BECAUSE THE ASSESSMENT ORDER IS COMPL ETELY SILENT REGARDING THE SECTION UNDER WHICH THE COST OF THE P ROPERTY HAS BEEN WORKED OUT. THEREFORE, THE AR OF THE APPELLANT IS M AKING A PRESUMPTION THAT THE COST OF THE PROPERTY HAS BEEN WORKED OUT U/S 49(1)(III)(A). THE HONBLE ITAT IN THE CASE OF ISHRAWATI DEVI VS. ITO (2008) 298 ITR (AT) 313 (ALLAHABAD) HAS HELD THAT THE CIT (A) HAS POWERS COTERMINOUS WITH THE ASSESSING OFFICER. THE COMMISS IONER (APPEALS) CAN DIRECT THE ASSESSING OFFICER TO DO WHAT THE LAT TER FAILED TO DO. UNLESS THERE ARE SPECIFIC FETTERS PLACED UPON THE P OWERS OF THE COMMISSIONER (APPEALS) BY EXPRESS WORDS, HE EXERCIS E THE SAME POWERS AS DOES THE ORIGINAL COURT OR AUTHORITY. IN FACT, THE ENTIRE ASSESSMENT IS THROWN OPEN BEFORE HIM. HE CAN TRAVEL OUTSIDE THE RECORD, I.E., THE RETURN MADE BY THE ASSESSEE AND A SSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. HE IS COMPETENT TO CONDUCT A DETAILED EXAMINATION OF ANY ASPECT DEALT WITH SUMMARILY OR B RIEFLY BY THE ASSESSING OFFICER. IN VIEW OF THE ABOVE OBSERVATION OF THE HONBLE ITA T ALLAHABAD BENCH IT IS HELD THAT THE COST OF THE PROPERTY FOR DETERM INING THE CAPITAL GAINS IN THE HANDS OF THE APPELLANT IS TO BE WORKED OUT A S PER SECTION 49(1)(III)(E). 4. FEELING AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT (A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 4.1. THE PRIMARY CONTENTION OF THE LD. A/R BEFORE U S AND BEFORE THE AUTHORITIES BELOW WAS THAT THE LAND AND BUILDING ALONG WITH OTH ER ASSETS WERE ACQUIRED BY THE 6 ITA NO. 428/JP/2013 UTSAV COLD STORAGE PVT. LTD. ASSESSEE COMPANY ON 29.12.2006 FROM A PARTNERSHIP F IRM, NAMELY, M/S. SARJU COLD STORAGE AND IN VIEW OF SECTION 47(XIII) OF THE IT A CT, THERE IS NO TRANSFER IN THE EYES OF LAW. IT WAS FURTHER SUBMITTED THAT THE PARTNERS HIP FIRM I.E. M/S. SARJU COLD STORAGE WAS MERGED WITH THE ASSESSEE COMPANY IN VIE W OF SECTION 47(XIII) AFTER RE- VALUATION OF THE ASSETS OF THE COMPANY TO RS. 3,70, 00,000/- FROM RS 2,50,000/-. THUS THE COST OF ACQUISITION IN THE HANDS OF THE AS SESSEE COMPANY WAS RS. 3,70,00,000/-. IT WAS ALSO THE CASE OF THE ASSESSE E THAT ON THE BASIS OF THE BOOK VALUATION, THE SHARE HOLDING OF THE COMPANY WAS GIV EN TO THE PARTNERS OF THE FIRM. IT WAS FURTHER SUBMITTED THAT AFTER THE MERGER TOOK PL ACE, THE ASSESSEE COMPANY SOLD THE ASSET (LAND) ON 15.5.2008 AND HAS DECLARED THE SHORT TERM CAPITAL LOSS IN THE REVISED COMPUTATION OF INCOME DURING THE ASSESSMENT PROCEEDINGS. IT WAS SUBMITTED BEFORE US THAT SECTION 49(III)(E) WAS INTRODUCED WI TH EFFECT FROM 1.4.1999 BY THE FINANCE ACT, 2012 AND, THEREFORE, THE LD. CIT (A) W AS LONG 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 RETR OSPECTIVE 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 RETROSPECTIV ELY APPLY TO THE TRANSACTION WHICH HAS TAKEN PLACE IN THE ASSESSMENT YEAR 2009-1 0. IT WAS SUBMITTED THAT ADDITION/LEVY ON THE BASIS OF RETROSPECTIVE AMENDME NT IS NOT PERMISSIBLE IN VIEW OF VARIOUS PRONOUNCEMENTS OF THE HONBLE SUPREME COURT , PARTICULARLY, CIT VS. HINDUSTAN ELECTRO GRAPHITES LTD., 109 TAXMAN 342 AN D SEDCO FOREX INTERNATIONAL DRILL VS.CIT, 279 ITR 310 (SC). 7 ITA NO. 428/JP/2013 UTSAV COLD STORAGE PVT. LTD. 4.2. THE NEXT CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE WAS THAT THE TAX PLANNING WITHIN THE FOUR CORNERS OF THE LAW IS AN A CCEPTED PRACTICE. NO MALAFIDE CAN BE ATTRIBUTED TO THE ASSESSEE. THIS HAS BEEN SO RE COGNIZED BY THE HONBLE SUPREME COURT IN THE CASE OF VODAPHONE INTERNATIONAL CASE W HEREIN THE PRINCIPLES LAID DOWN IN MCDOWELLS (154 ITR 148 (SC) CASE WAS UPHELD. 4.3. IT WAS THEREAFTER CONTENDED BY THE LD. A/R FOR THE ASSESSEE THAT THE SPECIFIC PROVISIONS OF SECTION 47(XIII) WHICH PREVAIL OVER T HE GENERAL PROVISIONS I.E. SECTION 49(1)(III)(A) OF THE ACT AND ON THE BASIS OF THE AB OVE SAID SUBMISSION, IT WAS SUBMITTED THAT THE AO WAS WRONG IN APPLYING THE PRO VISIONS OF SEC. 49(1)(III)(A) TO DETERMINE THE COST OF ACQUISITION. IT WAS FURTHER SUBMITTED THAT EVEN THE LD. CIT (A) WAS WRONG IN APPLYING THE PROVISIONS OF SECTION 49( 1)(III)(E) AS THE SAID PROVISION WAS NOT IN EXISTENCE AT THE TIME OF TRANSACTION OR DURING THE ASSESSMENT PROCEEDINGS AS THE SAID PROVISION WAS INSERTED BY THE FINANCE A CT,2012. ON THE BASIS OF THE ABOVE SAID CONTENTION, THE LD. A/R HAS SUBMITTED TH AT THE ADDITION MADE BY THE AUTHORITIES BELOW ON THE BASIS OF TRANSFER OF LAND WAS WRONG. IN FACT, THE ASSESSEE HAS SUFFERED SHORT TERM CAPITAL LOSS ON ACCOUNT OF SALE OF THE ASSETS AND THERE IS NO SHORT TERM CAPITAL GAIN TO THE ASSESSEE. IN THE AL TERNATIVE, IT WAS SUBMITTED THAT PROVISIONS OF SECTION 234B & 234C SHOULD NOT BE APP LIED FOR PAYMENT OF INTEREST ON THE BASIS OF RETROSPECTIVE AMENDMENT ON ACCOUNT OF NON-PAYMENT OF ADVANCE TAX. 4.4. THE LD. D/R ON THE OTHER HAND, HAS SUBMITTED T HAT THE TRANSFER WITHIN THE MEANING OF LAW HAS TAKEN PLACE AND THE ASSESSEE COM PANY IS SUCCESSOR AND INTEREST OF THE PARTNERSHIP FIRM M/S. SARJU COLD STORAGE AND , THEREFORE, THE COST OF ACQUISITION OF M/S. SARJU COLD STORAGE WOULD BE COS T OF ACQUISITION OF THE ASSESSEE 8 ITA NO. 428/JP/2013 UTSAV COLD STORAGE PVT. LTD. COMPANY. AS THE ASSETS OF THE PARTNERSHIP FIRM WER E SOLD BY CONSTRUCTION/MERGER OF THE ASSETS AND LIABILITIES OF THE FIRM OF THE ASSES SEE COMPANY, THEREFORE, THE ASSESSEE COMPANY IS LIABLE TO PAY THE CAPITAL GAIN ARISING OUT OF THE SAID TRANSACTION. 4.5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. BEFORE WE DEAL WITH THE FACTUAL ASPECTS OF THE MATTER, IT IS NECESSARY TO REPRODUCE SECTION 47(XIII) AND 49 FOR THE PURPOSE O F CLARITY AND REFERENCE. SECTION 47 : TRANSACTIONS NOT REGARDED AS TRANSFER NOTHING CONTAINED IN SECTION 45 SHALL APPLY TO TH E FOLLOWING TRANSFERS :- (XIII) ANY TRANSFER OF A CAPITA ASSET OR INTANGIBLE ASSET BY A FIRM TO A COMPANY AS A RESULT OF SUCCESSION OF THE FIRM BY A COMPANY IN THE BUSINESS CARRIED ON BY THE FIRM, OR ANY TRANSFER OR A CAPITAL ASSET TO A COMPANY IN THE COURSE OF DEMUTUALIZATION OR CORPORA TIZATION OF A RECOGNIZED STOCK EXCHANGE IN INDIA AS A RESULT OF W HICH AN ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS IS SUCCEEDED BY S UCH COMPANY : PROVIDED THAT (A) ALL THE ASSETS AND LIABILITIES OF THE FIRM OR OF TH E ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS RELATING TO THE BUSI NESS IMMEDIATELY BEFORE THE SUCCESSION BECOME THE ASSETS AND LIABILI TIES 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 CONSIDE RATION OR BENEFIT, DIRECTLY OR INDIRECTLY, IN ANY FORM OR MAN NER, 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 SUCCESSIO N; (E) THE DEMUTUALIZATION OR CORPORATIZATION OF A RECOGNI ZED STOCK EXCHANGE IN INDIA IS CARRIED OUT IN ACCORDANCE WITH A SCHEME FOR 9 ITA NO. 428/JP/2013 UTSAV COLD STORAGE PVT. LTD. DEMUTUALIZATION OR CORPORATIZATION WHICH IS APPROVE D BY THE SECURITIES AND EXCHANGE BOARD OF INDIA ESTABLISHED UNDER SECTION 3 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 TO 1992). SECTION 49 : COST WITH REFERENCE TO CERTAIN MODES O F ACQUISITION. (1) WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE (I) ON ANY DISTRIBUTION OF ASSETS ON THE TOTAL OR PARTI AL PARTITION OF A HINDU UNDIVIDED FAMILY; (II) UNDER A GIFT OR WILL; (III) (A) BY SUCCESSION, INHERITANCE OR DEVOLUTION, OR (B) ON ANY DISTRIBUTION OF ASSETS ON THE DISSOLUTIO N OF A FIRM, BODY OF INDIVIDUALS, OR OTHER ASSOCIATION OF PERSON S, WHERE SUCH DISSOLUTION HAD TAKEN PLACE AT ANY TIME BEFORE THE 1 ST DAY OF APRIL, 1987, OR (C) ON ANY DISTRIBUTION OF ASSETS ON THE LIQUIDATIO N OF A COMPANY, OR (D) UNDER A TRANSFER TO A REVOCABLE OR AN IRREVOCAB LE TRUST, OR (E) UNDER ANY SUCH TRANSFER AS IS REFERRED TO IN CL AUSE (VIA) OR CLAUSE (V) OR CLAUSE (VI) OR CLAUSE (VIA) OR CLAUSE (VIAA) OR CLAUSE (VICA) OR CLAUSE (VICB) OR CLAUSE XIIIB) OF SECTION 47; (IV) SUCH ASSESSEE BEING A HINDU UNDIVIDED FAMILY, BY THE MODE REFERRED TO IN SUB-SECTION (2) OF SECTION 64 AT ANY TIME AFTER THE 31 ST DAY OF DECEMBER, 1969, THE COST OF ACQUISITION OF THE ASSET SHALL BE DEEME D TO BE THE COST FOR WHICH THE PREVIOUS OWNER OF THE PROPERTY ACQUIRED I T, AS INCREASED BY THE COST OF ANY IMPROVEMENT OF THE ASSETS INCURRED OR BORNE BY THE PREVIOUS OWNER OR THE ASSESSEE, AS THE CASE MAY BE. FROM THE BARE READING OF BOTH THE PROVISIONS I.E. S ECTION 47 AND SECTION 49 OF THE ACT, IT IS CLEAR THAT SECTION 47 DEALS WITH THE TRA NSACTION NOT REGARDED AS TRANSFER WHEREAS SECTION 49 DEALS WITH THE COST WITH REFEREN CE TO CERTAIN MODE OF ACQUISITION. BOTH THE SECTIONS, IN OUR UNDERSTANDING, OPERATE AN D WORK IN DIFFERENT FORUM AND THERE IS NO OVER-LAPPING OF THE SECTION. UNDER SEC TION 47(XIII), IF A FIRM BY WAY OF SUCCESSION BECAME THE COMPANY, THEN THE TRANSACTION I.E. MIGRATION OF THE FIRM TO 10 ITA NO. 428/JP/2013 UTSAV COLD STORAGE PVT. LTD. THE COMPANY WOULD NOT BE TREATED AS TRANSFER. HOWE VER, THIS SECTION DO NOT PROVIDE THE CALCULATION OF COST OF ACQUISITION BY WAY OF SU CCESSION FROM FIRM TO THE COMPANY. SECTION 49, SPECIFICALLY PROVIDES THE MANNER IN WHI CH THE COST OF ACQUISITION THROUGH 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 VA LUATION OF LAND AND ASSETS OF FIRM THOUGH VALUED BY THE VALUER WILL NOT CHANGE OR ALTE R THE COST OF ACQUISITION OF THE FIRM DESPITE VALUATION OF ASSETS OF THE FIRM AND WO ULD REMAIN THE SAME, AND THEREFORE THE COST OF ACQUISITION OF THE COMPANY WO ULD BE COST OF ACQUISITION OF THE FIRM. THE FIRM IS BEING SUCCEEDED BY THE COMPANY A ND THE COMPANY IS NOT BUYING OR PURCHASING THE ASSETS OF THE FIRM. THE ELEMENT OF S ALE AND PURCHASE OF THE ASSETS OF THE FIRM WERE NOT INVOLVED IN THE CASE OF SUCCESSIO N OF THE FIRM TO THE COMPANY. IN VIEW THEREOF, WE DECIDE THE ISSUE AGAINST THE ASSES SEE 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 O N THE AMOUNT OF RS. 2,50,000/-. THE ARGUMENT OF THE ASSESSEE THAT THE AO HAS WRONGL Y CALCULATED THE COST OF ACQUISITION OF THE ASSESSEE U/S 49(1)(III)(A), IN O UR VIEW, IS NOT CORRECT AS BOTH THE AO AND LD. CIT (A) HAVE APPLIED THE COST OF ACQUISI TION ON THE BASIS OF PRINCIPLES STATED HEREIN ABOVE I.E. COST OF ACQUISITION OF THE FIRM. THE ASSESSEE, IN OUR VIEW, HAS WRONGLY GOT CONFUSED WITH THE PRINCIPLES LAID D OWN UNDER SECTION 47 WHICH TALKS ABOUT THE TRANSACTION WHICH ARE NOT REGARDED AS TRA NSFER, WITH THAT OF PRINCIPLES FOR DETERMINING OF COST OF ACQUISITION UNDER SECTION 49 . SECTION 49(1)(III)(E) WAS 11 ITA NO. 428/JP/2013 UTSAV COLD STORAGE PVT. LTD. INTRODUCED BY THE FINANCE ACT, 2012 WITH EFFECT FR OM 1.4.1999. THE SAID SECTION, IN OUR VIEW, IS ONLY CLARIFICATORY IN NATURE AND HAS S PECIFICALLY PROVIDED THE COST OF ACQUISITION IN CASE OF SUCCESSION OF FIRM TO THE CO MPANY. HOWEVER, THE SAID COST OF ACQUISITION WAS ALREADY IN EXISTENCE UNDER SECTION 49(1)(III)(A) OF THE IT ACT. THEREFORE, IN OUR VIEW NO FRESH CHARGE HAS BEEN CRE ATED ON ACCOUNT OF SUCCESSION OF A FIRM TO THE COMPANY. IT HAS ONLY CLARIFIED THE E XISTING BASIS OF CALCULATING THE COST OF ACQUISITION IN CASE OF SUCCESSION OF THE FIRM TO THE COMPANY. THEREFORE, THE ARGUMENT OF LD. A/R FOR THE ASSESSEE IS DEVOID OF A NY MERIT AND IS ALSO DISMISSED. 5. GROUND NO. 3 RELATES TO LEVY OF INTEREST UNDER S ECTION 234B. SINCE WE HAVE DISMISSED THE GROUND OF THE ASSESSEE RELATING TO CO ST OF ACQUISITION ON THE BASIS OF PRINCIPLES STATED HEREIN ABOVE I.E. COST OF ACQUISI TION OF THE FIRM, THEREFORE, LEVY OF INTEREST U/S 234B IS RIGHTLY CONFIRMED BY THE LD. C IT (A). WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT (A). THE SAME IS HEREBY UPHELD. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/05/2016 . SD/- SD/- FOE FLAG ;KNO] YFYR DQEKJ (VIKRAM SINGH YADAV) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 27/05/2016 DAS/ 12 ITA NO. 428/JP/2013 UTSAV COLD STORAGE PVT. LTD. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-M/S. UTSAV COLD STORAGE PVT. LTD., JA IPUR. 2. IZR;FKHZ@ THE RESPONDENT- THE ITO WARD 3(2), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 428/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 13 ITA NO. 428/JP/2013 UTSAV COLD STORAGE PVT. LTD. SL. NO. DATE INITIAL 1 DATE OF DICTATION 2 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER OTHER MEMBER 3 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S 4 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. 6 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 8 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER 9 DATE OF DISPATCH OF THE ORDER FROM THE PERUSAL OF SECTION 47(XIII), IT IS CLEAR T HAT THE CONCEPT OF THIS PROVISION INTRODUCED WITH EFFECT FROM 1.4.1999 BY THE FINANCE ACT, 2012 WITH A VIEW TO ENCOURAGE THE SUCCESSION OF FIRMS BY THE COMPANY. IN THE PRESENT CASE M/S. SARJU COLD STORAGE (THE PARTNERSHIP FIRM) WAS SUCCEEDED B Y A COMPANY (ASSESSEE COMPANY). IT IS NOT THE CASE OF THE AO THAT THE SU CCESSION OF THE FIRM TO THE COMPANY WAS NOT IN ACCORDANCE WITH THE PROVISIONS O F SECTION 47, THOUGH IN THE ASSESSMENT ORDER, THE AO MENTIONED AS UNDER :- THE EXEMPTION FROM CHARGEABILITY OF CAPITAL GAINS IN THE HANDS OF THE FIRM CAN ONLY BE ALLOWED OF ALL THE ABOVE MENTIONED CONDITIONS ARE SATISFIED. IT IS ALSO PERTINENT TO MENTION THAT YOU HAVE NOT FURNISHED DETAILS AS TO HOW ALL THE ABOVE MENTIONED CONDITION S WERE FULFILLED BY 14 ITA NO. 428/JP/2013 UTSAV COLD STORAGE PVT. LTD. THE ERSTWHILE FIRM M/S. SARJU COLD STORAGE. THUS YO U MAY PLEASE FURNISH DETAILS OF CONVERSION OF THE FIRM INTO COMP ANY, DETAILS OF ASSETS AND LIABILITIES HELD BY THE FIRM TRANSFERRED TO THE COMPANY AND CERTIFICATE TO THIS EFFECT THAT SUCH ASSETS AND LIA BILITIES WERE TAKEN OVER BY THE SUCCEEDING COMPANY AND ALSO WHETHER ALL OTHE R CONDITIONS ARE SATISFIED OR NOT. THUS, THE CHARGEABILITY OF CAPITA L GAINS IN THE CASE OF ERSTWHILE FIRM M/S. SARJU COLD STORAGE WILL DEPEND YOUR SUBMISSION ON THE ABOVE ISSUES. HOWEVER, THE LD. CIT (A) WHILE EXAMINING THE ISSUE HAS GIVEN A FINDING THAT