K.T.C.Automobiles (P) Ltd, Calicut V. DCIT, Calicut

ITA 446/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68986 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 12-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: R V VEERAMANI
• Keywords: Capital asset; Fair market value

Judgement Text

1 ITA NO.446/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 446/COCH/2013 (ASSESSMENT YEAR 2005-06) K.T.C. AUTOMOBILES (P) LTD VS DY.CIT, CIR.2(1) Y.M.C.A. ROAD, CALICUT 673 001 PAN : AADFK4576C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.V. VEERAMANI RESPONDENT BY : SMT. S VIJAYAPRABHA DATE OF HEARING : 02-09-2013 DATE OF PRONOUNCEMENT : 27-09-2013 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A), KOZHIKODE DATED 01-03-2013 AND PERTAINS TO ASSESSMENT YEAR 2005-06. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS CHARG EABILITY OF CAPITAL GAIN. SHRI R.V. VEERAMANI, THE LD.REPRESENTATIVE F OR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A PARTNERSHIP FIRM E NGAGED ITSELF IN THE BUSINESS OF AUTOMOBILE DEALERSHIP. ACCORDING TO TH E LD.REPRESENTATIVE, 2 ITA NO.446/COCH/2013 DURING THE YEAR UNDER CONSIDERATION, THE PARTNERSHI P FIRM WAS CONVERTED INTO A PRIVATE LIMITED COMPANY UNDER CHAPTER IX OF THE COMPANIES ACT, 1956. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT DURING THE COURSE OF CONVERSION OF THE PARTNERSHIP FIRM INTO COMPANY, TH E LAND BELONGING TO THE PARTNERSHIP FIRM WAS REVALUED AS PER THE MARKET VAL UE AND THE REALIZATION WAS CREDITED TO THE PARTNERS CURRENT ACCOUNT IN TH E PARTNERSHIP FIRM AS PER THEIR PROFIT SHARING RATIO. AFTER THE REVALUATION, THE PARTNERSHIP FIRM WAS CONVERTED INTO A PRIVATE LIMITED COMPANY UNDER CHAP TER IX OF THE COMPANIES ACT. THE LD.REPRESENTATIVE FURTHER SUBM ITTED THAT THE ASSESSEE COMPANY COMPLIED WITH THE PROVISIONS OF SECTION 47( XIII) OF THE ACT. THEREFORE, THERE IS NO LIABILITY FOR CAPITAL GAIN T AX ON TRANSFER OF ASSET TO THE COMPANY ON CONVERSION OF THE PARTNERSHIP FIRM INTO A PRIVATE LIMITED COMPANY. 3. REFERRING TO THE ORDER OF THE CIT(A), THE LD.REP RESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) PROCEEDED HIMSEL F ON THE PRESUMPTION THAT THE PARTNERSHIP FIRM WAS CONVERTED INTO A COMP ANY ONLY WITH AN INTENTION TO AVOID TAX ON CAPITAL GAIN. ACCORDINGL Y, HE APPLIED THE PRINCIPLES LAID DOWN BY THE APEX COURT IN THE CASE OF MCDOWELL & CO VS CTO 154 ITR 148 (SC). ACCORDING TO THE LD.REPRESEN TATIVE, THE ASSESSEE IS A WELL ESTABLISHED DEALER FOR HYUNDAI MOTOR INDI A LTD. HYUNDAI MOTOR INDIA LTD AS WELL AS THE BANKER INSISTED FOR THE CO NVERSION OF THE 3 ITA NO.446/COCH/2013 PARTNERSHIP FIRM INTO A PRIVATE LIMITED COMPANY. T HE BANKERS INSISTED FOR REVALUATION OF THE LAND FOR THE PURPOSE OF CONVERSI ON. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, IT IS NOT WITH A VIEW TO AVOID ANY TAX LIABILITY. THE CONVERSION OF PARTNERSHIP FIRM INTO PRIVATE LIMITED COMPANY WAS MADE IN VIEW OF BUSINESS EXIGENCY. 4. REFERRING TO THE JUDGMENT OF THE BOMBAY HIGH COU RT IN A.N. NAIK ASSOCIATES 265 ITR 346 (BOM), THE LD.REPRESENTATIVE SUBMITTED THAT THIS WAS A CASE OF DISSOLUTION OF THE FIRM. IN THE ASSE SSEES CASE THERE IS NO DISSOLUTION OF THE FIRM BUT THE FIRMS BUSINESS WAS CONVERTED INTO A PRIVATE LIMITED COMPANY. REFERRING TO THE JUDGMENT OF THE BOMBAY HIGH COURT IN SANJEEV WOOLLEN MILLS 264 ITR 68 (BOM), THE LD.REPR ESENTATIVE SUBMITTED THAT THIS CASE RELATES TO VALUATION OF CLOSING STOC K. THEREFORE, THIS JUDGMENT IS ALSO NOT APPLICABLE TO THE FACTS OF THE CASE. ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSEE HAS NOT CONVERTED T HE ASSETS OF THE FIRM INTO LOAN. THE ASSETS WERE ONLY REVALUED AT THE IN SISTENCE OF THE BANKERS. THE COMPANY WAS FORMED AS PER THE PROCEDURE LAID DO WN BY THE COMPANIES ACT UNDER CHAPTER IX. THEREFORE, ACCORD ING TO THE LD.REPRESENTATIVE, THERE IS NO TRANSFER OF PROPERTY WHEN THE PARTNERSHIP FIRM WAS CONVERTED INTO A PRIVATE LIMITED COMPANY, AND A S SUCH THERE IS NO QUESTION OF ANY CAPITAL GAIN. THE LD.REPRESENTATIV E PLACED HIS RELIANCE ON THE DECISION OF THE AHMEDABAD BENCH OF THIS TRIBUNA L IN ITO VS ALTA INTER- 4 ITA NO.446/COCH/2013 CHEM INDUSTRIES 2012 6 TAXCORP (A.T.) 29767 (AHMEDA BAD). THE LD.REPRESENTATIVE PLACED A COPY OF THE ORDER OF THE AHMEDABAD BENCH OF THIS TRIBUNAL ON RECORD. 5. ON THE CONTRARY, SMT. S VIJAYAPRABHA, THE LD.DR SUBMITTED THAT ADMITTEDLY, THE PARTNERSHIP FIRM WAS CONVERTED INTO A PRIVATE LIMITED COMPANY. THE ASSESSING OFFICER FOUND FROM THE NOTE S TO THE ACCOUNTS OF THE FIRM THAT THE LAND WAS REVALUED AND THE REALIZA TION WAS CREDITED TO THE PARTNERS CURRENT ACCOUNT. ACCORDING TO THE LD.DR, THE TOTAL VALUE OF THE LAND IN THE BALANCE-SHEET OF THE ERSTWHILE PARTNERS HIP FIRM WAS RS.181 LAKHS. HOWEVER, ON REVLAUATION IT WAS VALUED AT RS .772 LAKHS AND THE SAME WAS CREDITED TO PARTNERS CURRENT ACCOUNT. TH E LD.DR FURTHER SUBMITTED THAT AS PER SECTION 47(XIII) THE TRANSFER OF CAPITAL ASSET BY A FIRM TO A COMPANY AS A RESULT OF SUCCESSION CANNOT BE CO NSTRUED TO BE A TRANSFER SUBJECT TO CERTAIN CONDITIONS. 6. ONE OF THE CONDITIONS, ACCORDING TO THE LD.DR IS THAT THE PARTNERS OF THE FIRM DO NOT RECEIVE ANY CONSIDERATION OR BENEFI T DIRECTLY OR INDIRECTLY IN ANY FORM OR MANNER OTHER THAN BY WAY OF ALLOTMENT O F SHARES IN THE COMPANY. IN THE CASE BEFORE US, ACCORDING TO THE L D.DR, THE REVALUATION OF THE LAND OF THE ERSTWHILE FIRM WAS CREDITED IN THE PARTNERS CURRENT ACCOUNT AND IT WAS TREATED AS LOAN IN THE HANDS OF THE COMP ANY. THEREFORE, TO THE 5 ITA NO.446/COCH/2013 EXTENT OF THE VALUE OF THE LAND SHOWN AS LOAN IN TH E ACCOUNTS OF THE COMPANY, THE COMPANY HAS A LIABILITY TOWARDS THE PA RTNERS OF THE FIRM. MOREOVER, THE PARTNERS AT THEIR SWEET WILL HAVE EVE RY RIGHT TO WITHDRAW THE AMOUNT WHICH WAS SHOWN AS LOAN TO THE COMPANY. THE REFORE, THE TRANSACTION IS IN THE FORM OF TRANSFER OF THE PROPE RTY TO THE COMPANY GIVING RIGHT TO THE SHAREHOLDERS, WHO WERE ERSTWHILE PARTN ERS EITHER TO WITHDRAW THE MONEY SHOWN AS ADVANCE OR TO RECEIVE INTEREST O N THE AMOUNT SHOWN AS LOAN IN THE BALANCE-SHEET OF THE COMPANY. THERE FORE, ACCORDING TO THE LD.DR, THE PROFIT ACCRUED ON REVALUATION OF THE ASS ETS WERE INDIRECTLY TRANSFERRED TO THE BENEFITS THE PARTNERS. THEREFOR E, ACCORDING TO THE LD.DR, THE CONDITIONS LAID DOWN IN SECTION 47(XIII) ARE NO T FULFILLED; HENCE, THE ASSESSING OFFICER HAS RIGHTLY TREATED THE SAME AS C APITAL TRANSACTION. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NO T IN DISPUTE THAT THE LAND BELONGING TO THE PARTNERSHIP FIRM WAS REVALUED AND IT WAS CREDITED TO THE CURRENT ACCOUNT OF THE PARTNERS OF THE FIRM. IT IS ALSO NOT IN DISPUTE THAT THE CREDIT BALANCE IN THE PARTNERS CAPITAL ACCOUNT AFT ER REVALUATION WAS TREATED AS LOAN IN THE HANDS OF THE COMPANY AND NOT AS SHAR E CAPITAL. THE ONLY CONTENTION OF THE ASSESSEE BEFORE THIS TRIBUNAL IS THAT THE REVALUATION OF THE LAND WAS CREDITED IN THE CURRENT ACCOUNT OF THE PARTNERS OF THE ERSTWHILE PARTNERSHIP FIRM ACCORDING TO THEIR PROFIT SHARING RATIO. BUT THE FACT REMAINS 6 ITA NO.446/COCH/2013 IS THAT THE VALUE OF THE LAND AFTER REVALUATION WAS NOT TREATED AS SHARE CAPITAL OF THE RESPECTIVE SHAREHOLDERS/ ERSTWHILE P ARTNERS OF THE PARTNERSHIP FIRM. 8. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 47(XIII) OF THE ACT WHICH READS AS FOLLOWS: (XIII) ANY TRANSFER OF A CAPITAL ASSET OR INTANGIB LE 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 OF A CAPITAL ASSET TO A COMPANY IN THE COURSE OF [DEMUTUALIZATION OR ] CORPORATIZATION OF A RECOGNIZ ED STOCK EXCHANGE IN INDIA AS A RESULT OF WHICH AN ASSOCIAT ION OF PERSONS OR BODY OF INDIVIDUALS IS SUCCEEDED BY SUCH COMPANY: PROVIDED THAT (A) ALL THE ASSETS AND LIABILITIES OF THE FIRM OR O F THE ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS RELATING TO THE B USINESS 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 I N 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 CON SIDERATION OR BENEFIT, DIRECTLY OR INDIRECTLY, IN ANY FORM OR MAN NER, OTHER THAN BY WAY OF ALLOTMENT OF SHARES IN THE COMPANY; AND 7 ITA NO.446/COCH/2013 (D) THE AGGREGATE OF THE SHAREHOLDING IN THE COMPAN Y OF THE PARTNERS OF THE FIRM IS NOT LESS THAN FIFTY PER CEN T 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 EXCHANGE IN INDIA IS CARRIED OUT IN ACCORDANC E WITH A SCHEME FOR [DEMUTUALIZATION OR] CORPORATIZATION WHI CH IS APPROVED BY THE SECURITIES AND EXCHANGE BOARD OF IN DIA ESTABLISHED UNDER SECTION 3 OF THE SECURITIES AND E XCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992;] SO, NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 4 5, THE TRANSFER OF CAPITAL ASSET BY A FIRM TO A COMPANY AS A RESULT OF SUCCESS ION CANNOT BE SUBJECTED TO CAPITAL GAIN TAX, PROVIDED (I) ALL T HE ASSETS AND LIABILITIES OF THE FIRM RELATING TO THE BUSINESS IMMEDIATELY BEFOR E SUCCESSION BECAME THE ASSETS AND LIABILITIES OF THE COMPANY; (II) ALL THE PARTNERS OF THE FIRM IMMEDIATELY BEFORE THE SUCCESSION BECOME THE SHAREH OLDERS OF THE COMPANY IN THE SAME PROPORTION IN WHICH THEIR CAPIT AL ACCOUNTS STOOD IN THE BOOKS OF THE FIRM ON THE DATE OF THE SUCCESSION ; AND (III) THE PARTNERS OF THE FIRM DID NOT RECEIVE ANY CONSIDERATION OR BENEF IT DIRECTLY OR INDIRECTLY IN ANY FORM OR MANNER OTHER THAN BY WAY OF SHAREHOLDER S OF THE COMPANY. 9. IN THE CASE BEFORE US, ALL THE ASSETS AND LIABIL ITIES OF THE FIRM DID NOT BECOME THE ASSETS AND LIABILITIES OF THE COMPANY. IN FACT, THE ASSET, VIZ. 8 ITA NO.446/COCH/2013 THE LAND WHICH WAS SHOWN AS ASSET OF THE COMPANY, T HE REVALUATION AMOUNT WAS SHOWN AS LOAN IN THE BALANCE-SHEET OF TH E COMPANY. IN OTHER WORDS, IT IS A LIABILITY TOWARDS THE PARTNERS OF TH E ERSTWHILE PARTNERSHIP FIRM. SUCH A LIABILITY DOES NOT EXIST IN THE PARTNERSHIP FIRM. THEREFORE, BY CONVERTING THE PARTNERSHIP FIRM INTO A PRIVATE LIMI TED COMPANY, THE ASSESSEE MADE AN ATTEMPT TO CREATE A LIABILITY IN T HE HANDS OF THE PRIVATE LIMITED COMPANY. AS A CONSEQUENCE, THE FIRST CONDI TION LAID DOWN BY THE LEGISLATURE FOR EXEMPTION OF THE CAPITAL GAIN IS NO T COMPLIED WITH. 10. THE NEXT CONDITION IS THAT THE PARTNERS OF THE FIRM DID NOT RECEIVE ANY CONSIDERATION OR BENEFIT OTHER THAN THE ALLOTMENT O F SHARES IN THE COMPANY. IN THIS CASE, APART FROM ALLOTMENT OF SHARES, THEY ARE RECEIVING BENEFITS BY WAY OF TREATING THE REVALUATION OF ASSETS AS LOAN I N THE HANDS OF THE COMPANY. WHEN IT WAS TREATED AS LOAN IN THE ACCOUN TS OF THE COMPANY, THE ASSESSEE IS ENTITLED TO RECEIVE INTEREST ON THE AMOUNT WHICH WAS TREATED AS LOAN. AS RIGHTLY SUBMITTED BY THE LD.DR , THE SHAREHOLDERS / THE PARTNERS OF THE ERSTWHILE PARTNERSHIP FIRM MAY WITH DRAW THE LOAN AT ANY POINT OF TIME. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE WAS AN INDIRECT TRANSFER OF PROPERTY FROM PAR TNERSHIP FIRM TO ASSESSEE COMPANY IN VIOLATION OF THE CONDITIONS LAID DOWN IN SECTION 47(XIII) OF THE ACT. THE ASSESSEE COMPANY INSTEAD OF PAYING THE SA LE CONSIDERATION TO 9 ITA NO.446/COCH/2013 THE PARTNERSHIP FIRM / PARTNERS, TREATED THE MARKET VALUE OF THE LAND AS LOAN FROM THE ERSTWHILE PARTNERS OF THE FIRM. 11. WE HAVE CAREFULLY GONE THROUGH THE DECISION OF THE AHMEDABAD BENCH OF THIS TRIBUNAL IN THE CASE OF ALTA INTER-CH EM INDUSTRIES (SUPRA). IN THE CASE BEFORE THE AHMEDABAD BENCH OF THIS TRIBUNA L THE CURRENT ACCOUNT OF ALL THE PARTNERS WAS REFLECTED AS LOAN IN THE BA LANCE-SHEET OF THE COMPANY. THE CONTENTION OF THE REVENUE BEFORE THE AHMEDABAD BENCH OF THIS TRIBUNAL WAS THAT THERE WAS VIOLATION OF CONDI TIONS PRESCRIBED IN PROVISIONS OF CLAUSE (C) TO SECTION 47(XIII) OF THE ACT. THE AHMEDABAD BENCH OF THIS TRIBUNAL HAS NOT ADDRESSED THIS CONTE NTION OF THE REVENUE AND PROCEEDED ON THE PRESUMPTION THAT THERE WAS NO TRANSFER OF PROPERTY U/S 45(4) OF THE ACT AND AS SUCH THERE IS NO QUESTI ON OF ANY LEVY OF CAPITAL GAIN TAX. 12. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS O F SECTION 45(4) OF THE ACT, WHICH READS AS FOLLOWS: (4) THE PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET BY WAY OF DISTRIBUTION OF CAPITAL ASSETS ON T HE DISSOLUTION OF A FIRM OR OTHER ASSOCIATION OF PERSONS OR BODY O F INDIVIDUALS (NOT BEING A COMPANY OR A CO-OPERATIVE SOCIETY) OR OTHERWISE, SHALL BE CHARGEABLE TO TAX AS THE INCOME OF THE FIR M, 10 ITA NO.446/COCH/2013 ASSOCIATION OR BODY, OF THE PREVIOUS YEAR IN WHICH THE SAID TRANSFER TAKES PLACE AND, FOR THE PURPOSES OF SECTI ON 48, THE FAIR MARKET VALUE OF THE ASSET ON THE DATE OF SUCH TRANSFER SHALL BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER. 13. SECTION 45(4) WAS INTRODUCED IN THE STATUTE BOO K BY FINANCE ACT, 1987 WITH EFFECT FROM 01-04-1988. WHENEVER THERE W AS A TRANSFER OF CAPITAL ASSET BY WAY OF DISTRIBUTION OF CAPITAL ASS ET ON DISSOLUTION OF THE FIRM OR ASSOCIATION OF PERSONS OR BODY OF INDIVIDUA LS, THE PROFIT SHALL BE CHARGEABLE TO CAPITAL GAIN TAX. BEFORE INTRODUCTIO N OF THIS SECTION, THERE WAS NO CAPITAL GAIN ON DISTRIBUTION OF CAPITAL ASSE T WHEN THE FIRM WAS DISSOLVED FOR THE SIMPLE REASON THAT WHEN THE FIRM WAS DISSOLVED AND THE ASSET WAS DISTRIBUTED AMONGST THE PARTNERS, THERE W AS NO TRANSFER OF PROPERTY UNDER THE COMMON LAW. IT IS WELL SETTLED PRINCIPLES OF LAW THAT UNDER THE COMMON LAW, PARTNERS AND PARTNERSHIP FIRM ARE CONSIDERED TO BE SAME IN THE EYE OF LAW. THEREFORE, WHEN THE ASSETS WERE DISTRIBUTED AMONGST THE PARTNERS IT WAS CONSTRUED THAT THERE WA S NO TRANSFER OF PROPERTY AND THE PROPERTY WAS DISTRIBUTED TO THE PA RTNERS AS PER THEIR PROFIT SHARING RATIO. THEREFORE, NO CAPITAL GAIN TAX WAS LEVIED. TO AVOID THIS SITUATION, THE LEGISLATURE INTRODUCED SUB SECTION ( 4) IN SECTION 45 TO CHARGE CAPITAL GAIN TAX ON SUCH TRANSFERS ALSO. IN FACT, SUB SECTION (4) OF SECTION 45 WAS ORIGINALLY INTRODUCED BY THE FINANCE ACT, 19 64 WITH EFFECT FROM 01- 11 ITA NO.446/COCH/2013 04-1964 AND LATER ON IT WAS OMITTED BY FINANCE ACT, 1966 WITH EFFECT FROM 01-04-1966. SUBSEQUENTLY, THE SAME WAS REINTRODUCE D BY FINANCE ACT, 1987 WITH EFFECT FROM 01-04-1988. IN THE CASE BEFO RE US, THE PARTNERSHIP FIRM IS A SEPARATE ASSESSABLE UNIT UNDER THE INCOME -TAX ACT. THE PARTNERS OF THE FIRM CONVERTED THE PARTNERSHIP FIRM INTO A P RIVATE LIMITED COMPANY UNDER THE COMPANIES ACT. IN OTHER WORDS, PARTNER SHIP FIRM CEASED TO EXIT ON THE DAY ON WHICH THE PRIVATE LIMITED COMPANY CAM E INTO EXISTENCE. SO IT IS A CASE OF SUCCESSION OF THE PARTNERSHIP FIRM BY A PRIVATE LIMITED COMPANY. THEREFORE, THE ASSETS AND LIABILITIES OF THE PARTNERSHIP FIRM AS IT EXISTED AT THE TIME OF SUCCESSION HAS TO BE TAKEN O VER BY THE NEWLY FORMED PRIVATE LIMITED COMPANY. THE CAPITAL CONTRIBUTION, IF ANY, BY THE RESPECTIVE PARTNERS AND THE ASSETS OF THE ERSTWHILE FIRM HAS T O BE TREATED AS SHARES OF THE PARTNERS / SHAREHOLDERS IN THE PRIVATE LIMITED COMPANY. IN THIS CASE, INSTEAD OF TREATING THE REALIZATION ON REVALUATION OF LAND AS CAPITAL CONTRIBUTION OR SHAREHOLDING IN THE HANDS OF THE SH AREHOLDERS / PARTNERS OF THE ERSTWHILE PARTNERSHIP FIRM, THE ASSESSEE IS TRE ATING THE SAME AS LOAN. ONE OF THE CONDITIONS PRESCRIBED U/S 47(XIII) OF TH E ACT IS THAT ALL THE ASSETS AND LIABILITIES OF THE PARTNERSHIP FIRM SHALL BE TR EATED AS ASSETS AND LIABILITIES OF THE PRIVATE LIMITED COMPANY. IN THI S CASE, THE ASSET BEING THE LAND, THE REVALUATION AMOUNT WAS TREATED AS A LIABI LITY IN THE HANDS OF THE COMPANY. THEREFORE, THIS TRIBUNAL IS OF THE CONSID ERED OPINION THAT THE CONDITIONS LAID DOWN IN SECTION 47(XIII) OF THE ACT IS NOT COMPLIED WITH. THE 12 ITA NO.446/COCH/2013 AHMEDABAD BENCH OF THIS TRIBUNAL HAS NOT ADDRESSED THIS ISSUE EVEN THOUGH IT WAS SPECIFICALLY RAISED BY THE DEPARTMENT . 14. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT BY TREATING THE VALUE OF THE LAND AS LOAN IN THE HANDS OF THE ASSESSEE CO MPANY, THERE IS AN INDIRECT TRANSFER OF PROPERTY AND THE PARTNERS OF T HE ERSTWHILE PARTNERSHIP FIRM CAN WITHDRAW THE MONEY AT ANY POINT OF TIME WH ICH WAS SHOWN AS LOAN IN THE BOOKS OF THE ASSESSEE COMPANY APART FROM DRA WING INTEREST. IN FACT, THE PARTNERSHIP FIRM INDIRECTLY TRANSFERRED THE LAN D TO THE PRIVATE LIMITED COMPANY AND DISTRIBUTED THE CONSIDERATION TO THE ER STWHILE PARTNERS BY TREATING THE SAME AS IF THE PARTNERS ADVANCED LOAN TO THE PRIVATE LIMITED COMPANY. THIS IS AN ACCOUNTING TECHNIQUE ADOPTED B Y THE FIRM FOR INDIRECT TRANSFER OF PROPERTY TO EVADE TAX AND THE CAPITAL G AIN. THEREFORE, THERE WAS DISTRIBUTION OF ASSETS WHICH ENABLES THE PARTNERS O F THE ERSTWHILE PARTNERS OF THE FIRM TO WITHDRAW THE VALUE OF THE LANDED PRO PERTY AT ANY POINT OF TIME FROM THE ACCOUNTS OF THE COMPANY. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DECISION OF THE AHMEDABAD BENCH OF THIS TRIBUNAL IN ALTO INTER-CHEM INDUSTRIES (SUPRA) IS NOT APPLICABLE SIN CE THE CONDITIONS LAID DOWN IN SECTION 47(XIII) OF THE ACT ARE NOT COMPLIE D WITH. THE PARTNERS OF THE FIRM MADE AN ATTEMPT TO TRANSFER THE PROPERTY B Y TREATING THE VALUE OF THE LAND AS LOAN IN THE COMPANY. THEREFORE, THIS T RIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(A) HAS RIGHTLY CONF IRMED THE ADDITION MADE 13 ITA NO.446/COCH/2013 BY THE ASSESSING OFFICER. HENCE, WE DO NOT FIND A NY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY; THE SAME IS CONFIRMED. 15. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH SEPTEMBER, 2013. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 27 TH SEPTEMBER, 2013 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH