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Issues: Whether the excess realised on transfer of the business as a going concern to a private limited company, in which the partners became shareholders, was taxable and could be treated as fictional income or gain.
Analysis: The transfer was to be tested according to its legal form. The company was a separate legal entity from the firm, and the fact that the partners of the firm became the shareholders of the company did not mean that the transfer lacked legal reality. The principle that the substance of the transaction should override its form was not accepted on these facts. The contention that the excess amount was only fictional income or fictional gain was therefore rejected.
Conclusion: The excess realised on the transfer was not to be treated as fictional income or fictional gain, and the question was answered in favour of the Revenue.
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