TaxTMI 
TaxTMI 
2011 (12) TMI 347
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....as been reorganization of business. It is further observed that as on 31st March 2005, there is a succession of the proprietorship business in to a corporate entity Krystal Colloids Private Limited, whereby the assessee had assigned running business of M/s. Krystal Colloids sole proprietary concern as a going concern to Krystal Colloids Private Limited. Accordingly the assets and liabilities of the sole proprietary concern had been transferred to the Private limited company. The assessee vide letter dated 13th Aug.2007 contended that the said assignment was at book values and thus claimed exemption as per the provisions of section 47(xiv) of the Income Tax Act, 1961. It was further observed that the Assessee had carried out a revaluation of certain assets during the year. The details of the revaluation carried out were as under: S. No. Nature of asset Amount (Rs.) 1. Technical Know how 27500000/- 2. Trade Name and Trade Marks 6750000/- 3. Goodwill 2500000/- TOTAL 36750000/- The assessee had filed a valuation report dated 20.6.2004 to justify the derivation of the value of its intangible assets. The same is t....
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....said accounts have been reflected as assets in the balance sheet of the private limited company. The AO however was of the view that the bank accounts of the sole proprietary concern still continued and had not been transferred to the company nor the said accounts were closed. He, therefore, held that the aforesaid conditions were not satisfied. 3. The AO was of the view that condition mentioned in clause (c) of the proviso of section 47 (xiv) of the Act was not complied with for the following reasons. "11. Perusal of the Annexure to balance sheet of the assessee immediately before the succession reveals that there were certain additions to Fixed Asset. Note to Schedule - 3 Fixed Asset mentions that Additions "include revaluation of certain assets". It is further observed that under the head 'Intangibles' certain assets namely Technical Know how amounting to Rs. 2,75,00,000/- have been created and the same are being claimed to be transferred at book value alongwith other assets. 12. It is seen that the Assessee has carried out a revaluation of the intangible assets in its books of accounts and these assets have been reflected in the books of ac....
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....on that these bank accounts were not transferred considering business interest as a prudent businessman is logical and acceptable. All receipts have been transferred to the acquirer company as evident from the bank statements. Moreover, the balance in these accounts stand transferred in the name of the acquirer company and shown in its accounts. Thus, the company is to be considered as beneficial owner of these bank accounts. The appellant was operating these accounts for convenience. 5.2 All these assets have been transferred at book values except Technical Know how, Trade Marks and Goodwill. Clause (c) of section (xiv) reads as under: "(c) the sole proprietor does not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company;" The section envisages issues of shares and in the appellant's case no other consideration other than shares have been received on transfer. Receipts of higher number of shares by revaluation cannot be treated as consideration or benefit directly or indirectly in any manner other than by way of allotment of shares in the company." ** ** ** ....
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....d the said bank accounts have been considered as the bank account of the Limited Company. In the light of the above we are of the view that the bank account have become the assets of the Limited Company and proviso A to section 47(xiv) were not attracted. 8. As far as proviso (c) to section 47(xiv) is concerned the revenue has not disputed that the assessee has not received any consideration apart from allotment of shares in the company. The grievance of the revenue is only that prior to the transfer of the business to the Limited Company revaluation of assets had taken place and that intangible assets were also revalued. According to the revenue by doing so shares were issue at a higher cost to the assessee and in future when assessee transfers such shares cost of acquisition of the shares will be higher and consequently there would be a benefit of lesser capital gain on transfer of those shares. At the outset we are not convinced with this line of reasoning adopted by the AO. The section envisages denial of exemption under section 47 (xiv) under proviso (c) only in a case where consideration benefit for transfer of the business is received other than by way of allotment....
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....s regard. 3. Re: Disallowance of telephone expenses Rs. 24,193/-3.1 3.1 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) [hereinafter referred to as 'the learned CIT(A)9 grossly erred in upholding the action of the Assessing Officer in disallowing the telephone expenses incurred by the Appellant on an ad hoc basis to the extent of 10% of the expenses incurred by the Appellant. 3.2 Without prejudice to the above, the disallowance on the account of telephone expenses ought to be significantly reduced. 4. The Respondent (Cross Objector) craves leave to add to, alter, amend or delete any ground of cross objection." 11. The Assessee has shown an addition of Rs. 4,98,704/- on account of purchase of Gunsun Sorter Machine. The Assessee has claimed depreciation of Rs. 62,338I-(less than 180 days) on the said addition. A perusal of the various bills submitted by the Assessee shows that most of the spare parts and electrical accessories required for commissioning of electrical supply to the above machine and its air compressor were purchased only on 31/03/2005 as per Cash Memo N....