TaxTMI 
TaxTMI 
2011 (11) TMI 488
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....tion, the assessee converted his proprietorship business into company and claimed exemption u/s 47(xiv) in respect of transfer of capital assets. The Assessing Officer found that the assessee has not satisfied the conditions for claiming exemption u/s 47(xiv). He pointed out that as per clause (b) of Section 47(xiv), the shareholding of the sole proprietor in the company should not be less than 50% of the total voting power in the company and his shareholding continues to remain as such for a period of five years from the date of succession. He submitted that the Assessing Officer has pointed out that on the date of succession i.e. 6.9.2000 and till the end of the relevant accounting year i.e. 31st March 2001, the shareholding of the sole p....
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....proprietorship business was shown as share application money in the company's books of accounts and the assessee was allotted the shares for Rs. 55,69,700 vide Resolution of allotment of shares on 7.3.2002. That the company was registered with the issued share capital of Rs. 7000 i.e. of 700 equity shares of Rs. 10 each. The assessee, along with six other persons, was initially allotted 100 equity shares of Rs. 10 each. It was done because for the registration of company, seven shareholders were required. He further stated that the provisions of Section 47(xiv) were fully complied with in substance. If at all there is any lapse, it is only by way of delay in allotment of the shares against the share application money, but for such delay, th....
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....872 was credited in the company's books of account as share application money and eventually, the shares were allotted to the assessee for the above amount. It is not in dispute that the assessee did not transfer the shares till the date of hearing of this appeal i.e. 14.11.2011. The other shareholders taken together are 600 equity shares of Rs. 10 each i.e. Rs. 6000. Thus, the shareholding of the sole proprietor is almost 99%. Section 47(xiv) reads as under:- "(xiv) Where a sole proprietary concern is succeeded by a company in the business carried on by it as a result of which the sole proprietary concern sells or otherwise transfers any capital asset or intangible asset to the company: Provided that- (a) all the asset....
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....gainst such share application money. After the allotment of shares, the shareholding by the proprietor of the erstwhile business is approximately 99% of total shareholding of the company. The sole proprietor continued to hold the shares for a much longer period than the minimum period of five years as prescribed in clause (b). Thus, the condition of clause 'b' is also satisfied. The only mistake, if any, on the part of the company, is delay in the allotment of shares against share application money. However, in our opinion, merely because there is some delay in the allotment of shares against the share application money, it cannot be said that there is a violation of clause (b) of Section 47(xiv). From the totality of the facts, it is evide....