2014 (8) TMI 1056

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....bsp;M. Manglik, Rahul Agarwal and Santosh Advs. JUDGEMENT Satish Chandra, J:- The present appeal is filed by the department against the judgement and order dated 28.02.2005 passed by the Income Tax Appellate Tribunal, Agra in ITAT No. 219/Agra/2002 for the assessment year 1997-98. On 13.05.2013, a coordinate Bench has admitted the appeal on the following substantial questions of law:- ....

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....s' firm was constituted with the seven partners. The partnership firm M/s. Ajanta Raj Diary was continued till 07.04.1996. Thereafter w.e.f. 08.04.1996 the firm was converted into a Public Limited Company as per Section 566 of the Companies Act, 1956 under the name and style of M/s Ajanta Raj Proteins Ltd. All the seven partners became the Directors of the Company. No outsider was inducted as ....

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....d that under the provision of Section 45(1) of the Income Tax Act, capital gain can be said to arise only, if the full value of consideration is received or accrues to the firm for the capital assets. In the instant case, there is no transfer from the firm to the company. The shares were issued by the company not to the firms, but to the individuals, who were the partners of the erstwhile firm and....

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....partners of the firm. On 8.4.1996, when the partners got shares in lieu of the revaluation reserve the gain became a real gain and did not remain a fictional gain. But the A.O. has not considered any profit arising on account of revaluation of the assets. It was only on 8.4.1996 that the A.O. worked out the short-term capital gain and assessed it. Further, in the instant case, the partnership f....