TaxTMI 
TaxTMI 
2018 (6) TMI 1643
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....ffect from 1.4.1999. The said decision, in our view, is only clarificatory in nature and has specifically provided the cost of acquisition in case of succession of firm to the company." The above quoted position of law by the Coordinate Bench is altogether contrary to the actual existing statutory position of law. As a matter of fact, Section 49(1)(iii)(e) was in existence since the date when Income Tax Act itself came into existence in 1962. This clause had been a constant subject matter of amendments from time to time by way of various insertions therein. Therefore, a wrong and erroneous fact relating to existence of law, including the amendment vide Finance Act 2012, w.e.f. 01-04-1999 was considered, leading the Coordinate Bench to arrive at a wrong conclusion in rendering the decision. Clause (xiii) of Section 47 was only inserted along with clause (xiiib) thereof in clause (e) of Section 49(1) (iii) vide Finance Act 2012, with retrospective effect from 01- 04-1999. Also therefore, the Coordinate Bench committed a patent and obvious error in rendering the decision. Had the insertion in law vis-a-vis appellant's submissions, been understood in consonance with existi....
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....itted an apparent and patent error of law. 3rd Mistake: Ground No. 3 of appeal was relating to denying of any liability of interest in its totality. While deciding this ground, the Coordinate Bench has again committed a patent error of law in understanding the ground as that of a general nature of ground against levy of interest which is generally aimed for disputing consequential levy of interest when addition etc. is sustained. As a matter of fact, the appellant had absolutely, through this ground no. 3 denied its liability for charge of any interest, because no advance tax payment liability was in existence during the previous year relevant to the assessment year, as well as also the same was neither in existence on the date when the return of income was filed or the assessment was made. Because clause (xiii) of section 47 was not in existence in section 49(1) (iii) (e) of the Act during the previous year relevant to the asst. Yr. 2009-10. Any subsequent change cannot be foreseen or anticipated while performing an act in present therefore appellant had taken the ground denying its total liability for charge of interest u/s 234B etc., even if alternatively addition is....
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....the entire order may kindly be recalled and the appeal may kindly be heard afresh in the light of the position of the law in existence as on the date when the return of income filed and assessment was made. 3. The ld DR objected to the misc. application and submitted that the decision of the Coordinate Bench is a well-reasoned order taking into consideration relevant facts and circumstances of the case and the law applicable, hence, the subject misc. application should be rejected. It was further submitted that what the ld AR has submitted will lead to a review of the decision taken by the Coordinate Bench and the same is not permissible under section 254(2) of the Act. It was submitted that where the decision of the Coordinate Bench is not acceptable to the assessee, the law has provided for an appropriate remedy by way of further appeal before the Hon'ble High Court. 4. We have heard the rival contentions and purused the material available on record. 5. Firstly, we refer to grounds of appeal which were the subject matter of adjudication before the Coordinate Bench and the same reads as under:- "1. That in the facts and circumstances of the case and in view of th....
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....ch has been done by the AO but should have been done u/s 49(1)(iii)(e). First of all, it is a presumption that the cost worked out by the AO is u/s 49(1)(iii)(a) and not u/s 49(1)(iii)(e) because the assessment order is completely silent regarding the section under which the cost of the property has been worked out. Therefore, the AR of the appellant is making a presumption that the cost of the property has been worked out u/s 49(1)(iii)(a). In view of the above observation of the Hon'ble ITAT Allahabad Bench, it is held that the cost of the property for determining the capital gains in the hands of the appellant is to be worked out as per section 49(1)(iii)(e) of the Act." 7. In the context of the above two grounds of appeal and the findings of the ld CIT(A), the Coordinate Bench has then recorded the contentions of the ld. AR in its order which are reproduced as under:- "4.1 ........It was submitted before us that section 49(iii)(e) was introduced with effect from 1.4.1999 by the Finance Act, 2012 and, therefore, the ld. CIT (A) was long(wrong) in applying the provisions of section 49(1)(iii)(e) to the case in hand as the law was amended with effect from 1.4.....
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....xiii) and 49 for the purpose of clarity and reference. Section 47 : Transactions not regarded as transfer Nothing contained in section 45 shall apply to the following transfers :- (xiii) any transfer of a capita asset or intangible 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 or a capital asset to a company in the course of demutualization or corporatization of a recognized stock exchange in India as a result of which an association of persons or body of individuals is succeeded by such company : Provided that - (a) All the assets and liabilities of the firm or of the association of persons or body of individuals relating to the business 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 in 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 consideration or benefit, directly or indirec....
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....here is no over-lapping of the section. Under section 47(xiii), if a firm by way of succession became the company, then the transaction i.e. migration of the firm to the company would not be treated as transfer. However, this section do not provide the calculation of cost of acquisition by way of succession from firm to the company. Section 49, specifically provides the manner in which the cost of acquisition through various conditions is required to be calculated. If we look into section 49(1)(iii), it is specifically provide transfer by way of succession, inheritance/devaluation. The firm is succeeded by the company, therefore, the cost of acquisition of the company would be as that of acquisition of the firm. The valuation of land and assets of firm though valued by the valuer will not change or alter the cost of acquisition of the firm despite valuation of assets of the firm and would remain the same, and therefore the cost of acquisition of the company would be cost of acquisition of the firm. The firm is being succeeded by the company and the company is not buying or purchasing the assets of the firm. The element of sale and purchase of the assets of the firm were not involve....
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....n't provide for cost of acquisition in the hands of the company where a firm is succeeded by a company. The said findings of the Coordinate Bench thus takes into account the general position of law regarding specific nature of transfer where a firm is succeeded by a company and not regarded as transfer for the purposes of chargeability of capital gains tax and also the general position of law governing the cost of acquisition in such situations as so defined in section 49 of the Act. 11. In the instant case, in respect of cost of acquisition in the hands of the company, the Coordinate Bench further has held that section 49(1)(iii) specifically provides for such transfer by way of succession, inheritance/devaluation. It was held by the Coordinate Bench that where the firm is succeeded by a company, the cost of acquisition of the company would be as that of acquisition of the firm. It was further held by the Coordinate Bench that the argument of the assessee that the AO has wrongly calculated the cost of acquisition of the assessee u/s 49(1)(iii)(a), in our view, is not correct as both the AO and ld. CIT (A) have applied the cost of acquisition on the basis of principles stated he....