TaxTMI 
TaxTMI 
2023 (2) TMI 444
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....l: 1. The order of the Id. Commissioner of IT. (Appeals) is erroneous on facts of the case and in law. 2.1. The Id. CIT(A) erred in deleting the addition of Rs.3.47 crores, by holding that there was no capital gain on transfer of goodwill at book value, by wrongly placing reliance on the Id. CIT(A)'s order dated 24.02.2015 passed in the case of erstwhile proprietor (Shri.D. Sathish Babu) of the erstwhile proprietory concern for asst. year 2006-07 which has no relevance at all to the impugned issue raised in the assessment order of the assessee company for asst. year 2009-10. 2.2. The Id. CIT(A) failed to appreciate that the A.O. in the impugned assessment order has subjected to assessment the gains arising from transfer of proprie....
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....tary concern of Mr.Sathish Babu, has been converted into a Pvt. Ltd. Co., under the name and style of M/s.Univercell Telecommunications India Pvt. Ltd., on 28.09.2005. Pursuant to conversion, the proprietary concern becomes a Pvt. Ltd. Co., and transfer of assets and liabilities of proprietary concern, has been treated as exempt as per provisions of Sec.47(xiv) of the Act. During the course of assessment proceedings, the AO noticed that although, the conversion of proprietary concern into a Pvt. Ltd. Co., is coming under the provisions of Sec.47(xiv) of the Act, but the assessee has violated the conditions prescribed therein by transferring shareholding of Mr.S.Satish Babu, within a period of five years from the date of transfer of propriet....
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....der, stated that Department had not gone in further appeal against the order of Hon'ble ITAT in case of Shri D. Sathish Babu. In that case, the Ld.CIT(A) decided the matter as under: "The next observation of the Assessing officer is that the goodwill show in the books of the assessee was a self-generated asset where the cost of acquisition is Nil. This observation by the Assessing Officer is not correct. As explained by the assessee, the goodwill is not a self-generated goodwill. The assessee has been in the process of building the brand image by incurring substantial amounts of advertisements and capitalized the books in the form of goodwill in all the years up to the date of transfer of the business to the private limited company, ....
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....l at book value by wrongly placing reliance on the order of the Ld.CIT(A) dated 22.04.2015 passed in the case of erstwhile Proprietor of the erstwhile proprietary concern for the AY 2006-07, which has no relevance at all to the impugned issue raised in the assessment order. The Ld.DR referring to provisions of Sec.47A(3) r.w.s.47(xiv)(b) of the Act, submitted that in order to be exempt from capital gains tax on conversion of proprietary concern into Pvt. Ltd. Co., the assessee should satisfy certain conditions, as per which, the shareholding of erstwhile Proprietor and now Director cannot be transferred or reduced below specified percentage within five years from the date of conversion. In this case, the assessee has transferred 16.67% of h....
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.....D, was taken over by the assessee company on 28.09.2005 in terms of Sec.47(xiv)(b) of the Act. It is an undisputed fact that when proprietary concern was converted into a Pvt. Ltd. Co., conditions of Sec.47(xiv)(b) of the Act, has been satisfied. However, at later date, Mr.Satish Babu.D has transferred 16.67% of his shareholding to Mr.Shankar S.Nathan on 10.10.2018 i.e. within five years from the date of transfer of proprietary concern into the assessee company and thus, breached the conditions prescribed u/s. 47(xiv)(b) of the Act, i.e. retaining not less than 50% of the shares of successor company for a period of five years from the date of transfer of proprietary concern. Therefore, we are of the considered view that the assessee is hit....