The Income Tax Appellate Tribunal (ITAT) New Delhi has held that the capital asset of a company transferred as a Limited Liability Partnership (LLP) not amounts to transfer and addition to non-compliance with section 47 (xiiib) of the Income Tax Act,1961 is not sustainable.
The revenue challenged the order dated 18.01.2018 in appeal no. 256/2017-18 for the assessment year 2015-16 passed by Commissioner of Income Tax (Appeals)-10, New Delhi regarding the appeal before it arising out of assessment order dated 31.12.2017 u/s 143(3) of the Income Tax Act, 1961 passed by ITO, Ward 30(4), New Delhi.
The assessee was formed on 9th February 2015 by conversion of the company M/s. Ava Landmark Pvt. Ltd., is a private limited company registered under the Companies Act, 1957. The capital assets held by the erstwhile company transferred to the assessee as LLP was considered a transfer and the Assessing officer made an addition of Rs.11,37,40,244/- to the returned income on allegation of non-compliance of Section 47(xiiib) of the Act. CIT(A) observed that there is no violation of the provisions of Section 47 (xiiib) (e) of the Act and allowed the appeal.
The revenue contended that the objects of the two entities were different. On the other hand, the assessee stated that the AO has recalculated the value on basis of all the assets and submitted that the investments in the plot have been wrongly considered to be stock-in-trade.
It was observed that in the previous years of assessment, the plot was shown by the assessee as investment and the AO has accepted the same. Thus, the transaction of sale of the plot was rightly held as LTCG by CIT(A).
A Coram comprising of Sh. N K Billaiya, accountant member and Sh. Anubhav Sharma, judicial member observed that “AO had erred in expanding the definition of turnover to extent of including capital gains in the turnover for ascertaining that the threshold limit of Rs. 60 lakhs, is maintained by the assessee to get the benefit of Section 47(xiiib) of the Act.”
The Appeal got dismissed. Sh. Ishtiyaque Ahmed appeared for the revenue and Sh. Sushil Wadhwa appeared for the assessee.
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