Immobilization of Transferred Company as LLP Not Equivalent to Transfer, Addition for Non-Compliance with Section 47(xiiib) Not Enduring: ITAT

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Fixed assets - LLP - ITAT - taxscan

The Income Tax Appeal Tribunal (ITAT) of New Delhi has ruled that the fixed assets of a company transferred as a limited liability company (LLP) do not amount to a transfer and failure to comply with section 47 (xiiib) of the Income Tax Act, 1961 is not lasting.

The tax authorities challenged the order of 18.01.2018 on appeal no. 256/2017-18 for the tax year 2015-16 passed by Commissioner of Income Tax (Appeals)-10, New Delhi regarding the appeal before him arising out of the Assessment Order of 31.12 .2017 u/s 143(3) Revenue Tax Act, 1961 enacted by ITO, Ward 30(4), New Delhi.

The appraised was incorporated on February 9, 2015 by transformation of the company M/s. Ava Landmark Pvt. Ltd., is a limited liability company registered under the Companies Act 1957. The fixed assets held by the former company transferred to the assessed as LLP were treated as a transfer and the agent of valuation added Rs.11,37,40,244/- to income returned on alleged non-compliance with Section 47(xiiib) of the Act. CIT(A) observed that there was no violation of the provisions of section 47(xiiib)(e) of the Act and allowed the appeal.

Revenue argued that the objects of the two entities were different. On the other hand, the assessee stated that the AO recalculated the value based on all the assets and argued that the investments in the land were wrongly considered goodwill.

It was observed that in previous appraisal years, the land was presented by the appraisee as an investment and the AO accepted the same. Thus, the land sale transaction was properly held as LTCG by CIT(A).

A Coram consisting of Accounting Member Sh. NK Billaiya and Judiciary Member Sh. Anubhav Sharma observed that “AO erred in expanding the definition of turnover to include capital gains in turnover to ensure that the threshold limit of Rs. 60 lakhs, is maintained by the assessee to benefit from Section 47 (xiiib) of the Act.

The appeal was dismissed. Sh. Ishtiyaque Ahmed appeared for income and Sh. Sushil Wadhwa appeared for assessee.

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AVA Landmark LLP v ACIT

Counsel for the Appellant: Sh. Sushil Wadhwa

Counsel for the Respondent: Sh. Ishtiyaque Ahmed

CITATION: 2022 TAXSCAN (ITAT) 1319

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