RAVI JALAN,KOLKATA vs. ITO, WARD - 36(1), KOLKATA , KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘C’ BENCH, KOLKATA (Before Sri J. Sudhakar Reddy, Accountant Member & Sri S.S. Godara, Judicial Member) ITA No. 2292/Kol/2017 Assessment Year: 2012-13 Shri Ravi Jalan………………………………………………………..................................……………..….......Appellant 4, B.B.D. Bag East 1st Floor Room No. 5A Kolkata – 700 001 [PAN : ACXPJ 1738 M] Vs. Income Tax Officer, ward – 36(1), Kolkata……................................................….…….....…..Respondent Appearances by: Shri Subash Agarwal A/R & Shri Siddharth Agarwal, Advocate, appeared on behalf of the assessee. Mr. Altaf Hussain, JCIT D/R, appearing on behalf of the Revenue. Date of concluding the hearing : November 11th, 2019 Date of pronouncing the order : January 15th, 2019 ORDER Per J. Sudhakar Reddy, AM :- This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals) – 10, Kolkata, (hereinafter the “ld.CIT(A)”), passed u/s. 250 of the Income Tax Act, 1961 (the ‘Act’), dt. 08/09/2017, for the Assessment Year 2012-13. 2. The assessee is an individual and is engaged in the business of trading in stock, under the name and style of M/s. Ravi Jalan, sole proprietor concern. He filed his return of income on 04/09/2012 declaring total income of Rs.3,82,060/-. The Assessing Officer completed assessment u/s 143(3) of the Act on 20/03/2015 and assessed the total income at Rs.1,39,68,151/- interalia, denying the benefit claimed by the assessee u/s 47 (xiv) of the Act, in respect of transfer of assets and liabilities of the proprietary concern M/s. Ravi Jalan to a Private Limited Company, M/s. J.S. Tradex Pvt. Ltd. Consequent to the denial of the benefit u/s 47(xiv), the Assessing Officer alternatively computing the income in question under the head “Income from other sources”, by invoking the provisions of Section 56(2)(vii)(c) of the Act. A sum of Rs.1,24,54,080/- was brought to tax. Disallowance was made u/s 14A of the Act r.w.r. 8D. An addition was also made on the ground that there was suppression of closing stock being gold. The Assessing Officer also made an addition on account of notional rent.

2 ITA No. 2292/Kol/2017 Assessment Year: 2012-13 M/s. Ravi Jalan 2.1. Aggrieved the assessee carried the matter in appeal. The ld Aggrieved the assessee carried the matter in appeal. The ld Aggrieved the assessee carried the matter in appeal. The ld. First Appellate Authority confirmed the additions made by the Assessing Officer. He granted part relief Authority confirmed the additions made by the Assessing Officer. He granted part relief Authority confirmed the additions made by the Assessing Officer. He granted part relief only on the issue of notional rent. only on the issue of notional rent. 3. Aggrieved the assessee is before us on various grounds. Aggrieved the assessee is before us on various grounds. 4. The ld. Counsel for the assessee, Shri Subash Agarw The ld. Counsel for the assessee, Shri Subash Agarwal, submitted that, all the al, submitted that, all the grounds except Ground No. 2(a), Ground No. 3 and Ground No. 4, are not pressed. grounds except Ground No. 2(a), Ground No. 3 and Ground No. 4, are not pressed. grounds except Ground No. 2(a), Ground No. 3 and Ground No. 4, are not pressed. Hence, we dismiss the Ground Nos. 1, 2(b), as not pressed Ground Nos. 1, 2(b), as not pressed. 5. We have heard Shri Subash Agarwal We have heard Shri Subash Agarwal, the ld. Counsel for the assessee , the ld. Counsel for the assessee and Mr. Altaf Hussain, JCIT, ld. Sr. D/R on behalf of the revenue. On careful consideration of the ain, JCIT, ld. Sr. D/R on behalf of the revenue. On careful consideration of the ain, JCIT, ld. Sr. D/R on behalf of the revenue. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the facts and circumstances of the case, perusal of the papers on record, orders of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows: authorities below as well as case law cited, we hold as follows:- 6. Ground No. 2(a) reads Ground No. 2(a) reads as follows:- “(a) On the facts and in the circumstances of the case, the learned C.I.T. (A) erred in On the facts and in the circumstances of the case, the learned C.I.T. (A) erred in On the facts and in the circumstances of the case, the learned C.I.T. (A) erred in confirming the order of the A.O. and charging to tax by way of “Short Term Capital Gain or confirming the order of the A.O. and charging to tax by way of “Short Term Capital Gain or confirming the order of the A.O. and charging to tax by way of “Short Term Capital Gain or income from other source whatever name may call” on a sum of Rs income from other source whatever name may call” on a sum of Rs.1,24,54,080/ .1,24,54,080/-“. 6.1. The assessee was running a business of trading in gold under the name and style The assessee was running a business of trading in gold under the name and style The assessee was running a business of trading in gold under the name and style of M/s. Ravi Jalan. This business was transferred by the assessee to a Private Limited of M/s. Ravi Jalan. This business was transferred by the assessee to a Private Limited of M/s. Ravi Jalan. This business was transferred by the assessee to a Private Limited Company, M/s. J.S. Tradex Pvt. Ltd., by way of an agreement dt. 27/ Company, M/s. J.S. Tradex Pvt. Ltd., by way of an agreement dt. 27/ Company, M/s. J.S. Tradex Pvt. Ltd., by way of an agreement dt. 27/03/2012. All the assessee’s liabilities specified in schedule (a) and schedule (b) to the agreement dt. assessee’s liabilities specified in schedule (a) and schedule (b) to the agreement dt. assessee’s liabilities specified in schedule (a) and schedule (b) to the agreement dt. 27/03/2012, belonging to the assessee, were transferred to the company for a 27/03/2012, belonging to the assessee, were transferred to the company for a 27/03/2012, belonging to the assessee, were transferred to the company for a consideration of Rs.2,70,69,200/ consideration of Rs.2,70,69,200/-. The consideration was paid as under: . The consideration was paid as under:- a) By way of issue of 3 lac equity shares @ Rs.10/ way of issue of 3 lac equity shares @ Rs.10/- amounting to: amounting to: Rs.30,00,000/- b) Balance by other modes (cheques): Rs.2,40,69,200/- Balance by other modes (cheques): Rs.2,70,69,200/- The assessee had claimed that there was no transfer under the Act, in view The assessee had claimed that there was no transfer under the Act, in view The assessee had claimed that there was no transfer under the Act, in view of Section 47(xiv) of the Act and hence the transaction was not exigible to levy of tax as Section 47(xiv) of the Act and hence the transaction was not exigible to levy of tax as Section 47(xiv) of the Act and hence the transaction was not exigible to levy of tax as capital gains.

3 ITA No. 2292/Kol/2017 Assessment Year: 2012-13 M/s. Ravi Jalan 6.1.1. The Assessing Officer observed that three mandatory conditions were required The Assessing Officer observed that three mandatory conditions were required The Assessing Officer observed that three mandatory conditions were required to be fulfilled, for a transaction to be fulfilled, for a transaction, not to be considered as a transfer u/s 47(xiv) of the Act. nsfer u/s 47(xiv) of the Act. These are:- “(a) all the assets and liabilities of the sole proprietary concern relating to the business all the assets and liabilities of the sole proprietary concern relating to the business all the assets and liabilities of the sole proprietary concern relating to the business immediately before the succession become the assets and liabilities of the company; immediately before the succession become the assets and liabilities of the company; immediately before the succession become the assets and liabilities of the company; (b) the shareholding of the sole the shareholding of the sole proprietor in the company is not less than fifty per cent of proprietor in the company is not less than fifty per cent of the total voting power in the company and his shareholding continues to remain as such the total voting power in the company and his shareholding continues to remain as such the total voting power in the company and his shareholding continues to remain as such for a period of five years from the date of the succession; and for a period of five years from the date of the succession; and (c) the sole proprietor does not receive any (c) the sole proprietor does not receive any consideration or benefit, directly or indirectly, consideration or benefit, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company;” in any form or manner, other than by way of allotment of shares in the company;” in any form or manner, other than by way of allotment of shares in the company;” 6.2. As the assessee has not fulfilled As the assessee has not fulfilled the third mandatory condition, the Assessing mandatory condition, the Assessing Officer held that the transaction would Officer held that the transaction would be considered a transfer, as it would not fall as it would not fall within the ken of Section 47(xiv) of the Act and that the transaction was liable to be within the ken of Section 47(xiv) of the Act and that the transaction was liable to be within the ken of Section 47(xiv) of the Act and that the transaction was liable to be taxed under the head “Income from capital gains”. He held that consequently the taxed under the head “Income from capital gains”. He held that consequently the taxed under the head “Income from capital gains”. He held that consequently the transaction attracts Section 56(2)(vii)(c transaction attracts Section 56(2)(vii)(c) of the Act. He computed short term capital ) of the Act. He computed short term capital gains at Rs.1,24,54,080/- and while doing so, the consideration was computed as and while doing so, the consideration was computed as and while doing so, the consideration was computed as under:- (A) FMV of shares of M/s. J.S. Tradex (P) Ltd. FMV of shares of M/s. J.S. Tradex (P) Ltd. As per Rule 11UA(1)(c)(b) As per Rule 11UA(1)(c)(b) Rs.51.51. x 3 lac shares: Rs.51.51. x 3 lac shares: Rs.1,54,54,080/ Rs.1,54,54,080/- (the value comes to Rs.1,54,53,000) (the value comes to Rs.1,54,53,000) (A) Amount of consideration received in Amount of consideration received in Cash as per agreement dt. 27.03.12: Cash as per agreement dt. 27.03.12: Rs.2,40,69,200/ Rs.2,40,69,200/- Rs. 3,95,23,280/ Rs. 3,95,23,280/-

6.3. The Fair Market Value (FMV) of each share as on 31/03/2012 was fixed at The Fair Market Value (FMV) of each share as on 31/03/2012 was fixed at The Fair Market Value (FMV) of each share as on 31/03/2012 was fixed at Rs.51.51./- under Rule 11UA(1)(c)(b) of the Income Tax Rules, 1962 (‘Rules’), instead of under Rule 11UA(1)(c)(b) of the Income Tax Rules, 1962 (‘Rules’), instead of under Rule 11UA(1)(c)(b) of the Income Tax Rules, 1962 (‘Rules’), instead of face value of Rs. 10/- per share declared by the assessee. He also mentions, without per share declared by the assessee. He also mentions, without per share declared by the assessee. He also mentions, without giving any reason that, the short term capital gain is also assessable under the head the short term capital gain is also assessable under the head the short term capital gain is also assessable under the head “income from other sources”. The ld. CIT(A) upheld the findings of the Assessing Officer “income from other sources”. The ld. CIT(A) upheld the findings of the Assessing Officer “income from other sources”. The ld. CIT(A) upheld the findings of the Assessing Officer that the assessee is not entitle to the benefit u/s 47(xiv) of the Act for the detailed that the assessee is not entitle to the benefit u/s 47(xiv) of the Act for the detailed that the assessee is not entitle to the benefit u/s 47(xiv) of the Act for the detailed reasonings given at page 15 to 18 of his order. On the issue of computation of capital sonings given at page 15 to 18 of his order. On the issue of computation of capital sonings given at page 15 to 18 of his order. On the issue of computation of capital gains, the ld. CIT(A) at para 9 page 18 of his order held as follows: gains, the ld. CIT(A) at para 9 page 18 of his order held as follows:-

4 ITA No. 2292/Kol/2017 Assessment Year: 2012-13 M/s. Ravi Jalan “9. In the appellate proceedings, the appellant has not disputed or raised any In the appellate proceedings, the appellant has not disputed or raised any In the appellate proceedings, the appellant has not disputed or raised any objection to the compu objection to the computation of sale consideration of Rs.3,95,23,280/ consideration of Rs.3,95,23,280/- by the Ld. AO. I am also in agreement with the computation of sale consideration. The Ld. AO. I am also in agreement with the computation of sale consideration. The Ld. AO. I am also in agreement with the computation of sale consideration. The only objection raised by the appellant is with reference to the cost of only objection raised by the appellant is with reference to the cost of only objection raised by the appellant is with reference to the cost of acquisition. According to the appellant, the Ld. AO ought to have considered acquisition. According to the appellant, the Ld. AO ought to have considered acquisition. According to the appellant, the Ld. AO ought to have considered the cost of intangible asset i.e. the appellant's goodwill as well. Undeniably ble asset i.e. the appellant's goodwill as well. Undeniably ble asset i.e. the appellant's goodwill as well. Undeniably goodwill is a capital asset; however I find that no cost whatsoever was goodwill is a capital asset; however I find that no cost whatsoever was goodwill is a capital asset; however I find that no cost whatsoever was incurred by the appellant in this regard instead it was a self incurred by the appellant in this regard instead it was a self-generated asset. generated asset. Even the Ld. AR of the appellant was unable Even the Ld. AR of the appellant was unable to point out the cost incurred cost incurred on goodwill or whether the goodwill was purchased earlier from outside. Section goodwill or whether the goodwill was purchased earlier from outside. Section goodwill or whether the goodwill was purchased earlier from outside. Section 55 of the I.T. Act, 1961 provides that the cost of acquisition of such self T. Act, 1961 provides that the cost of acquisition of such self T. Act, 1961 provides that the cost of acquisition of such self- generated assets, particularly goodwill has to be taken at NIL. In vi generated assets, particularly goodwill has to be taken at NIL. In view of the ew of the foregoing therefore and provisions of Section 55(2), the objection raised by the foregoing therefore and provisions of Section 55(2), the objection raised by the foregoing therefore and provisions of Section 55(2), the objection raised by the appellant with reference to the AO's working of cost of acquisition is found to appellant with reference to the AO's working of cost of acquisition is found to appellant with reference to the AO's working of cost of acquisition is found to be unjustified. I find that the cost of acquisition was rightly considered at be unjustified. I find that the cost of acquisition was rightly considered at be unjustified. I find that the cost of acquisition was rightly considered at Rs.2,70,69,200/-. Accordingly the short term capital gain chargeable to tax Accordingly the short term capital gain chargeable to tax Accordingly the short term capital gain chargeable to tax worked out by the AO at Rs.1,24,54,080/ out by the AO at Rs.1,24,54,080/- was correct on facts as well as in was correct on facts as well as in law.” 6.4. Before us, the ld. Counsel for the assessee submits that he is not pressing the Before us, the ld. Counsel for the assessee submits that he is not pressing the Before us, the ld. Counsel for the assessee submits that he is not pressing the claim of benefit u/s 47(xiv) of the Act. Hence the findings of the ld. CIT(A) on this issue 47(xiv) of the Act. Hence the findings of the ld. CIT(A) on this issue 47(xiv) of the Act. Hence the findings of the ld. CIT(A) on this issue of denial of benefit u/s 47(xiv) of the Act, of denial of benefit u/s 47(xiv) of the Act, is hereby upheld. The transaction in question upheld. The transaction in question is a transfer and in exigible to capital gains is a transfer and in exigible to capital gains. 6.5. The ld. Counsel for the assessee dispute The ld. Counsel for the assessee disputes the computation of short term capital s the computation of short term capital gains and computation of income from other sources by invoking provisions of Section gains and computation of income from other sources by invoking provisions of Section gains and computation of income from other sources by invoking provisions of Section 56(2)(vii)(c) of the Act. He argues that both the Sections cannot be clubbed and the 56(2)(vii)(c) of the Act. He argues that both the Sections cannot be clubbed and the 56(2)(vii)(c) of the Act. He argues that both the Sections cannot be clubbed and the computation methodology has no sanction of law computation methodology has no sanction of law. He also contended that both the . He also contended that both the Assessing Officer as well as the ld. CIT(A) have not specified the provision of law Assessing Officer as well as the ld. CIT(A) have not specified the provision of law Assessing Officer as well as the ld. CIT(A) have not specified the provision of law followed, while adopting the methodology of arriving at the cost of consideration. while adopting the methodology of arriving at the cost of consideration. while adopting the methodology of arriving at the cost of consideration. The ld. Counsel for the assessee submits that the comp The ld. Counsel for the assessee submits that the computation of capital gains has utation of capital gains has to be done as per the provisions of Section 48 of the Act and that the cost of acquisition to be done as per the provisions of Section 48 of the Act and that the cost of acquisition to be done as per the provisions of Section 48 of the Act and that the cost of acquisition of assets which is Rs.2,70,69,200/ of assets which is Rs.2,70,69,200/-, has to be reduced from the full value of , has to be reduced from the full value of consideration received and if done so, the capital gain wo consideration received and if done so, the capital gain would be Nil. He submitted that uld be Nil. He submitted that the cost of acquisition and the price of assets the cost of acquisition and the price of assets, as reduced by the liabilities, is reflected in reduced by the liabilities, is reflected in the balance sheet on 26/03/2012. He pointed out the balance sheet on 26/03/2012. He pointed out to the total assets and liabilities the total assets and liabilities, which is reflected in the balance sheet as on which is reflected in the balance sheet as on 26/03/2012. He submitted submitted that out of the total assets and liabilities, as reflected in the combined balance sheet of M/s. Ravi Jalan, as reflected in the combined balance sheet of M/s. Ravi Jalan, as reflected in the combined balance sheet of M/s. Ravi Jalan, prepared on 26/03/2012, only those assets and liabilities prepared on 26/03/2012, only those assets and liabilities, pertaining to business of pertaining to business of

5 ITA No. 2292/Kol/2017 Assessment Year: 2012-13 M/s. Ravi Jalan trading in gold should be considered should be considered for transfer under the agreement to the company. for transfer under the agreement to the company. He relied on the decision of the Kolkata Bench of the Tribunal in the case of the decision of the Kolkata Bench of the Tribunal in the case of the decision of the Kolkata Bench of the Tribunal in the case of M/s. Aravali Polymers LLP vs. JCIT, order dt. 27.06.2014, Polymers LLP vs. JCIT, order dt. 27.06.2014, where it was held that, the value of the assets where it was held that, the value of the assets taken-over as per the agreement would be the sale price and the value of the assets agreement would be the sale price and the value of the assets agreement would be the sale price and the value of the assets appearing in the books of the erstwhile entity would be the cost of acquisition and the appearing in the books of the erstwhile entity would be the cost of acquisition and the appearing in the books of the erstwhile entity would be the cost of acquisition and the difference would be either capital gain or capital loss. He submitted that as the value of difference would be either capital gain or capital loss. He submitted that as the value of difference would be either capital gain or capital loss. He submitted that as the value of assets taken-over by way of agreement and the value of these assets in the balance er by way of agreement and the value of these assets in the balance er by way of agreement and the value of these assets in the balance sheet of the assessee company being the same, there is no capital gains earned by the sheet of the assessee company being the same, there is no capital gains earned by the sheet of the assessee company being the same, there is no capital gains earned by the assessee. 6.6. He argued that Section 56(2)(vii)(c) of the Act, has been wrongly invoked by the He argued that Section 56(2)(vii)(c) of the Act, has been wrongly invoked by the He argued that Section 56(2)(vii)(c) of the Act, has been wrongly invoked by the Assessing Officer. He submitted that the provision can be invoked only when the ing Officer. He submitted that the provision can be invoked only when the ing Officer. He submitted that the provision can be invoked only when the assessee acquires property other than immovable property for a consideration which is other than immovable property for a consideration which is other than immovable property for a consideration which is less than the FMV of these properties. In such cases, only the FMV of the property over less than the FMV of these properties. In such cases, only the FMV of the property over less than the FMV of these properties. In such cases, only the FMV of the property over and above the sale consideration is assessed as income from other sources. He e the sale consideration is assessed as income from other sources. He e the sale consideration is assessed as income from other sources. He submitted that the Assessing Officer committed a grave error in valuing shares of M/s. submitted that the Assessing Officer committed a grave error in valuing shares of M/s. submitted that the Assessing Officer committed a grave error in valuing shares of M/s. J.S. Tradex Pvt Ltd. as on 31/03/2012, though, the shares were allotted to the assessee J.S. Tradex Pvt Ltd. as on 31/03/2012, though, the shares were allotted to the assessee J.S. Tradex Pvt Ltd. as on 31/03/2012, though, the shares were allotted to the assessee on 27/03/2012. Thus, he submits that as per Rule 11U(J) of the Rules, the valuation in 12. Thus, he submits that as per Rule 11U(J) of the Rules, the valuation in 12. Thus, he submits that as per Rule 11U(J) of the Rules, the valuation in question should have been made only on 27/03/2012. He further submits that the FMV question should have been made only on 27/03/2012. He further submits that the FMV question should have been made only on 27/03/2012. He further submits that the FMV of shares on 27/03/2012 cannot exceed the price of Rs.10/ of shares on 27/03/2012 cannot exceed the price of Rs.10/- per share for which it was per share for which it was allotted, as the company was formed in this Financial Year itself, i.e., on 14/09/2011 s the company was formed in this Financial Year itself, i.e., on 14/09/2011 s the company was formed in this Financial Year itself, i.e., on 14/09/2011 with an objective to takeover over the running business of the assessee. He pointed out that the running business of the assessee. He pointed out that as on 27/03/2012, the only transactions that the company had were share capital loans as on 27/03/2012, the only transactions that the company had were share capital loans as on 27/03/2012, the only transactions that the company had were share capital loans taken for payments to the assessee taken for payments to the assessee, in addition to bank charges and preliminary in addition to bank charges and preliminary expenses. Thus, he submits that expenses. Thus, he submits that the valuation of per share at Rs.51.51/ the valuation of per share at Rs.51.51/-, does not arise as on 27/03/2012. The ld. Counsel for the assessee, further pointed out that on 31/03/2012, 40,000 The ld. Counsel for the assessee, further pointed out that on 31/03/2012, 40,000 The ld. Counsel for the assessee, further pointed out that on 31/03/2012, 40,000 shares were allotted by the assessee company @ Rs.400/ shares were allotted by the assessee company @ Rs.400/- per share, resulting the per share, resulting the breakup value of increasing to Rs.51.51/ increasing to Rs.51.51/- per share and submitted that this per share and submitted that this value as on 31/03/2012, cannot be applied o 31/03/2012, cannot be applied on 27/03/2012. Thus, he prayed that the addition in 27/03/2012. Thus, he prayed that the addition in question be deleted.

6 ITA No. 2292/Kol/2017 Assessment Year: 2012-13 M/s. Ravi Jalan 7. On Ground No. 3, the ld. Counsel for the assessee submitted that the issue be s On Ground No. 3, the ld. Counsel for the assessee submitted that the issue be s On Ground No. 3, the ld. Counsel for the assessee submitted that the issue be set aside to the file of the Assessing Officer with a direction that the value of those aside to the file of the Assessing Officer with a direction that the value of those aside to the file of the Assessing Officer with a direction that the value of those investments which have yielded dividend income be taken into account in accordance investments which have yielded dividend income be taken into account in accordance investments which have yielded dividend income be taken into account in accordance with the judgment of the Hon’ble Jurisdictional High Court in the case of with the judgment of the Hon’ble Jurisdictional High Court in the case of with the judgment of the Hon’ble Jurisdictional High Court in the case of CIT vs. REI Agro Ltd. in GA 3022 OF 2013/ ITAT 161 OF 2013 ITAT 161 OF 2013, judgment dt. 23/12/2013. 8. On Ground No. 4, he submits that the Assessing Officer’s allegation that the On Ground No. 4, he submits that the Assessing Officer’s allegation that the On Ground No. 4, he submits that the Assessing Officer’s allegation that the assessee transferred closing stock of gold to the company at assessee transferred closing stock of gold to the company at a lower prices lower prices than the prevailing market prices is wrong. He pointed out that out of the total stock prevailing market prices is wrong. He pointed out that out of the total stock prevailing market prices is wrong. He pointed out that out of the total stock-in-trade of Rs.1.99 Crores, transferred, the Assessing Officer alleges that there is a suppression of Rs.1.99 Crores, transferred, the Assessing Officer alleges that there is a suppression of Rs.1.99 Crores, transferred, the Assessing Officer alleges that there is a suppression of Rs.1,38,690/-, which is less than 1% of the total value. He furthe , which is less than 1% of the total value. He further submitted that there is r submitted that there is no provision in the Act which mandates that stock in trade has to be transfe no provision in the Act which mandates that stock in trade has to be transfe no provision in the Act which mandates that stock in trade has to be transferred at market value and that the Assessing Officer wrongly applied the judgment of the market value and that the Assessing Officer wrongly applied the judgment of the market value and that the Assessing Officer wrongly applied the judgment of the Hon’ble Supreme Court in the case of Hon’ble Supreme Court in the case of ALA Firm vs. CIT (1991) 189 ITR 285 (SC) ITR 285 (SC). 9. The ld. D/R, Mr. Altaf Hussain, on the other hand, supported the order of the The ld. D/R, Mr. Altaf Hussain, on the other hand, supported the order of the The ld. D/R, Mr. Altaf Hussain, on the other hand, supported the order of the Assessing Officer as confirmed by the ld. CIT(A). As the assessee has not pressed for Assessing Officer as confirmed by the ld. CIT(A). As the assessee has not pressed for Assessing Officer as confirmed by the ld. CIT(A). As the assessee has not pressed for benefit u/s 47(xiv) of the Act, he submitted that capital gains have to be benefit u/s 47(xiv) of the Act, he submitted that capital gains have to be benefit u/s 47(xiv) of the Act, he submitted that capital gains have to be computed after determining the FMC of the assets u/s 56(2)(vii)(c) of the Act. He argued that the determining the FMC of the assets u/s 56(2)(vii)(c) of the Act. He argued that the determining the FMC of the assets u/s 56(2)(vii)(c) of the Act. He argued that the assessee has acquired shares in consideration for sale of his proprietary concern as a assessee has acquired shares in consideration for sale of his proprietary concern as a assessee has acquired shares in consideration for sale of his proprietary concern as a growing concern. He pointed that ld. CIT(A) has recorded that the asses growing concern. He pointed that ld. CIT(A) has recorded that the asses growing concern. He pointed that ld. CIT(A) has recorded that the assessee has not disputed or raised any objection disputed or raised any objection on the computation of the sale consideration at sale consideration at Rs.3,95,29,280/- and submitted that it is not and submitted that it is not correct for the assessee to correct for the assessee to raise this issue before the Tribunal. He relied on the order of the Assessing Officer as before the Tribunal. He relied on the order of the Assessing Officer as before the Tribunal. He relied on the order of the Assessing Officer as well as the ld. CIT(A) and submitted that the same may be upheld. CIT(A) and submitted that the same may be upheld. 9.1. On the issue of disallowance u/s 14A r.w.r. 8D, he submitted that the issue may On the issue of disallowance u/s 14A r.w.r. 8D, he submitted that the issue may On the issue of disallowance u/s 14A r.w.r. 8D, he submitted that the issue may be set aside to the file of the Assessing Officer for applying the proposition of law laid be set aside to the file of the Assessing Officer for applying the proposition of law laid be set aside to the file of the Assessing Officer for applying the proposition of law laid down by the Hon’ble Jurisdictional High Court in the case of n’ble Jurisdictional High Court in the case of REI Agro Ltd. (supra) REI Agro Ltd. (supra). For other issues, he relied on the order of the lower authorities. other issues, he relied on the order of the lower authorities. 9.2. In reply, the ld. Counsel for the assessee submitted that it is not correct on behalf In reply, the ld. Counsel for the assessee submitted that it is not correct on behalf In reply, the ld. Counsel for the assessee submitted that it is not correct on behalf of the ld. CIT(A) to record of the ld. CIT(A) to record that the assessee has not raised any dispute or objection that the assessee has not raised any dispute or objection

7 ITA No. 2292/Kol/2017 Assessment Year: 2012-13 M/s. Ravi Jalan regarding the computation of sale consideration. He pointed out t regarding the computation of sale consideration. He pointed out to o the submissions made by the assessee before the ld. CIT(A), which was extracted at page 15 of his order. the assessee before the ld. CIT(A), which was extracted at page 15 of his order. the assessee before the ld. CIT(A), which was extracted at page 15 of his order. He further submitted that the assessee has every right to dispute the computation of the assessee has every right to dispute the computation of the assessee has every right to dispute the computation of sale consideration as all the facts are on record and has this is not a new ground of sale consideration as all the facts are on record and has this is not a new ground of sale consideration as all the facts are on record and has this is not a new ground of appeal. He prayed for justice. appeal. He prayed for justice. 10. Rival contentions heard. On careful consideration of the facts and circumsta Rival contentions heard. On careful consideration of the facts and circumsta Rival contentions heard. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as of the case, perusal of the papers on record, orders of the authorities below as well as of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows: case law cited, we hold as follows:- 11. The following table shows the assets/liabilities that were transferred by the The following table shows the assets/liabilities that were transferred by the The following table shows the assets/liabilities that were transferred by the assessee to the company:-

8 ITA No. 2292/Kol/2017 Assessment Year: 2012-13 M/s. Ravi Jalan

11.1. The Kolkata ‘C’ Bench of the Tribunal in the case of The Kolkata ‘C’ Bench of the Tribunal in the case of M/s. Aravali Polymers LLP M/s. Aravali Polymers LLP (supra), at para 12 held as follows: at para 12 held as follows:- “12. ……..In the computation of capital gains, nowhere in the Act is In the computation of capital gains, nowhere in the Act is In the computation of capital gains, nowhere in the Act is there provision, more so in section 45, for deeming the sale price in t there provision, more so in section 45, for deeming the sale price in t there provision, more so in section 45, for deeming the sale price in the case of equity shares. The value at which the shares or the assets of the case of equity shares. The value at which the shares or the assets of the case of equity shares. The value at which the shares or the assets of the Company Aravali Polymers Pvt. Ltd. was taken over by the Limited Company Aravali Polymers Pvt. Ltd. was taken over by the Limited Company Aravali Polymers Pvt. Ltd. was taken over by the Limited Liability Partnership firm, would be the sale price and the cost of Liability Partnership firm, would be the sale price and the cost of Liability Partnership firm, would be the sale price and the cost of acquisition thereof is to be as per books of t acquisition thereof is to be as per books of the erstwhile Company. In he erstwhile Company. In these circumstances, the issue of computation of the capital gains these circumstances, the issue of computation of the capital gains these circumstances, the issue of computation of the capital gains under section 45 is restored to the file of the Assessing Officer, who under section 45 is restored to the file of the Assessing Officer, who under section 45 is restored to the file of the Assessing Officer, who shall take the sale consideration as on 12.10.2010 at the figure, at shall take the sale consideration as on 12.10.2010 at the figure, at shall take the sale consideration as on 12.10.2010 at the figure, at which the assets of the which the assets of the erstwhile firm has been acquired or taken over erstwhile firm has been acquired or taken over by the appellant Aravali Polymers LLP. by the appellant Aravali Polymers LLP.” 12. Applying the propositions of law laid down in the case, to the facts of the case on Applying the propositions of law laid down in the case, to the facts of the case on Applying the propositions of law laid down in the case, to the facts of the case on hand, the value of the assets taken over by the company should be considered as t hand, the value of the assets taken over by the company should be considered as t hand, the value of the assets taken over by the company should be considered as the full value of consideration for the purpose of computation of capital gains under the Act. In value of consideration for the purpose of computation of capital gains under the Act. In value of consideration for the purpose of computation of capital gains under the Act. In this case, the full value of consideration is Rs.2,70,69, this case, the full value of consideration is Rs.2,70,69,200/-. This is also, the cost of . This is also, the cost of acquisition of assets. As the cost of acquisition and the full value acquisition of assets. As the cost of acquisition and the full value acquisition of assets. As the cost of acquisition and the full value of consideration received on sale are the same figure, no capital gains has accrued or was received by the received on sale are the same figure, no capital gains has accrued or was received by the received on sale are the same figure, no capital gains has accrued or was received by the assessee. Thus, the addition under the head capital gains is hereby deleted. assessee. Thus, the addition under the head capital gains is hereby deleted. assessee. Thus, the addition under the head capital gains is hereby deleted. 13. We now deal with the findings of the Assessing Officer that the inco We now deal with the findings of the Assessing Officer that the inco We now deal with the findings of the Assessing Officer that the income in question is assessable as “income from other sources” after valuing the shares received question is assessable as “income from other sources” after valuing the shares received question is assessable as “income from other sources” after valuing the shares received by the assessee from M/s. J.S. Tradex Pvt. Ltd. under Rule 11UA r.w.s. 56(2)(vii)(c) of by the assessee from M/s. J.S. Tradex Pvt. Ltd. under Rule 11UA r.w.s. 56(2)(vii)(c) of by the assessee from M/s. J.S. Tradex Pvt. Ltd. under Rule 11UA r.w.s. 56(2)(vii)(c) of the Act. The particular sub- -section under which the Assessing Officer soug section under which the Assessing Officer sought to value the shares that were allotted by the company to the assessee, reads as follows: the shares that were allotted by the company to the assessee, reads as follows: the shares that were allotted by the company to the assessee, reads as follows:- “(c) any property, other than immovable property: (c) any property, other than immovable property:- (i) Without consideration, the aggregate fair market value of which exceeds fifty thousand Without consideration, the aggregate fair market value of which exceeds fifty thousand Without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the rupees, the whole of the aggregate fair market value of such property; aggregate fair market value of such property; (ii) For a consideration which is less than the aggregate fair market value of the property by For a consideration which is less than the aggregate fair market value of the property by For a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such an amount exceeding fifty thousand rupees, the aggregate fair market value of such an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration.” property as exceeds such consideratio

9 ITA No. 2292/Kol/2017 Assessment Year: 2012-13 M/s. Ravi Jalan 13.1. The ld. CIT(A) in his order held that the amount of Rs.1,24,54,080/ The ld. CIT(A) in his order held that the amount of Rs.1,24,54,080/ The ld. CIT(A) in his order held that the amount of Rs.1,24,54,080/- is assessable under the head short term capital gains. He has not under the head short term capital gains. He has not adjudicated the issue adjudicated the issue as to whether this amount can be brought to tax under the head “income from other this amount can be brought to tax under the head “income from other this amount can be brought to tax under the head “income from other sources”. While computing income under the head “capital gains”, the provisions of Section 56(2)(vii)(c) computing income under the head “capital gains”, the provisions of Section 56(2)(vii)(c) computing income under the head “capital gains”, the provisions of Section 56(2)(vii)(c) of the Act, cannot be invoked. of the Act, cannot be invoked. The sub-section is not applicable when the subject matter section is not applicable when the subject matter of transfer is “immovable property”, as in this case. of transfer is “immovable property”, as in this case. Moreover, an agreement of transfer , an agreement of transfer of allotment of shares was executed on 27/03/2012 and whereas, the Assessing Officer of allotment of shares was executed on 27/03/2012 and whereas, the Assessing Officer of allotment of shares was executed on 27/03/2012 and whereas, the Assessing Officer has done the valuation under Rule 11UA(1)(c)(b) on 31/03/2017 under Rule 11UA(1)(c)(b) on 31/03/2017. The exercise was . The exercise was done on 31/03/2012, for 40,000 shares were allotted at done on 31/03/2012, for 40,000 shares were allotted at a premium a premium i.e., Rs.400/- per share. If the shares are valued on the date of transfer i.e., on 27/03/2012, which is If the shares are valued on the date of transfer i.e., on 27/03/2012, which is If the shares are valued on the date of transfer i.e., on 27/03/2012, which is before the allotment of shares at a premium, the value would come to Rs.10/ before the allotment of shares at a premium, the value would come to Rs.10/ before the allotment of shares at a premium, the value would come to Rs.10/- per share. 13.2. When the assessee has been allotted certain shares as co When the assessee has been allotted certain shares as consideration for property nsideration for property transfer, then the question of value of those shares by invoking Section 56(2)(vii)(c) of transfer, then the question of value of those shares by invoking Section 56(2)(vii)(c) of transfer, then the question of value of those shares by invoking Section 56(2)(vii)(c) of the Act, does not arise. When a value the Act, does not arise. When a value is fixed for a share allotted, it reflects the market is fixed for a share allotted, it reflects the market value of the asset transferred. It is not the cas value of the asset transferred. It is not the case of the Assessing Officer that the assessee e of the Assessing Officer that the assessee has not valued the assets while transferring the same to the company. What is to be valued the assets while transferring the same to the company. What is to be valued the assets while transferring the same to the company. What is to be considered is that this exchange/barter is on a particular date. When the exchange was is that this exchange/barter is on a particular date. When the exchange was is that this exchange/barter is on a particular date. When the exchange was on 27/03/2012 and when the when the shares were allotted on 27/03/2012, the Assessing llotted on 27/03/2012, the Assessing Officer seeks to value the already allotted Officer seeks to value the already allotted shares on 31/03/2012 i.e., after allotment of 40,000 equity shares at a premium of a premium of Rs.400/- per share which g per share which gave the company premium of Rs.1,56,00,000/ premium of Rs.1,56,00,000/-. This is not permissible. Such method of method of computation is not laid down under any provision of the Act. not laid down under any provision of the Act. Thus, the same is not in accordance with Thus, the same is not in accordance with law. 14. In view of the above discussion, we delete, both the addition made under the In view of the above discussion, we delete, both the addition made under the In view of the above discussion, we delete, both the addition made under the head “Capital Gain” as well as under the head “i head “Capital Gain” as well as under the head “income from other sources” on the issue ncome from other sources” on the issue of transfer. In the result, Ground No. 2(a) of the assessee is allowed. of transfer. In the result, Ground No. 2(a) of the assessee is allowed. 15. Ground No. 3 is set aside to the file of the Assessing Officer for fresh Ground No. 3 is set aside to the file of the Assessing Officer for fresh Ground No. 3 is set aside to the file of the Assessing Officer for fresh adjudication, in accordance with law. The Assessing Officer shall a adjudication, in accordance with law. The Assessing Officer shall apply the judgment of pply the judgment of the Special Bench of the ITAT in the case the Special Bench of the ITAT in the case ACIT vs. Vireet Investments (P) Ltd. ACIT vs. Vireet Investments (P) Ltd. [2017] 82 taxmann.com 415 (Delhi - Trib.) Trib.) and take into account only those investments which are take into account only those investments which are

10 ITA No. 2292/Kol/2017 Assessment Year: 2012-13 M/s. Ravi Jalan dividend yielding with respect to disallowance u/s 14A ith respect to disallowance u/s 14A r.w.r. 8D. In the result, Ground r.w.r. 8D. In the result, Ground No. 3 is allowed for statistical purposes. No. 3 is allowed for statistical purposes. 16. Ground No. 4, is allowed and the disallowance of Rs.1,38,690/ Ground No. 4, is allowed and the disallowance of Rs.1,38,690/ Ground No. 4, is allowed and the disallowance of Rs.1,38,690/- is deleted as the total closing stock of gold which was transferred is Rs.1.99 Crores and this addition, is total closing stock of gold which was transferred is Rs.1.99 Crores and this addition, is total closing stock of gold which was transferred is Rs.1.99 Crores and this addition, is miniscule and not supported with cogent evidence. cule and not supported with cogent evidence. 17. In the result, appeal of the assessee is allowed. In the result, appeal of the assessee is allowed. Kolkata, the Kolkata, the 15th day of January, 2020 20.

Sd/- Sd/- [S.S. Godara] [J. Sudhakar Reddy J. Sudhakar Reddy] Judicial Member Accountant Member Accountant Member Dated : 15.01.2020 {SC SPS}

Copy of the order forwarded to: 1. M/s. Ravi Jalan 4, B.B.D. Bag East 1st Floor Room No. 5A Kolkata – 700 001 2. Income Tax Officer, ward – – 36(1), Kolkata 3.CIT(A)- 4. CIT- , 5. CIT(DR), Kolkata Benches, Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.