UMICORE AUTOCAT INDIA PRIVATE LIMITED ( ORIGINAL APPELLANT UMICORE ANANDEYA (INDIA) PRIVATE LIMITED),ZUARINAGAR, GOA vs. INCOME TAX OFFICER, WARD - 2,, MARGAO
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Income Tax Appellate Tribunal, PANAJI BENCH, PANAJI
Before: SHRI R.S. SYAL & SHRI S.S.VISWANETHRA RAVI
आदेश / ORDER
PER R.S.SYAL, VP :
These two appeals by the assessee relate to the assessment
years 2009-10 & 2010-11. Since a common issue is raised in these
appeals, we are, therefore, proceeding to dispose them off by this
consolidated order for the sake of convenience.
2 ITA Nos.118 & 119/PAN/2019 Umicore Autocat India Private Limited
A.Y.2009-10 :
The assessee has raised an additional ground to the effect that
the Assessing Officer wrongly assessed short term capital gain of
Rs.2.96 crore and odd on conversion of partnership firm into a
Private Limited Company under Part IX of the Companies Act,
1956. This being a legal ground, going to the root of the matter, is
admitted for disposal on merits.
Briefly stated, the facts of the case are that there was a
partnership firm with the name and style of M/s. Anandeya Zinc
Oxides Pvt. Ltd., which set up its plant for manufacture of high
purity while seal zinc oxide in 1994 and commenced production in
1995. The partnership firm continued to claim depreciation. Later
on, M/s. Anandeya Zinc Oxides Pvt. Ltd. was incorporated
succeeding the erstwhile firm M/s. Anandeya Zinc Oxides. The
conversion of firm into a Private Limited company was effected on
13-09-2005 under Part IX of Indian Companies Act. Thereafter,
M/s.Umicore Finance Luxembourg, a non-resident company, firstly
purchased 99.96% of the shares of the Indian company, namely,
M/s. Anandeya Zinc Oxides Pvt. Ltd. and later on the remaining
shares as well. Control and Management of M/s.Umicore Finance
Luxembourg is outside India. M/s. Anandeya Zinc Oxides Pvt. Ltd.
3 ITA Nos.118 & 119/PAN/2019 Umicore Autocat India Private Limited
is a wholly owned subsidiary company of M/s.Umicore Finance
Luxembourg. The conversion of partnership firm into M/s.
Anandeya Zinc Oxides Pvt. Ltd. was not regarded as a transfer
within the meaning of section 2(47) of the Act and no capital gain
was charged to tax in the A.Y. 2006-07. The AO opined that, by
acquisition of the entire share capital of M/s. Anandeya Zinc Oxides
Pvt. Ltd. by M/s.Umicore Finance Luxembourg, it violated the
mandate of proviso to clause (d) of section 47 (xiii) of the Act and
hence, exemption from capital gain enjoyed by the assessee firm
upon conversion into company became chargeable to tax.
M/s.Umicore Finance Luxembourg, being, a non resident company
approached the Authority for Advance Ruling (AAR) on the
taxability of such capital gain. The Authority held that no capital
gain accrued or arose at the time of conversion of partnership firm
into Private Limited company and the position did not change in
terms of non-compliance of section 47(xiii) by reason of the
premature transfer of shares. The Revenue preferred writ petition
against the ruling of the AAR. During the pendency of the writ
petition, the AO held that there was such short term capital gain of
Rs.2.00 crore to the assesssee and as such depreciation of
Rs.68,79,894/- was not allowed. The ld. CIT(A) affirmed the view
4 ITA Nos.118 & 119/PAN/2019 Umicore Autocat India Private Limited
point of the AO, against which the assessee has approached the
Tribunal.
After considering the rival submissions and perusing the
relevant material on record, it is found as an admitted position that
the AAR ruled in favour of the assessee that no liability towards the
capital gain was attracted on the assessee acquiring the full share
capital of the company. This was done through its order dated
12-03-2010. The Revenue’s writ petition before the Hon’ble
Bombay High Court came to be dismissed on 25-11-2016, thereby,
affirming the view point of the AAR. The effect of the affirmation
of the ruling by the Hon’ble High Court is that no liability is
attracted towards the capital gain - whether short term or long term.
Resultantly, the depreciation allowed has to be withdrawn. In view
of this, Ground No.1 of the assesses’ appeal against the
disallowance of depreciation on the transfer value of the asset to the
extent of Rs.68,79,894/- is dismissed and Ground No.2 against the
gain on transfer of technical know-how being treated as short term
capital gain to the extent of Rs.2.00 crore, as against the without
prejudice claim of the assessee of the same being long term capital
gain, is also dismissed as having become infructuous. The
5 ITA Nos.118 & 119/PAN/2019 Umicore Autocat India Private Limited
assessee’s additional ground about no liability towards capital gain
is allowed.
A.Y. 2010-11 :
The only issue raised in this appeal is against not allowing
depreciation on the transfer value of the asset to the tune of
Rs.55,51,642/-. The ld. AR fairly admitted that in view of the
judgment of Hon’ble Bombay High Court affirming the AAR
ruling, this ground is to be decided against the assessee. We order
accordingly.
In the result, the appeal for the A.Y. 2009-10 is partly allowed
and that of A.Y. 2010-11 is dismissed. Order pronounced in the Open Court on 05th October, 2023.
Sd/- Sd/- (S.S.VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; िदनांक Dated : 05th October, 2023 सतीश आदेश की �ितिलिप अ�ेिषत/Copy of the Order is forwarded to: अपीलाथ� / The Appellant; 1. ��थ� / The respondent 2. 3. The Pr.CIT , Panaji 4. DR, ITAT, Panaji Bench, Panaji गाड� फाईल / Guard file. 5. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune
6 ITA Nos.118 & 119/PAN/2019 Umicore Autocat India Private Limited
Date 1. Draft dictated on 04-10-2023 Sr.PS 2. Draft placed before author 04-10-2023 Sr.PS 3. Draft proposed & placed before JM the second member 4. Draft discussed/approved by JM Second Member. 5. Approved Draft comes to the Sr.PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *
