DCIT vs. Univercell Telecommunications India Pvt. Ltd.
TS-721-ITAT-2022 (Chennai) A.Y.: 2009-10
Date of order: 7th September, 2022 Sections: 45, 47, 47A
37. Despite violation of conditions for grant of exemption on conversion of proprietary concern into a company, transfer of goodwill `at cost’ will not be taxable.
FACTS
The assessee company came into existence as a result of conversion of M/s Univercell Telecommunications, a proprietary concern of Mr. Satish Babu into a company on 28th September, 2005. Transfer of assets and liabilities of proprietary concern to the assessee has been treated as exempt u/s 47(xiv) of the Act. In the course of assessment proceedings, the AO noticed that as a result of transfer of shareholding by Mr. Satish Babu within a period of five years from the date of conversion, the conditions prescribed have been violated. The AO invoked section 47A of the Act and assessed the difference between the assets and liabilities of the assessee company as long term capital gain and added it to the total income of the assessee.
Aggrieved, the assessee preferred an appeal to the CIT(A) and contended that assuming that the provisions of section 47A are triggered because of violation of conditions prescribed in section 47(xiv) there is still no liability to capital gains tax because the difference between assets and liabilities has been determined by the AO by excluding cost in
