[CIT v. Well Pack Packaging, (2009) 309
ITR 338 (SC)]
The respondent-assessee was a partnership firm.
On August 30, 1995, it filed its original return of income in respect of the
A.Y. 1995-96 declaring a total income of Rs.1,93,930. The said return was
processed u/s.143(1)(a) of the Income-tax Act, 1961 (for short, ‘the Act’), on
January 29, 1996. Subsequently, the Assessing Officer noticed that the
assessee had revalued the depreciable assets and enhanced the value at
Rs.1,28,13,831 on July 31, 1994. It was also noticed by him that the
partnership firm was converted into a company under Part IX of the Companies
Act, 1956, and was registered as such u/s.567 of the said Act on October 17,
1994. Therefore, proceedings u/s.148 of the Act for reassessment were
initiated. After considering the explanation of the respondent, the Assessing
Officer determined the total income of the respondent at Rs.1,30,07,761. The
Assessing Officer made an addition of capital gains of Rs.1,28,13,831 on
account of transfer of the depreciable assets at enhanced value on conversion
to company under Part IX of the Companies Act , which was a separate entity.
The Commissioner (Appeals) dismissed the appeal. The Tribunal allowed the
appeal and set aside the orders of the Commissioner (Appeals) and the
Assessing Officer.
Before the High the following four questions of
law were said to be arising from the order of the Tribunal :
“(1) Whether the Income-tax Appellate Tribunal
is right in law and on the facts of the case in holding that revaluation of
the assets of the assessee-firm and subsequent conversion of the firm into
limited company under Part IX of the Companies Act which has taken over such
assets at the enhanced value will not result into any capital gains
liability under the Income-tax Act ?
(2) Whether the Income-tax Appellate Tribunal
is right in law and on the facts of the case in holding that there is no
transfer involved when the assessee gets itself registered under Part IX of
the Companies Act, 1956 ?
(3) Whether the Income-tax Appellate Tribunal
is right in law and on facts of the case in holding that the assessee is not
liable to any capital gains tax either u/s.45(1) or u/s.45(4) of the
Income-tax Act ?
(4) Whether the Income-tax Appellate Tribunal
is right in law and on the facts of the case in directing to delete the
addition of Rs.1,28,13,831 ?”
The High Court, by the impugned order, dismissed
the appeal by passing a short order observing, that no question of law much
less a substantial question of law arose from the order of the Tribunal.
On an appeal, the Supreme Court held that it did
not agree with the view taken by the High Court. In its opinion, the questions
of law as raised by the Revenue before the High Court were substantial
questions of law which arose from the order of the Tribunal.
