R.S Padvekar, J.M:— The Revenue has filed this appeal challenging the impugned order of the Ld CIT(A)-Central II, Mumbai dated 6.2.2007 for the A.Y 2002-2003
2. The Revenue has taken following effective Ground
“1) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 1,42,42,000/- on account of assessee's claim of exemption u/s. 47(xii) of the I.T Act, 1961 as the assessee company failed to fulfill the conditions laid down in proviso sub-section (b) of the section 47(xiii) of the Act.”
3. The facts which reveal from the record are as under:
The assessee is a closely held company which is engaged in the business of stevedoring. The assessee filed the return of income on 29.10.2002 for the A.Y 2002-2003 declaring the total loss of Rs. 43,38,867/- which was subsequently revised to Rs. 1,85,80,867/-. The assessment of the assessee was completed u/s. 143(3), in which the A.O determined the total loss at Rs. 24,93,590/-. There was a partnership firm which was constituted in the year 1992 with two partners namely Mr. Gautam Mansukhani and Mr. Chandu Mansukhani and the said firm was carrying on the business in the name of Softchip Consultants. The assessee and one another company Centraum Finance Ltd. had advanced money to the partnership firm namely Softchip Consultant. It appears that the assessee company had become the partner in Softchip Consultant along with Central Finance Ltd. and the amount advanced by both were treated as capital contribution in the said firm in the ratio of 14% and 26% respectively. Subsequently, vide agreement dt. 22.6.2001 between the said firm and another company Software Technologies Ltd., the business of the firm, together with all rights and benefits in the business, was sold as a going concern to Software Technologies Ltd. for a consideration of Rs. 6 crores. The amount of Rs. 6 crores was converted into shares of the company in the ratio of partners in the firm. Subsequently, the firm namely Software Consultants was dissolved by the Deed of Dissolution dated 2.4.2001 The shares which were allotted to the assessee was of Rs. 168.42 lakhs. Apart from that, the assessee company was having the share in the firm to the extent of Rs. 26.28 lakhs. The difference between those two amounts i.e Rs. 1,42,42,000/- being a capital gain was claimed as exempt u/s. 47(xiii) of the Act in the revised return and the loss was enhanced from Rs. 43,38,861/- as declared in the original return to Rs. 1,85,80,861/-. The A.O rejected the claim of the assessee u/s. 47(xiii) which was made in the revised return but on this issue, the A.O has not discussed anything in the assessment order. The assessee challenged the action of the A.O declining to accept the claim of the assessee of the exemption of the capital gain u/s. 47(xiii) of the Act. Before the Ld CIT(A), the assessee pleaded that as per the agreement between the partnership firm and Private Limited Company, to which the entire business of the partnership firm was sold, it was agreed that all the partners would be allotted shares in the company in proportion to the closing balances of their capital accounts as per the audited balance sheet of the Company as on 31st March 2001. It was also contended that the other conditions for claiming the exemptions like (i) all the assets and liabilities of the firm became the assets and liabilities of the company's (ii) the partner did not receive any consideration or benefits from the company other than by way of allotment of shares in the company and (iii) the aggregate of the share holdings of the partners in the company was not less than 50% of the total voting power in the company and accordingly, as all the conditions were fulfilled as laid down in Section 47(xiii) of the Act, the amount of capital gain arising on the transfer of the business and assets to the new company was exempted from the tax. The Ld CIT(A) accepted the plea of the assessee, the operative part of the finding is as under:
“Thus, the assessee has rightly claimed the exemption U/s. 47(xiii) to the extent of Rs. 1,42,42,000/- in the revised return which should have been taken into account by the Assessing Officer. The present Assessing Officer's reply that the assessee filed only the computation statement alongwith the return of income and no P&L Account, Balance-Sheet were filed alongwith the revised return and that is the reason why the revised return was not acted upon by his Predecessor, does not carry any weight. There was no change in the P&L Account and Balance-Sheet, only change was in the computation of income. Since the assessee had rightly filed the Balance-Sheet and P&L Account alongwith the original return, there was no need to file again the same. Therefore, in view of the above discussion, I direct the Assessing Officer to delete this Rs. 1,42,42,000/- from the income of the assessee as it is exempted in view of Section 47(xiii) of the Income-tax Act.”
Now the Revenue is in appeal before us.
4. We have given our anxious considerations to the rival submissions of the parties. The facts of this case are in narrow compass. The controversy is in respect of exemption claimed by the assessee u/s. 47(xiii) of the Act. In this case, the assessee company was a partner in Softchip Consultants. The entire business along with the assets and liabilities of the firm was sold to Software Technologies Ltd., for the consideration of Rs. 6 Crores and the said amount was converted into the shares of the company and given to the partners of the firm. The position of the closing balances of the capital A/Cs as on 31.3.2002, number of shares issued and the percentage is as under:
Partners/Shareholders
Closing Balance of Share Capital on 31.3.02
Percentage%
No. of shares issued
Percent-age%
CPM
2,783,366
29.72
1,783,200
29.72
GCM
2,536,189
27.09
1,625,400
27.09
CFL
1,415,518
15.12
907,200
15.12
CSPL
2,628,818
28.07
1,684,200
28.07
Total
9,363,891
100
6,000,000
100
The A.O did not discuss anything on this issue but refused to consider the claim made by the assessee in the revised return. The relevant provision of Section 47 reads as under:
47. Nothing contained in section 45 shall apply to the following transfers:—
(i) any distribution of capital assets on the total or partial partition of a Hindu undivided family;
(ii) to (xii)…………..
(xiii) any transfer of a capital asset or intangible asset by a firm to a company as a result of succession of the firm by a company in the business carried on by the firm, or any transfer of a capital asset to a company in the course of corporatisation of a recognised stock exchange in India as a result of which an association of persons or body of individuals is succeeded by such company:
Provided that-
(a) all the assets and liabilities of the firm [or of the association of persons or body of individuals relating to the business immediately before the succession become the assets and liabilities of the company;
(b) all the partners of the firm immediately before the succession become the shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the succession;
(c) the partners of the firm do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company; and
(d) the aggregate of the shareholding in the company of the partners of the firm is not less than fifty per cent of the total voting power in the company and their shareholding continues to be as such for a period of five years from the date of the succession;
(e) the corporatisation of a recognised stock exchange in India is carried out in accordance with a scheme for corporatisation which is approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992); …….
5. For claiming exemption from capital gain, certain conditions are to be fulfilled which are narrated here-in-above. As per the chart given by the Ld CIT(A) in his order regarding the position of the capital balances of the partners in the dissolved firm and said factual position has been not controverted by the Ld. D.R It is clear from language of the Section, more particularly, Clause (B) of Section 47(xiii), that all the partners of the firm become the shareholders of the succeeding company in the same proportion in which their capital account stood in the books of the firm on the date of the succession. The argument of the Ld. D.R that the allotment of the shares to the partners were not in accordance with their profit sharing ratio as per the deed of partnership. We are unable to accept the said argument for the reason that as per the above referred clause what is to be considered for the allotment of the shares as per the position of the capital accounts of the partners in the books of account of the firm on the date of succession. It is well settled rule of the Casus Omissus as held in the case of Padmasundara Rao (Deceased) v. State of Tamil Nadu 255 ITR 147 (S.C) wherein their Lordships have held that-” It is well settled principle in law that the court can not read anything into a statutory provision which is plain and unambiguous. A statute is an edict of the Legislature. The Language employed in a statute the determinative factor of legislative intent”.
6. In the present case, as the language of Sec. 47(xiii) is very clear and in our opinion, the Ld CIT(A) has rightly allowed the claim of exemption of the assessee u/s. 47(xiii). We do not find any reason to interfere with the order of the Ld CIT(A). We, accordingly, confirm the same.
7. In the result, Revenue's appeal stands dismissed.