Daily Archives: June 27, 2014


Aravali Polymers LLP v JCIT (I.T.A. No. 718/Kol. / 2014 dated 27.06.2014) (Kol ITAT) Background: A Private Limited Company namely Aravali Polymers Pvt. Ltd. was converted into a Limited Liability Partnership under section 56 of the ertwhile Companies Act and the assessee Aravali Polymers LLP came into existence. After the conversion of the Private Limited Company into the Assessee LLP, 31,84,807 equity shares of the East India Hotels Ltd. was sold by the appellant for an amount of Rs.53,56,69,888/- and the same was offered for taxation as long-term capital gains. After paying the capital gains tax, the assessee had approximately Rs. 49 crores profit. The assessee had also received Reserves and Surplus amounting to Rs.3,06,31,969/- of the Private Limited Company. The assessee had given an amount of Rs.50 crores as interest-free loans to the partners of the LLP. When the assessee filed its return, the assessee had offered the capital gains on the sale of the equity shares of East India Hotels Ltd. and had also claimed exemption under section 47(xiiib). The AO observed that the assessee had provided interest-free loan to the partners of the assessee-firm out of the Reserve and Surplus received by the assessee firm on the conversion. The AO held that there was violation of the provisions of section 47(xiiib) and consequently held that in view of the provisions of section 47A(4), the amount of profit and gains arising from the transfer of the capital assets or shares is to be profit and gains chargeable to tax on the assessee. The AO adopted the value of the shares in East India Hotels Ltd. held by the Pvt. Limited Company and transferred to the assessee-firm as liable to be valued at market price as on the date of the transfer. 

On violation of S. 47(xiiib) (for LLP), capital gains to be computed considering value at ...