COMMISSIONER OF INCOME TAX Vs. MOHAMMED ZAKIR

JUDGEMENT

(1.) Can, a person borrow from himself and whether the 'sole proprietor' and his 'business concern' can be treated as two separate entities in the realm of the assessment of long term Capital Gain Tax. Is it not necessary to satisfy all the requirements under Section 47 (xiv) [proviso a, b and c] of the Income Tax Act [herein after referred to as 'Act'] separately, to have exemption from the transfer envisaged under Section 45 of the Act, involving taxability/exigency to tax. Is the Tribunal justified in passing the order under challenge in this appeal, in favour of the assessee, treating the amount in the current account of the proprietorship concern, as a 'loan to the proprietor', which was stated as taken over by the Company, despite the absence of any such case before the Commissioner, whose order under Section 263 of the Act was subjected to challenge before the Tribunal at the instance of the assessee? These are the substantial questions of law, on which the parties were heard in this appeal.

(2.) The respondent assessee was running a proprietorship concern under the name and style as KAP (India) Constructions, Thrissur. The said establishment, which was pursuing business in civil construction on contract basis, was having the head office at Bangalore and site offices at different places, including in Kerala. The proprietorship concern was run upto 30.09.2000 and thereafter, it was taken over by a limited Company by name KAP (India) Projects and Constructions (P) Limited, with all the assets and liabilities of the former, as per the terms agreed and settled.

(3.) The respondent assesee filed return for the year 2001 - '02, declaring a total income of Rs. 47,83,440/-; of course revealing the income received from the proprietorship concern up to 30.09.2000 and income from other sources as well. Pursuant to scrutiny under Section 143(3) of the Act, the assessment was finalized by the assessing officer as per Annexure A order dated 30.10.2003, treating the assessed income as Rs.50,49,130/- and fixing tax liability accordingly.