Dismissing the appeal of the revenue the court held that when the firm converted in to company by revaluation of assets from firm to company and the partners remained as share holders there is no transfer as as contemplated under S. 2(47) and 45(4) of the Act .Accordingly not liable to capital gains tax . Followed CIT v . Texspin Engineering and Manufacturing Works ( 2003) 263 ITR 345 (Bom) (HC) (AY. 2009 -10)
CIT v. Ram Krishnan Kulwant Rai Holdings P. Ltd. (2019) 416 ITR 123/ 182 DTR 468 (Mad) (HC)
S. 45(4) : Capital gains – Conversion of firm to pvt Ltd company – revaluation and transfer of assets from firm to company – Same partners as share holders- No dissolution of firm – No transfer – Not liable to capital gains tax . [ S.2(47) , 45 ]