ORDER
Chhibber, Accountant Member
1. The vital issue raised in this appeal by the assessee is whether on the facts and circumstances of the case, a partnership firm can be subjected to Gift-tax, and when a partnership firm passes its assets and liabilities as a going concern to a private limited company is it liable to Gift-tax ?
2. The assessee, M/s Jain Farm Agencies, a partnership firm was carrying on the business of manufacturing PVC since 1982. A private limited company, namely, JEF PVC Pipe (P.) Ltd. was separately formed on 21-7-1984 with the following as its shareholders :
(1) Shri Ashok Bhavarlaljain,
(2) Smt. Kantabai Bhavarlaljain.
The accounting year followed by the assessee-firm and the company was July to June.
3. On 16-9-1985, i.e. in the accounting year 1-7-1985 to 30-6-1986 (assessment year 1987-88), the running business of the partnership firm was taken over by the limited company with all its assets and liabilities at book value in terms of the Agreement executed on 25-9-1985. The firm did not own any immovable property. The Memorandum of Articles of Association was drawn and has been placed in the paper book. The Agreement by which the business was transferred to the Limited Company is to be found on pages 30 to 31 of the paper book. From the Agreement, it is seen that Party of the First Part, i.e. partners of the firm M/s Jain Farm Agencies have assigned business of M/s Jain Farm Agencies alongwith the name, assets and all liabilities, as a going concern, to JEF PVC Pipes (P.) Ltd. for a value referred to in the balance sheet of the said business drawn on 15-9-1985. It was mutually agreed between the parties to hand over all the properties to the Limited Company on 15-9-1985. As a result of the Agreement, the partners of the firm were entitled to carry on any other
business in any other name except as M/s Jain Farm Agencies and could carry on any other business except that of manufacturing and selling of PVC pipes. The consideration agreed between the parties was partly paid by way of allotment of shares of JEF PVC Pipe (P.) Ltd. to the Party of the First Part, i.e. the partners and the balance amount as was mutually agreed was to be kept as deposit with the Party of the Second Part, i.e. the Company. It was to carry interest at the rate not less than 18% per annum. The Firm also transferred licences, permission, Government orders, quotas and all such entitlements, claims etc. connected with the business of manufacture and sale of PVC pipes and Fittings. Clause 6 enumerated the liabilities taken over by the Limited Company which included all disclosed and undisclosed, disputed and undisputed liabilities on account of any tax, duty, interest, cess etc. on account of any transactions entered into by the Firm upto 15-9-1985. The Limited Company was also to take over the investment allowance reserve, subject to certain conditions.
4. Page 27 of the paper book gives details of shares allotted to the partners on transfer of business to the Limited Company. 5990 equity shares and 9000 preference shares were issued having face value of Rs. 14,99,000. The balance sheet of the Firm on the date of transfer is placed at page 15 of the paper book. It is noted that all the partners became the shareholders of the new Company and, at the time of handing over, there was no other shareholder other than the partners. Page 27 of the paper book shows that Shri Hiralal Sagarmal Jain became a shareholder subsequently on 21-3-1986 when he was allotted 250 preference shares.
5. The Company closed its accounts on 30-6-1986. At the time of closing its accounts, it had revalued its assets on the basis of valuation report, copy of which has been placed on pages 32 onwards. As per this valuation, the plant and machinery, office equipment, furniture and fixtures were revalued. Page 24 of the paper book shows that there was an increase on account of revaluation of the assets to the extent of Rs. 48,61,838. This was shown in the balance sheet of the Company as on 30-6-1986 under the head ‘Reserves and Surplus’.
6. The Assessing Officer issued notice under section 16 of the Gift-tax Act, 1958 to the Company. The reason given for issuing this notice, as stated in para 2 of the assessment order, was that on 30-6-1986, the Company had revalued the assets, namely, plant and machinery, furniture and fixtures. Additional value consequent upon valuation amounted to Rs. 48,61,858. The Assessing Officer held that considering the fact that there was a transfer and as the assets of the Company were valued at a much higher figure, it was considered necessary to issue notice under section 16. The assessee filed a ‘NIL’ return of Gift. The reasons for the assessee’s contention that there was no gift involved have been enumerated in paras 4 and 5 of the assessment order. The crux of the submissions of the assessee before the Assessing Officer was that there was no transfer and hence there was no gift and that the provisions of Gift-tax Act were
not applicable to the case of the Firm. These contentions were rejected by the Assessing Officer on the ground that the Firm and partners are separate entities for taxation purposes. According to him, the assignment deed is made between the Firm through its partners, first part and Company through its directors, second part, showed that the assets of the firm were transferred to the Company. For Gift-tax purposes, transfer included assignment also. According to the Assessing Officer there was clear transfer from the Firm to the Company, as the Firm was not dissolved till the date of transfer. The Assessing Officer then further held that the transfer could not be called a transfer to self, because both the Firm and Company were separate independent entities and it was not necessary to see who are the ultimate beneficiaries.
7. Dealing with the assessee’s contention that the approved valuer had merely valued the plant and machinery on the basis of its replacement cost was not accepted by the Assessing Officer as, according to him, the Company had substituted the valuation as per the valuation report in its balance sheet. In other words, the Company had adopted valuation of its machinery as its market price by increasing the cost as per the valuation report. Ultimately, the Assessing Officer held that the assessee’s case fell in the provisions of the Gift-tax Act, since the balance sheet showed addition on revaluation of Rs. 48,61,858. This was treated to be deemed gift and was subjected to tax. It is noticed from the assessment order that the Assessing Officer has not specified the section under which he has brought the gift to tax. In the computation he says that there is a deemed gift. He has not as to which section he wanted to invoke for taxing the alleged gift. It appears that he had section 4(1)(a) of the Gift-tax Act in mind, but if he had that section in mind, he has not given any finding in regard to adequacy of consideration or also regarding whether on the date of transfer the market value of the property exceeded the value of consideration between the parties. This was particularly because the consideration was paid partly by allotment of shares. If, thus, the consideration was in kind, it was necessary for him to find out the value of the shares on the date of transfer, which, according to him, was less than the market value of assets transferred. Similarly, he did not examine the circumstances whether the consideration fixed by the Parties was adequate or otherwise.
8. The assessee appealed to the CGT(A) who partly confirmed the order of the Assessing Officer. The reasons given by the CGT(A) are to be found on page 5 onwards of his order. The findings of the CGT(A) can be summarized as under :
(1) The Firm is an assessable entity under the Gift-tax Act.
(2) The contention that there was a transfer to self, inasmuch as all the shareholders were partners of the Firm was not acceptable. Although partners and shareholders may be the same, the running concern
belonged to the Firm which was transferred to the corporate body, i.e. Company.
(3) The decision of the Calcutta High Court in GTOv. Venesta Foils Ltd. [1980] 124 ITR 660 was distinguishable. A holding Company in that case owned a subsidiary and, therefore, there could be said to be same persons involved. But the Firm and the Company could not be said to be same persons, although partners and shareholders may be same.
(4) The assets whose market value was more was transferred at a lesser consideration. [This seems to be the reading of the CIT(A) of section 4(1)(a)].
(5) The transferee valued the assets after nine months of the transfer, but it is not the case of the assessee that in a period of nine months, due to certain exceptional circumstances, the market value of the assets rose to a figure at which it was revalued. The Assessing Officer was, therefore, justified in adopting the value of assets at market value on the date of transfer.
(6) The contention of the assessee that against the transfer of the asset at book value, the partners had been allotted shares. If there was any revaluation of the assets, consequently there would be increase in the value of the shares also would arise and there cannot be any question of gift, was not correct. Reliance of the assessee on the decision in CGTv. Motor Sales (RF) [1990] 186 ITR 419 (All.) was not correct. Thedccision of the Allahabad High Court was distinguishable on facts. In the present case, the assessee himself had revalued the entire assets and it was not a single item. Further in the assessee’s case, the consideration was received partly in allotment of shares and partly by retaining sums as deposit. Further, there were other shareholders of the Company. Thus, to the extent of other shareholders and the sums treated as deposits, there could not be any proportionate rise in intrinsic worth of the shares allotted to the partners. Moreover, the Firm transferred the assets and the consideration received was received by the partners and therefore, the increase in the intrinsic worth of the partners’ share would not be available to the firm.
(7) As regards the contention of the assessee that certain liabilities had not been allowed by the GTO, the same was considered by the CIT(A) and deduction as claimed was allowed.
It is against this order of the CGT(A) that the assessee has come up in appeal before this Tribunal.
9. Five grounds have been raised. The same are discussed and disposed of as follows :
Ground No. I (1 to 4) :
10. Ground No. I (1 to 4) reads as under :
“1.1. The Id. CGT(A) erred in confirming that a Partnership Firm is exigible to Gift-tax and in, accordingly, charging gift-tax to the appellant.
2. He further erred in this connection in holding that as the Firm has right to make gift, it shall attract Gift-tax.
3. He failed to appreciate that and ought to have held that the definition of ‘person’ given by section 2(xviii) of the G.T. Act, 1958 does not include a ‘Partnership Firm’.
4. The appellant prays that it be held that Gift-tax is not leviable on Partnership Firm and consequently the assessment of Gift-tax in the hands of appellant be quashed.”
11. Shri KA. Sathe, the learned counsel for the assessee, submitted that the Firm is not taxable entity under the Gift-tax Act because in the definition of ‘person’, though Association of Persons is included, Firm is not so included. He relied upon the decision of the Calcutta High Court in the case of Aminchand Pyarelal v. GTO[1990] 185 ITR 264. According to the learned counsel, a Firm is not liable to Gift-tax. There could not be made an assessment on a Firm which is not a taxable entity. Moreover, in this case, the transaction was between partners of the Firm on one hand and the Company on the other hand. The consideration was paid by the Company to the partners by way of allotment of shares, though partners have acted collectively in transferring the business as a going concern, the transaction could be regarded as one between the partners and the Company and charge of Gift-tax if at all could not be against the Firm as has been held by the Assessing Officer and the CGT(A).
12. Shri Adhir Jha, the learned D.R. strongly supported the orders of the authorities below. He submitted that a Firm is a taxable entity under the Gift-tax Act. In support of this contention, he relied upon the judgment of the Allahabad High Court in CGT v. S.B. Sugar Mills [l979] 120 ITR 126and the judgment of the Madras High Court in CIT v. Bharani Pictures [1981] 129 ITR 244′.
13. We have considered the rival submissions and perused the fads on record. In the case of Aminchand Pyarelal (supra), the Hon’ble High Court of Calcutta has clearly held that a Firm is not included in the definition of ‘person’ under section 2(xviii) of the Gift-tax Act and hence, the firm is not an assessable entity under the Gift-lax Act and the notice issued to a Firm will not be valid. However, in the two judgments, one by the Allahabad High Court and other by the Madras High Court relied upon by the learned D.R. and referred to supra, it has been held that Firm is not a separate legal entity and it falls within the definition of ‘person’ in the
category of ‘Body of Individuals or persons’ and hence, a Firm is liable to Gift-tax. We find that there is no judgment of the jurisdictional High Court, i.e. Bombay High Court on the issue. The judgment of the Calcutta High Court in the case of Aminchand Pyarelal (supra) is the latest of judgments quoted before us. It is now well-settled that when there are two legal opinions on an issue, the one favouring to the assessee should be followed. Accordingly, in consonance with the decision of the Hon’ble Supreme Court in CIT v. Naga Hills Tea Co. Ltd [1973] 89 ITR 236 and in CIT v. Vegetable Products Ltd [1973] 88 ITR 192, the view more favourable to the assessee has to be taken. Accordingly, following the judgment of the Hon’ble Calcutta High Court in the case of Aminchand Pyarelal (supra), we hold that the assessee-firm is not liable to Gift-lax. This ground accordingly succeeds.
Ground No. II (1 to 3):
14. In this ground, the assessee has submitted that the transaction under consideration could not be regarded as a transfer for the purpose of Gift-tax, because what was relevant was transfer of beneficial ownership and not the legal title. At the time of hearing, Shri Sathe, the learned counsel for the assessee did not press this ground, in view of the decision of the Hon’ble Supreme Court in CITv. B.M. Kharwar [1969] 72 ITR 603. This ground fails accordingly is dismissed.
Ground Ho. III (I to 4):
15. In this ground, the assessee has pointed out certain incorrect observations of the CGT(A) which are as under :
(i) There were other shareholders in the Company other than the partners.
(ii) In the present case, the assessee himself had revalued the entire assets.
(iii) The asset whose market value was more was transferred at a lesser consideration.
16. Shri Sathe, the learned counsel for the assessee, submitted that the first observation of the CGT(A) is incorrect, as on the date of transfer there were only two shareholders who were partners of the assessee-firm. The third shareholder Shri Hiralal Sagarmal Jain became a shareholder subsequently on 21-3-1986. As regards the second observation of the CGT(A), the learned counsel submitted that actually the revaluation was done much afterwards and not by the assessee-firm but by the Company. As regards the third observation, the learned counsel submitted that no attempt to find out the market value was made. There was no finding about the actual consideration passed between the parties. Shri Sathe further submitted that on the date of transfer, the partners alone became shareholders in the transferee Company. In consideration of the transfer of running business, including all the assets and liabilities, there was
exchange by way of allotment of shares to the partners and the balance was kept as partners’ deposits at the Firm’s insistence. This constituted a single transaction and it was for adequate consideration. The intrinsic value of the shares received was equivalent to the value of the assets transferred as well as liabilities and the amount shown as deposits. Consequently, the consideration received on transfer of assets and liabilities was equal to the market value of the shares and cannot be said that there was any inadequate consideration. The learned counsel, therefore, submitted that the provisions of section 4(1)(a) were not attracted. In support of his contention, he relied upon the decision of the Allahabad High Court in Motor Sales (RF)’s case (supra). The learned counsel further submitted that even though the above contention was taken before the Assessing Officer, he had made no attempt whatsoever in first pointing out the actual consideration which passed between the parties and in the absence of such finding, invoking of section 4(1)(a) on the ground of inadequacy was totally uncalled for. The learned counsel further relied upon the decision of the Madras High Court in CGTv. Indo Traders & Agencies (Madras) (P.) Ltd [1981] 131 ITR 313. Shri Sathe further relied upon the judgment of the Calcutta High Court in Venesta Foils Ltd.’s case (supra) and in Bireswar Sarkar v. GTO [1997] 223 ITR 404′.
17. Shri Adhir Jha, the learned D.R. strongly supported the orders of the authorities below. He relied upon the decision of the Bombay High Court in the case of Keshub Mahindra v. CGT [1968] 70 ITR 1 at p. 18 in regard to interpretation of adequate consideration.
18. We have considered the rival submissions and perused the facts on record. In the case of Indo Traders & Agencies (Madras) (P.) Ltd, (supra), the Hon’ble Madras High Court has held that section 4(1)(a) was intended to apply to cases where there was an attempt of evasion of tax. The Court further held that adequate consideration is not necessarily what is ultimately determined by someone-else as market value. In the case before the Hon’ble High Court, a business of a partnership firm with all its assets and liabilities were taken over by a Limited Company. One of the assets of the Firm as disclosed in the balance sheet was goodwill which was valued at Rs. 3,000. In the balance sheet of the Company, there was no mention of any goodwill. The GTO took the view that realisable value of the stock as well as goodwill over its actual cost as shown in the balance sheet was required to be taxed. The Tribunal held that the consideration in the case could not be stated to be inadequate so as to justify application of section 4(1)(a). For this purpose, the Tribunal took into account the fact that the shareholders and partners were same and that there was no question of any profit made by the shareholders which they would forgo. According to the Tribunal, this could be relevant consideration for deciding the adequacy of consideration. There was no gift, according to
the Tribunal, on the transfer of stock-in-trade. Merely because subsequently the price realised for the stock-in-trade was higher, it did not follow that on the date when the transaction took place there was a higher price for them and that should be taken as adequate consideration. It was further held that when the transfer was as a going concern, the GTO could not pick out only one item of asset, namely, goodwill alone, and try to evaluate it for arriving at the value of the gift. The High Court confirmed the findings of the Tribunal and while doing so, the High Court has extensively considered the interpretation of section 4(1)(a). As is seen from page 320 of the judgment, according to the Revenue, the adequacy of the price was to be judged only in the light of the market value of the property and there could be no other yardstick which could be applied to a situation like this. The Hon’ble High Court specifically disagreed with this proposition by stating that adequacy of the consideration has to be considered with reference to the facts of the case and the market value is not yardstick thereof and computation of market value in most cases is a matter of estimate, which may also vary, and such a variable concept would not have been made the yardstick. The Hon’ble High Court thereafter considered the decision of the Bombay High Court in CGTv. Cawasji Jehangir Co. (P.) Ltd. [1977] 106 ITR 390. As regards the interpretation of section 4(1)(a), the High Court has held as under :.
“The relevancy of the market price as shown by the provision is only to fix the quantum of the value of the gift after it is found that the transaction was for inadequate consideration. When once the GTO assumes jurisdiction and is in a position to establish that the property has been transferred otherwise than for adequate consideration, then there is no option for him but to take the market value of the property as on the date of the transfer and compare it with the value of the consideration as shown by the parties. The difference will be deemed to be a gift made by the transferor. If the Legislature had contemplated as a universal rule that the market value should alone be the criterion for testing the adequacy of consideration, the provision would have been differently worded. The wording would then have been, ‘where the property is transferred for less than its market value, then the difference between the market value and the consideration stipulated, shall be deemed to be the gift made by the transferor.’ Parliament not having made any such provision, it would not be for us to take the market value of the property for determining the adequacy of consideration in all events.”
Applying the above decision to the facts of the assessee’s case, we hold that the authorities below have not appreciated that adequacy of consideration had to be considered without taking into account the so-called market value adopted by the Company after about 10 months. This was a case where the partners of the Firm wanted to reorganise themselves as a Limited Company and it was only to change the form of business that the present transaction was entered into. The partners transferring the
business and the partners having control over the business were the same. There could not have been any intention to confer any benefit by way of gift on themselves. If any outsider was involved, possibly an allegation of gift could have been made. But in the case before us, the partners being shareholders in the Company and the purpose of the transaction was merely to reorganise the form in which the business was carried on, there could be said to be no motive for not stating the consideration. In fact, if we consider the beneficial ownership of the transferor and the transferee, it remains the same. Same persons who owned the business continued to own it despite the fact that they now owned it as a Company. There was thus an adequate consideration when shares were allotted to the partners on transfer of the business as a going concern and the allotment of shares covered the entire assets of the business. The allotment of shares, therefore, though at a stated face value, could be equivalent in its intrinsic worth of its entire asset and on that ground also, there cannot be said to be any inadequacy in consideration. In our opinion, the decision of the Madras High Court in Indo Traders & Agencies (Madras) (P.) Ltd. ‘s case (supra) is an authority for the proposition. The Assessing Officer, on one hand, has totally failed to apply any of the conditions of section 4(1)(a), the CGT(A) on the other hand, did not interpret the section correctly when he held that for the purpose of section 4(1)(a) what was relevant was the asset whose market value was more was transferred at lesser consideration. Thus, in our considered view, both the authorities below have totally failed in properly appreciating the correct interpretation of section 4(1)(a) and also to arrive at correct finding of facts as regards to adequacy of consideration.
19. We find that the CGT(A) has wrongly assumed that the revaluation was done by the assessee, whereas it was in fact made by the Company and that too, after nine months. Similarly, it was not found as a fact whether the valuation made by the Valuer on replacement basis was really the market value of the assets or not. Thus, even on this factual basis the authorities below have not applied their mind to the problem. In the case of Venesta Foils Ltd. (supra) and In Bireswar Sarkar’s case (supra), the Hon’ble Calcutta High Court has held that the transfer by the assessee of the assets at book value of the Company in which he was automatically interested or had controlling interest was not a deemed gift. It was further held that there was no explanation by the GTO for the adoption of different standards for the purpose of evaluating the value of the assets transferred and for evaluating the consideration received. The question of adequacy of consideration was the basis upon which the GTO could have assumed jurisdiction in the first place. If the same standard of valuation was adopted, both with regard to the assets transferred and the consideration received, the GTO might not have found the consideration to be inadequate, particularly when the bulk of the interest of the Company was being held by the assessee itself. In other words, what was being transferred by the assessee to the Company was being received
back by the assessee from the Company in the form of shares. In our opinion, the ratio of the above decisions squarely applies to the facts of the case before us.
20. Coming to the judgment of the Bombay High Court in Keshub Mahindra ‘s case (supra) relied upon by the learned D.R. in regard to the interpretation of adequate consideration, we hold that the same is of no assistance to the Revenue, in view of the decision of the Madras High Court in the case of Indo Traders & Agencies (Madras) (P.) Ltd. (supra) which has also considered the subsequent decision of the Bombay High Court in Cawasji Jehangir Co. (P.) Ltd.’s case (supra). In the case before us, the revaluation resulted only in book entry. The revaluation result has no significance, except to show some healthy figures in the balance sheet and there could be no advantage obtained by the transferors nor by the transferees because subsequently the Company revalued the assets.
21. In the light of above discussion, we hold that the authorities below have wrongly applied the provisions of section 4(1)(a) of the Gift-lax Act. This ground accordingly succeeds.
Ground No. IV (I to 4) :
“IV. 1. The ld. CGT(A) erred in confirming that the amount of gift is the difference between revalued figure of assets and the book value of assets at which they were transferred.
2. He erred in deeming the revalued figure of assets as the fair market value of the assets.
3. He failed to appreciate that the transferee Company had revalued the assets on the basis of replacement cost and the same cannot be equaled to value realisable on its disposal.
4. The appellant prays that it be held that ‘replacement value’ of asset cannot be taken as market value of assets.”
This ground in some sort is a repetition of the earlier ground. The assessee has contended that the transferor Company had revalued the assets on the basis of replacement cost and the same cannot be equated to value realisable on its disposal. As held above by us, no attempt has been made by the Assessing Officer or CGT(A) to find out the correct market value and that too on the dateof transfer. Accordingly, this ground succeeds and we hold that no case has been made out for invoking section 4(1)(a) and the assessment made is required to be cancelled.
22. Ground No. V reads as under :
“The appellant craves leave to reserve right to add, amend, acts or modify the above or any of the above grounds on or before the date of hearing.”
Obviously, this ground is general in nature and calls for no comments.
23. Tosum up, we conclude that the assessee Firm is not liable to tax under the Gift-tax Act and that no case has been made out for invoking section 4(1)(a) and the assessment made is accordingly cancelled.
24. In the result, the appeal is allowed. Per K.C. Singhal, Judicial Member.–
25. After going through the proposed order carefully, I entirely agree with the legal finding given by my ld, brother in para 13 of the proposed order to the effect that the “Firm” does not fall within the ambit of the definition of ‘person’ under section 2(xviii) of the Gift-tax Act, 1958 and consequently the ‘Firm’ cannot be assessed under the provisions of the charging section. The decision of Calcutta High Court in the case of Amimchand Pyarelal (supra) on which reliance is placed by the assessee is also fortified by the ratio laid down by the Hon’ble Supreme Court in the case of CWT v. Ellis Bridge Gymkhana [1998] 229 ITR 1. In that case the question was whether association of persons could be assessed to tax under the Wealth-tax Act, 1957. It was held by the Apex Court that section 3 of Wealth-tax Act, which is a charging section does not include the association of persons unlike Income-tax Act and Gift-tax Act and therefore, association of persons could not be assessed under the provisions of Wealth-tax Act. It would be useful to refer the relevant observations of their Lordships as under :
“The rule of construction of a charging section is that before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section. No one can be taxed by implication. A charging section has to be const rued strictly. If a person has not been brought within the ambit of the charging section by clear words, he cannot be taxed at all. Just like the Indian Income-tax Act, 1922, under the Gift-tax Act, 1958, and the Income-tax Act, 1961, an association of persons or body of individuals have been specifically brought in as units of assessment. It is only under the Wealth-tax Act, 1957, that the charge is on ‘every individual, Hindu undivided family and company’ and not on an association of persons or a body of individuals or a firm. If the language of section 3 of the Wealth-tax Act, 1957, is contrasted with the provisions of other cognate statutes it will clearly appear that the intention of the Legislature was not to treat an association of persons or a body of individuals or a firm as a unit of assessment for the purpose of imposition of wealth-tax.”
The aforesaid ratio laid down by the Apex Court can be applied to the present case. Section 3 of the Gift-tax Act is the charging section which provides that Gift-tax in respect of gifts made by a person shall be chargeable to tax. The word “person” has been defined in clause (xviii) of section 2 which does not include the “Firm” unlike Income-tax Act. That implied means that Legislature never intended to treat “Firm” as unit of assessment. Therefore, applying the ratio laid down by the Hon’ble Supreme Court, it is held that “Firm” cannot be assessed to Gift-tax under the Gift-tax Act, 1958.
26. Since the assessee succeeds on the preliminary ground, the discussion on merits would be merely academic one and therefore, it is not necessary for me to express any opinion on the merits of the case in view of the Special Bench of the Tribunal in the case of Rahulkumar Bajaj v. ITO [1999] 69 ITD 1 (Nag.). Accordingly, I refrain myself from expressing any view on merits of the case.
27. Subject to the aforesaid observations, the appeal of the assessee stands allowed.