Law:

Section:

Section 45 of the Income-tax Act, 1961 - Capital gains - Chargeable as - Assessment year 1989-90 - Whether by retirement of a partner of a firm there is no transfer of assets in favour of surviving partners within meaning of section 45(4) chargeable to capital gains - Held, yes - Whether catena of decisions it could be said that when a partnership is reconstituted by adding a new partner, there is no transfer of assets within meaning of section 45(4) - Held, yes - Whether ownership of property of a firm does not change even with change of constitution of firm - Held, yes FACTS The assessee-firm originally had five partners. Subsequently, there was a change in the constitution of the partnership, when two more partners were admitted. At the time of new partnership there was a revaluation made in respect of the assets of the firm. It was agreed that the difference representing enhancement by revaluation of the assets would be credited to the accounts of the original partners and the two new partners would have no share in it. The fixed assets of the firm had been revalued and that revaluation was credited equally in the accounts of the original five partners. During the accounting year relevant to the assessment year 1989-90, the original five partners retired and the business was continued by the partnership consisting of the surviving two partners. A deed of retirement was executed between the two continuing partners on the one hand and the five retiring partners on the other. The retiring partners were entitled to the credit balances in their accounts with the firm. The Assessing Officer invoked section 45(4) on the ground that on retirement of five partners taking of the enhanced value for the assets amounted to a transfer of capital assets and, thus, the profit arising from the transfer was liable to tax as the income of the assessee. On appeal, the Commissioner (Appeals) deleted the addition on the ground that there was neither dissolution of the firm nor distribution of capital assets when the partners retired from the firm. On further appeal, the Tribunal confirmed the order of the appellate authority. On reference : HELD What is postulated under section…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492