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Section 45 of the Income-tax Act, 1961 - Capital gains - Chargeable as - Assessment year 2003-04 - Taking over of assets of firm by a company and allotting shares to partners of firm as per their holding in firm would not give rise to profit chargeable to capital gain under section 45(4) [In favour of assessee] The assessee-firm came to an end on 31-3-1995 and the co-partners of the firm, by a deed of settlement 28-3-1995, mutually settled their holdings of the subscribed capital amongst themselves as members of the joint stock company and also agreed to take over certain number of shares of the newly constituted limited company. The Assessing Officer held that the transaction of taking over the assets of the firm by the company and allotment of shares to the erstwhile partners constituted 'transfer' chargeable to tax under section 45(4). The Commissioner (Appeals) dismissed the assessee's appeal. On second appeal, the Tribunal deleted addition holding that taking over of the assets of the firm by a company and allotting shares to the partners of the firm as per their holding in the firm would not give rise to profit chargeable to capital gain under section 45(4). On the revenue's appeal: Held that no capital gain under section 45(4) would be attracted in the instant case. CASE REVIEW Artex Manufacturing Co. v. CIT[1981] 131 ITR 559 (Guj.), CIT v. A.N. Naik Associates[2004] 265 ITR 346 (Bom.) and Suvardhan v. CIT[2006] 287 ITR 404 (Karn)distinguished. CASES REFERRED TO Artex Manufacturing Co. v. CIT [1981] 131 ITR 559/5 Taxman 109 (Guj.) (para 8),Suvardhan v. CIT [2006] 287 ITR 404/156 Taxman 229 (Kar.) (para 8), CIT v. A.N. Naik Associates [2004] 265 ITR 346/136 Taxman 107 (Bom) (para 8), CIT v.Texspin Engg. & Mfg. Works [2003] 263 ITR 345/129 Taxman 1 (Bom) (para 8),CIT v. Kunnamkulam Mill Board [2002] 257 ITR 544/125 Taxman 802 (Ker.) (para 8) and CIT v. Vijayalakshmi Metal Industries [2002] 256 ITR 540/[2003] 132 Taxman 49 (Mad.) (para 8) JUDGMENT Ajay Kumar Mittal, J. - This appeal under section 260A of the Income-tax Act, 1961 (in short "the Act"), against the order dated April 28, 2000, annexure A 3, passed by the Income-tax Appellate Tribunal,…

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