Law:

Section:

section 48 of the income-tax act, 1961-capital gains-mode of computation-partnership deed of assessee-firm comprising three partners stipulated that death/retirement of partner would not entail its dissolution and that share of deceased/retiring partner was to be paid by preparing general account of firm's capital assets (excluding goodwill), credits and liabilities, etc., as on date of death/retirement-assets would thereafter vest absolutely in surviving partners-on a paptner's death, firm revalued its assets as aforesaid, for crediting/debiting to estate of deceased, his share in appreciation/ depreciation of assets-business continued uninterrupted with surviving partners-whether amount so credited/debited to estate of deceased partner, qua certain shares sold by assessee subsequently, would form part of cost of acquisition for purposes of computing capital gains-held, on facts, no Facts The assessee-firm initially comprised three partners, S, J and P, having equal share. The partnership deed, inter alia,provided (i) that the death or retirement of any partner would not dissolve the partnership; (ii) that on death or retirement, a general account would be taken by and between the surviving partners and the legal representatives of the deceased partner of the capital assets (excluding goodwill), credits, liabilities and the transactions of the partnership ; and (iii) that the whole of the partnership business and the assets, effects, outstandings and credits would absolutely vest in and belong to the surviving partners for their own benefit. When S died on 23-10-1961, the assessee-firm got its assets, both movable and immovable, valued as aforesaid, and credited/debited the estate of the deceased with his one-third share in the appreciation/depreciation of the assets by corresponding debit/credit to the account of the relevant asset. The two surviving partners continued the firm and carried on the business without any break. During the succeeding two assessment years, the assessee sold some shares, held by it as investments. For computing capital gain for tax purposes, it took the difference between the sale price and the original cost plus or minus the…

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