Law:

Section:

Section 187 of the Income-tax Act, 1961 - Firm - Change in constitution of - Assessment year 1975-76 - One of partners of assessee-firm sold his share in assets of said firm on 8-4-1974 - Remaining partners executed release deed on 17-4-1974 - All partners executed deed of dissolution on 24-6-1974 stating therein that firm had discontinued its business from 12-4-1974 and should be deemed to have dissolved by mutual consent - Tribunal held that firm was not dissolved on 12-4-1974 but on 24-6-1974 when deed of dissolution was executed - Whether finding Tribunal was finding of fact and no question of law arose from its order - Held, yes Section 45, read with section 41(2), of the Income-tax Act, 1961 - Capital gains - Chargeable as - Assessment year 1975-76 - Whether on facts stated under head 'Firm - Change in constitution of', title to property could pass to transferee only after execution of release deed which was executed by remaining partners on 17-4-1974 and, therefore, transfer could only be by firm and capital gain on such transfer was assessable in hands of assessee-firm and not in hands of individual partners - Held, yes FACTS The petitioner-firm consisting of four partners had constructed a building on the properties belonging to it and was running a Lodge there. One of its partners sold his share in the assets of the firm on 8-4-1974 to a certain party. On 17-4-1974 the other three remaining partners partner executed a release deed in favour of the same party. On 24-6-1974, the four partners executed a deed of dissolution of the partnership stating therein that the firm had discontinued its business from 12-4-1974 and should be deemed to have dissolved by mutual consent with effect from 12-4-1974. In the relevant assessment year the ITO computed the capital gains profits under section 41(2) in the hands of the firm holding that the dissolution of the firm was effective only from 24-6-1974, when the deed of dissolution was executed. However, the Commissioner (Appeals) accepted the plea of the assessee. On further appeal, the Tribunal held that there was an effective transfer of the properties to the transferee only after the execution of the release…

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