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Section 52, read with section 2(47) of the Income-tax Act, 1961 - Capital gains - Understatement of consideration for transfer - Whether no transfer of immovable property of firm can be made by it to its partners by mere entries in its books - Held, yes - Whether, therefore, properties so transferred have to be treated and assessed as those of firm and, consequently, income arising from those properties must be assessed in hands of firm and not in hands of partners - Held, yes FACTS The ITO, treating the entries in the firm's books as transfer of immovable property by the firm to its partners, proceeded to assess the income from the property in question in the hands of the individual partners, while at the same time, this income was also treated as that of the firm. The AAC on appeal, deleted this addition from the income of the assessee-partners. This order was upheld by the Tribunal. On reference: HELD In the case of the firm, reported as CIT v. Bharati Engineering Corporation [1989] (1989) 180 ITR 32 (Punj. & Har.), it has been held that no transfer of immovable property of the firm can be made by it to its partners by mere entries in its books. This being so, the properties, so transferred, have to be treated and assessed as being those of the firm and, consequently, the income that arises from these properties must be assessed in the hands of the firm and not the partners. In view of the said decision it was to be held in the instant case that Tribunal was right in deleting the property income from the total income of the assessee on the footing that the transfer of property by the firm to partners by means of book entries was inoperative. Note : The decision was in favour of the assessee. CASE REFERRED TO CIT v. Bharati Engg. Corpn. [1989] (1989) 180 ITR 32 (Punj. & Har.). L.K. Sood for the Applicant. K.K. Cuccria, D.R. Miglani and Anil Miglani for the Respondent. JUDGMENT S.S. Sodhi, J-The matter here pertains to what purported to be a transfer of immovable property of the firm to three out of its four partners by mere entries in the books of the firm without any deed of registration. This question had earlier arisen while dealing with the case…

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