Law: Income Tax Act, 1961

Section: 256,28,45

(a) Income-tax----Reference---Capital gains---Business---Firm---Business income or capital gains---Firm constituted to construct multi-storeyed building---Sale of part of building---Subsequent dissolution of firm and formation of new firm---Sale of part of building by new firm---Profits whether assessable as business income or capital gains---Question of law---Indian Income Tax .Act, 1961, Ss. 28, 45 & 256(2). If, the assessee, was a firm which came into existence on August 8, 1970 through a deed of partnership duly executed. The object of the partnership was to construct a multi-storeyed commercial building. The firm was dissolved on March 17, 1979, on completion of the project for which it was constituted. For the assessment years 1972-73 to 1977-78, it was held by the Income-tax Appellate Tribunal that the assessee was engaged in real estate business and, therefore, the land held by it was its stock-in-trade. Up to March 17, 1979, nearly. half of the building constructed by the assessee had. been sold. The income from the sale of portions of the building was¬ being assessed as income from business and not as income by sale of capital assets. On March 19, 1979, there was a change in the constitution of the firm. The then existing firm was dissolved. Hotel HPL, one of the partners of the then firm, disassociated itself from the firm and the remaining partners constituted a new. firm. A deed of dissolution (of the old firm) and a deed of partnership (for the new firm) were executed on the same day. Various assets and liabilities of . the erstwhile firm were revalued for the purpose of distribution amongst the partners. The multi-storeyed building was valued at a price mutually agreed upon by the partners inter se. What was distributed to the partners was ploughed back as capital of the partners in the new firm at the same valuation at which it was distributed in the final accounts of the previous firm. Incidentally, till March 17, 1979, stock-in-trade was valued by the then firm as per book value; i.e., the actual cost of land plus the total amount spent on construction. The valuation agreed upon-between the partners by mutual consent was at variance with…

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