Law: Income Tax Act, 1961

Section: 45

Income Tax----Capital gains---Firm---Contribution of assets by partner constitutes transfer within the meaning of S.45---Question whether capital gains arose when amount was credited in both capital account and current account of partner not considered by Tribunal---Matter remanded---Indian Income Tax Act, 1961, S.45. The assessee was an individual and in the accounting year relevant to the assessment year 1977-78, the assessee entered into a partnership agreement with two private limited companies. The assessee brought into the business of the partnership, buildings and lands valued at Rs.30,000 and Rs.1,50,000, respectively. The business of the partnership was stated to be m real estate, letting out or hiring of properties, construction of flats, shops, houses, etc. The partnership was to commence on April 1, 1976, and the partnership was dissolved on March 30, 1977. The partnership assets were allotted to the erstwhile partners. The Income-tax Officer for the assessment year 1977-78. assessed a sum of Rs.66,892 under the head "Capital gains" by deducting from the value of the land and building brought by the assessee to the partnership firm valued at Rs.1,80,000 the cost thereof which he determined at Rs.1,13,103. The Tribunal held that there was no transfer of capital assets when the assessee made over the capital assets to the firm as his contribution and, therefore, no liability under the capital gains arose in that transaction. On a reference: Held that in Sunil Siddharthbai v . CIT (1985) 156 ITR 509 (SC) the Supreme Court held that where a partner of a firm makes over capital assets which are held by him, to a firm as his contribution towards capital, there is a transfer of capital asset within the terms of section 45 of the Act, because an exclusive interest of the partner in personal assets is reduced, on their entry into the firm, into a shared interest. Therefore, the Tribunal was not correct in holding that there was no transfer of property when the partner introduced his capital asset as his capital contribution. The further question that remained was whether it was possible to evaluate the partner's interest by the credit of certain amount in…

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