Law:

Section:

Section 49 of the Income-tax Act, 1961 - Capital gains - Cost with reference to certain modes of acquisition - Assessment years 1968-69 to 1970-71 - Whether where capital asset became property of assessee-partner on dissolution of a firm, then cost of acquisition is deemed to be cost for which property was acquired by partnership firm and there is no provision for entitlement to set off liability of partnership in computation of capital gain - Held, yes Section 48 of the Indian Partnership Act, 1932 - Dissolution of a firm - Mode of settlement of amounts between partners - Whether merely because a partner has advanced some money over and above capital he has agreed to subscribe does not convert suit for dissolution of partnership and winding up of affairs of partnership into an action to recover a debt but it remains a suit for declaration to dissolve partnership and winding up of its affairs - Held, yes - Whether in such a case accounts are to be settled as per mode indicated in section 48 alone consequent upon dissolution of firm and not independently for recovery of amount - Held, yes FACTS The assessee-company was a partner in a firm and the entire finance to run the partnership concern had been brought by the assessee. The assessee filed a suit in the Bombay High Court for dissolution of partnership and for rendition of accounts of the partnership firm. The Court passed an ex parte decree declaring that the partnership stood dissolved and the assets and liabilities of the partnership firm along with goodwill were transferred to the assessee. The assessee disposed of plant and machinery in piecemeal in three different years and the Assessing Officer computed the capital gain resulting from such sale. The Commissioner (Appeals) dismissed the appeal against the order of the Assessing Officer. On further appeal, the Tribunal arrived at a finding that merely because a partner had advanced some money over and above the capital he had agreed to subscribe did not convert the suit for dissolution of partnership and winding up of the affairs of the partnership into an action to recover a debt but it remained a suit for a declaration to dissolve the partnership and…

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