9911796707
|
Home
Issues:
1. Whether the case falls under section 2(47) of the Income-tax Act, 1961, and if capital gain is taxable for the assessment year 1964-65. 2. Whether the Tribunal was justified in directing the re-computation of penalty under section 271(1)(a) of the Income-tax Act, 1961, based on reduced total income after deletion of capital gains. Analysis: The case involved a dispute where the assessee entered into an agreement for purchasing land, leading to an arbitration award requiring the parties to form a partnership. The main issue was whether the contribution of plots by the assessee to the partnership constituted a "transfer" under section 2(47) of the Income-tax Act, 1961, making the capital gain taxable. The Income-tax Officer held the assessee liable for capital gain tax, but the Tribunal overturned this decision, stating that the contribution of plots did not amount to a transfer for tax purposes. The first issue was addressed in light of the Supreme Court decision in Sunil Siddharthbhai v. CIT [1985] 156 ITR 509, which clarified that transferring capital assets to a firm as a capital contribution constitutes a transfer under section 45 read with section 2(47) of the Income-tax Act, 1961. However, the Court emphasized that such contribution does not attract capital gains tax as the consideration includes future profits, losses, and assets of the firm, making it impossible to evaluate the consideration acquired by the partner at the time of contribution. As the partnership in this case was deemed genuine, the Court held that the capital gain was not taxable for the assessment year 1965-66. In conclusion, the Court ruled that the case fell within the scope of section 2(47) of the Income-tax Act, 1961, and capital gain was not applicable to the assessee for the specified assessment year. Consequently, the second issue regarding the re-computation of penalty under section 271(1)(a) was answered in favor of the assessee.
|
