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TMI Blog1984 (7) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the ITO noticed that the assessee claimed depreciation on enhanced value of some old machinery and building used previously by a firm of the same name Ashok Theatres, Shamli. Since the ITO was not convinced about the genuineness of the claim, he took recourse to section 43(1) of the Income-tax Act, 1961 (' the Act '). After getting the approval of the IAC in this behalf the ITO revalued the assets as follows : By the assessee By the ITO Rs. Rs. Building 4,00,000 1,18,010 Engine 30,000 13,372 Cinema machinery 20,000 462 Cooling plant 30,000 10,058 Fans 5,000 487 Furniture 25,000 1,841 Car 10,000 Nil Scooter Nil 189 The ITO, accordingly, allowed the claim of depreciation on the above basis. 4. Aggrieved by the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not open to the AAC to upset the finding without any basis. The question whether there has been dissolution of the firm and upon such dissolution a new firm has succeeded to the old firm is a question which depends upon the intentions of the parties to be gathered from the document or documents, if any, executed by and between the partners and other facts and surrounding circumstances of the case as held the hon'ble Supreme Court in the case of CIT v. Pigot Chapman Co. [1982] 135 ITR 620. Whether the old firm was dissolved and the new firm was rightly constituted was a subject-matter of claim before the ITO and the ITO satisfied himself about the genuineness of the claim and allowed registration. As such the AAC cannot upset the fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iginal partners of the dissolved firm decided to reconstitute a new firm by admitting another partner. In that process they revalued the assets of the old firm and introduced them in the new firm at its enhanced value just to get the benefit of higher depreciation allowance. In this view of the matter, it is not necessary any longer for the revenue to prove that the transfer was with the intention to reduce the tax liability. The purpose being evident, no further proof is necessary. With regard to the valuation also the learned senior departmental representative contended that the valuation being done by the partners on mutual agreement without taking the advice of an expert in this regard, the same cannot be accepted and has to be revalued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tnership shall be the actual cost to the respective partners as held by the hon'ble Delhi High Court in the case of Raj Narain Agarwala v. CIT [1970] 75 ITR 1. Similar view is held by the Allahabad High Court in the case of Matrumal Dhanna Lal. When there was dissolution and the assessee as a partner in that dissolved firm received assets, then the valuation of that assets taken or given to it while making allocation of assets of partnership would be the actual cost to the assessee. In this case the dissolution deed of 1-4-1978 specifically allotted the share of each partner after valuing the entire capital assets consisting of building, shops, land under cinema and machinery, fans and cooling plant, furniture and fixtures at Rs. 5,20,000. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to the requirements of the section. Since the existing partners wanted to enter into a new partnership with another firm, they consider it necessary to increase their capital contribution by revaluing the assets. It is not the case of the revenue that the valuation made by the partners for the assets in question are not market value. 9. The next objection raised appears to be that the market value fixed in the instant case do not represent the written down value of the assets taken over from the other assets. This cannot be a valid reason for treating the transaction as for the purpose of reducing the tax liability. There is no such restriction in law and the partners can distribute their shares at the time of dissolution either accord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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