9911796707
TMI Blog2012 (2) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... ghth and ninth grounds are general in nature which requires no adjudication and, hence, the same are dismissed. 3. The ground No.7 relates to the issue of levy of interest under sections 234B and 234C of the Act. Levy of interest under sections 234B and 234C of the Act is mandatory and consequential in nature and, hence, this ground is not maintainable. 3.1. The remaining grounds, namely, ground Nos.2, 3, 4 and 5 relate to the issue of computation of long term capital gains [LTCG]. 3.2. Subsequently, the assessee firm in its application dated 18.10.2010 has raised an additional ground which reads as follows: 1. Without prejudice to the above grounds of appeals, the case of the appellant falls within section 49(i)(iii) (a) of the Act there being a succession, inheritance or devolution , the cost of acquisition has to be taken as the cost of acquisition to the previous owner and in computing the capital gains that cost of acquisition or the cost of the asset as on 1.4.1981 at the option of the appellant should be allowed and in addition that cost has to be increased by cost inflation index in terms of section 48 of the Act. 3.2.1. After due consideration of the Ld. Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cost shown as per the books of account as on 1.4.1981 and not the fair market value (FMV) as on 1.4.1981 as contended by the assessee. Therefore, the AO adopted the value of Rs.2,70,975/- as taken in the books of accounts on 1.4.1981 when this asset was introduced as an asset of the assessee firm. Accordingly, the AO worked out the index cost of the acquisition at Rs.14,06,360/- and reducing the same from the net consideration arrived at the LTCG at Rs.5.83,95,652/- instead of Rs.4.44 crores disclosed by the assessee. The reasons given by the AO to adopt the book value as cost of acquisition are as follows: (i) that the contention of the assessee would have been true, if the asset was acquired in any of the modes as described in section 49 of the I.T. Act, 1961 and as it is not falling in those modes in the instant case; (ii) the cost of acquisition of the asset brought into the firm by a partner as capital contribution is to be that value which was credited in the books of the firm, based on the decision in the case of Rajdoot Hotel Enterprises Corporation v. CIT 167 ITR 167 (MP). 6. The assessee being aggrieved of the re-computation of LTCG carried the matter in appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the immovable property having been acquired in the year 1971, the market value of the property as in 1971 as increased by the cost of inflation index and other expenses for the conversion of the land for industrial use should have been allowed as a deduction u/s 48 of the Act while computing the Capital Gains; and that the CIT (A) had, further, failed to recognize that the value taken was supported by a Registered Valuer s report as on the date of the formation of the firm and as increased by the cost of inflation index, if any, as the cost of acquisition for computation of Capital Gains. (iii) The Ld. Sr. Counsel further argued that the CIT (A) failed to appreciate that there was no cost of acquisition for the firm since the asset was already in the books of account of the proprietary concern which was, subsequently, converted into a partnership firm by an agreement of partnership entered into between the erstwhile proprietor and the new partners without change in the book value of the asset and, therefore, the book value of the asset as on the date of conversion of the proprietary concern into a partnership firm cannot be taken as the cost of acquisition of the asset. In con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valued with some cost. As the property belonged to the firm was taken out and was divided among partners during the subsistence of the firm the assessee s account was debited with Rs.9400/- and, thereafter, he had sold that property for a consideration. Considering the facts of the issue, the Hon ble Madras High Court held that the assessee was bound by the cost as shown in the books of the firm, as well as its own books and the value which the parties put for the lands was not a notional one but a real one whereas in the case on hand the property not having been revalued, the value taken in the balance sheet of the partnership firm was, evidently, notional. We are, therefore, of the considered view that the case law relied on by the Ld. CIT (A) to justify his stand is clearly distinguishable. We have, with due respects, perused the ruling of Kalooram Govindram v. CIT reported in (1965) 57 ITR 336 (SC). The issue before the Hon ble Court was obviously distinguishable to the facts of the issue on hand. 7.2.2. At this juncture, we would like to recall the ruling of the Hon ble highest judiciary of the country in the case of Sunil Siddharthbhai v. CIT reported in (1985) 156 ITR 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision is fundamental to the computation machinery incorporated in the scheme relating the determination of the charge provided in section 45, such a case must be regarded as falling outside the scope of capital gains taxation altogether. After applying the earlier ruling in the case of CIT v. B.C. Srinivasa Setty (1981) 128 ITR 294 (SC), it was held: Accordingly, that, when the assessee, a partner in a firm, made over to the firm certain shares in a company which were held by him there was a transfer of the shares, but that he received no consideration within the meaning of section 48. Nor id any profit or gain accrue to him for the purpose of section 45. If the transfer of the personal asset by the assessee to a partnership in which he is or becomes a partner is merely a device or ruse for converting the asset into money which would substantially remain available for his benefit without liability to income-tax on a capital gain, it will be open to the income-tax authorities to go behind the transaction and examine whether the transaction of creating the partnership is a genuine or a sham transaction and, even where the partnership is genuine, whether the transaction of tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other hand, the Ld. AO had relied on the ruling of the Hon ble Madhya Pradesh High Court in the case of Rajdoot Hotel Enterprise Corporation v. CIT cited supra to justify his stand. The issue before the Hon ble Court, in brief, was that the assessee firm consisted of eight partners and was constituted in 1967. The partners of the firm had purchased a piece of land for a sum of Rs.1.25 lakhs in 1965. The partners transferred the land to the firm. A land account was opened in the books of the firm to which the sum of Rs.2 lakhs was debited and a corresponding credit was given to the capital accounts of the eight partners to the extent of the share of each partner in the ownership of the land. In 1970, the land was sold by the assessee for Rs.2 lakhs. The Income-tax Officer held that the transaction had resulted in a gain of Rs.75000/- to the assessee which was taxable and this was upheld by the Tribunal. On a reference: The Hon ble Court had held that in the instant case, all the eight partners of the assessee brought the parcel of land of which they were co-owners into the partnership firm as their contribution to the capital. The amount of such contributions to be credited into th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
