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TMI Blog2012 (9) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... st in the site and the super- structure of the cinema theatre. At that point of time the property was valued at Rs.6.00 lakhs. The business of the firm was carried on till 28-02-1979. Thereafter, disputes arose between the partners of the firm. The appellant sent a notice dated 07-03-1979 dissolving the partnership firm. As per Section 43 of the Partnership Act, 1932, where the partnership is at will, the firm stands dissolved by any partner giving notice in writing of his intention to dissolve the firm. Therefore, the partnership stood dissolved on 07-03-1979 which falls in the assessment year 1979-80. 3. The other partner Y.Kalyana Sundaram filed a suit O.S.No.125 of 1979 in the Sub Court, Vijayawada for settlement of accounts which was decreed with the following directions: " i) that the first defendant be and is hereby directed to render accounts of 2nd defendant firm up to 28-02-1979 within one month from the date of this decree; ii) that in case, the first defendant fails to render accounts as per clause No.1, Commissioner be appointed for settlement of accounts of D-2 firm; iii) that the plaintiff be and is hereby directed to deposit into court the half share of the firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s restored subject to the modification in clause (iii) of the decree as regards the sum to be paid by the appellant/plaintiff to respondent/defendant No.1 in regard to the valuation of one half share of the defendant No.1 in the defendant No.2 firm as per clause 18 of the Partnership Deed as indicated hereafter and to the said extent. Upon the accounts as on 7th March 1979 being taken and the assets and liabilities being finally settled the assets will vest in the appellant/plaintiff and the liabilities as determined on taking accounts will be the responsibility of the appellant/plaintiff; 2. The appellant/plaintiff shall pay to respondent (defendant) No.1 Rs.15.00 lakhs (Rupees fifteen lakhs only) in the manner specified hereinafter. 3. Out of the amount of Rs.15.00 lakhs, a sum of Rs.10.00 lakhs shall be deposited in the trial Court on or before November 5, 1988 and the remaining amount of Rs.5.00 lakhs shall be deposited in the trial Court as early as possible but in any event before February 7, 1989. The sum of Rs.5.00 lakhs will carry interest at the rate of 10% per annum from November 7, 1988 till the date of payment. 4. On deposit of this amount of Rs.15.00 lakhs (and int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne partner and the other on the dissolution of the firm is not correct, that there was a sale by the appellant to Y.Kalyana Sundaram for Rs.15.00 lakhs, that the sale took effect on the date of payment of the 1st instalment i.e. 07-11-1988 to the appellant, that on payment of second and final instalment, the transfer dated back and took effect from the date of payment of the 1st instalment i.e. 07-11-1988. He therefore, computed the net long term capital gain as Rs.3,51,050/- on the site and short term capital gain as Rs.4,98,450/- on the assets and determined that the total income of the appellant for the assessment year 1989-90 as Rs.9,00,260/-. He also proposed to initiate penalty proceedings under Section 271(1) (c) of the Income Tax Act 1961. 10. Aggrieved thereby, the appellant filed an appeal to the Commissioner of Income Tax (Appeals), Vijayawada. The appeal was numbered as I.T.A.No.33/V/CIT(A)/94-95; and was dismissed on 05-08-1994. 11. Challenging the appellate order, the appellant filed I.T.A.No.1529/Hyd/94 before the Income Tax Appellate Tribunal, "B" Bench, Hyderabad. 12. Before the Tribunal, the appellant filed written submissions on 04- 02-2000 specifically conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vaidya (supra), C.I.T. Vs. Raghu Kumar (1983) 141 ITR 0674, and C.I.T. Vs. Patel (1988) 171 ITR 0128. 16. The Standing Counsel for the respondent contended that the appellant had not raised these contentions before the I.T.A.T. but when the written submissions dated 04-02-2000 of the appellant before the I.T.A.T. were pointed out by this Court, he accepted that these points were indeed raised before the I.T.A.T. by the appellant. 17. A reading of the impugned order shows that the I.T.A.T. did not refer to the contentions raised by the appellant in his written submissions dated 04-02-2000 filed before the I.T.A.T. It also did not refer to the case law cited by the appellant in the written submissions. It merely adopted the reasoning of the C.I.T. (Appeals) and opined that the half share enjoyed by the appellant in the properties of the cinema theatre stood transferred to Y.Kalyana Sundaram only on the receipt of consideration as stipulated in the compromise decree of the Supreme Court and that for the purpose of income tax, capital gains are assessable in the assessment year 1989-90. 18. In C.I.T. Vs. Dewas Cine Corporation (supra), the Supreme Court of India held as follows: " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r his share in the assets of the firm. Payment of the amount agreed to be paid to the respondent under the arrangement of his share was therefore not in consequence of any sale, exchange or transfer of assets." The Supreme Court upheld the contention of the assessee that no part of the amount of Rs.1,25,000/- received by the assessee represented capital gains and relied on C.I.T. Vs. Dewas Cine Corporation (supra) referred to above. It held that adjustment of the rights of the partners in a dissolved firm by allotment of its assets is not a transfer for a price. The facts of the instant case are identical with the facts of the case in C.I.T. v. Bankey Lal Vaidya (supra). 20. In C.I.T. Vs. Raghu Kumar (supra), a Division Bench of the Andhra Pradesh High Court followed the judgment of the Gujarat High Court in C.I.T. Vs. Mohanbhai Pamabhai (1973) 91 ITR 393 (Guj) and held that no transfer is involved when a retiring partner receives at the time of retirement from the firm, his share in the partnership assets either in cash or any other asset. It further held that for the purpose of Section 45 of the I.T. Act, no distinction can be drawn between an amount received by the partner on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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